Issue 48. October 30th, 2023

Happy Monday💸 If you have kids, you know the excitement for 🎃 tomorrow night. Especially since our school district had the foresight to give the kids the day off on Wednesday.

I’m sure there are a ton of parents not too happy about that. Personally, I’m happy we don’t have to call it a night super early because it would be a “school night”. So rock on there.

Otherwise, we are entering the “Holiday Zone” with:

• 🕸️ Halloween

• 🎖️ Veterans Day

• 🦃 Thanksgiving

• 🎄 Christmas

• 🥂 New Year

All jammed within 59-60 days. But it feels like a 3-week sprint because of all the holiday parties that chew up weekends as well. Tis the season…

🕙 Prepare for Daylight Savings this weekend, where we “Fall Back” an hour on Sunday morning. This will further confuse our bodies after snacking on the kid’s candy while they sleep. It’s pretty standard parent behavior, really.

🧛 Here are some Fun Halloween stats!

1. Spectacular Spending:

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   • In 2023, U.S. consumers are projected to spend over $12 billion on Halloween festivities. This spending encompasses costumes, decorations, and of course, candy¹.
   • On a per-person basis, Halloween spending is set to top $108 this year, marking a continuation from 2021 when per-person spending surpassed the $100 mark for the first time².

2. Candy Craze:

   • The sweet tooth is in full swing during Halloween, with U.S. consumers expected to spend over $3.5 billion on trick-or-treat candy alone in 2023³.

3. Costume Commotion:

   • Costume sales have seen a significant boost, with a rise of 34% from $3.2 billion in 2019 to an estimated $4.1 billion in 2023².

4. Decoration Delight:

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   • Decorations are not left behind in the spending spree. Sales for Halloween decorations are up by 50%, from $2.6 billion in 2019 to $3.9 billion in 2023, showcasing the love for spooky aesthetics².

5. Engagement Excitement:

   • Halloween enthusiasm is soaring with 73% of Americans, which is more than 240 million people, diving deep into Halloween spending, be it for spooky home décor, creative costumes, or party-sized Halloween candy mixes

As always, reach out with questions or scenarios. See you in the trenches.

Have a wonderful week.

– Glenn T. Groves

TLDR (Too Long Didn’t Read) Summary:

• ⬇️ RATES – Small breathing room after weeks of run-up.

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• 📊 TECHNICALS – Fall Market Trends.

• 🏘️ PRODUCT SPOTLIGHT – 2-4 Multi-Unit Guideline Update.

RATES
➡️ OCTOBER 30TH, 2023

The Office / 2004 – NBC

Product Rate / APR Weekly Change

⬇️ Conventional (Zero Point) 8.000% / 8.014% -.125%

Conventional (One Point) 7.625% / 7.763%

⬇️ Conv. HB (Zero Point) 8.250% / 8.310% -.125%

Conv. HB (One Point) 7.875% / 8.023%

⬇️ JUMBO (Zero Point) 7.875% / 7.930% -.125%

JUMBO (One Point) 7.500% / 7.673%

⬇️ FHA 3.5% Down (Zero Point) 7.250% / 8.006% –.125%

FHA 3.5% Down (One Point) 7.000% / 7.856%

⬇️ VA 0% Down (Zero Point) 7.375% / 7.856% –.125%

VA 0% Down (One Point) 7.000% / 7.333%

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.

*NEW* Debt Consolidation Options

↔️ FIXED 2nd (Zero Point) 10.250% / 10.280% –.000%

FIXED 2nd (One Point) 9.750% / 9.927%

Rate data as of morning of publication. Unless noted otherwise, above scenario are assuming 30 Year Fixed, Closed End 2nd mortgage, Cash Out Refinance. No origination points charged, 780 FICO score, 60% CLTV .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: A little relief vs last week.

I have also added a section for Fixed Rate 2nd mortgages. These will allow you to leave your current 1st mortgage in place and access equity on your home to pay off other bills. This Could be an excellent “out” for those clients that are feeling the sting of high-interest rates on credit card debt. This is the alternative to a HELOC, which would have an adjustable rate.

Reach out, and I can run through the pros/cons of each type of loan. The biggest positive of either is NOT TOUCHING your fixed rate first.

TECHNICALS

Spooky Market Trends This Fall

We are quickly approaching that “cozy” time of year. Days are getting shorter, nights are getting colder, and the holiday calendar is starting to get filled up. Every year, this means the Real Estate market slows down.

Last year, after the epic rate rise, we saw an absolute standstill in activity. What will this year bring?

🏠 Lodging, Energy Costs Nudge Inflation Upward:

• The Consumer Price Index (CPI) for September showcased a 0.4% uptick, marginally above projections. Although the yearly rate remained at 3.7%, the core CPI (excluding food and energy costs) showed a small decline from 4.3% to 4.1% on an annual basis. The main culprits behind the increase were shelter, energy, and gasoline prices. However, a drop
  in oil prices post-September hints at easing inflation.
• Bottom Line: The inflation rate has significantly dropped from the peak of last year, potentially alleviating concerns of further rate hikes by the Federal Reserve.

🔥 Wholesale Inflation Getting Toasty:

• The Producer Price Index (PPI) recorded a 0.5% rise in September, with the annual rate climbing from 2% to 2.2%. The core PPI also saw a 0.3% increase. Much of this uptick was driven by a 3.3% jump in energy prices.
• Bottom Line: Despite the upward movement, the annual PPI is well beneath last year’s peak of 11.7%, largely thanks to a drop in energy prices post-summer.

🏦 Fed Members Divided on Rate Hikes:

• The narrative around rate hikes took an interesting turn with several Fed members expressing differing opinions. While some, like Fed Governor Michelle Bowman, voiced concerns over high inflation, others like Atlanta Fed President, Raphael Bostic, suggested a pause on rate hikes as they see current rates as restrictive.
• Bottom Line: The dissent among Fed members is something to keep an eye on as it could influence future rate decisions, potentially impacting mortgage rates.

🍂 Seasonal Housing and Appreciation Trends:

• Zillow reported a slight 0.1% decrease in home values for
  September, marking the first dip since February. However, values are still 2.1% higher than last year and on track for a 6% increase this year.
• Bottom Line: The autumn season traditionally sees less competition and softer home price appreciation, following substantial increases during spring and summer.

👥 Job Market Stability:

• Initial Jobless Claims held steady, indicating a robust job market. While Continuing Claims rose slightly, the numbers suggest employers are retaining their staff, which bodes well for the housing demand.
• Bottom Line: A stable job market continues to support a healthy housing demand, although recent upticks in Continuing Claims warrant monitoring.

🔮 What’s on The Horizon:

• Keep an eye out for several key housing reports due this week, including updates on home builder sentiment, Housing Starts, Building Permits, and Existing Home Sales. Additionally, regional manufacturing data and Retail Sales figures
  are slated for release, which could provide further economic insights.

📊 Technical Overview:

• Mortgage Bonds and the 10-year treasury note witnessed a wide trading range last week, indicating a mixed sentiment among investors. The upcoming Fed meetings and economic reports might provide a clearer direction.

The interplay of inflation, Fed’s stance on rate hikes, and seasonal housing trends creates a multifaceted scenario for the real estate market. Stay tuned for more updates as we dissect these trends and their potential impact on the housing sector.

Feel free to utilize the data and insights provided to educate your clients and guide them in making informed decisions. For a deeper dive into any of the topics, you can explore the following sources: Federal Reserve, Bureau of Labor Statistics, and Zillow.

PRODUCTS

KILLER Changes to Multi-Unit Guidelines

Scream / 1996 – Demension Films

A Big Update to Fannie Mae's LTV Ratios for Multi-Unit Properties

If your clients have been considering investing in multi-unit properties for their primary residence, there’s some noteworthy news. Fannie Mae has updated their LTV ratios, and this could potentially transform the upfront costs your clients may need to bear.

How does this impact the down payment?

In simple terms, the upfront costs for borrowers could be considerably less. Let’s delve into the numbers to understand the implications of these updated LTV ratios:

LTV Ratios Table:

The Math in Simple Terms:

Let’s use a practical example:

Sales Price: $1,000,000

For 3-4 units before the update:

• 75% LTV = $750,000
• Required downpayment = $250,000

For 3-4 units after the update:

• 95% LTV = $950,000
• Required downpayment = $50,000

This translates to a substantial savings of $200,000 on the downpayment!

A Few Important Points to Note:

1. These favorable changes are strictly for Conforming Loan Limits. If you’re looking at high-balance loans, these updated LTVs will not apply. Here are the limits for Sonoma County:

   • 2 Units: $1,102,700

   • 3 Units: $1,332,900

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   • 4 Units: $1,656,450

2. This significant update is only applicable to owner-occupied scenarios.

3. With less than 20% Down Payment, Mortgage Insurance will be required. It is currently unknown how aggressive these numbers will be.

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4. Counting prospective rents received to offset proposed mortgage payment for qualification will be dependent on landlord history of the qualifying borrower.

5. First Time Home Buyers could be eligible to WAIVE loan level price adjustments to interest rates IF they fall under Area Median Income limits.

This is an opportune moment for potential homeowners looking to invest in multi-unit properties. Real Estate agents, make sure you’re keeping your clients in the loop about these changes and helping them make informed decisions.

Created by Glenn Groves

Loan Scenario Question?

• Email the team: TeamGlenn@gtgfi.com

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