Tag Archive for: economy

Oil Prices & Rates Drop; Why Nobody Can Predict Anything!

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Rates fell today on news of possible diplomatic talks between the U.S. and Iran and news that oil shipment volume has been higher than analysts thought. Read More

Is A Recession Our Only Hope For Rate Relief? Why Care About Radiologists? Loan Limits Up – Do We Care?

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I. Radiologists: The Best AI & Economic Lesson Ever? In 2016, Geoffrey Hinton (The “Godfather of AI”) predicted that radiologists would be obsolete in five years. BUT – now there's a shortage of them, and salaries are surging higher. AI made imaging so much cheaper that medical practices are ordering far more images – creating a totally unexpected and much greater need for radiologists. This is a huge reminder of two things: There will not only not be a “jobs apocalypse” because of AI, but there will be an increase in jobs because of AI. Technology often ends up making things so much cheaper that demand ends up increasing for tech-enabled products and services – ultimately creating more jobs. Note that this also doesn't account for all the new jobs AI will create that nobody can envision right now, much like how nobody envisioned Social Media Managers, Content Creators, and SEO Specialists 20 years ago.Read More

Taxing Elon’s Wealth Would LOWER Rates (A Lot); Thank God The Economy’s So Weak!

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I. Agents and Loan Officers Have No Idea How Lucky They Are Right Now – Because the Economy Is So Weak! The 10-Year Treasury yield is over 4.7% - a level we saw in 2023 when inflation was raging. But – that yield would be far higher if there were not three very clear signs of economic weakness: The job market is very weak. The most recent nonfarm payroll report was negative, and we’ve lost about 1.5 million full-time jobs over the last year. Retail sales declined in July. This is serious because America is driven by consumption, and the retail sales numbers are not even adjusted for inflation. If they were, the numbers would be even worse. GDP growth is slowing. It fell from 2.1% in Q1 to 1.5% in Q2. The average mortgage rate is pushing 6.8% today, driven almost entirely by inflation concerns. This is a reminder, though, that the bond market (that controls long-term rates) reacts to both inflation concerns and growth expectations. The weak economic data discussed above signals slower growth, which is keeping rates far lower than they otherwise would be. In addition, if the spread between mortgage rates and the 10-Year were back at 2023 levels, the average mortgage rate would be close to 8%. Lucky indeed. Or at least a reminder that things can always be worse…Read More

Japan’s Currency Crisis Is Becoming America’s Mortgage Rate Problem

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Japan’s currency crisis should scare the heck out of you. 99% of America is oblivious to the havoc taking place right now in international currency markets, as the Japanese yen came very close to collapsing.Read More

Why Oil Prices Are Not Surging! Gasoline ≠Oil; Assuaging Payment Shock Part II

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I. Why Oil Prices Are Not Spiking (and…Thank God, They’re Not) The last time the Iran war heated up like it is now, oil prices surged to over $100 per barrel. But today, West Texas Crude hovers in the $82 range. Oil prices are not rising this time, though, for three reasons: (1) there are still about 7 million barrels of oil making it through the Strait of Hormuz; ships just have their transponders off, so they can’t be tracked; (2) there are another 7 million barrels avoiding the Persian Gulf (Iran) altogether with a pipeline that is carrying oil to the Red Sea; and (3) demand is way lower than it was pre-war – as the world economy is slower and China is importing a lot less. Hence, 14 million barrels are still making it out of the Persian Gulf – 70% of the 20 million barrels making it out before the war. (Thank you, Barry Habib, for this). If oil prices were spiking again, rates would be much higher.Read More

“Net” Payment After Taxes – Why Tax Cuts Killed The Mortgage Industry; If Only The Fed Could Drill For Oil…

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I. The Dallas Fed President is very concerned about inflation - suggesting that the Fed increase rates to fend off inflation. But today’s inflation is mostly due to high oil prices. So, Barry Habib wondered today how an increase in the Fed Funds Rate will bring down oil prices – other than by slowing down the economy to thwart demand. But – analysts and economists like Judy Shelton and Steve Forbes repeatedly explain that economic growth does not cause inflation, as long as the growth comes from productivity (rather than government spending). So, slowing growth to fend off inflation caused by oil prices would simply hurt Americans - for no reason (something the Fed is very good at). The only productive thing the Fed can do to fend off today’s inflation is drill for oil. Or, barring that, hopefully, they do nothing.Read More

Shock: Crashing Inflation Bringing Down Rates! Townhouse Vs. Condo Confusion – More Important Than Ever!

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“Condo Concerns” include low owner-occupancy ratios, HOA litigation, low reserves, and insufficient coverage under the master insurance policy. These issues often render condo projects non-warrantable or ineligible for Fannie, Freddie, and competitive jumbo financing. And – even when condo issues are not present, condos are subject to higher interest rates when borrowers have an equity cushion of less than 25% (for a refi) or put less than 25% down. Townhomes are also known as PUDs, detached PUDs, rowhomes, patio homes, zero-lot-line homes, and attached single-family residences. The confusion comes from the fact that they often look just like condos! And condos often look just like townhomes – particularly when they are built in an attached rowhome or two-story townhome style. The primary difference is that with townhomes, owners own the lot beneath their unit. With condos, the owners only own a pro-rata portion of the entire lot under the entire condo complex.Read More

OPEC’s Impending Death Bodes Extremely Well For Rates

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A huge irony of the Iran war is how much it will end up pushing down oil prices – and it is largely because the war broke OPEC. OPEC (Organization of Petroleum Exporting Countries) came onto the scene in 1973 when it embargoed oil in response to U.S. support for Israel in the Yom Kippur War. Oil prices very quickly quadrupled from $3 to $12 per barrel ($22 per barrel to over $80 per barrel in today’s dollars) – crushing the world economy. That would be like oil shooting from $70 to $280 per barrel today. Keep in mind that in March, the world absolutely panicked over the prospect of $150 (oil is $75 now).Read More

Why Reviews Are More Important Than Ever Now; AI’s Not Killing Jobs; Recession Signs?

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Remember around 2010 when online reviews suddenly became essential for business? They helped us and many agents I know get a lot more business. Then everyone started to cultivate reviews, and they became less important. Well, that’s changed… Reviews are huge once again because the AI platforms correlate heavily to them. So, when someone asks Claude, ChatGPT, or Perplexity who the best mortgage lender or real estate agent is, the first thing those AI engines will do is look for recent (that is key) reviews. Equally important, though, is having reviews on multiple platforms, rather than just on Google, as those AI engines are not Google-affiliated and they look across multiple platforms. The platforms should include Google, but also Yelp, Zillow, and Trustpilot (and yeah, I’ve never heard of Trustpilot either, but ChatGPT, Perplexity, and Claude have – and that is what matters). Final point. It is easier to get reviews nowadays too because people use AI to write them. Comically though, one of our recent reviews included the AI commentary along with the review itself. The review is copied at the bottom of the blog, if you want a good laugh.Read More

Fed Comments Push Rates Way Up (Again)…For No Reason (Again). Sigh.

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A few years ago, I wrote my “famous” blog about that time when the Fed offered to mow my lawn. I highly recommend reading it, as it takes about a minute, will likely make you smile, and is a perfect metaphor for how the Fed operates. Yesterday on CNBC, Cleveland Federal Reserve Bank President Beth Hammack reminded me of how accurate my lawn-mowing blog was. Ms. Hammack called for rate hikes due to inflation concerns – and her comments sent rates sharply higher, as she is a “voting member of the Fed” (she gets to vote on Fed policy). This is all well and good, but her reasoning and comments were suspect. She said that high oil prices will cause inflation, but when asked about today’s far lower oil prices (back to pre-war levels), she said they would cause inflation too (“because consumers will now have more money to spend”). Yeah…I am confused too. She also informed us that a hot economy and AI would cause inflation. And a month ago she told us her base case was “hold for some time.” But the only thing that changed since is oil prices…falling by 30%.Read More

Gov’t Now Spends $2 For Every $1 It Collects! THIS Is Why ARMs Scare The Sh*t Out Of Me; PIW Update

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I. Appraisal Waivers (PIWs) do not run with properties alone; borrowers need to qualify too. An agent asked me last night whether we could check whether his listing was eligible for a PIW. And unfortunately, we could not because we can only check for PIWs with a full borrower application. We run the borrower’s application with the property address through Fannie’s or Freddie’s automated underwriter to see if we get a PIW. Weaker borrowers often do not get PIWs for the same address that might yield a PIW for a strong borrower. I should finally add that Fannie and Freddie sometimes yank PIWs and require appraisals when a borrower’s financial situation or loan terms change, e.g., reserves shrink, down payment is lowered, DTI increases.Read More

Alan Greenspan Moves On To The Ultimate Meeting: Hero Or Villain? (Villain)

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Alan Greenspan may be the only man who is more interesting than the Dos Equis guy – “who could speak French in Russian…” Mr. Greenspan just passed away, after making an enormous mark on the world. He was nominated by Reagan to be the Fed Chair in 1987, and he served for almost 19 years until early 2006. He was born in 1926 in NYC, when the Fed was still a baby, and antibiotics, transistors, atomic energy, computers, chips, jet travel, space travel, cell phones, and the internet were mere pipe dreams. He was a very accomplished clarinet and saxophone player who toured with a jazz band before becoming an economist. He studied economics in the early 1950s under future Fed Chair Arthur Burns – who oversaw the 1970s inflationary disaster. He was a disciple and close friend of Ayn Rand, the author of Atlas Shrugged (the famous pro-capitalism book that disdained the kind of central planning that Greenspan’s Fed ultimately embraced to some extent). And, he was married to the famous NBC reporter, Andrea Mitchell, for decades, while playing the role of one of the most powerful men in the world. The entire world hung on every word Mr. Greenspan spoke because the Fed became far too powerful and influential during his tenure.Read More

Instant/Easy/Algo HELOCs; War & Inflation Up, But Rates Hold – WHY? Reason To Worry!

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We Have Push-Button Helocs Now that it is clear rates will stay “higher for longer,” I want to remind readers again that we have a Home Equity Line of Credit (HELOC) that is insanely easy to apply for. Underwriting uses an AI-based algorithm that requires no documentation or appraisals. Borrowers simply fill out an application and get an answer almost instantly. Borrowers can close and get cash in as quickly as 5 days. Borrowers can often qualify even when they have no traditional income documentation. And, applying costs nothing, so there is nothing to lose. When we first got access to these HELOCs, we were extremely skeptical (“too good to be true”). But now they are one of our most popular loan products because they definitely are true – reminding us that AI will take over all lending at some point.Read More

The Dollar Didn’t Die (again) & Why The Dollar Is America’s Super-Weapon

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When the dollar dies, and it will at some point, interest rates in the U.S. will skyrocket (we'll be lucky to see 10% to 12% mortgage rates) – crushing the real estate and mortgage industries (which is why it matters so much). This is because the Treasury will be forced to offer much higher yields to attract foreign bond buyers. Because the dollar is the world's reserve currency – used for most international trade and finance – countries are forced to hold dollars and/or Treasury bills and bonds that they can quickly convert to dollars - creating artificial demand that keeps our rates much lower than they would otherwise be, given our drunken-sailor-spending Congress and drunken-sailor deficits (nobody would lend money to drunken sailors unless they were forced to). Social and traditional media accounts are constantly sharing reports about the dollar's impending demise, e.g., that countries are "dumping" U.S. Treasuries, that the BRICS nations are establishing a new reserve currency, and that the dollar's value is collapsing. But none of this is true – at least not yet and not anytime soon.Read More