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Why I Am Convinced Rates Will FALL By March

Why I Am Convinced Rates Will FALL By March

I have myriad acquaintances in the mortgage industry (mortgage bank CEOs even) who insist rates will continue to rise throughout 2023.

They tell me I am crazy to think they will fall as early as March – with inflation surging and the Fed on the warpath.

They further tell me that the Fed cannot get off the warpath or it will lose all credibility, causing the bond market to think it has no control over inflation – which will result in much higher rates (ironically).

So, I wanted to again set out my reasons for believing rates will fall so much and so soon.


There are several causes of consumer price inflation: (1) Excess Demand; (2) Supply Constraints; and (3) Money Supply Increases.

  1. Demand Is Way Down. Demand was artificially increased with massive Federal stimulus throughout the COVID crisis and that has now dried up with little more on the horizon. In addition, the Fed’s rate increases have pushed the economy into a recession or to the brink of recession (depending on news sources), and that too has significantly impaired demand.
  2. Supply Is Way Up. Supply is now surging at almost every level, in the face of untangled supply chains and plummeting demand. We see this in plunging lumber prices, chip prices, consumer goods, and even energy prices in Europe, as reported by the WSJ this morning (very surprisingly).
  3. Money Supply Is Shrinking. The money supply was massively increased by all the Fed stimulus – which has now ended. In addition, the money supply is also greatly curtailed by the lack of bank lending worldwide, as bank lending is the biggest single source of money supply increases. And finally, the “velocity” of money (or how fast it turns over in the economy) is also much lower and that too significantly slows inflation.

None of this is my opinion either, as I am just a mortgage guy. I got all this from some exceptionally well-informed macro experts with excellent track records. These experts include Barry Habib, Lacy Hunt, Jeff Snider and Stephanie Pomboy.

Barry Habib, who is usually behind a paywall, just made his case for plummeting inflation readings in this recent YouTube video. I, however, also summarized his views in this recent blog.

Jeff Snider frequently points out (in his Eurodollar University podcasts) how most of our inflation was simply a result of artificial demand (from stimulus) and constrained supply chains (from COVID), and how that is all unwinding.

Lacy Hunt is a Fed expert/economist and the money supply guy, and I recommend searching for any of his recent interviews on YouTube.

And finally – Stephanie Pomboy made a very strong case for deflation by March in this Wealthion Podcast in September. I summarized her views in this blog.

TLDR: Rates will very likely fall below 5% (or 4% for jumbo) again by March – making homes more affordable, sparking more demand for homes and propping up prices again (take that “doomers and gloomers”); and allowing today’s buyers to refi into lower rates!

Jay Voorhees
Founder | JVM Lending
(855) 855-4491 | DRE# 1197176, NMLS# 310167