Tag Archive for: inflation

Rates Fall As Treasury Rides To The Rescue With Bond Purchases. Will It Work?

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I was going to blog about the new appraisal form – but this is too big a deal to ignore today. There is only one thing Donald Trump fears more than an orange makeup shortage or a windy day: high interest rates. Higher rates make Federal Debt more expensive to service – pushing up deficits and requiring even more borrowing. Our economy thrives off of cheap credit (low rates) – the stock and real estate markets in particular. Further, Peter St. Onge says that every 1% cut in the Fed Funds Rate results in 1 million new jobs, and Trump likely falls in that camp as well. Mr. Trump has been losing a lot of sleep lately, as the 30 Year Treasury hit levels we have not seen for 19 years.Read More

Why Low Inventory Is Such A Big Deal; What Event Will Bring Rates Way Down?

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Total housing inventory in 2007 peaked at over 4 million homes for sale. Today, we’re down to about 1.5 million homes. We are also down year over year! Big deal…right? Yes! Very big deal!Read More

Why Are Boomers So Rich? Theft? Selfishness? Shrewd Investing? Hard Work? Luck?

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The dog park near my CA home is populated entirely by boomers with free-and-clear $3+ million homes – and very fat retirement accounts.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

Reasons For Optimism? Why I Hate Price-Per-Square-Foot Analyses; Appraisers Only Call Out What They See

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Most of the world’s analysts are still on the inflation-and-higher-rates train. But there are still a lot of analysts who believe we’ll see lower rates this year, like the gentleman I referenced yesterday – James E. Thorne.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

Did Immigrants Push Home Prices Up 30% During The Biden Years – Like The Right Is Saying? Vantage Scores Save Deals!

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I. VantageScores Are Saving Deals! I blogged about the new credit-scoring model, VantageScore, last year and got yelled at by my team because no investors (lenders that buy our loans) accepted VantageScores at the time. VantageScore is an alternative to FICO for credit scoring — built by Equifax, Experian, and TransUnion jointly. Fannie and Freddie now allow lenders to use VantageScore 4.0 instead of FICO, and it can score thinner credit files (with fewer accounts) than FICO can. Long story short: we now have investors that accept them, and we’re closing loans for borrowers whose scores were too low to work in the pre-VantageScore days. Borrowers who can’t qualify under the FICO model because their scores are too low should explore the VantageScore alternative.Read More

Iran Bombing Pushes Oil & Rates Higher – But Not THAT High; Price of Doritos; OK – AI IS A Bubble – Woohoo!

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I. Iran’s Exercising Its Most Powerful Weapon: Higher Prices and Rates. Oil prices shot up along with interest rates in response to the U.S. bombing of Iran in retaliation for Iran’s bombing of commercial ships in the Strait of Hormuz. Iran was trying to exert control over the Strait to command extortion fees and establish a strong bargaining position, but the resulting tensions gave Iran the added benefit of two things that hurt Mr. Trump politically: higher oil prices and interest rates. The “average mortgage interest rate” is now back up to about 6.625%, 5/8% higher than the low we saw before the war. But mortgage rates are still ¼% lower than they were on this date last year. Also interesting and encouraging: WTI oil prices are up considerably from last week ($67 to $75), but they remain far below the $90+ levels we saw in early June (prior to the supposed peace talks). So, prices and rates are higher, but not THAT high…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

Oil Crashes & Rates Follow! Will We See 5% Mortgage Rates This Year After All?

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The biggest surprise from the Iran war is turning out to be the best news for interest rates. Oil prices (WTI) fell below $70 per barrel this morning, only $3 above the pre-war price of $67. The biggest surprise from the Iran war is the fact that oil prices did not shoot above $150 per barrel, as most analysts predicted.Read More

Fed Chair Pushes Rates Up; Rates Fall Next Day – Reminding Us How Powerless The Fed Is; Expect Lower Rates!

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Interest rates moved higher yesterday in response to the Fed's comments implying we will not see a rate cut this year, among other things. The bond market then decided to remind the Fed who’s really in charge by pushing rates lower this morning in response to a peace deal with Iran and falling oil prices. The markets often respond to Fed comments in the near term, only to offset those moves soon thereafter with reactions to actual economic data – which is what happened today. It is a huge reminder not to get concerned about market reactions to Fed comments, as the Fed has much less power than most people realize.Read More

Condo Financing Hits Peak Debacle – But We Can Help! The War Ends For The 27th Time

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330% Increase in Condo Projects Losing Fannie Mae Eligibility! Some 1,700 condo complexes are non-warrantable now, meaning they are no longer eligible for Fannie/Freddie financing. Calling this a debacle is an understatement. That is because losing financing options wipes out entire contingents of buyers (especially low-down-payment buyers). Depending on the issues with the complex/HOA and the financing options available, we have seen complexes lose 25% to 50% of their value when they become non-warrantable. In the olden days, the issues that made condos non-warrantable included: Litigation involving the HOA Owner occupancy ratios (need to be over 50% - for FHA and investor financing only) Too much commercial use (35% limit) Structural issues noted in the HOA minutes or MLS Concentration Issue (one owner can’t own more than 20% of the units) But today, the two big issues we see over and over are insufficient reserves and/or inadequate insurance. What happened? Inflation pushed up repair costs, condos got old, insurance costs went way up, and the occasional complex fell into the ocean (that seems to make lenders nervous).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

Stock Market Crash Is Coming FOR SURE; Preventing It Will Push Rates Higher

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We are going to see a 1987-style stock market crash (only worse) for sure, and it is only a matter of when. I have blogged about this many times, but investing guru Mike Green was just on this Julia La Roche podcast - Why A 1987-Style Crash Is Now Almost Inevitable – explaining why. So, I am hitting it again for two reasons: (1) the podcast is very short – so every investor should listen to it; and (2) I am adding another twist to explain why this threat will lead to higher rates.Read More