Potential Tariffs while it’s still unclear if these are negotiated sticks or intended policy, the ramifications would be massive and likely inflationary (which we know is the archnemesis of Mortgage Rates). Purposed tariffs include a 25% tariff with Canada and Mexico and a 10% tariff with China. The Conservative premier in Ontario plans to call early elections to deal with potential tariffs as they could cost as many as 500,000 jobs. For many businesses the uncertainty of what crops to plant or materials to invest in makes for a complicated business climate to negotiate.
Mortgage Rates – moved laterally this week as the price of Mortgaged-Backed Securities (MBS) oscillated and ended the week very near way they started. Rates are up 0.25% from this time last year.
Home Sales existing home sales recorded their lowest year in nearly 3 decades. Sales total 4.06M – the lowest since 1995. On the flipside the December report came in strong up 2.2% from November and up 6.1% year over year. This is the largest year over year gain since June 2021. Inventory remains tight, supporting home prices, and first-time homebuyers now make up 31% of transactions (up from 29% last year).
Congressional Outlook – the Congressional Budget Office (CBO) released their Budget & Economic Outlook, and they expect debt to increase 70% over the next decade. A of percentage of GDP the current level of 98% is predicted to increase to 118% by 2035. These projections assume nothing is added to the budget (yeah right). The CBO expects unemployment to remain at 4.3% in 2025 and the Fed to make a single rate cut.
Rents – Core Logic’s Single Family Rent Index showed that rents rose 1.5% year over year in November down 0.2% from October’s reading. This is the lowest increase in 14 years. Hopefully this will be reflected in future inflation index reports and provide some oxygen for the MBS market.
Mortgage Applications to purchase homes rose 1% last week and are up 7% year over year. Refinance applications declined 3% and are up 42% year over year.