Portland Mortgage Market Update — February 28, 2025

All eyes were on today's CPE report, and it came in right as expected. However this was kind of seen as a missed opportunity. The Core CPE (which is the part the Fed focuses on) came in at a 2.6% increase year over year, which is right at where everyone thought it was going to come in. But they also revised last month's report upwards from 2.8% to 2.9%. With today's core report coming in at 2.9% that would have been a .3% improvement, so if they hadn't upwardly revised last month's number we would have seen a 2.5% YOY Core report today which would have spurned a rally on rates.

Regardless, rates have had a great week! We saw improvements every day this week and are currently at levels we haven't seen since early December, putting rates back in the high 6's. Fed members have been putting out "rosier" vibes when they talk about where they are seeing inflation headed this year, and the general public consensus of the labor market is things are not as strong as the employment reports would indicate. Initial Jobless claims surprised the market this week, coming in 20K higher than expected, loan delinquencies seem to be on the uptick, and investors are moving more and more into safety positions like bonds and even cash (see Warren Buffet). This is bodes well for rates.

You know what else is good for rates? A RECESSION. Yes, the "R" word is coming back, unfortunately. Wednesday we saw an "inverted yield curve" which means the Yield on the 10 yr treasury note dipped below that of the 3 month note. The Fed monitors this closely and considers it the gold standard for a recession indicator. They hold it in such high regard that each month the put odds on the likelihood of if happening (last month they estimated a 23% chance). If we do enter (or already are in) a recession the Fed will have no choice but to cut rates.