Market Update - September 11th, 2023
Good morning! It definitely feels like fall is already here. Football has returned in full force and the morning air has a chill to it. No matter the season, the mortgage and housing market still feels as volatile as. But don’t fret, Kreg and I are here to break it all down for you. We’ll share what happened last week, a look at things to come and a realtor “value bomb” that’s been requested a lot lately.
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August CPI Wednesday
We get another look at the inflation data this Wednesday. It will be one of the final, influential data points prior to the Fed meeting next week. The current consensus is that headline CPI will increase from 3.2% to 3.6%. Core CPI (excluding food and energy) is expected to pull back from 4.7% to 4.3%. If it comes in higher than expected, the Fed may feel the need to raise rates again later this year.
Key Takeaway: At first blush, the headline increase looks abysmal, jumping 0.4%. We called out that August will be tough because the August 2022 CPI numbers were very low. We are replacing that lower August 2022 data point with a higher August 2023 data point, which is why the headline number is expected to go up. This is why inflation feels “sticky” as the Fed fights to get inflation back to 2.0% annually.
Is a Consumer Credit Cycle Beginning?
Knowledge Leaders Capital released some interesting charts last week showing a sharp rise in auto loan and credit card delinquencies over the last year and a half. As borrowers struggle to repay their debts, we may start to see the hot US economy start to cool, especially with student loan payments coming back online this month. Remember, when the economy cools, that will pull down inflation which will help interest rates.
Key Takeaway: On a positive note, mortgage loan delinquency is very, very low (likely attributed to the appreciation over the last few years). Auto loan delinquency are relatively low, but borrowers between 18-39 currently have the highest rate of delinquency in 13 years. As vehicles are repossessed, that should put more cars on the lot bringing prices down which may help cool inflation. Lastly, credit card delinquencies more than doubled in the last two years from 2.5% to 5.0%. When you isolate the younger generation, the picture is much worse. Almost 1 out of 10 18–29-year-olds is more than 90 days late on their credit card payments. This should get worse as this demographic is most affected by the lift of the student loan moratorium.
FHA Issues Waiver on Harmful Flag
Last week, the FHA issued a waiver eliminating the need for mortgage lenders to flag rejected loans in the FHA Connection system. Historically, this action flags the borrower and the case number for 6 months, hurting their chances at another lender attempting to get them approved. It’s been determined that this flag does not improve FHA’s risk. Kreg and I could not agree more!
Key Takeaway: Not all lenders are created equal. It’s just a fact. Kreg and I have been in the industry a very long time and have helped thousands of clients secure a mortgage. We’ve seen it all and have saved many folks who have been turned down by other lenders. Why? Because we take our time and ask the right questions. The removal of this flag is one less hurdle in our way to get qualified applicants into homes. 👏
Realtor “Value Bomb” : FHA/VA Appraisals
We recently met with one of our realtor teams to discuss the unique FHA/VA appraisal guidelines. We hear often that listing agents shy away from FHA/VA borrowers due to fear of the appraisal. Additionally, buyer’s agents get weak in the knees when their client can’t go Conventional. Fear not! We got you covered!
Kreg and I compiled a list of the big things that appraisers will review on FHA/VA appraisals. It’s not an exhaustive list, but it includes the major ones we’ve seen over the years. If you know what the appraiser is going to look for, you can work to mitigate the risk of any issues. Do you see chipping paint? Get it scrapped and re-painted before the appraiser arrives. Is there a staircase without a handrail? Throw one up quickly and you’ll be fine!
The PDF attached is worth its weight in gold 😊
Instagram Posts from Last Week
Don’t hesitate to reach out if you need anything at all. Have a wonderful week!