Tag Archive for: inflation

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

Woohoo! Another Financial Crisis Is Coming – And It’s Gonna Be Bad!

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“What’s good for General Motors is good for America!” That is a slight bastardization of a quote famously uttered by GM’s CEO in 1953 – and he was largely right. What is ironic, though, is that the opposite is true for the mortgage industry (and for real estate).Read More

Should Buyers Wait For Lower Rates To Buy?

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Oil prices (WTI) spiked up to $90 per barrel (from only $66 prior to the war), and rates rose again in response. Interesting thing number #1: Inflation fears trump weak labor markets. A very weak jobs report surfaced today, which would normally have caused rates to plummet. But higher oil prices outweighed the very weak job numbers, and rates rose. Interesting thing number #2: Oil spiked far higher when Putin invaded Ukraine. WTI oil prices were in the $80 range when Putin started to build up his forces in anticipation of his Ukraine invasion in early 2022. After the invasion, prices spiked up to almost $116 in a few weeks – a $36 increase. What is interesting, though, is that Russia was only responsible for about 10% to 12% of the world’s oil production in early 2022, vs. 20% for the Persian Gulf region. This implies that the markets thought the Ukraine war would last longer and be more severe.Read More

Rates Up Again; When Will They Come Back Down?

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We saw record loan volume last week, hitting a number of locked loans we have not seen since 2022. Then…it all stopped. The reason, of course, was the Iran war – which threatens the distribution of as much as 20% of the world’s energy supplies (sparking inflation fears). In other words, right when things were getting good, geopolitics threw a wrench into the machine (again).Read More

Why Rates Will Now Stay Elevated Even When The War Ends; But Don’t Worry…

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West Texas Intermediate (WTI) oil was down to $64 per barrel last week before the Iran war. Today, WTI is close to $74 per barrel – a whopping 16% increase that will work its way into every other thing we purchase. This is because the war threatens the supply and transportation of a huge portion of the world's oil and liquid natural gas (over 20%). Gasoline prices are already up 20 cents per gallon – the largest jump we’ve seen over a short period in over 20 years.Read More

Great News About Inflation! 8 Inflation Facts Every Agent Should Know

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Almost nothing impacts interest rates as much as inflation. This is because bond investors (who control interest rates) demand higher yields (rates) when inflation runs hotter. Agents and mortgage lenders alike should care about inflation because lower rates drive homebuying demand – something we saw take place directly in November and December in response to falling rates. NAR economist Lawrence Yun often reminds us that as many as 5.5 million more homebuyers qualify for mortgages when rates drop 1%, and 10% of those people jump into the housing market. So – this is why everyone should be ecstatic about the significant declines in inflation we’re seeing.Read More

Inflation Plummets Again (Woohoo for Rates!) BUT The Fed Won’t Allow Very Low Inflation!

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As I mentioned a few weeks ago, Truflation is a blockchain-based (non-government) platform that provides real-time price analyses based on thousands of products, and many consider it much more accurate than the government’s PCE and CPI reports. Truflation was 1.2% in January, but it has recently fallen to an impressively low 0.68% (on falling natural gas prices). In contrast, the government’s less-accurate CPI figure is at 2.7% (with an update coming Friday). So, inflation is definitely cooling, and that is very good news for rates, as bond investors focus heavily on inflation.Read More

“Interest Rates” ≠ Mortgage Rates; Inflation Cools, So Woohoo But Not For Long; Banker & Broker; Land-to-Value Ratios

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“Interest Rates” Are Not Always “Mortgage Rates.” When the media is telling everyone that interest rates are climbing, it does not always mean that mortgage rates are climbing. We have been seeing this play out recently, as the 10-Year Treasury Yield (the benchmark interest rate) has been edging higher, but mortgage rates are holding relatively steady. In other words, the “spread” between mortgage rates and the 10-Year Treasury continues to tighten. Interest rates can in fact refer to many things such as mortgage rates, mortgage-backed security rates (different from mortgage rates), Treasury bond and bill rates, the Prime Rate, the Fed Funds Rate – and more.Read More

What Else Can Mr. Trump Do To Bring Down Rates And Home Prices?

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“We should ban rich people from going to McDonald's to bring down McDonald's prices.” 😊 George Gammon said that in jest in response to Mr. Trump’s ban on institutional investors from buying single-family homes. More on that below. In recent days, numerous Trump administration officials (Bessent, Lutnick, etc.) and other macro-observers (including the “All-In” podcast hosts) predicted 5% to 6% GDP growth this year.Read More

What Happens If The Economy Grows At A 10%+ Rate – Like Elon Predicts?

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On Friday, December 26th, when most of the world was shut down, we were awash in purchase contracts – receiving more in one day than we’ve received on any other day all year. What made it more interesting is that most of the contracts were isolated to one area. The reason is very telling – particularly for purposes of this blog. On December 24th, Elon Musk posted this: Double-digit growth is coming within 12 to 18 months. If he’s right, interest rates will be as high as 10% - and real estate agents everywhere will be dancing with glee! Elon is referring to economic or gross domestic product growth. It’s been averaging 2% to 3% over the last few years – and much of that was just government spending (so not “real” growth that benefits everyone). Elon thinks AI and robotics will foster double-digit private sector growth. This means that we will add over $3 trillion of NEW (out of thin air) wealth to our economy each year.Read More

The Cost Of Waiting For Rates To Fall Is Getting Expensive!

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Yesterday, I predicted rates would fall in response to cooling inflation, resulting from falling rents. Welp, that didn’t take long. Today, rates fell in response to cooling inflation, resulting from falling rents. Read More

Unusual: The Fed Cut Rates & Rates Fell! Why Does Anyone Listen To The Fed?

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Something very odd happened in July of 2008 – only a few months before the biggest financial meltdown since 1929. Inflation was over 5% (double today's levels), the Fed was panicking, and the markets were predicting a Fed rate increase in August of 2008. What makes that so comical is that only a few months later in October of 2008, the Fed did an emergency rate cut of 50 bps, shortly after the Lehman collapse (and we saw “DEFLATION” set in).Read More