Today’s blog is a “random show” of short and unrelated (but interesting, I promise) snippets.
Interest Rates Hit Peak for 2024
Rates are their highest level of the year and almost 1% higher than the bottom we saw in January. They’re still over 1/2% lower than October’s rates though.
Who Got Inflation Right?
Many analysts predicted yesterday’s higher inflation print, but two prominent analysts really nailed it – and I highly recommend following them both.
Jim Bianco started to predict today’s inflation back in Q3 of 2023, focusing heavily on both the consumer’s and the government’s propensity to keep spending…no matter what.
Lyn Alden thinks inflation will bounce way up and then come down over and over for the rest of the decade, and today’s 3 to 4% prints are at the bottom end of the range.
Will the Fed or the Market Lower Rates?
Analyst Danielle DiMartino Booth posted this angry diatribe on X, telling us that Fed Chair Powell is NOT a political shill and will not lower rates for any party or President. She’s a former Fed advisor, so her comments are taken seriously.
So, no, the Fed will not lower rates IF things continue status quo. BUT the markets might say otherwise if there is a major financial or geopolitical disruption, like I have pointed out many times, e.g. wars, currency crises, banking crises, stock market crash, real estate crises.
I am just not holding my breath for falling rates in the near term.
Why “Balance Sheet Runoff” Matters So Much
The Fed is holding over $8 trillion of mortgage-backed securities (MBS) and Treasuries – a number that is both unprecedented and terrifying because the Fed was never supposed to dominate markets like this.
As a result, the Fed has been trying very hard to unload those securities via a process called “balance sheet runoff” – or simply letting the securities mature or pay off without using the proceeds to buy more.
They have been allowing up to $60 billion of runoff per month, but they’re going to cut that in half – meaning that they will start to buy an additional $30 billion per month of Treasuries and maybe MBS with the proceeds from maturing or paid-off bonds.
This increase in demand for Treasuries and possibly MBS should help on the interest rate front.
New Rules for Rental Incomes From “Departing Residences”
We frequently pre-approve buyers who plan to keep their departing residences as rentals. And we often use the future rental income from those residences to help those buyers qualify to finance a new home.
BUT that is not so easy now because Fannie Mae changed the rules. We can only use the departing residence rent to offset the departing residence housing payment; we can no longer use the excess rent (over and above the housing payment) as added income to further help a borrower qualify for a larger mortgage.
Can Real Estate Agents Do Loans? Maybe in Iowa…
JVM has an extraordinarily sharp and academic team, and nonetheless they’re often exhausted from having to know SO MANY GUIDELINES for NON-QM, FHA, VA, JUMBO, FANNIE MAE, FREDDIE MAC, USDA, and HOME EQUITY Loans – among other things. They also need to know dozens of different down payment assistance loan programs – as well as specific guidelines for dozens of different investors to whom we sell loans.
If they did not know ALL of those guidelines, they’d make deal-killing errors far more often and miss opportunities for dozens if not hundreds of buyers referred to us by agents. We’re still not perfect, despite our diligence and academic prowess, but if we were trying to pre-approve buyers while also selling real estate – we’d be mired in catastrophes and missed opportunities 24/7.
There is no way anyone could effectively advise clients in a complex market – unless they are focused on the job full-time. This is largely why I personally am no longer allowed to talk to buyers, as I too am too removed from the trenches to ever effectively advise a borrower (the above departing residence rent rule is a great example of something I was clueless about).
I bring this up because there is so much talk of having agents get “dual licenses” (NMLS and Real Estate). It might work in Iowa with inexpensive housing and lots of W2 borrowers, but in more complex markets? No way…
