MARKET UPDATE | 10-06-2023
Hello All,
As mentioned, I am in builder meetings in Florida today. I just walked out of the first meeting and looked at some of the data from this morning. It is not good for mortgage rates. There is a strong chance we are over 8% by the end of the day on the benchmark averages.
The market reaction is that most believe there is a clear path to over 5% yields on the 10 year. I expect equity markets to get crushed and bonds to continue to deteriorate now until something breaks. This path to over 5% is now very possible.
This late cycle volatility makes the chances for a soft landing nearly impossible. This is not what the Feds envisioned a few weeks back with the soft landing narrative.
What we now want to see is things break as quickly as possible as this is going to be the hardest window of your careers unless you are attached to builders.
Ideally the government shuts down in a few weeks and the equity markets continue to get pummeled, which I think will happen. That will potentially help rates begin their decent. This is all a pendulum swinging and it is very far to the right and must swing back. I believe it will be as quick going down as it was going up when the time comes. For a year we have been waiting for a break in job numbers and this simply has yet to materialize. But with savings out, student loans coming off deferment, credit card burdens and high cost to borrow, this is inevitable. It is just a matter of when and I don’t know the answer to that. What I know is what is starting to happen is likely to result in a much worse situation the longer it continues before they break.
Feedback from Builder meetings… Builder’s absolutely want to work with us. Their confidence is down with rates where they are and they don’t want to lose the wealth they built back up after getting crushed in the late 2000’s. This is the easiest time I have ever seen in the industry landing builder partners if you bring something of value. Those talking points work with a focus on “de-risking” them and giving them the formula to get rates down through forward commitments and take their risk off the table while increasing the pool of buyers. At these rates, their buyer pool has all but disappeared. We will spend time on the next national sales webinar going through this. The time is NOW to solidify long-standing relationships.
Sorry I am sending this while driving between Orlando and Tampa on freeway. If typos or grammar issues I apologize. Agree, I should not be doing this while driving so save the comments.
Josh Erskine Chief Executive Officer