May 03, 2022
Stocks and Mortgage Bonds are both slightly higher so far this morning. Today kicks off the Fed’s two-day meeting, with the conclusion coming tomorrow at 2:00pm ET with their statement and press conference to follow.
The Fed is expected to hike the Fed Funds rate by 50bp, but it will be interesting to see if they give more clarity on the start time and scope of their balance sheet reduction plan. Can the Fed take the Fed Funds rate high enough to curb inflation? If the Fed hikes by 50bp tomorrow, in June, and in July, the Fed Funds Rate will be just under 2%. In September they will likely be hiking, but it’s unclear if it will be 25 or 50bp. At that level, and with the comparisons for inflation getting tougher later in the year, we think inflation will peak in September and start to come down from there. The ADP Employment report will also be released tomorrow morning, where the market is expecting around 400,000 job creations for the month of April.
CoreLogic released their Home Price Index report, showing that home prices rose by 3.3% in March and 20.9% on a year over year basis, which is an acceleration from 20% in February and the highest reading in the 45-year history of the index. CoreLogic has been missing their forecasts by a large margin – Let’s take a look at what CoreLogic forecasted for March: They anticipated a 0.6% reading in the month, meanwhile we saw 3.3%. When we look to their report from last year at this time, they forecasted that home prices would increase 3.5%…meanwhile they reported today that prices rose nearly 21%.CoreLogic forecasts that home prices will appreciate 1.2% in April and 5.9% in the year going forward, which is an increase from 5% in the previous report, but still behind most other forecasts. Even if CoreLogic is correct in their nearly 6% forecast, it is still extremely meaningful for wealth creation. If someone bought a $400,000 home, and put 10% down, that means they would gain$24,000 in appreciation over the next year and earn a 60% return on their investment due to leverage.
Top Metros:
-Phoenix 30%
-San Diego 26%
-Las Vegas 27%
