August 21th, 2023

Happy Monday💸 Here is the good news. Kids are back in school, and Football season is approaching. Kickoff is September 7th .

The bad news? The bond market and rates are going to hell in a handbasket. These are the highest rates I have seen in my career. If anyone else has seen higher, you are a 20-year industry vet. Good for you.

Here are some obligatory first-day-of-school pics to lighten you up before bludgeoning you with the rest of the interest rate news.

Gerald “JJ” Groves – Kindergarden

Grayson T. Groves – 2nd Grade

Gray & JJ – First day of school 2023

Please try and have a wonderful week.

– Glenn T. Groves

TLDR (Too Long Didn’t Read) Summary:

• ⬆️ RATES – If you have a high gag reflex, 🤮 scroll past these.

• 💀 INDUSTRY – Breached 2002 and October 2022 levels.

• 📊 TECHNICALS – Mixed stats for builders.

  Verify my mortgage eligibility (Oct 3rd, 2023)

• 🌟 INSPIRATION – (WWWBD) What Would Warren Buffett Do?

RATES

Anchorman: The Legend of Ron Burgundy / 2004 – Dreamworks Pictures

Product Rate / APR Weekly Change

⬆️ Conventional (Zero Point) 7.499% / 7.515% +.125%

Conventional (One Point) 7.125% / 7.239%

⬆️ Conv. HB (Zero Point) 8.000% / 8.010% +.500%

Conv. HB (One Point) 7.375% / 7.485%

⬆️ JUMBO (Zero Point) 7.625% / 7.636% +.250%

JUMBO (One Point) 7.375% / 7.461%

⬆️ FHA 3.5% Down (Zero Point) 7.000% / 7.737% +.375%

FHA 3.5% Down (One Point) 6.500% / 7.345%

⬆️ VA 0% Down (Zero Point) 7.125% / 7.364% +.375%

VA 0% Down (One Point) 6.625% / 6.963%

Rate data as of morning of publication. Unless noted otherwise, all scenarios are assuming 30 Year Fixed mortgage, Purchase & R/T Refinance. No origination points charged, 780 FICO score, and 20% down payment .Provided for consumer education only and does not serve as a binding offer to extend lending. Payment period, interest rate, APR, and other terms subject to income, asset, and credit profile qualification.

Rates highlighted in this color have the same metrics as above, but would incur one discount point charge.

• 📊 Mortgage Rates: Hits keep coming. What really stings is that these are premium borrower scenarios. Have sub 720 FICO and we are likely looking at another .250% piled onto the rate.

  Verify my mortgage eligibility (Oct 3rd, 2023)

INDUSTRY

Highest Rates Since 2002

Dumb and Dumber / 1994 – New Line Cinema

Hey gang, we did it. We’re there. Highest rates in 21
years!

30 Year Fixed Mortgage Rates 2000 – 2023

And no offense, but I don’t wanna hear the boomer crowd with the, “When I bought my first home, rates were 9%…” rhetoric. Give it a rest, you were dealing with a median home price of roughly 36% of what the national average was.

Median Home Prices 1990 – 2023

The last 2 weeks have seen a .375% – .625% run-up in RATE.

10Y T 8.21.23

📈 Things are going from bad to worse with rates. Remember this chart I put up a few weeks back (8/7/23):

10Y T Sep ’22 – Aug ’23

💀 We’re now where we feared we could end up. We’ve exceeded the October 2022 rate spikes.

10Y T Sep ’22 – Aug ’23

TECHNICALS

All Eyes On Builders

Michael Scott – The Office

So now we need to root for one of our arch-rivals (builders) to get their ass in gear so later on we can go to war with their borderline illegal "preferred lender" antics. This gets better and better! LOL

🏡 Strong Summer for Housing Starts:

Housing Construction’s Positive Trend:

• Home construction picked up significantly in July.
• Housing Starts, the measurement of new home construction, rose by 3.9% from June.
• Single-family homes’ starts were particularly strong, at 6.7% higher from June to July.
• Building Permits, which signal future construction, were relatively flat but permits for single-family homes rose 0.6% – the highest in a year.

Implications for Real Estate Agents:

• More inventory is needed to meet the current demand, but this uptick is a step in the right direction.
• New supply will be around 1.45 million homes annualized.
• Considering 100,000 homes that need to be replaced due to aging, the supply
  still falls below the demand trend of 2.07 million.

📉 Understanding the Decline in Home Builder Confidence:

Decline in Confidence:

• The National Association of Home Builders (NAHB) Housing Market Index fell six points to 50 in August.
• This index is a barometer for builder confidence and this latest reading is right at the breakeven level between expansion and contraction.
• So confidence is down, but they are plowing forward with breaking new ground on the amount of starts (see above).

Reasons for Decline:

• Rising mortgage rates are making financing more expensive.
• High construction costs due to a lack of workers and buildable lots.
• Ongoing shortages of crucial materials like distribution transformers.
• Record high heat deterred potential buyers from home shopping, impacting builders’ perception of buyer traffic.

Implications for Real Estate Agents:

• Even though confidence has declined, it follows seven consecutive monthly increases.
• Agents should be aware of these challenges as they may impact construction timelines and availability.
• Understanding these factors can also help agents
  set the right expectations with their buyers who are interested in new construction properties.

💵 Are More Fed Rate Hikes Ahead?

• The Fed hints at potential rate hikes due to concerns about inflation.
• Key data in the coming weeks will affect the next rate decision on September 20.

👔 Initial Jobless Claims Remain Tame:

• Unemployment claims fell by 11,000.
• 239,000 Initial Jobless Claims suggest employers are retaining workers.
• Continuing Claims are at 1.716 million but trending lower.

🔮 What an Important Recession Indicator Is Saying:

• Leading Economic Indicators fell 0.4% in July.
• Potential for a mild contraction in the coming months.
• Lower interest rates may follow a recession 🙏.

📆 What to Look for This Week:

• More housing data on Existing and New Home Sales.
• Watch for the Jackson Hole Economic Symposium starting Thursday.
• Mortgage Bonds and yields to keep an eye on.

Michael Scott, Michael Scott Paper Company – The Office

Bottom Line 🎯

Homebuilding starts and builder confidence are integral indicators of the housing market’s health. The positive trends in home construction are encouraging, but challenges in builder confidence signal underlying issues that may affect the availability and pricing of new homes.

We cannot expect that home building alone will solve the current inventory issues.

Something else has got to give. A 40-year purchase-only mortgage? This could kill two birds with one stone:

• Help alleviate some affordability issues with strapped borrowers.

  Verify my mortgage eligibility (Oct 3rd, 2023)

• Incentivize sellers who currently feel trapped by a sub-4% rate and do not want to sell.

Agents should keep these builder factors in mind to provide informed guidance to their clients, be it buyers looking to invest in newly constructed homes or sellers who might benefit from increased home values due to supply shortages.

INSPIRATION

Wise Words

Not a whole lot of good news, but remember. There is ALWAYS an opportunity. Right now, that opportunity is that a whole lot of borrowers are going to be throttling back and sitting on the fence. Advise your clients that now might be the best time to STRIKE!

Buffett is betting big on home builders.

Happy house hunting! 🏠💼🎉