Market Themes as We Enter 2023

January 3, 2023

Last Week in Review: Market Themes as We Enter 2023

Home loan rates crept higher in the final week of 2022. Let's look at some themes that should bode well for housing in 2023.

Inflation Has Peaked

One of the biggest economic stories in the U.S. was seeing inflation hit the highest levels in over 40-years. The Federal Reserve, led by Jerome Powell, lifted short-term rates at the fastest pace in decades to combat inflation and help reach their federal mandate of price stability.

There are different monthly readings that track consumer inflation, including the Consumer Price Index and the Core Personal Consumption Expenditure Index. The good news is both readings have declined in recent months, suggesting we enter 2023 with the rate of inflation slowing. This is good news, because it will take pressure off Fed rate hikes and it will allow long-term rates, like mortgages, to continue to improve in 2023.

Recession Fears Elevated

At the December Fed Meeting, the Federal Reserve revised their economic growth forecast lower to just .50% in 2023. This means the economy is going to slow further and be at or close to a recession next year. What could tip the economy into a recession? Policy error. This is a fancy way of suggesting the Fed may hike rates too far or keep rates high too long.

The Treasury market, which is arguably more accurate than the Federal Reserve in forecasting economic conditions, is saying a recession is looming. The 3-month T-Bill has been yielding more than the 10-year Note yield. This has happened eight times since the 1960's and each time a recession came in the months thereafter.

The good news is if the economy is at or near the recession, it will help lower inflation, lower rates and make for a healthier housing market, with slower price gains.

Labor Market Remains Strong

Probably the brightest spot in our economy is the labor market, we finish the year with a tight 3.7% unemployment rate. We expect unemployment to tick up from here as the Fed wants unemployment to move higher and slow demand. Even still, an unemployment rate beneath 5.00%, which is what we should expect for the foreseeable future, is healthy and will support the housing market into the future.

The good news is, jobs buy homes and our labor market looks healthy heading into 2023. It may be strong enough to help our economy avoid a recession.

Bottom line: After a rough 2022 for interest rates and housing, there are many positive signals as we enter 2023, setting us up for a healthy housing market into the future.

Government Agency Approvals

FHA Non-Supervised Mortgagee Approval #:
24751-0000-5
VA Automatic Lender Approval #:
902324-00-00

Mortgagee/Loss Payee Clause

Carrington Mortgage Services LLC
ISAOA/ATIMA
P.O. Box 692408
San Antonio, TX 78269-2408

Industry Links

Loan Limits LookupMortgage Letters
This information is provided for your convenience and Carrington Mortgage Services, LLC makes no warranties concerning the accuracy or completeness of any of the information. This is not financial or legal advice and should not be taken as such. This information is for mortgage professionals only and is not intended for distribution to consumers.
CAREERSINVESTORSABOUT USCORRESPONDENT
An Equal Housing Opportunity Lender. Copyright 2007 - 2024 . Carrington Mortgage Services, LLC headquartered at 1600 South Douglass Road, Suites 110 & 200-A, Anaheim, CA 92806. NMLS ID # 2600. Toll Free # 800-561-4567. All rights reserved. Restrictions may apply. All loans are subject to credit, underwriting and property approval guidelines.  Nationwide Mortgage Licensing System (NMLS) Consumer Access Web Site: www.nmlsconsumeraccess.com.

The content of this website is intended for licensed third party originators or brokers only and may not be duplicated or disseminated to the public. Carrington Mortgage Services is one of the leading wholesale mortgage lenders.

Government Agency Approval | FHA Non-Supervised Mortgage Approval #: 24751-0000-5 | VA Automatic Lender Approval #: 902324-00-00

linkedin facebook pinterest youtube rss twitter instagram facebook-blank rss-blank linkedin-blank pinterest youtube twitter instagram