What Does the Inflation Report Mean for Home Buyers? Insights Inside

Recently, I did a video saying Barry Habib, a legend in the mortgage industry plus a lot of other YouTubers I follow are predicting rates in the 5% this year, not within by the end of 2025, within the next three to four months. That's what we're going to talk about in today's video because we just got some breaking news on the producer side of the equation that's going to give us some insight in where interest rates are going to go from here. And then we also have BlackRock speaking today on how the valuations of stocks, the way they are right now, how that might be a catalyst for even higher rates in the future. So let's get to today's video. These are the top six programs people use when they're buying their first house. Now, these aren't my rates, folks. If you want to find out if you can qualify first and then what interest rates you're looking at, please reach out to me. I'd love to help you. My name is Dan Frio. I'm licensed in all 50 states as well as Puerto Rico. And there isn't really any reason why you shouldn't be using us because not only do I work at ServBank, we're also a huge mortgage brokerage. So we're set up with over 30 different lenders to be able to offer you their programs and their rates with one application, one credit pool. We're going to shop your loans to over 30 different lenders. Where else can you get that? But without further ado, let's get today's data. So the news that just came in right now is right through here. It's breaking news. Rick Santelli on CNBC. He's going to tell it to us. The PPI, the producer inflation numbers, how did it come in? Take it away, Rick. Rick is standing by at the CME in Chicago. Yes, our December read for the producer price index. The wholesale side of inflation. Expecting a headline number up four-tenths, cut it in half, up two-tenths. Up two-tenths, much lower than expected. It equals where we were in September to find a lower number. You're going to July of last year when it was unchanged. You strip out food and energy. Also on the cool side, unchanged. We're expecting the number closer to up three-tenths. Unchanged. You have to go back to July of last year again to get a lower number at minus one-tenth. Now, if we look at ex-food, energy, and trade, up one-tenth. Less than the three-tenths expected. You have to go back quite a ways. You're going all the way back on one-tenth to equal November of last year, September of last year. But to find a lower number, you have to go all the way back to May of 23. May of 23. Now, take a step back. We're going to do the year-over-year numbers. Year-over-year headline or final demand. Expect it up close to 3.8. It comes in at 3.5. 3.5, though, in this case, it follows 3%. And it is definitely 3.3 is a little warmer than the rearview mirror, even though it's less than expectations. 3.5. I'm going back to January, February of last year, when it was 4.7. We've had many lower numbers since. If you look at ex-food, energy, we are now at 3.5. Once again, less than expected, but hotter than the rearview mirror. Last month was 3.4. To find a 3.5 or higher, you're going back to February of 23. And finally, ex-food, energy, and trade, up 3.3. This one is the only year-over-year number that's sequentially lower than our last look, which was 3.5. 3.3 equals September of 24. Going back to April of 24 to find a lower number, 3.2. So the year-over-year were a bit problematic. Very nice gains on the month-over-month, which is definitely reflected in yield drops. We're at 479 and a 10. We're now at 475. That's down three on the session. And when we were at the highs, and actually still right now at this level, should we close here, once again, you're comping back to the Halloween of 2023 on both 10s and 30s. Dollar index yesterday, Joe, it touched over 110 briefly. We'll have to monitor its weakness here based on the numbers we're seeing pushing interest rates down. And there has been a last-minute revision I'm catching, and maybe there'll be some more trickling in. But the ex-food and energy year-over-year, our last look of 3.4 gets upgraded to 3.5, equaling the current look. So that's what we're seeing right through there, but the markets aren't too well looking at it this way. Here's what the MBS market's doing. So if you're new to the channel, this is what we follow to figure out what's going on with mortgage rates. This is the mortgage bond that trades on Wall Street. You might even have it in your portfolio. So how you have to understand this chart, this is the price of the bond. So how you figure out what the rate is or the yield, it's inverse. So you flip it. So if the price is going down, which you see in this case, that means rates are going up. So we love when prices are going up, not down. So you're seeing the markets deteriorating a little bit right now, so that means mortgage rates are ticking up just a little bit. Why a lot of people don't put credence in the PPI is because there's a lot of other figures that come out. Tomorrow, we're getting the CPI. Let's go over to the economic calendar we have. So we got the PPI in today. That's usually not a market mover for some reason. It's the producer inflation. Tomorrow, we have consumer inflation, and it breaks it all the way down for month over month, as well as the core. So we'll see how that comes in. And then on Thursday, we have core retail sales and initial jobless claims. But here's BlackRock's, the bond portfolio person there, Rick Ryder. He's giving his thesis on why he's expecting rates not to go down this year, but to actually go up. And it's pretty intriguing. He gets a little technical when he starts talking about puts and calls and things like that, but he has a great insight into this. So let's go over and take it away with this interview. And I'll put it into perspective as the end of this thing, so you guys can understand a lot of the terminology he's talking about. So let's take it away. Half of this bull market taking a turn for the worse. Let's ask BlackRock CIO of Global Fixed Income, Rick Ryder. He joins me now at PostNice. Good to see you again, man. Yeah, thanks for having me. So let's talk about this backup in rates. I just want to know sort of what you think about it. As you're sitting here, like we all are, watching it and trying to figure out what it means. So, I mean, the first thing you say, man, that employment number on Friday was pretty powerful. And it led to this belief and looking at when you look at the confluence of data that's come out, you've got an economy that's operating at a pretty strong level. We've talked about it a bunch of times on your show. People want to continue to talk about, well, this is it. The economy is bending down. We've got pressure in different parts of it. And if you look at how the service sector did, again, in hiring and you look at services, generally economy, they're doing well. So, you know, you get asked all the time, like, where do you start buying rates here? And I, you know, I find long-end interest rates still not that interesting. I mean, there is a point that you start adding as you get to around 5% in the 10 year, maybe add a little bit. But you've got an economy that's operating pretty well, and you've got uncertainty around where inflation is. I mean, the Fed, I mean, we're going to get CPI, PPI this week. You're still operating year-on-year core CPI at 3 plus percent. And core PCE, we think, is going to run mid to high twos for most of the year. Fed's still, you know, in a tough spot. Unless employment starts to soften, you've got rates that aren't going to come down from here of any significant magnitude. All right. So you make the case, it sounds like, first and foremost, that rates are going up for the quote, unquote, right reason, right? You tweeted earlier today about an economy, in your words, as you just said, is in very healthy shape. So why is the stock market then having a problem with rates if it's for the right reason? So I think there's a near-term dynamic, and I think there's an intermediate-term dynamic. So, you know, every time people say, remember it was like, if the 10-year gets to 3.75, it's over 4 percent. It takes a little bit of digestion. You know, I know we've said it before. This economy is much less interest-rate sensitive than ever before. And you look at things like the MagSavvy, look at the big tech stocks. They don't borrow. In fact, they're net long cash. So, but you need to digest this rate dynamic. My sense is, we'll go through this period. Rates will stabilize around these levels. I still think the trend is, particularly in long rates, is to go move a bit higher still. Higher than here? Yeah. So, I mean, the 30-year is basically 5 percent, right? We're at, what, 4.80 on the 10. Yeah. Are you saying that the 10-year is going to go over 5? So first of all, I think the momentum of the 10-year is to move higher than that. Second of all, there isn't a lot of rationale for buying 10-year Treasuries today. You get so much yield in the front end of the yield curve. We talked about it on your show for a while. If you think about how 2024 finished, if you're sitting in the front end, you had significantly positive return. The one- to three-year part of the index was plus 4 percent. The back end was negative 4 percent. What's changed? You still have a relatively flat yield curve. You've got term premiums not enough out the yield curve. So, I still think you could have, and you've got a lot of issuance that's going to come. So, I still think you could move higher in interest rate. Listen, I think once you get to 5, it is, whether it's optically a ceiling or not, there is some buying that will come in. So, I don't think we're going much higher. But, listen, I think the gravitation is you still move higher around the economy that's in good shape, and a Fed that can't really go until you get. So, what he's saying is, and it makes sense, that you have, let's say, the 10-year treasury at 475 to 5. So, an investor, let's say you're an investor and you have this money to invest. Do you buy a government bond at 5 percent? Or what's your alternative? If you go to mortgages, which has default risk, how much premium do you need in that bond to buy the bond? So, that's what's happening, and that's why rates, mortgage rates are so high because the premium's higher and the 10-year treasury is continuing to go up. He makes a case right now, you know, in his situation, it's like, well, I'm buying short-term bonds, not long-term. And I'm also buying, you know, tech stocks and equities because they have much, much more potential to go up than the values of treasury bills. You're going to get a 5 percent yield no matter what, which is fantastic if you're on fixed income or you're in a fixed income investment. But if you're looking for real gains, the stock market is still where it's at. So, he concludes with a lot of jargon when it comes to trading and things like that. But that's his point. He's saying, we're investing in short-term bonds and then in equities. We're not buying in long-term bonds. And that's an unfortunate part about this is mortgage rates are tied to a mortgage bond that competes with treasuries. And the higher the yields go in treasuries, the higher the yields are going to go on mortgage bonds. So, that's what my expectations are. I'm expecting rates to stay stagnant rate in this area. I'm not expecting any wild swings up or down. Unfortunately, you know, some of those that I follow are saying, you know, mortgage rates are probably going to be in the high fives within the next three months. Guys, I hope you're correct and I'm absolutely wrong, but only time is going to tell. So, that's my report for this morning. My name is Dan Frio. Like I explained, I'm actually a loan officer. I'd love to work with you. I don't do videos for living folks. I actually do mortgages. I just do this to inform you guys what the heck's going on with interest rates, real estate, and also programs that might be able to get you into a house in 2025 that maybe you otherwise didn't even realize was out there. So, how do you find out more about me and my team? Go to the rateupdate.com. Here it is. If you want to put in your application, just click the application right up through there. But what we want to do is we want to talk with you, and you should be wanting to talk with us as well. Don't just go online and fill out an application. You need to talk with us, one of us, and vet us. So, how do you do that? Well, schedule a consultation. You can do that right through here with me, David, or Alan, or if you want to call us, that might be the best way to do it. Just scroll down to the bottom of our website, and that information is right down through there, our 800 number is 844-775-5626, or if you email me, if you want to email me, it's danatherateupdate.com. If you have a question, please put it in here. Give me your contact information so I can reach back to you. If you have any other comments, please leave them down below in the description. But if you have a question for me, please make sure to email me. So, thanks so much for watching, guys. Don't forget we're live today with Rick from Arizona, a friend of ours. He's going to come in and tell us what the Arizona market looks like, and also, he's pretty darn close to California. We'll get his take on the fires out there as well. So, check out our live event today with Rick, then I'll also be back later at the closing bell to let you know how all this mess ends for the day. Thanks so much for watching, guys. God bless. Have a fantastic day. Hope to see you soon. Bye-bye.