Orion’s brokers know that a strong economy usually means higher rates. The final economic data before our national and local elections this week show a strong economy, incomes outpacing inflation, slower inflation, and consumers stills pending. But Orion’s management believes that the specifics are worth looking at for anyone trying to understand mortgage rates.

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First off, we learned that the U.S. economy grew at strong 2.8% in the 3rd quarter, a bits lower than 2nd quarters 3.0%, but at a pace that supports a good job market and consumer spending.

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But Friday’s employment data for October was weak. Many experts quickly dismissed the numbers, given the storms. Employers added a net 12,000 jobs for the month; a number that ordinarily would foretell a downturn in the economy. Ordinarily two significant hurricanes that result in tremendous damage, loss of life, and shutting down of regions of the country do not occur within ten days of each other, while also having a major strike by workers of one of the largest employers in the country. It is easy to say “what if” regarding the storms, but they happened.

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Credit card debt is now around $1.1 trillion, an all-time record. Consumer spending is65-70% of our nation’s economy. The 4th quarter of the year began with consumers still spending, increasing spending from September by 0.5% in October. Year of year consumer spending was up; 3.7%, well above the rate of inflation. Supporting continued strength in consumer spending is personal income. Workers earned 0.3% more in October than the month before, and year over year have seen their income increase by 3.0%.

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Personal Consumption Expenditures (PCE) is the preferred gauge of inflation for the Federal Reserve when determining its policies. In September PCE showed a 0.2%increase in prices from August and a 2.1% increase from September 2023: down from 2.3% the month before. This is good news for mortgage rates and rates in general.

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The Fed digs a bit further into the PCE data for its decision making, using the “core” rate, which strips out food and energy costs. Due to lower gas prices not in the data, the core rate showed a 0.3% growth month-to-month and a steady 2.7%annual growth. The core rate is sticky primarily due to housing prices remaining high.

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What does this all mean for 30-year and 15-year mortgage rates? The overall data supports the Federal Reserve enacting minor rate cut(s) in the near future as overall inflation is slowing. However, with wages, spending and growth all showing moderate to strong growth, the potential for inflation increasing seems more likely than the economy slowing towards recession. If you are hoping for a notable downward move in mortgage rates, don’t hold your breath unless we see a major surprise. Fortunately, Orion has competitive rates and great programs for your borrowers, regardless of rates.

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