August 14th, 2023

Happy Monday💸 Update this week is a double-edged sword. Rates continue to surge, so I am over-indexing with happy family news!

The last days of Summer are here. Kids go back to school on Wednesday and I have a freshly minted 6-year-old (JJ) as of tomorrow.

Some of you likely already have kids back in school. Seems way earlier than when we were kids, though, right??

We took the weekend to slam in the last-minute stuff on our “Summer to-do list” at home. We went on a night hike on North Sonoma Mountain to learn about Bats. Made the annual trip to the Sonoma County Fair on Saturday and took out the kids’ Kayaks on Spring Lake Sunday evening.

Secretly, I am trying to keep my calendar busy with hopes this means my phone won’t stop ringing with new business, but no dice (damn rates!)…. It looks like I need to plan an actual vacation to get the plan to work, LOL!

We all know how that happens!!!

Sonoma Mountain Sunset

Sonoma County Fair – Hall of Flowers was “Jurassic” Themed and was AWESOME.

Spring Lake Kayaking

Have a wonderful week.

– Glenn T. Groves

TLDR (Too Long Didn’t Read) Summary:

• ⬆️ RATES – All up, it could get worse.

• 📊 TECHNICALS – Looking at 2022 vs 2023 bond market.

RATES

Product Rate / APR Weekly Change

⬆️ Conventional (Zero Point) 7.375% / 7.391% +.250%

Conventional (One Point) 6.950% / 7.066%

⬆️ Conv. HB (Zero Point) 7.500% / 7.512% +.125%

Conv. HB (One Point) 7.250% / 7.354%

⬆️ JUMBO (Zero Point) 7.375% / 7.389% +.250%

JUMBO (One Point) 7.000% / 7.090%

⬆️ FHA 3.5% Down (Zero Point) 6.625% / 7.357% +.125%

FHA 3.5% Down (One Point) 6.200% / 7.081%

⬆️ VA 0% Down (Zero Point) 6.750% / 6.988% +.250%

VA 0% Down (One Point) 6.250% / 6.586%

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: It’s a shit show. Not much else to say, but these rates are not fun.

  Verify my mortgage eligibility (Oct 3rd, 2023)

• 🔓 LOCKING – Friendly reminder for you and your clients: you CANNOT lock a rate without collateral (a home in contract).

We get calls every once in a while from people asking if they can go ahead an lock in a rate (during the pre-approval process) if they are afraid it is going to get worse or they assume that the rates we show them during pre-approval breakdowns are locked or binding.

TECHNICALS

Not Out Of The Woods

10Y T May ’23 – Aug ’23

10Y T May ’22 – Aug ’22

So far, July and August have not treated us well. Comparing last Summer of the same time period to now, you can see the daily volatility this year is MUCH more pronounced.

This time period last year was when lenders started scrambling, and we started seeing doors close on wholesale & retail lenders alike. Will we see the next wave soon??

🎈 Is Consumer Inflation Rearing Its Head Again?

• July's CPI: Inflation rose 0.2% monthly and from 3% to 3.2% annually. Core CPI (excluding volatile food and energy) increased by 0.2% and declined from 4.8% to 4.7% annually.
• Factors: Costs for used cars, airfares, shelter, gasoline, and food helped suppress inflation.
• Bottom Line 🧠: Though annual inflation moved higher, it’s partly due to last July's negative figure. The easing trend is good news, as lower inflation generally aids Mortgage Bonds and mortgage rates, offering potential buying opportunities.

🔥 Wholesale Inflation Hotter
Than Expected

• July's PPI: Increased by 0.3%, annual PPI rose from 0.2% to 0.8%. Core PPI (excluding food and energy) rose by 0.3%, with a yearly rate at 2.4%.
• Fed’s Decision 📅: Watching inflation reports for decisions on rate hikes, possibly in their meeting on September 20.
• Bottom Line 🧠: Although PPI moved higher, it’s still well below last year's 11.7% peak. This might not directly impact real estate but could influence overall economic stability.

🏠 Home Price Appreciation Heading Higher

• Black Knight's Home Price Index: Prices rose 0.7% in June, up 0.8% annually. On track to appreciate 5.8% in 2023.
• Market Insights: Nearly every major market experienced growth, mirroring other strong housing indices.
• Bottom Line 🧠: Continued growth in home prices shows that opportunities for building wealth through homeownership and appreciation are present. This contradicts the gloomier forecasts some had made about the housing market.

❓ Is the Rise in Initial Jobless Claims a New Trend?

• Jobless Claims: Increased by 21,000 to 248,000, while Continuing Claims fell by 8,000.
• Hiring Challenges 🧩: 92% of small businesses struggled to find qualified workers.
• Bottom Line
  🧠: Jobless Claims remain relatively low, reflecting hiring difficulties. A continued trend could impact local economies and consequently real estate markets.

📅 What to Look for This Week

• Housing Reports 🏗: Updates on builder sentiment, Housing Starts and Building Permits may indicate future housing supply.
• Manufacturing & Sales 🏭💲: Regional data can hint at broader economic trends; Retail Sales will shed light on consumer spending.
• Fed's July Meeting 📈: The minutes release could spark market volatility, potentially affecting mortgage rates.

📈 Technical Picture

• Mortgage Bonds 💸: Trading between wide ranges, with potential price fluctuations that could affect mortgage rates.
• 10-Year Yield 📊: Ended above 4.09%, with a next ceiling at 4.23%. Movements here could also influence mortgage rates.