assumptions

Apache is functioning normally

Apache is functioning normally

We maintain our forecast for a modest economic contraction in the first half of 2024. Fundamentally, personal consumption remains at what we believe to be an unsustainable level relative to incomes, and the full effects of monetary policy tightening are still working through the economy. We have upgraded our 2023 real GDP growth outlook to 2.2 percent from 1.9 percent on a Q4/Q4 basis largely due to incoming July data, while our forecast for growth in 2024 is unchanged. Meanwhile, we forecast the topline and core measures of the Consumer Price Index (CPI) to end the year around 3.1 percent and 4.0 percent in 2023, respectively, slowing further in 2024 to 2.4 percent and 2.5 percent.

With the jump in mortgage rates to above 7 percent, the housing market faces renewed headwinds. Mortgage origination activity has slowed further in recent weeks and total home sales remain at levels not seen since 2011. The new home market, which showed surprising strength over the first half of 2023, due in part to a limited inventory of existing homes for sale, may now be taking a breather. We forecast total home sales to be around 4.8 million in 2023, which would be the slowest annual pace since 2011 and 4.9 million in 2024. Similarly, our expectation for 2023 mortgage originations was downgraded from $1.60 trillion to $1.56 trillion in 2023 and from $1.92 trillion to $1.88 trillion in 2024.

Q3 GDP Growth Poised to Accelerate, but Strength is Likely Temporary
The third quarter started off on a strong note, with real personal consumption jumping 0.6 percent month over month in July, pointing to a stronger Q3 2023 GDP growth figure than previously anticipated. Even if personal consumption expenditures were to remain flat over the next two months, July’s growth alone would translate into a pace of personal consumption over the quarter of around 3.8 percent annualized. However, this surge in spending is likely unsustainable and our outlook is for decelerating activity. We believe much of the July consumption was the result of pulling forward future spending in part due to a combination of the release of popular movies and concerts as well as an increase in spending on energy during the July heat waves, and perhaps due to seasonal timing related to online retailer sales. Both recent credit card transaction data and auto sales data point to a likely pullback in consumption in August, with auto sales falling 4.6 percent month over month. August nominal retail sales jumped by 0.6 percent, but this was almost entirely due to price increases in gasoline. Control group retail sales, which feed into the GDP report, rose by only 0.1 percent in nominal terms, suggesting flat or slightly declining real sales. Furthermore, the 0.6 percent pop in real consumption in July came despite a decline of 0.2 percent in real disposable income, increasing the divergence between the two series. Recent spending growth has come via a further reduction in the already below-trend personal saving rate to 3.5 percent in July. This was down from 4.3 percent in June and around an average of 8.0 percent from 2017 to 2019. Especially when accounting for an expected deceleration in wage growth, we expect more modest consumer spending growth in coming quarters.

Refinance Application-Level Index (RALI), remains depressed given that mortgage rates remain above the 7 percent level.

Economic & Strategic Research (ESR) Group
September 14, 2023
For a snapshot of macroeconomic and housing data between the monthly forecasts, please read ESR’s Economic and Housing Weekly Notes.

Data sources for charts: Bureau of Economic Analysis, Bureau of Labor Statistics, Mortgage Bankers Association, National Association of REALTORS®, Fannie Mae

Opinions, analyses, estimates, forecasts and other views of Fannie Mae’s Economic & Strategic Research (ESR) Group included in these materials should not be construed as indicating Fannie Mae’s business prospects or expected results, are based on a number of assumptions, and are subject to change without notice. How this information affects Fannie Mae will depend on many factors. Although the ESR group bases its opinions, analyses, estimates, forecasts and other views on information it considers reliable, it does not guarantee that the information provided in these materials is accurate, current or suitable for any particular purpose. Changes in the assumptions or the information underlying these views could produce materially different results. The analyses, opinions, estimates, forecasts and other views published by the ESR group represent the views of that group as of the date indicated and do not necessarily represent the views of Fannie Mae or its management.

ESR Macroeconomic Forecast Team

  • Doug Duncan, SVP and Chief Economist
  • Mark Palim, VP and Deputy Chief Economist
  • Eric Brescia, Economics Manager
  • Nick Embrey, Economist
  • Nathaniel Drake, Economic Analyst
  • Richard Goyette, Economic Analyst

Source: fanniemae.com

Apache is functioning normally

Apache is functioning normally

Dark Matter Technologies, formerly Black Knight Origination Technologies, is focused on mainly two things: the smooth transition to new owners, and lowering the cost to originate loans for lenders.

Executives from Dark Matter Technologies, under the Constellation Software umbrella, said that a down market is the best time to make investments in technology and prepare for the next cycle.

With lenders focused on bringing origination costs down in a tough origination environment, the firm saw up to a 300% year-over-year growth in new user numbers for the past couple of years.

“We actually do well in any kind of market,” Rich Gagliano, CEO of Dark Matter Technologies and former president of Black Knight, said in an interview with HousingWire on Friday.

“Now we’re in a down cycle, they need to do it with fewer people and they need to be more efficient to get the cost down. So it’s really the same story, just different markets,” Gagliano said.

Dark Matter Technologies, which completed the acquisition of Black Knight’s Empower and Optimal Blue last week, will be working towards a smooth transition over to Constellation Software with its 1,300-plus employees for the remainder of the year.

The company doesn’t plan to raise pricing for Empower and is focused on services and products that will drive down the cost of origination and employee borrower retention, executives said. 

Gagliano, Sean Dugan, CRO of Dark Matter Technologies and Tom George, co-president of Romulus, part of the Perseus Group of Constellation Software, participated in the interview.

Read on to learn more about Dark Matter Technologies’ plan for mortgage.

This interview has been condensed and lightly edited for clarity.

Connie Kim: Constellation’s Perseus Group has a pretty big real estate portfolio. What were the reasons for buying Black Knight’s Empower and Optimal Blue? What opportunities did the firm see?

Tom George: The way Constellation operates is that we focus on acquiring vertical market software companies and portfolios of vertical market software companies with the intent to stay in these industries forever. 

We started almost 20 years ago and Perseus in the homebuilding industry, we built a significant player in homebuilding software, that led us to an adjacency residential real estate where we bought over 20 companies. More recently, we started acquiring businesses in the mortgage tech space. 

We plan to be in the mortgage tech space forever. And we plan to continue to acquire there. 

Kim: What other mortgage tech companies has Constellation Software acquired?

George: We’ve acquired three other businesses in the mortgage space. We bought Mortgage Builder Software from Altisource Portfolio Solutions in 2019. There have been two additional acquisitions – ReverseVision, which is a leader in the reverse mortgage LOS space, and then a document storage product called Back Support.

Kim: Are you expecting any layoffs during the transition? Will the same management from Black Knight’s Empower and Optimal Blue be in place? 

Rich Gagliano: We’re not expecting any changes. [About] 1300 [employees] are going to move over with us and it’s business as usual.

Kim: It’s a tough mortgage origination market right now. How does the company expect to manage profit amid industry consolidation, bankruptcies and attrition?

Gagliano: We’ve seen a strong pipeline. Even though the markets are down, what we encourage and talk to clients about is when you’re slow, that’s the best time to make technology changes. Now is the time for that change, and get yourself ready for the next cycle.

We actually do well in any kind of market. But honestly, when the market is crazy, lenders are looking for efficiencies because they can’t find and hire enough staff. Now we’re in a down cycle, they need to do it with fewer people and they need to be more efficient to get the cost down. So it’s really the same story, just different markets.

Kim: I definitely hear a lot of mortgage tech companies saying ‘this is the time to invest, especially when the market is down.’ You mentioned a strong pipeline, are we talking about new clients? 

Sean Dugan: We’ve had 200% to 300% growth year-over-year for the last couple of years. And we don’t see that backing up. Those are not financial metrics, that was just on the number of clients acquired. When we took the Empower LOS platform to the down- to mid-market clients and really focused on that, we saw the number of acquisitions per year grow in a really significant fashion. 

Kim: Empower has an estimated market share of around 10-15% after ICE’s Encompass which takes up about 40 to 45% of market share. How does Dark Matter plan to compete against Encompass?

Gagliano: We believe strongly in technology. We’re generally in most of the deals when we know about them. We believe that the automation, and the technology and the solution that we bring, and the ecosystem that we have, is best in the industry and really helps these lenders drive cost out of the system.

We compete with multiple product providers out there, including Encompass. But we like where we are positioned and I think our clients like the innovations that we’ve brought over the past over years.

Kim: When I talk to lenders, they say when using a company’s LOS, using the same company’s add-on products makes it more cost-efficient and seamless. What are some of the add-on products the company has already developed or is seeking to develop to win over lenders?

Gagliano: Just over the past couple of years, we’ve added Ava, which is our artificial intelligence capability. Ava has added a couple of additional products over the past two years. We’ve added an underwriting efficiency product, we’ve added a post-close product that’s going into production – so fairly new products.

We’re going to continue to use the products that we have in our bundle today and sell those so no changes there. But we are incrementally adding new technology, new innovations, that are going to help drive that cost down.

Dugan: We’ve also delivered digital portals for each one of our business channels within Empower, which would include retail, wholesale, correspondent, home equity and assumptions. We also have business intelligence as a component, and then a vendor aggregation platform, which was by the name of Exchange. Those are some of the components that make up the Dark Matter-owned bundle of services within Empower.

Kim: I know Ava has some kind of AI aspect to it. Right now, a lot of mortgage tech companies are focusing on AI. How they’re going to utilize AI to be that middleman between the customer and the loan originator. I’m curious how Dark Matter is going to integrate AI and machine learning (ML) to the LOS and other products.

Dugan: Regardless of what the technology solution is, clients are looking for flexibility, configurability – things that they can configure to meet their particular requirements. They’re looking for a really significant return on their investment, and they’re looking to drive the cost of origination as well as employee and borrower retention.

Kim: One of the concerns about the ICE-Black Knight merger was the fear that ICE would raise prices on the LOS products. Will there be any pricing changes for Dark Matter Technologies?

Gagliano: We don’t have anything planned at this point. Our Constellation partners haven’t asked us to come in and raise prices. That’s not part of their strategy, their strategy is to acquire quality companies and run the businesses.

Kim: Who does Dark Matter Technologies consider as competitors right now?

Dugan: It’s any origination technology provider. There are a number of providers that are delivering services specific to underwriting capabilities, so we would compete with them. So I think it’s a host of providers and vendors across the ecosystem of this particular vertical that we compete with on a day-by-day basis.

Kim: What are your prospects for the remainder of the year for mortgage origination? What are some of the larger goals for Dark Matter Technologies?

Gagliano: Through the end of the year, we’re going to be transitioning to Constellation moving off Black Knight Technologies. We’ve added some corporate-level capabilities already. So we feel good about where we are and stay focused on that through the end of the year.

Source: housingwire.com

Apache is functioning normally

Wachovia today reported a third quarter loss of $23.9 billion, or $11.09 per share, compared to a profit of $1.7 billion, or 90 cents per share, a year earlier.

The enormous loss included an $18.8 billion goodwill impairment reflecting declining market valuations and terms of its impending merger with Wells Fargo.

“We believe that it was prudent for Wachovia to put these losses behind them,” said Wells Fargo’s Chief Financial Officer Howard Atkins, in a statement. “The asset write-downs, reserve build, and other items are consistent with our acquisition assumptions.

Another $6.6 billion was set aside as a credit loss provision, including $3.4 billion to build reserves for its nasty Pick-a-Pay mortgage portfolio, which is rapidly souring, especially in states like California and Florida.

Amazingly, Wachovia was pitching the loans as late as March of this year and originating them until late June, which makes you wonder who’s running these billion-dollar companies.

Regarding those Pick-a-Pay’s, 66 percent of borrowers have some deferred interest balance, and the current average loan-to-value is 95 percent, up from 71 percent upon loan origination.

Net charge-offs for all types of loans totaled $1.9 billion, or an annualized 1.57 percent of average net loans, up from 1.10 percent the previous quarter and 0.19 percent a year earlier.

Nonperforming assets, including foreclosed properties held for sale, totaled $15 billion, or 3.05 percent of loans, up from 2.41 percent in the second quarter and 0.66 percent last year.

Despite largely steering clear of the higher-risk mortgages, Wells Fargo will acquire a stable of the most toxic loans out there, in the form of billions worth of pay option arms.

Atkins said the merger is on track and expected to close in the fourth quarter as planned.

Total third quarter mortgage origination was $6.9 billion, down 57 percent from the second quarter and 64 percent from a year ago, reflecting more prudent lending criteria.

Shares of Wachovia were down nine cents, or 1.48%, to $6.00 in early morning trading on Wall Street.

(photo: dreamsjung)

Source: thetruthaboutmortgage.com

Apache is functioning normally

Howdy, friends! This summer, there will be another chautauqua on financial independence in Ecuador. You should consider attending. These Ecuador chautauquas — which are unrelated to the European chautauquas — are always a fun, educational, and bonding experience.

Clarification: At some point, chautauqua founders Cheryl Reed and JL Collins parted ways. Now JL runs the European chautauquas — which are on hiatus — with Katie and Alan Donegan. Cheryl continues to run the unrelated Ecuador gatherings. Both events are excellent.

I often speak about the intersection of money and meaning when I attend.

How can you find purpose in your life — with or without money? How much money is enough? What should you do after you’ve achieved financial independence? These are the sorts of questions I’ve explored at past chautauqua events. I expect these are the same questions being explored in July.

Speakers this year include:

  • Tanja Hester from Our Next Life. Tanja is an outspoken voice in the personal-finance community, working hard to challenge assumptions and to promote financial freedom for all. She’s the author of the excellent Work Optional and the award-winning Wallet Activism. (Tanja is also a fellow office-supply nerd. Seriously, our chat history is filled with geeky discussions of favorite pens and notebooks.)
  • Piggy and Kitty (a.k.a. Jess and Lauren) from Bitches Get Riches. Long-time readers know that BGR is one of my favorite money blogs. I admire how Jess and Lauren blend biting humor with deep dives into personal-finance topics. Not an easy task. And the Bitches are just as funny in person as they are on the web. (I turn to Piggy and Kitty when I need help with modern pop culture. “What does S-tier mean?” “How do I make a Taylor Swift animated GIF?”)
  • Jessica and Corey from The Fioneers. While I’ve met Jessica and Corey, I’ve never really had a chance to get to know them. I’m eager to change that in Ecuador. I find their writing considered and thoughtful. I’m particularly fond of their concept of Slow FI, the notion that you can use “the incremental financial freedom [you] gain along the journey to financial independence to live happier and healthier lives, do better work, and build strong relationships”. This meshes well with my own vision of the stages of financial freedom. (Last Halloween, Jessica and Corey published an interview with me: Money doesn’t magically fix our problems.)

And, of course, we’ll enjoy a presentation from our host, Cheryl Reed. Cheryl founded these money chautauquas with JL Collins in 2013 and she’s hosted ten of them in the past. She likes to discuss happiness and joy and how to develop it in your life.

If you’re interested in attending this chautauqua, you can find more information at the official website. Note that there are two gatherings in Ecuador this year. If it doesn’t work to join this one, perhaps you can attend the second event.

Each chautauqua is different, of course, but the four previous retreats I’ve attended all had similarities:

  • Attendees gather at a resort for a week of conversation and camaraderie. These are smallish facilities that allow us to spend time together with few other guests. We eat and drink together. We walk together. We play games together. We talk about money together. We have fun!
  • Each day, one (or more) of the presenters gives a talk about a subject dear to her heart. (I talk about money and meaning, for instance.) These are l-o-n-g presentations but they’re fun, interactive, and informative.
  • Each attendee meets one-on-one with a presenter. What you do with that time is up to you. I’ve had people bring detailed spreadsheets and questions about retirement. I’ve had people chat with me about travel. I’ve had people ask for relationship advice (no joke!). Generally speaking, it’s a chance for you to pick a person’s brain about some sort of topic related to their area of expertise.
  • There are various (optional) off-site trips to visit the local area. In Portugal, we visited a winery. In Ecuador, we’ve visited thriving markets, chocolate factories, and butterfly preserves.

From what I’ve seen, however, the real value is in the friendships formed during these weeks. Much of our time is spent sitting together discussing life, the universe, and everything.

I’m still in contact with folks from each of the chautauquas I’ve attended in the past. Some of these folks have become close friends with whom I have frequent contact. (Our 2016 crew — the Werewolf Hunters — even rented a house in Utah for an in-person reunion. We visit each other whenever we’re in each other’s cities and have a semi-active group chat.)

I can’t promise that you’ll form life-long friends during this week, but from what I’ve seen, the odds are good. And no wonder. You’re gathering with a group of like-minded people to talk about some deep, personal subjects. Bonding is bound to occur.

Here are a few favorite photos from past chautauquas…

These chautauquas aren’t for everyone, and I know that. But they’re perfect events for a certain class of people. If you think that you are one of those people, hop on over to the website to take a look at the details. Maybe I’ll see you in Ecuador this summer!

One more quick note: I recently joined my pal Grant Sabatier on the Earn & Invest podcast for a discussion about money burnout. These conversations with Grant and Doc G are always entertaining and enlightening.

Source: getrichslowly.org

Apache is functioning normally

Mortgage rates were mixed this week, according to data compiled by Bankrate. See below for a breakdown of how each loan term moved.

After increasing interest rates at 10 consecutive meetings in 2022 and 2023, the Federal Reserve finally paused at its June 14 meeting — only to resume July 26, with a quarter-point increase.

Official inflation has fallen to 3 percent, near the Fed’s official goal of 2 percent, and housing economists say the end is near for the central bank’s intense fight against inflation.

“We do expect mortgage rates to trend down once the [Federal Open Market Committee] clearly signals that they have reached the peak for this cycle, as the reduction in uncertainty with respect to the direction of rates should narrow the spread of mortgage rates relative to Treasury benchmarks,” says Mike Fratantoni, chief economist at the Mortgage Bankers Association.

Rates accurate as of September 6, 2023.

The rates listed here are marketplace averages based on the assumptions indicated here. Actual rates listed across the site may vary. This story has been reviewed by Suzanne De Vita. All rate data accurate as of Wednesday, September 6th, 2023 at 7:30 a.m.

>>Check out historical mortgage interest rate trends

You can save thousands of dollars over the life of your mortgage by getting multiple offers. Comparing mortgage offers from multiple lenders is always a smart move, but shopping around grew especially critical during the interest rate run-up of 2022, according to research by mortgage giant Freddie Mac. It found the payoff for bargain-huntng borrowers doubled last year.

“All too often, some homeowners take the path of least resistance when seeking a mortgage, in part because the process of buying a home can be stressful, complicated and time-consuming,” says Mark Hamrick, senior economic analyst for Bankrate. “But when we’re talking about the potential of saving a lot of money, seeking the best deal on a mortgage has an excellent return on investment. Why leave that money on the table when all it takes is a bit more effort to shop around for the best rate, or lowest cost, on a mortgage?”

Mortgage rates for home purchase

30-year mortgage moves upward, +0.06%

The average rate for the benchmark 30-year fixed mortgage is 7.59 percent, an increase of 6 basis points from a week ago. This time a month ago, the average rate on a 30-year fixed mortgage was lower, at 7.40 percent.

At the current average rate, you’ll pay principal and interest of $705.39 for every $100k you borrow. That’s an increase of $4.12 over what you would have paid last week.

When to consider a 30-year fixed mortgage

Choosing the right home loan is an important step in the homebuying process, and you have a lot of options. You need to take several factors into consideration, including your credit score, income, down payment amount, budget, and financial goals.

15-year mortgage rate moves lower,-0.02%

The average 15-year fixed-mortgage rate is 6.79 percent, down 2 basis points from a week ago.

Monthly payments on a 15-year fixed mortgage at that rate will cost $887 per $100,000 borrowed. That may squeeze your monthly budget than a 30-year mortgage would, but it comes with some big advantages: You’ll come out several thousand dollars ahead over the life of the loan in total interest paid and build equity much more rapidly.

5/1 ARM rate retreats, -0.01%

The average rate on a 5/1 ARM is 6.54 percent, ticking down 1 basis point since the same time last week.

Adjustable-rate mortgages, or ARMs, are mortgage terms that come with a floating interest rate. In other words, the interest rate can change periodically throughout the life of the loan, unlike fixed-rate loans. These types of loans are best for people who expect to sell or refinance before the first or second adjustment. Rates could be materially higher when the loan first adjusts, and thereafter.

While borrowers shunned ARMs during the pandemic days of super-low rates, this type of loan has made a comeback as mortgage rates have risen.

Monthly payments on a 5/1 ARM at 6.54 percent would cost about $635 for each $100,000 borrowed over the initial five years, but could climb hundreds of dollars higher afterward, depending on the loan’s terms.

Jumbo mortgage moves up, +0.10%

Today’s average rate for jumbo mortgages is 7.63 percent, up 10 basis points over the last week. This time a month ago, the average rate on a jumbo mortgage was below that, at 7.43 percent.

At the current average rate, you’ll pay $708.14 per month in principal and interest for every $100,000 you borrow. That’s an extra $6.87 compared with last week.

Rate review: How mortgage rates have shifted over the past week

  • 30-year fixed mortgage rate: 7.59%, up from 7.53% last week, +0.06
  • 15-year fixed mortgage rate: 6.79%, down from 6.81% last week, -0.02
  • 5/1 ARM mortgage rate: 6.54%, down from 6.55% last week, -0.01
  • Jumbo mortgage rate: 7.63%, up from 7.53% last week, +0.10

Interested in refinancing? See mortgage refinance rates

30-year mortgage refinance moves higher, +0.09%

The average 30-year fixed-refinance rate is 7.75 percent, up 9 basis points compared with a week ago. A month ago, the average rate on a 30-year fixed refinance was lower, at 7.46 percent.

At the current average rate, you’ll pay $716.41 per month in principal and interest for every $100,000 you borrow. That’s an additional $6.21 per $100,000 compared with last week.

Where are mortgage rates headed?

The days of sub-3 percent mortgage interest on the 30-year fixed are behind us, and rates have so far risen beyond 7 percent in 2022.

“Low interest rates were the medicine for economic recovery following the financial crisis, but it was a slow recovery so rates never went up very far,” says McBride. “The rebound in the economy, and especially inflation, in the late pandemic stages has been very pronounced, and we now have a backdrop of mortgage rates rising at the fastest pace in decades.”

Comparing different mortgage terms

The 30-year fixed-rate mortgage is the most popular option for homeowners, and this type of loan has a number of advantages, including:

  • Lower monthly payment: Compared to a shorter term, such as 15 years, the 30-year mortgage offers lower payments spread over time.
  • Stability: With a 30-year mortgage, you lock in a consistent principal and interest payment. Because of the predictability, you can plan your housing expenses for the long term. Remember: Your monthly housing payment can change if your homeowners insurance and property taxes go up or, less likely, down.
  • Buying power: With lower payments, you can qualify for a larger loan amount and a more expensive home.
  • Flexibility: Lower monthly payments can free up some of your monthly budget for other goals, like saving for emergencies, retirement, college tuition or home repairs and maintenance.
  • Strategic use of debt: Some argue that Americans focus too much on paying down their mortgages rather than adding to their retirement accounts. A 30-year fixed mortgage with a smaller monthly payment can allow you to save more for retirement.

That said, shorter-term loans have gained popularity as rates have been historically low. Although they have higher monthly payments compared to 30-year mortgages, there are some big benefits if you can afford the upfront costs. Shorter-term loans can help you achieve:

  • Greatly reduced interest costs: Because you pay off the loan faster, you’ll be able to pay less interest overall.
  • Lower interest rate: On top of less time for that interest to compound, most lenders price shorter-term mortgages with lower rates.
  • Build equity faster: The faster you pay off your mortgage, the faster you’ll own value in your home outright. That’s especially handy if you want to borrow against your property to fund other spending.
  • Debt-free sooner: A shorter-term mortgage means you’ll own your house free and clear sooner than you would with a longer-term loan.

What comes next:

Featured lenders for today, September 6, 2023

Source: bankrate.com

Apache is functioning normally

In the competitive world of real estate recruitment, brokerages fight for the attention and loyalty of talented agents who can drive their success. As the lifeblood of the industry, agents play an important role in attracting clients, closing deals and determining the ultimate profitability of a brokerage. For real estate firms, recruiting a high number of agents as well as recruiting the best-fit agents for your firm is the key to long-term success. 

Today, new brokerage models and disruptors are the norm. A firm’s ability to adjust to new competitors and evolve its way of doing business will determine if it comes out ahead in the agent attraction showdown.  

At the heart of our comparative analysis, we’ll examine two popular brokerage models: the flat-fee model and the traditional model. Each one boasts its own approach to compensating and supporting agents, promising distinct advantages and challenges. By examining the data, we aim to gain a deeper understanding of each and determine which ultimately comes out ahead. 

The flat-fee model: Simplifying compensation, embracing independence

In the flat-fee model, the traditional commission-based structure takes a backseat. Instead, agents are charged a fixed fee or a flat monthly rate, which allows them to retain a more substantial portion of their commissions from transactions. This straightforward approach grants agents the freedom to keep more of their hard-earned income, resulting in potentially higher take-home pay.

  1. Pros:
    1. Perceived enhanced earnings with a reduced fee structure.
    2. Flexibility to structure their services and marketing strategies to fit their needs.
    3. Lower financial risk by keeping costs low, particularly during leaner times.
  1. Cons:
    1. Typically, limited support and resources in the form of training, marketing, etc. 
    2. Usually, less brand recognition as compared to well-established traditional firms.

The traditional model: Commission-driven powerhouses

In the traditional model, agents are compensated through the classic commission-based structure. They earn a percentage of the commission from each completed transaction, but a portion of it is shared with the brokerage. This model has been the bedrock of the real estate industry for decades, with established firms carrying well-known brand identities.

  1. Pros:
    1. Extensive support and training with a significant investment in agent development, mentorship, and marketing resources.
    2. Established brand recognition, attracting clients and contributing to an agent’s credibility.
    3. High-value transactions due to their market position and network.
  1. Cons:
    1. Higher cost structure, leading to potentially lower take-home earnings.
    2. Limited flexibility with agents sometimes bound by brokerage policies and practices, typically leaving less room for individual business decisions.

The analysis 

To assess the agent attraction expertise of the flat-fee and traditional brokerage models, we looked to the data. We meticulously examined a collection of 20 of the largest real estate firms; 10 flat-fee firms collectively closing $100B in annual sales volume versus ten traditional firms which were also collectively closing $100B in annual volume [2022 RealTrends 500 brokerage data]. We excluded from our analysis any alternative models, disrupters, luxury brands and any other firms that may skew our findings.

Agent count & average sides per agent comparison

Using 2022 data from RealTrends, we first looked at the number of agents associated with each model as well as the total number of sides transacted. The data reveals that flat-fee firms collectively had a 136% higher agent headcount than their counterparts, the traditional models.

As a whole, the flat-fee firms also transacted more sides than traditional firms; approximately 19% more sides closed. We would expect that flat-fee firms would transact a higher number of deals since they have a significantly higher agent count. However, agents within the flat-fee model on average closed four deals per agent while agents within the traditional model closed eight deals per agent.

Average volume per agent & average home price per transaction comparison

Another critical data point to review is found in the average closed volume per agent. A higher closed volume can indicate an agent’s future earning potential as well as longevity in the business. In addition to examining the total volume, it’s also helpful to review the average size of the deals closed by agents within each model, which will provide insight into experience level and expertise.   

The data shows that agents within flat-fee firms close less in average volume per agent, approximately 52% less. We can also see that they also closed smaller deals, on average.  

Attracting new-to-the-business agents

Based on the statistical analysis, it becomes apparent that flat-fee firms often focus on a large agent count with high transaction volume. A notable trend emerges where agents drawn to flat-fee models are frequently those who are relatively new to the industry or are brand new licensees. Additionally, individuals attracted to the part-time flexibility that a real estate career offers are inclined towards flat-fee firms.

Consequently, a greater number of agents are required within flat-fee firms to achieve equivalent volume targets. Remarkably, this demand for increased agent numbers has not posed a deterrent for flat-fee firms, as evidenced by their substantial growth in recent years.

Historical shifts

While the initial data analysis reinforces existing assumptions, a more interesting and unexpected dimension emerges when historical shifts in volume and sides across both brokerage models are examined. Following the post-COVID real estate boom, both flat-fee and traditional firms experienced a surge in sides transacted as well as increasing property values, contributing to an upswing in overall sales volume.

However, the scenario shifted in 2022 with the market downturn. Traditional brokerages experienced a sharper decline in sides, attributed in part to agents leaving due to high costs, whereas flat-fee firms exhibited greater resilience. The notion that flat-fee models attract individuals who do not rely primarily on real estate as their main business is worth noting. Most intriguing is the fact that although sides decreased more significantly, the impact on overall sales volume was less severe for traditional firms compared to flat-fee firms.

A plausible theory suggests that agents within traditional firms specialize in higher value properties than flat-fee firms, leading to increased value growth. Their higher production per agent, coupled with greater experience and support, equips them to navigate market fluctuations more adeptly.

Takeaways:

  • Stability in challenging times:
    • Flat-fee models were less affected by side reductions in bad years, possibly due to part-time agents with diverse income sources.
  • Traditional brokerage strategy:
    • Traditional models maintained stable sales volume despite fewer sides, likely due to experienced agents handling higher-value deals.
  • Diverse model strengths:
    • Flat fee emphasized transactional efficiency, accommodating a larger number of transactions.
    • Traditional models prioritized experienced agents and larger deals, ensuring steady revenue despite lower transaction count.
  • Market adaptation:
    • Both models should consider adapting strategies to market conditions and leveraging their unique strengths.

As we conclude our analysis, it’s evident that the many seasons of change in real estate demand a strategic negotiation between innovation and tradition. Agents, the driving force of the industry, now have the luxury of choice. To win in agent attraction, flat-fee models can further bolster their appeal by offering targeted support and mentorship, enhancing their brand recognition, and cultivating a sense of community among their diverse agent base. 

Conversely, traditional models can leverage their established brand identities to attract experienced agents while embracing flexibility in their offerings to cater to the changing preferences of a new generation of real estate professionals. By embracing the strengths of both models and charting a course that resonates with modern agents, brokerages can ensure they remain at the forefront of the industry’s evolution.

Diana Zaya is the founder and president of Maverick RE Consulting.

Source: housingwire.com

Apache is functioning normally

In the competitive world of real estate recruitment, brokerages fight for the attention and loyalty of talented agents who can drive their success. As the lifeblood of the industry, agents play an important role in attracting clients, closing deals and determining the ultimate profitability of a brokerage. For real estate firms, recruiting a high number of agents as well as recruiting the best-fit agents for your firm is the key to long-term success. 

Today, new brokerage models and disruptors are the norm. A firm’s ability to adjust to new competitors and evolve its way of doing business will determine if it comes out ahead in the agent attraction showdown.  

At the heart of our comparative analysis, we’ll examine two popular brokerage models: the flat-fee model and the traditional model. Each one boasts its own approach to compensating and supporting agents, promising distinct advantages and challenges. By examining the data, we aim to gain a deeper understanding of each and determine which ultimately comes out ahead. 

The flat-fee model: Simplifying compensation, embracing independence

In the flat-fee model, the traditional commission-based structure takes a backseat. Instead, agents are charged a fixed fee or a flat monthly rate, which allows them to retain a more substantial portion of their commissions from transactions. This straightforward approach grants agents the freedom to keep more of their hard-earned income, resulting in potentially higher take-home pay.

  1. Pros:
    1. Perceived enhanced earnings with a reduced fee structure.
    2. Flexibility to structure their services and marketing strategies to fit their needs.
    3. Lower financial risk by keeping costs low, particularly during leaner times.
  1. Cons:
    1. Typically, limited support and resources in the form of training, marketing, etc. 
    2. Usually, less brand recognition as compared to well-established traditional firms.

The traditional model: Commission-driven powerhouses

In the traditional model, agents are compensated through the classic commission-based structure. They earn a percentage of the commission from each completed transaction, but a portion of it is shared with the brokerage. This model has been the bedrock of the real estate industry for decades, with established firms carrying well-known brand identities.

  1. Pros:
    1. Extensive support and training with a significant investment in agent development, mentorship, and marketing resources.
    2. Established brand recognition, attracting clients and contributing to an agent’s credibility.
    3. High-value transactions due to their market position and network.
  1. Cons:
    1. Higher cost structure, leading to potentially lower take-home earnings.
    2. Limited flexibility with agents sometimes bound by brokerage policies and practices, typically leaving less room for individual business decisions.

The analysis 

To assess the agent attraction expertise of the flat-fee and traditional brokerage models, we looked to the data. We meticulously examined a collection of 20 of the largest real estate firms; 10 flat-fee firms collectively closing $100B in annual sales volume versus ten traditional firms which were also collectively closing $100B in annual volume [2022 RealTrends 500 brokerage data]. We excluded from our analysis any alternative models, disrupters, luxury brands and any other firms that may skew our findings.

Agent count & average sides per agent comparison

Using 2022 data from RealTrends, we first looked at the number of agents associated with each model as well as the total number of sides transacted. The data reveals that flat-fee firms collectively had a 136% higher agent headcount than their counterparts, the traditional models.

As a whole, the flat-fee firms also transacted more sides than traditional firms; approximately 19% more sides closed. We would expect that flat-fee firms would transact a higher number of deals since they have a significantly higher agent count. However, agents within the flat-fee model on average closed four deals per agent while agents within the traditional model closed eight deals per agent.

Average volume per agent & average home price per transaction comparison

Another critical data point to review is found in the average closed volume per agent. A higher closed volume can indicate an agent’s future earning potential as well as longevity in the business. In addition to examining the total volume, it’s also helpful to review the average size of the deals closed by agents within each model, which will provide insight into experience level and expertise.   

The data shows that agents within flat-fee firms close less in average volume per agent, approximately 52% less. We can also see that they also closed smaller deals, on average.  

Attracting new-to-the-business agents

Based on the statistical analysis, it becomes apparent that flat-fee firms often focus on a large agent count with high transaction volume. A notable trend emerges where agents drawn to flat-fee models are frequently those who are relatively new to the industry or are brand new licensees. Additionally, individuals attracted to the part-time flexibility that a real estate career offers are inclined towards flat-fee firms.

Consequently, a greater number of agents are required within flat-fee firms to achieve equivalent volume targets. Remarkably, this demand for increased agent numbers has not posed a deterrent for flat-fee firms, as evidenced by their substantial growth in recent years.

Historical shifts

While the initial data analysis reinforces existing assumptions, a more interesting and unexpected dimension emerges when historical shifts in volume and sides across both brokerage models are examined. Following the post-COVID real estate boom, both flat-fee and traditional firms experienced a surge in sides transacted as well as increasing property values, contributing to an upswing in overall sales volume.

However, the scenario shifted in 2022 with the market downturn. Traditional brokerages experienced a sharper decline in sides, attributed in part to agents leaving due to high costs, whereas flat-fee firms exhibited greater resilience. The notion that flat-fee models attract individuals who do not rely primarily on real estate as their main business is worth noting. Most intriguing is the fact that although sides decreased more significantly, the impact on overall sales volume was less severe for traditional firms compared to flat-fee firms.

A plausible theory suggests that agents within traditional firms specialize in higher value properties than flat-fee firms, leading to increased value growth. Their higher production per agent, coupled with greater experience and support, equips them to navigate market fluctuations more adeptly.

Takeaways:

  • Stability in challenging times:
    • Flat-fee models were less affected by side reductions in bad years, possibly due to part-time agents with diverse income sources.
  • Traditional brokerage strategy:
    • Traditional models maintained stable sales volume despite fewer sides, likely due to experienced agents handling higher-value deals.
  • Diverse model strengths:
    • Flat fee emphasized transactional efficiency, accommodating a larger number of transactions.
    • Traditional models prioritized experienced agents and larger deals, ensuring steady revenue despite lower transaction count.
  • Market adaptation:
    • Both models should consider adapting strategies to market conditions and leveraging their unique strengths.

As we conclude our analysis, it’s evident that the many seasons of change in real estate demand a strategic negotiation between innovation and tradition. Agents, the driving force of the industry, now have the luxury of choice. To win in agent attraction, flat-fee models can further bolster their appeal by offering targeted support and mentorship, enhancing their brand recognition, and cultivating a sense of community among their diverse agent base. 

Conversely, traditional models can leverage their established brand identities to attract experienced agents while embracing flexibility in their offerings to cater to the changing preferences of a new generation of real estate professionals. By embracing the strengths of both models and charting a course that resonates with modern agents, brokerages can ensure they remain at the forefront of the industry’s evolution.

Diana Zaya is the founder and president of Maverick RE Consulting.

Source: housingwire.com

Apache is functioning normally

Credit Report, Buyer Research, Broker Processing Products; Guild and First Centennial Deal

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Credit Report, Buyer Research, Broker Processing Products; Guild and First Centennial Deal

By:
Rob Chrisman

Mon, Aug 28 2023, 10:31 AM

As the rumor spreads that millions of women are lined up to be weighed at the Fulton County Jail, we head into late summer and early autumn, rarely a time for increased home sale activity. The National Association of REALTORS®’ total membership in July 2023 is 1.56 million. There are about 547k active listings. That’s one listing per three NAR members, which doesn’t even include non-NAR real estate agents. Analysts continue to point to the nationwide housing market struggling with low inventory levels and decreased affordability. While active inventory through the first six months of 2023 was higher than the record lows set in 2022, new listings have been lagging below 2022 levels. Just simply not enough homes? But Hawai’i’s Marcelle Loren writes, “I don’t agree with the reports of a lack of inventory. There’s just a lack of agents digging up properties to sell. For example, the death of Baby Boomers is a source of inventory: Rising costs are prompting more adult children to sell the homes they inherit from their parents. (Today’s podcast can be found here and this week’s is sponsored by Black Knight. Black Knight is an award-winning software, data and analytics company that drives innovation in the mortgage and real-estate industries, and the capital and secondary markets. Listen to an interview with the company’s Conrad Ficca and Richard Lombardi on climate risk and how lenders can mitigate its impact through data.)

Lender and Broker Software and Services

“How will this solution improve the homebuyer or homeowner experience?” This simple question guides the way we develop and deliver products at Black Knight, a mindset we call “Think Customer.” By combining this mentality with a Scaled Agile Framework (SAFe), Black Knight aligns product development and delivery with end-consumer needs while staying ahead of the latest market and technology advancements. Learn more about the value this approach has brought Black Knight clients and their customers in the blog post “’Think Customer’ in an Agile World”.

In this market, hustle is everything. You can’t afford to waste a single deal, or a single minute. That’s why ReadyPrice has launched Shop.Lock.Deliver.® It’s an innovative new platform designed to help independent mortgage brokers like you save time and money. Now you can shop competitive loan offerings from multiple lenders, get rate lock guarantees in real time, receive underwriting findings, and deliver the borrower’s complete loan file to lenders, and all on a single platform, at no cost to brokers. It’s the industry’s most powerful universal delivery portal, and it’s already helping brokers around the country thrive and compete in even the toughest market environments. Multiple lenders. One platform. Zero b.s. Check out ReadyPrice today.

Free report: These growing borrower segments present opportunities for new business in 2023’s market. Wondering how to fill your pipeline when loan volume is scarce? New data from Maxwell gives lenders an exclusive look into home buyer groups taking on higher rates head-on. Did you know, for instance, that the share of 18 to 24-year-old borrowers has increased by 18 percent year-over-year? Now is the time to cater to these rising home buyers. For exclusive data and actionable takeaways, click here to download Maxwell’s Q2 Mortgage Lending Report.

Credit Products for Brokers and Lenders

In today’s competitive landscape, every dollar and interaction matter more than ever. Blend’s first-of-its-kind soft credit pull delivers a simpler pre-qualification process, reducing top-of-funnel friction, cutting approximately $50 per credit file, and safeguarding borrowers from tri-merge solicitation and negative impacts on their credit scores. For lenders, Blend’s soft credit pre-qualification streamlines the application process, reducing drop-offs and increasing conversion rates. It provides lenders with valuable insights without an expensive hard credit inquiry, improving risk assessment and decision-making. Blend seamlessly integrates soft credit checks into the mobile loan officer experience and self-serve processes, with widespread adoption, ultimately leading to substantial cost savings for our customers. For borrowers, soft inquiries remove barriers to accessing early eligibility information, protect borrower credit scores, and promote financial empowerment, encouraging more borrowers to engage with lenders. Soft credit pre-qualification is a game-changer in the lending industry and a true win-win for borrowers and lenders.

Fraudulent employment data in mortgage loan applications cause risks for lenders and borrowers. For many years, it has been common practice for mortgage lenders or brokers to ask for paper pay stubs to help verify loan applicant’s income. But in 2022, out of all mortgage loans that had a fraud investigative finding, 43 percent were classified as income fraud. Technological advances allow lenders to instantly and securely obtain reliable income and employment verifications from a trusted third-party provider. Available for use by credentialed verifiers with a permissible purpose under the FCRA, The Work Number® database is the leading commercial repository of employer-contributed payroll data. Unlock the power of our expansive database, instant access to 161 million current employment records directly from 2.8 million employers and payroll providers. With buybacks on the rise, why use paper-based processes that potentially increase repurchase risk at a time when proven GSE-approved options exist?

The Big Getting Bigger

Guild Mortgage further expanded its market share with the announcement this morning of the company’s acquisition of First Centennial Mortgage, a privately held residential lender headquartered in Illinois. Founded by brothers Steven and David McCormick in 1995, First Centennial will bring 15 branches and nine satellite offices to Guild’s growing national retail network. This acquisition is Guild’s third this year, following its purchase of Cherry Creek in April and Legacy Mortgage in February. (Guild was represented by the STRATMOR Group’s M&A team.)

Lenders tired of the rate volatility, the cost cutting, rates possibly trending higher with the Fed fighting inflation (until the Silicon Valley bank failure drove them down) may be looking at selling their company or merging it. “Valuing a Lender” was recently posted on the STRATMOR website.

Sure enough, STRATMOR’s M&A practice is on fire as big lenders have become small lenders, or brokers, and culturally paired lenders are wondering, “Why have two accounting teams? Two capital markets groups? Two underwriting staffs?” And so on. (Anyone interested in learning more should talk to David Hrobon or Garth Graham.) Of course, as has been mentioned in this commentary, larger lenders are also adept at simply hiring production staff away from smaller, thinly capitalized lenders.

Many owners of lenders around the nation are earnestly interested in making a decision about what to do with their company before a decision is made for them. I have received this question from a number of owners of small lenders. ‘Rob, is it only the lenders who have servicing who have any value? Or can small lenders with decent market share like mine have interest from buyers?”

Garth Graham replied. “Great question, Rob, and one we field nearly every day. We are hearing from lenders who are inquiring about the M&A space, and often trying to find out what is going on and what they should do.

“The answer is that there continues to be good deals for potential sellers, and the reason is that there are a lot of buyers we work with who continue to want to grow market share in a down market. We closed three deals in the last 60 days, and all had upfront premiums with solid earn outs, with a good cultural fit for the parties. Often the premium being paid is driven by the ability for the seller to add the production without having to add all the corporate expense, so it can be painful decisions about the corporate depts (secondary, HR, Risk, technology etc.), but the end result is that the production is worth more to the buyer than it is to the seller due to the cost savings. And that shows up on premium offers. And the seller gets the balance sheet plus a share of that financial benefit. So, it can be a potential win-win. Of course, it has to be a deal that makes sense for the LOs, and production staff too, so that is why culture matters so much.” Thank you, Garth.

To wrap up, in valuing a company, a potential buyer will look at the audited net worth and the discounted cash flows, usually for the next three years of estimated earnings. (The devil’s in the details and assumptions!) The value to a potential buyer will depend on different factors, and three main variables often used in an analysis are loan volumes, margins, cost structure, & profitability, and the current policies, procedures, & business model.

Of course, repurchase obligations are included, as well as existing or potential liabilities. Are there outstanding lawsuits? Is the buyer buying the entire company, or a percentage of ownership… a minority ownership has very little value. It is not a simple process, and making assumptions about the future is problematic. A thorough examination of these factors is where the value of a competent advisor shows itself.

Capital Markets

Spoiler alert: our Federal Reserve doesn’t set mortgage rates, but the “hawkish” tone from Federal Reserve Chairman Jerome Powell was an indication that there won’t be much slack in the battle to bring down inflation. If they are any indication, futures trading is pricing in roughly a two-thirds probability that the central bank will boost its key interest rate by a quarter percentage point in November after a pause in September.

In an eagerly anticipated speech from Jackson Hole on Friday, Fed Chair Powell made no bones about the Fed’s unwavering pursuit of returning annualized inflation to 2 percent. As far as the Fed is concerned, the message is “stay the course” even if that means even higher interest rates. Powell reiterated that the Fed would not change its long-term inflation target of 2 percent as some market commentators may have hoped and reaffirmed the reliance on incoming economic data and the potential to further tighten monetary policy if the conditions warrant. His wholly expected remarks seem to have had a calming effect on markets. Other central bank chiefs echoed Powell in projecting a cautious stance, saying the inflation triggered by Covid-19 and its fallout has not been fully conquered.

While recent data has been trending in the Fed’s desired direction, Powell noted that the previous two months of data are not enough to instill confidence that inflation will continue to trend down towards the Fed’s goal. There are still supply and demand imbalances that put upwards pressure on inflation specifically as it pertains to shelter and non-housing services. Overall, goods prices have declined and residential lease rates are cooling, however home prices remain high due to lack of supply. Given the desire not to repeat the mistakes of the 1970s in declaring victory over inflation too soon, it is not surprising the tone of the Fed continues to be one of caution, which may continue even as more positive data is released.

The Federal Reserve is data-dependent, of course, and this week is packed with potential market moving events including front-loaded month-end supply, and economic data including several labor market indicators, culminating with monthly U.S. employment numbers that will be released on Friday, and Fed-favorite PCE on Thursday, which also happens to be month-end. Other economic data of interest include housing-related releases, consumer confidence, GDP, Chicago PMI, ISM, and construction spending. The start of the week is all about supply with the Treasury auctioning $45 billion 2-year notes and $46 billion 5-year notes. Today also brings Dallas Fed Texas manufacturing for August and comments from Fed Vice Chair for Supervision Barr. We begin the week with Agency MBS prices roughly unchanged from Friday’s close and the 10-year yielding 4.23 after closing Friday at 4.24 percent. The 2-year is at 5.10 after Fed Chair Powell’s Friday comments drove the yield higher.

Employment

“A seasoned executive is looking to explore the next growth and strategic opportunity. Over the course of a twenty-three-year career, I developed expertise in many aspects of the business, spanning retail, wholesale, and correspondent production. Background also includes a deep understanding of MSR and servicing operations. Proven ability to manage businesses at scale, with a strong focus on compliance, credit, and enterprise risk management. Passionate about process optimization and leveraging technology to drive efficiency, all while fostering a positive organizational culture. Track record includes driving maximized revenue through aggressive yet responsible growth strategies. Working for private equity-owned organizations, providing valuable experience in capital acquisition and broad investor relations. If you’re interested in learning more about my background and how I can contribute to your team’s success, please don’t hesitate to contact Anjelica Nixt to forward your note.”

The Maryland regional office of USA Mortgage has added leading Home Loan Officer Jamison Mullen to its team. Mullen, a 20-year industry veteran, joins a USA office headed by Bill Sohan who recently came on board as a regional vice president. “I wasn’t looking for a change. I was with a great company. But sometimes an opportunity arises that you can’t ignore,” said Mullen. “When Bill and Sam Rosenblatt approached me about joining forces, I had to listen. And as soon as I met the corporate leadership team at USA Mortgage, I knew they were the kind of people I wanted to work with for the remainder of my career.” Founded in St. Louis in 2001, 100 percent employee-owned USA Mortgage has offices in 34 states and is licensed in 49 states plus the District of Columbia. For a confidential conversation about joining USA, contact Bill Sohan at 410-963-2308.

Quality. Stability. Virtue. Traits that define a successful mortgage company, or any company, for that matter. But when we’re talking about mortgages, InterLinc Mortgage hits the mark on these three skills, and more. With an average of $32 million in annual production per Loan Originator, the mortgage team not only kept pace through a turbulent market, but they did also so with excellence. Scotsman Guide’s 2022 Top Overall Lender and Top Retail Lender awards prove the grit and sustainability displayed by the producers (which is an assembly of the elite) and its leaders. A company that proves fortitude and character…worth the look.

 Download our mobile app to get alerts for Rob Chrisman’s Commentary.

Source: mortgagenewsdaily.com

Apache is functioning normally

With the morning economic data having come and gone with little fanfare, the most significant role today can fill is as a placeholder.  It offers the bond market an opportunity to vote on whether or not yesterday’s rally was a token “oversold correction” (the ayes have it) and to position for tomorrow’s Jackson Hole speech from Fed Chair Powell.  Surely someone has informed him of the buzz surrounding R-star since his last speech, so odds are greater for volatility tomorrow.  Today is uneventful so far with modest losses overnight and a small chance for a reaction to today’s 30yr TIPS auction.  Normally, TIPS aren’t worth mentioning, but given the current preoccupation with “real yields” in financial circles, this one could be an exception. 

That said, it wouldn’t be an exception in a bigger picture sense.  In other words, it wouldn’t create any lasting momentum or a big enough reaction to change anything at all.  TIPS yields are actually fairly uninteresting relative to the current level of buzz.  They’ve almost perfectly mirrored and matched their non-TIPS counterparts all year.

Moreover, they’ve done a pretty good job of capturing the inflation implications.  If we subtract TIPS yields from cash yields, we can see “market-based inflation.”  Traders also refer to this is “TIPS Breakevens.”  In general, it should simply convey the bond market’s inflation assumptions.  Bottom line: looks pretty similar to actual inflation.

Source: mortgagenewsdaily.com