“Hi Jay, why do you need a 14-day contingency when the buyer is fully pre-underwritten and there is an appraisal waiver?”
That was a question a listing agent sent me over the weekend – and the answer was this: “The property is a condo – so we asked for 14 days to ensure that the condo project itself is warrantable – or approved by Fannie Mae and/or Freddie Mac.”
Condo project approvals are a bigger issue now because Fannie and Freddie are scrutinizing them more closely; because condo projects themselves seem to have more issues relating to insurance, repairs and maintenance, and litigation; and because many HOA management companies have become bureaucratic and non-responsive.
We can often get condo projects approved much faster than 14 days, but we ask for 14 days nonetheless in case we run into HOA issues or a very non-responsive HOA management company (which happens often now).
Rates Have Fallen 3/8% Since Mid-November – While Analysts Screamed: “Inflation’s Coming!”
Jeff Snider continues to predict falling rates in his daily videos, only to be viciously derided in the comments section. Snider is adamant though, as he focuses on the entire world economy, past history, and every data set imaginable including swap spreads, yields curves, the gold to copper ratio, and TIC data.
He also continually reminds us that we have to pay for our COVID lockdowns at some point (and we still have not fully paid the piper), and that the entire world economy is “globally synchronized” (so Germany, Japan and China, with all of their problems, are impacting U.S. rates). In addition, Snider reminds us over and over that Treasury Yields or interest rates are a function of growth and inflation expectations and nothing more.
So, just listening to Snider, it was no surprise to see rates fall all last week, and again today (but only marginally).
Inflation Predictions Galore
But, what made last week’s rate drops very surprising were all of the inflation predictions we’ve been hearing from prominent analysts, fund managers and economists – including Peter Schiff, Luke Gromen, Jeff Gundlach, Larry Summers, and Stan Druckenmiller.
As I have mentioned time and again, bond investors won’t accept lower yields if they think inflation is imminent.
Enter Ed Dowd’s Dire Predictions
Ed Dowd is a highly respected analyst, a former fund manager for BlackRock, and the current manager of his own fund, Phinance Technologies. He’s very concerned about commercial real estate (default rates just hit 2008 levels), credit cycles, global debt loads, government spending (like everyone else), and how people confuse the “financial economy” with the real economy (stock prices do not reflect the health of middle America in any way).
His biggest concern though is how much ostensibly false data we received over the last few years from government agencies trying to paint a picture that was much rosier than reality – with respect to employment, inflation, GDP growth and more. If you search for Ed Dowd on YouTube, you will see dozens of his interviews.
If Mr. Dowd is correct, the question is – when will we start to see accurate data? Because, if and when we do and if it is far less rosy, rates will very likely fall.
We’re expecting employment data this week in fact, and it could move interest rates significantly.
My guess though is that it will still be a bit too rosy, if Mr. Dowd’s cooked-books hypothesis is correct, as the current administration will still want to look good on their way out.
So, we may not see the real data until Mr. Trump is in office – unless his administration plays the same games. They may not, however, do so in the short run, as they will have a few years to blame the previous administration (much like Reagan did when he entered office and blamed Carter).
