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Mortgage rates look like they have room to keep dropping in July after a closely-watched gauge of inflation showed the economy continued to cool in May.
The personal consumption expenditures (PCE) price index, the Federal Reserve’s preferred gauge of inflation, fell to 2.56 percent in May from a year ago, the Commerce Department’s Bureau of Economic Analysis reported Friday.
It was the second-consecutive month that annual inflation inched closer to the Fed’s 2 percent target, raising the odds that the central bank will start bringing short-term interest rates down as soon as September.
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Core PCE, which excludes the cost of food and energy and can be a more reliable indicator of underlying inflation trends, dropped to 2.57 percent in May — the lowest reading since March 2021. The Core PCE index hasn’t moved away from the Fed’s 2 percent target since January 2023.
Ian Shepherdson
“Looking ahead, we see little chance of a lasting and broad-based re-acceleration in the core PCE deflator after the slowing in April and May,” Pantheon Macroeconomics Chief Economist Ian Shepherdson said in a note to clients. “Accumulating labor market slack is increasingly weighing on wage growth, commodity prices are broadly flat, supply chains remain fluid, margins are under increasing pressure, and newly-agreed rents are rising slowly.”
While Pantheon economists expect core PCE to pick up slightly from May to June, after that they’re looking for “a multi-month run” of decelerating inflation.
“If we’re right, the Fed should be confident enough by its meeting in September that core PCE inflation is heading sustainably back to 2 percent that it can start to ease,” Shepherdson said.
Futures markets tracked by the CME FedWatch tool on Friday put the odds of at least one Fed rate cut in September at 64 percent, up from 46 percent on May 28.
After peaking at 7.12 percent in June 2022, a series of Fed rate hikes gradually tamed inflation to 2.48 percent in January. But the PCE price index showed inflation worsening in February and March, sending mortgage rates rebounding as hopes for multiple Fed rate cuts in 2024 dimmed.
The latest declines in PCE and core PCE were in line with expectations, as previous data releases that the indexes build on — including the Consumer Price Index (CPI) and Producer Price Index (PPI) — also suggested that inflation eased in May.
Bond market investors who fund most mortgages initially snapped up 10-year Treasury notes after the PCE numbers for May were released at 8:30 a.m. EDT Friday, pushing yields as low as 4.26 percent. But 10-year Treasury yields, a barometer for mortgage rates, quickly climbed back above Thursday’s close of 4.29 percent.
Daily loan lock data tracked by Optimal Blue, which lags by a day, showed rates for 30-year fixed-rate mortgages averaging 6.88 percent Thursday, down 39 basis points from a 2024 high of 7.27 percent registered April 25. A basis point is one-hundredth of a percentage point.
An index maintained by Mortgage News Daily (MND) showed rates for 30-year fixed-rate loans climbed 2 basis points Friday, to 7.07 percent. Rates reported by MND are higher because they are adjusted to estimate the effective rate borrowers would be offered even if they’re not paying points. Optimal Blue tracks contracted rates, including those locked in by borrowers who pay points to get a lower rate.
Mortgage rates are largely determined by investor demand for mortgage-backed securities, and investors are skittish about the prospects that the Fed will continue its “higher for longer” rate strategy. Fed policymakers indicated at their June 12 meeting that they’ll be cautious about bringing rates down until they’re certain that inflation won’t surge again.
Speaking to bankers at a conference Thursday, Federal Reserve Governor Michelle Bowman attributed much of last year’s progress on inflation to “easing of supply chain constraints, increases in the number of available workers due in part to immigration, and lower energy prices.”
Michelle Bowman
Bowman called it “unlikely” that those factors will contribute to bringing inflation down more in the future. Supply chains “have largely normalized, the labor force participation rate has leveled off in recent months below pre-pandemic levels, and an open U.S. immigration policy over the past few years, which added millions of new immigrants in the U.S., may become more restrictive.”
Additional “upside risks” that inflation will worsen include potential spillovers from regional conflicts that might disrupt global supply chains and send food, energy, and commodity prices soaring.
“There is also the risk that the loosening in financial conditions since late last year, reflecting considerable gains in equity valuations, and additional fiscal stimulus could add momentum to demand, stalling any further progress or even causing inflation to reaccelerate,” Bowman said.
Bowman, rated by Reuters as the most hawkish Fed policymaker for her hardline stance against inflation, reiterated that she’s willing to raise rates if needed — a position she’d previously staked out in October and May.
“While the current stance of monetary policy appears to be at a restrictive level, I remain willing to raise the target range for the federal funds rate at a future meeting should the incoming data indicate that progress on inflation has stalled or reversed,” Bowman said Thursday.
Source: Fannie Mae Housing Forecast, June 2024; MBA Mortgage Finance Forecast, June 2024.
But the recent decline in mortgage rates from 2024 highs has revived interest among homebuyers, and housing industry economists think rates have more room to come down this year and next.
Homebuyer demand for purchase loans picked up for the third-consecutive week during the week ending June 21 after mortgage rates hit their lowest levels in months, according to a weekly survey of lenders by the Mortgage Bankers Association (MBA).
In a June 24 forecast, MBA economists said they expect rates on 30-year fixed-rate loans to drop to 6.6 percent during the fourth quarter of 2024, and to an average of 6.0 percent during Q4 2025.
Fannie Mae economists said on June 10 that they envision 30-year fixed-rate loans will drop to 6.7 percent during Q4 2024, and to 6.3 percent by the end of next year.
More listings and lower mortgage rates should boost 2025 home sales by 9.3 percent, to 5.3 million transactions, Fannie Mae forecasters said.
But analysts at Bank of America Global Research think home sales might not rebound until 2026 if home prices continue to rise and inventory continues to be constrained by the “lock-in effect” experienced by homeowners who refinanced when rates were at historic lows.
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Source: inman.com
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After the latest report revealed that inflation remains high at 3.4% — and after the May Consumer Price Index All Urban Consumers report showed a 0.3% increase in April — the Federal Reserve elected to hold the federal funds rate steady for the sixth consecutive meeting. This, in turn, further delayed the anticipated rate cuts that had, at one point, been expected to occur in mid-2024.
While the Federal Reserve doesn’t directly set mortgage rates, the rates offered by lenders tend to follow the agency’s lead. As such, mortgage rates remain elevated, and once again have climbed over the 7% mark on average, with the 30-year fixed-rate mortgage rate averaging 7.18% as of June 4, 2024.
The Fed’s next meeting is set for June 11 and 12, and many potential borrowers are hopeful that a rate cut will occur, followed by a drop to mortgage rates. Late last year, the agency hinted at multiple rate cuts in 2024, but persistent inflation has delayed such cuts. So, any rate drop would be welcome news for potential homebuyers looking for lower borrowing costs. But will mortgage rates fall after the June Fed meeting? Here’s what experts say.
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We consulted several experts to get their take on the Federal Reserve’s potential course and how it could influence mortgage rates. Here’s what they had to say.
Joseph Camberato, CEO at NationalBusinessCapital.com:
“I highly doubt we’re going to get a rate cut just yet. I really believe we’re finally headed in the right direction, albeit very slowly. Inflation still rose 0.3% in April, which was better than expected, but it’s still up 3.4% for the year and unemployment remains the same. The Fed is looking for it to worsen to lower rates.
If the Fed keeps rates the same, mortgage rates will probably remain unchanged in the short term.”
Daniel McKeever, assistant professor at the School of Management at Binghamton University, State University of New York:
“I think the probability of a June rate cut is pretty low. Just take a look at the minutes from the Fed’s most recent policy meeting (April 30 and May 1). There appears to be a pretty clear consensus to continue chasing a 2% inflation target, even if it takes longer than initially thought. Rate hikes aren’t off the table, either, in the event that persistent rates in the 5.25% to 5.50% range don’t appear to have the same impact that they once did.
The most probable outcome is that the Fed doesn’t change rates. Mortgage rates track extremely closely with the Fed’s benchmark rate. Since the Fed completed the bulk of its aggressive rate hikes in spring 2022, average 30-year fixed-rate mortgage rates have hovered around 7% pretty consistently. I’d expect to see them stay there if the Fed keeps its benchmark rate the same at the upcoming meeting.”
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Van Hesser, chief strategist at Kroll Bond Rating Agency:
“No (the Fed will not cut rates). Inflation remains meaningfully above the Fed’s 2% target, and it is taking longer than usual for restrictive rates to slow the economy. That has a lot to do with the extraordinary amount of stimulus deployed in the pandemic era.
Over the near term, with the Fed keeping rates elevated, we do not expect mortgage rates to fall materially. As the economy slows in 2024’s second half and the Fed begins to ease monetary policy, we would expect mortgage rates to fall gradually and modestly but remain well above the sub-3% lows hit during the pandemic.”
Emily Overton, capital markets analyst at Veterans United Home Loans:
“It is widely expected that the Federal Reserve will keep rates unchanged at this month’s meeting. While this decision is expected, markets eagerly anticipate what the Fed’s new dot plot and summary of economic projections will reveal.
Markets currently anticipate one cut this year, so if the Fed keeps three cuts on the table, we should see a small improvement in mortgage rates. However, if the Fed were to match market expectations, then mortgage rates should remain relatively unchanged.”
The consensus among these experts suggests the Federal Reserve is likely to keep the federal funds rate where it is, but it could lower rates later in the year. Consequently, mortgage rates are likely to stay in the current 7% range, with little room to drop much lower, at least in the near future, experts say.
“If a prospective buyer is looking to buy a home this year, waiting for lower rates may not necessarily result in more savings as rates are likely to hover near current levels,” says Overton. “For a seller, waiting for home prices to rise may also not be a feasible option because we haven’t seen a huge uptick in buying activity, and recent data suggests home prices may have peaked as delistings and price drops are increasing.”
Source: cbsnews.com
Welcome to NerdWallet’s Smart Money podcast, where we answer your real-world money questions. In this episode:
Explore car buying in 2024, from Carvana’s process to the electric vehicle surge and how to maximize your car’s sale value.
Budgets Beyond the Numbers: How do you manage the emotional aspects of budgeting? What’s the car buying market like in 2024? Hosts Sean Pyles and Elizabeth Ayoola discuss personal budgeting and the future of car buying to help you understand how to navigate financial decisions with confidence. They begin with a discussion of budgeting “beyond the numbers,” with tips and tricks on categorizing expenses into their emotional impacts to make budgeting feel more personal.
Today’s Money Question: Is Carvana a good service? Should you buy an electric vehicle if you’re in the market for a new car? NerdWallet autos writer Shannon Bradley joins hosts Sean Pyles and Sara Rathner to delve deeper into the future of car purchases and the electric vehicle revolution. They explore the evolution of electric vehicles, the current state of the car market for both buyers and sellers, and strategies to get the best deal when selling your vehicle. The conversation aims to provide insights on choosing the right time to buy an electric car, understanding the market dynamics, and ensuring a smooth car selling experience.
Check out this episode on your favorite podcast platform, including:
NerdWallet stories related to this episode:
This transcript was generated from podcast audio by an AI tool.
Sean Pyles:
What’s in a budget? If you look at the 50/30/20 budget, you have your needs, wants along with extra debt payments and savings. But we all know a budget can be much more than that. We get into it this episode. Welcome to NerdWallet’s Smart Money Podcast, where we help you make smarter financial decisions, one money question at a time. I’m Sean Pyles.
Elizabeth Ayoola:
And I’m Elizabeth Ayoola.
Sean Pyles:
This episode we answer a couple listeners’ questions about car buying and selling, including what to know about the electric car market right now. But first, we’re exploring what’s really in a budget beyond the numbers and Elizabeth, this is something that you are especially interested in, right?
Elizabeth Ayoola:
I am, Sean, because budgeting gets a bad rep, but it can be fun too, especially when you have something you really want and are working towards, but it can be equally stressful. I’m not going to deny that.
Sean Pyles:
Totally. When people hear the word budget, they might just think about numbers in a spreadsheet or about restricting themselves from purchasing something that they want. Neither is really fun. And don’t get us wrong, we are still big proponents of having a budget and we think the 50/30/20 budget, where you have half of your income going towards needs, 30% going towards wants and 20% going towards extra debt, payments and savings, can be a really accessible and flexible framework for most people, but it doesn’t get to the more personal parts of our finances. So Elizabeth, you like getting into those deeper parts of a budget and you do this by breaking it into three general categories: something stressful, something exciting, and something confusing. Can you talk about why you are thinking about your budget in this way and what’s the purpose of each category?
Elizabeth Ayoola:
So I feel like by doing this, it gives our budget some personality, it creates some interesting conversation around our budgets. I think we all know that budgets can be monotonous, so breaking it up like this helps me stay engaged with my budget and also have something to feel excited about. You know what I’m saying, Sean? So the confusing one especially is a chance for me to challenge myself to untangle areas of my budget where I’m winging it or I’m just disorganized and usually I’m winging it or disorganized because I’m overwhelmed and don’t understand something.
Sean Pyles:
This reminds me of a game that I sometimes play with my friends called Rose, Thorn, and Bud. The rose is something good that happened to you, the thorn is as you might expect, something that’s a little bit thornier or unpleasant and the bud is something that is in progress or something that you are excited about. This is kind of like that, but for your finances, it’s a way to categorize items of your budget under broader themes, which can help you process them in that more personal and emotional way. Is that how you think about it too?
Elizabeth Ayoola:
Exactly. You just put it in a fancy way. Thank you, Sean.
Sean Pyles:
Thank you.
Elizabeth Ayoola:
And I also have a new game that I’m playing with my friends because I’m stealing your idea.
Sean Pyles:
Happy to hear it.
Elizabeth Ayoola:
As of recent, I’ve been asking them when I go on girlfriend dates, what’s one thing they hope happens this year? But I’m definitely going to swap it out for your idea.
Sean Pyles:
Oh, I love that. Well, to help our listeners understand this way of thinking about budgeting, Elizabeth, I would love to hear what you are finding stressful, exciting, and confusing in your budget right now?
Elizabeth Ayoola:
As a recovering over sharer, I am definitely going to share that. So let’s start with stressful. Start with the worst, a moving budget. So just please anybody rescue me on a red carpet and make sure you bring a margarita with you because moving is stressing me out. I’m trying to make the move as cost-effective as possible because it’s looking like I’m going to spend a couple of thousand dollars right now and that’s really hurting my feelings.
Sean Pyles:
Yeah, it’s a lot of money.
Elizabeth Ayoola:
So now let’s get into the exciting thing, a love sack. I don’t know if any of our listeners or you, Sean, have heard of love sacks before, but they’re essentially these giant beanbags and in my fantasy of living out the Bohemian dream in my household, I have something like a love sack where I can read books and watch Netflix and do whatever else I want to do on it. So I’ve wanted one for years, but they are pretty pricey. They can start around the $900 range and go up to a thousand dollars, but I am budgeting for that and I’m looking forward to it. The only thing I’m worried about is my son putting his Cheeto hands all over my stuff.
Sean Pyles:
That’s a fair concern. Also, you might want to wait to get that until after you’re moved because that would be just one other thing to haul across state lines.
Elizabeth Ayoola:
Oh fact, I’m definitely not buying that now, so I’m going to buy it once I move. So it’s also giving me more time to save towards it or to budget for it. Another exciting thing I’m also budgeting for is to go to Nigeria. So I am Nigerian for the listeners and I haven’t been since I had my son maybe like four or five years ago, and he’s been asking me to go. That’s kind of what inspired the trip, but it does cost a couple of thousand dollars, so I’m budgeting towards that as well, but excited. And lastly, what is confusing? Balancing business and personal budgets at the same time is very confusing for me right now.
So I’m trying to kind of figure out how much to put towards retirement saving because my expenses just keep changing and I’m also trying to ensure that I don’t commingle, which is when you’re mixing kind of your business finances with your personal because we don’t want the IRS to come knocking. So all these kind of things are just confusing and maybe a little bit stressful as well. Then lastly, my son is going to a private school in August, so my budget is going to change. I’m trying not to be hard on myself because I really like saving big chunks of money and him going to private school might mean I have to save less, but it’s all good.
Sean Pyles:
See, I feel like this really shows how your budget is being enacted to help you meet the short and long-term life goals that we talk about so much on Smart Money and also the various emotions that come with meeting your goals or trying to meet them and the compromises that are just inherent in this conversation you have with yourself and your finances. Also, Elizabeth, last week you said that you were financially boring, and I’m going to say that all of these things are interesting. I’m especially excited about your trip to Nigeria, so let me know how that goes. And also let me know where you land on your savings when your son starts private school.
Elizabeth Ayoola:
Of course, I’m going to share that with you guys, so watch out for that. It has been so long since we’ve been to Nigeria, so we’re looking forward to it. And private school, well all the listeners with kids know that kids swallow up your dollars, but I hope to get a good return on investment on this. So what are yours, Sean? Tell me about your things that are stressful, exciting, confusing.
Sean Pyles:
Okay, well this is where I reveal that I am actually boring. Something stressful is that I’m in the middle of a season of travel right now, which is not boring. It’s very exciting actually. But I went down to San Francisco for a concert a couple of weeks back and I’m about to fly out to the East coast to see some friends in New York and DC and it’s going to be great to see these friends and it was great to see San Francisco again where I lived for many years, but boy, oh boy, traveling is very expensive. It’s much more expensive than working from home day in day out and the adjustment from making my breakfast every morning and having my coffee and a nice little ritual for myself, going from that to spending $20 on the sandwich and a coffee every single morning is a little bit painful and a little bit stressful for my budget, but I’ll make it work.
And then something exciting, this might be a little bit premature because it’s not actually going to happen for nine months, but I’m getting relatively close to paying off my car. I’ve had this car loan since 2020 and I know I took a longer car loan than we typically recommend, but that’s just where my finances were at the time. And I’m kind of lucky to have a pretty affordable car payment. But I am also very excited about having that extra $350 that I pay for my car each month back in my budget, even though I will likely direct most of that into my car savings bucket. Confusing? To be honest, nothing is too confusing for me right now fortunately, but as ever, I am in this continual dialogue with myself and my ADHD impulses that tell me to buy random things that I sincerely do not need. And what’s helped me recently to shake myself from buying things online is just asking what do I expect this thing to do for me? And the answer is usually nothing meaningful. So that helps me break the spell.
Elizabeth Ayoola:
Oh, I love that. And I can relate with you re ADHD. I think in a previous episode I told y’all that I was emotional buying and I’m so glad to update y’all that that has stopped.
Sean Pyles:
Oh, congratulations.
Elizabeth Ayoola:
Thank you. No more random Zara shops every other week. So I’ve been doing pretty good and I can understand what you’re saying, re travel because I have lots of upcoming trips as well and it’s so expensive. But Sean, I’m excited about the car. $350 a month sounds really good to do something else with. And that’s about how much my payment is too. So I’m going to tap into your excitement and hopefully I will be there next year.
Sean Pyles:
Manifesting that for us, yes. Well listener, I hope this exercise has helped you think about your own budget in a new way. Before we get into this episode’s money question segment, let’s check in on our nerdy question of the month, which is what is your weird money habit, behavior, or principle that you live by?
Elizabeth Ayoola:
Here’s one weird money habit that a listener texted us. I just listened to your podcast of a person with dozens of credit cards. I’m one of those individuals too. To be clear though, the only balances I carry are those on temporary 0% promo offers and ones that are paid off monthly. My system is to carry five to six cards in my wallet and rotate them, then return those cards to the bottom of my home credit card stack. Another side gig hobby I do is entering sweepstakes online daily. It’s an easy but exciting activity that can lead to surprise winnings at any given time. My biggest win to date is $24,000 minus taxes, of course. That’s a large chunk of cash.
Sean Pyles:
Oh, that’s an interesting one. Thanks for sharing that. So listener, let us know: what is your weird money habit? Do you only use cash for all of your transactions or are you a hardcore credit card point maximizer?
Elizabeth Ayoola:
Or maybe you have 10 billion bank accounts like Sean. Okay, he just has 10. It’s not 10 billion, it’s just 10.
Sean Pyles:
I didn’t really think that was weird until recently. I was talking with a friend who was considering getting her very first high yield savings account, and she looked at me like I had two heads when I mentioned that I have 10 accounts. So maybe that’s also a good way to think about this. What is something that you do with your finances that seems maybe totally normal to you, but everyone else around you thinks is a little bit off? We want to know.
Elizabeth Ayoola:
Yes, we do. So tell us your weird money habit by texting us or leaving a voicemail on the Nerd hotline at (901) 730-6373. That’s (901) 730-N-E-R-D. Or you can email us a voice memo at [email protected].
Sean Pyles:
And while you’re at it, send us your money questions too. We know how confusing money can be and we want to help you make smarter financial decisions. And a quick reminder that we are running another book giveaway sweepstakes ahead of our Nerdy Book Club episode.
Elizabeth Ayoola:
Our next club guest is Jake Cousineau, author of How to Adult: Personal Finance for the Real World. The book offers tips to young people on how to get started with managing their money.
Sean Pyles:
To enter for a chance to win our book giveaway, send an email to [email protected] with the subject ‘book sweepstakes’ during the sweepstakes period. Entries must be received by 1159 P.M. Pacific Time on May 17th. Include the following information: your first and last name, email address, zip code, and phone number. For more information, please visit our official sweepstakes rules page. All right, now let’s get into this episode’s money question segment with our co-host, Sara Rathner, after a quick break, stay with us.
We’re back and answering your money questions to help you make smarter financial decisions. This episode we’re taking on a couple questions about cars, how to buy and sell them, and how electric vehicles fit in. And we’re joined by NerdWallet autos writer Shannon Bradley to help us navigate the winding roads of car buying in 2024. Shannon, welcome back to Smart Money.
Shannon Bradley:
Thanks for having me back. Let’s get to the first listener’s question. This comes from a voicemail.
Listener Voicemail:
Hello. The reason I’m calling is we were wondering what do you think about the company Carvana? We’re thinking about selling our vehicle to them because if we maybe try to sell it at a car dealership or something, we’re not really thinking that we’re going to get a good deal for it. But we don’t know as far as us selling a vehicle to them, not us purchasing one from them, if they’re reputable with regards to that. We’ve never used them.
Sean Pyles:
So Shannon, can you start by giving us a quick explanation of how Carvana works?
Shannon Bradley:
Yeah. Carvana is an online only car retailer and they sell and buy used cars only. They also take trade-ins. And based upon the listener’s question, I think the most important thing is that you can request an offer for your car right on the Carvana website as long as it’s a 1992 model or newer. And it’s a pretty simple process. They’re going to ask you for your 17 digit vehicle identification number, more commonly known as your VIN, or your license plate number. They’re going to ask you for mileage, the vehicle condition, vehicle options, and then if you have a loan or a lease on the car, they’ll ask you for information about that too.
Sara Rathner:
So other than Carvana’s iconic car vending machines that you see dotting the landscape in different cities, what makes it different from going to a dealership or to CarMax?
Shannon Bradley:
Well, let’s talk about CarMax first. CarMax is an online retailer too, and they’re very similar to Carvana. I think one of the biggest differences when you sell your car between the two is how you get your car to the retailer. With Carvana, you can finalize the entire sale remotely. They will come to your house, they’ll pick up your car, do the inspection there. You do have to be within one of their service areas, and there could be a small fee depending upon how far you are from their hub. CarMax, on the other hand, they offer pickup, but only at limited locations in four states.
So more than likely you’re going to have to take your car to a CarMax store for inspection. And depending upon where you live, that could be quite a distance. So if you compare these types of online retailers to a dealership, I think two of the biggest differences are convenience and being able to negotiate what’s offered for your car. Again, with Carvana, you can potentially complete the entire process of selling your car right from your home, but when you get an offer from Carvana or CarMax, it’s not negotiable. Whereas if you sell to a dealership, you can attempt to negotiate that offer.
Sean Pyles:
So car buying and selling is a notoriously frustrating process. Are there any common complaints about how Carvana handles this process that maybe are distinct from other ways of buying and selling a car?
Shannon Bradley:
On the selling side, I’m not aware of too many complaints. In fact, it was kind of funny, over the weekend I had a friend on Facebook ask this very question, and so I was monitoring responses of people and they were saying that it was a fast and easy process to sell their car to Carvana. On the buying side, I think the thing is, you have to remember that when you buy a car from Carvana, you can’t test drive it, you can’t inspect it. And on occasion, I’ve heard of people receiving a car that they didn’t feel really matched what was represented online. But I think the thing to keep in mind there is that Carvana offers a seven-day money-back guarantee with a limit of 400 miles. So when you get your car, just take that time to really test drive it and get a very thorough inspection done.
Sean Pyles:
So people go with Carvana because it seems like a really easy way to buy or sell a car and you can potentially just have the car dropped off at your front door. But that doesn’t mean that you still don’t have to do your due diligence and then get that inspection to make sure the car is as good as they are telling you it is.
Shannon Bradley:
Yes, exactly. They will allow you to, I think return up to three vehicles. There is some leeway there. And then the other thing that I was just going to mention, because I think a lot of people have heard about this because there was a lot of media coverage about it. This was in late 2022, early 2023, there was an issue with Carvana buyers. They would buy a car, they didn’t get their title in a timely manner, and so they couldn’t even register and drive the cars. And that’s something that our autos team has been monitoring. It doesn’t seem to be the issue that it has a year ago, but we still recommend for people to ask for proof of title. It’s just given that there were issues a year and a half ago, it’s just not a bad idea to do that.
Sara Rathner:
So our listener, like so many others, is interested in getting a good deal when selling their car. Do we know if places like Carvana offer better or worse deals than other places where you can sell your car?
Shannon Bradley:
Well, when you compare Carvana to CarMax, I’d say that’s kind of a toss-up. I think a lot depends on the vehicle you’re selling. Is it one that the retailer needs in their inventory at that time? And if it is, they may be more inclined to make you a better offer, but that’s why it’s so important to get more than one offer. And then you asked about dealerships. Traditionally you can get more selling your car to an individual, but of course that’s not going to be as easy as selling to someone who’s going to come right to your door and pick it up or even being able to go to the dealership down the road, but dealerships, their offers tend to be the lowest. But again, it depends on the car that you’re selling. Right now we’re seeing that both new and used cars are low inventory for Toyota. So if you have a type of car that a dealer is really needing on their lot, you may be able to negotiate a better deal.
Sean Pyles:
So the car market has been on a wild ride over the past few years, really since the pandemic began. So what is the car market looking like right now both for buyers and sellers?
Shannon Bradley:
Well, I would say wild ride is kind of an understatement. As someone who’s been covering the car market for the last three years, it has been a wild ride. It is not back to where it was before the pandemic. But from a car buyer aspect, several things are improving. For one, inventory is returning to normal. And actually you have some auto manufacturers who have overshot and are overstocked and those particular manufacturers, they’re starting to offer incentives again. We’re hearing you may be able to negotiate below the manufacturer’s suggested retail price, which was really unheard of during the pandemic. And then on the downside, we all know how vehicle prices are still high. I think actually this morning I saw that the average transaction price for a new vehicle is still at $47,000. That’s not small change by any means.
Sean Pyles:
No, it’s a lot of money.
Shannon Bradley:
But you can find deals out there, especially if you’re flexible about what you’re buying. And then leasing has some good deals. And if you buy or lease an EV right now, you could qualify for the federal tax credit of up to $7,500 on top of the other incentives that are out there.
Sara Rathner:
So how about sellers in the current climate? How are things looking for people who are selling their car right now?
Shannon Bradley:
Well, I would say they’re not faring quite as well as the buyers. Depends on what you’re selling, but if you recall, during the pandemic the vehicle shortage meant that individuals were actually selling their cars for a lot more than they paid for them. And with car supplies returning to normal for most manufacturers, selling isn’t what it was during the pandemic. You shouldn’t anticipate a huge profit like we were seeing in the past several years, but you should expect to receive a fair price and you can do that by researching the current market value of your car.
Sean Pyles:
So how can people get the most money for their vehicle?
Shannon Bradley:
Well, I go back to research. Research is key. If I was selling my car right now, I definitely wouldn’t put all of my eggs in one basket. If you get only one offer, which is something a lot of people do, they just don’t want to take the time to get more than one offer, you won’t ever know if there was a better offer out there. And the thing is, nowadays, it’s easy to do your research. You have online pricing guides where you can find estimates like Edmunds or Kelley Blue Book. And as we’ve been discussing, you can request actual offers from sites like Carvana, CarMax or TrueCar. And there’s not any cost or obligation to do that. Something we recently launched at NerdWallet, we can also make an offer on your car. We now have NerdWallet Automotive and you can find that when you Google NerdWallet buy my car.
Sean Pyles:
Alrighty. Well now let’s turn to the next question, which comes from a listener’s text message. They wrote, what is the fuel of the future? I’ve been researching about buying a new car and they’re saying that cars in the future are going to be electric, but if there’s a new fuel of the future, should I just wait until the new fuel comes out or just buy an electric car now? So Shannon, if you don’t mind, please bring out your crystal ball or industry research and tell us is there a new fuel of the future or does it seem like electric vehicles are the automotive energy of the coming years?
Shannon Bradley:
Well, we’re hearing a lot about research of different alternative fuels like natural gas, propane, or hydrogen fuel cells, which is really just another way of generating electricity. But these are all really in their early stages of development and adoption. So while I think development of various ways to lower vehicle emissions will definitely continue, my crystal ball says that in the near future, the emphasis will still be on EVs.
Sara Rathner:
And is that because EVs have just been around longer and have an advantage in the market over these other fuel types?
Shannon Bradley:
Yes, Sarah, it is. Many people don’t realize that the first electric vehicles were actually introduced in the late 1800s, then they kind of fell by the wayside and interest renewed in the 1970s. So it’s actually taken a long time for us to reach a point where electricity is accepted as a fuel source as it’s becoming today. According to Kelley Blue Book, EVs represent the fastest growing car sales category, and last year nearly 1.2 million U.S. vehicle buyers went electric. We don’t expect that pace to slow down with federal and state legislation as well as so many car makers devoting many resources to the transition to EVs. I just don’t see a quick pivot to other fuel sources that are going to take more time to build that infrastructure and to build that adoption rate.
Sean Pyles:
So the EV market has been developing rapidly over the past few years, but many anxieties that would-be buyers might have around electric vehicles like range, affordability, finding chargers are pretty persistent. Have any of these issues gotten better?
Shannon Bradley:
They have gotten better. For comparison, before 2016, when you’re looking at range, the median range of a new EV was below 100 miles and the top performing option couldn’t travel 300 miles without a charge. Today you can buy an EV that has a 250-mile range for less than $40,000 and the high-end models can have a range of more than 400 miles per charge. When you’re talking about the charging infrastructure, that’s improving too. We now have about 60,000 charging stations across the country, and that’s more than twice the number that we had five years ago. And there are a lot of incentives out there to help with installing home chargers, like from some auto manufacturers or your local electric company.
Sara Rathner:
What about the price of these cars? EVs are generally more expensive than gas powered cars. Is this changing?
Shannon Bradley:
That’s improving too. I think the Tesla price drops have driven other car makers to follow suit. There are a lot of EV incentives out there to help reduce the cost. As I said earlier, you could qualify for the federal tax credit of up to $7,500 and that can usually be stacked with other incentives from car manufacturers, state and local government and electric companies. The U.S. Department of Energy actually has a site, you can find it by searching alternative fuels U.S. Department of Energy, that has a database where you can research all of the various incentives that are available. Late last year, I talked to someone who was an EV buyer in California and he used multiple incentives to knock $8,000 off the price of a Chevy Bolt. And then right now there are a lot of EV leasing deals, and that’s a great option if you’re someone who just isn’t sure that you want to go ahead and buy an EV right now.
Sean Pyles:
Okay. So Shannon, I have to ask you, as a consumer and also someone who writes about this stuff a lot, how are you thinking about electric vehicles? Have you made the jump or are you planning to?
Shannon Bradley:
I haven’t made the leap yet, but it isn’t because I don’t want one. I’m pretty frugal with my money and I bought a gas-powered car right before the pandemic, so I was able to buy it before car prices skyrocketed. And I’m in a fortunate position right now where I’m no longer supporting children. I was receiving, like everyone, stimulus funds during COVID, so I was able to pay down that car and I actually don’t have a car payment right now. I am environmentally conscious. So I think that eventually I will buy or lease an EV, but for right now, I’m enjoying taking a vacation from car payments and putting that money into my retirement savings.
Sean Pyles:
Well, that does sound like a very smart financial decision. I’ll say that. Well, Shannon, thank you so much for joining us on Smart Money.
Shannon Bradley:
Well, thanks for having me.
Sean Pyles:
And that is all we have for this episode. Remember, listener, we are here for you and your money questions. So if you have anything that you want the Nerds to help you out with, call us or text us on the Nerd hotline at (901) 730-6373. That’s (901) 730-N-E-R-D. You can also email us at [email protected]. Also visit nerdwallet.com/podcast for more info on this episode. And remember to follow, rate and review us wherever you’re getting this podcast. This episode was produced by Tess Vigeland who also helped with editing. Sara Brink mixed our audio. And a big thank you to NerdWallet’s editors for all their help.
Sara Rathner:
And here’s our brief disclaimer, we’re not financial or investment advisors. The nerdy info is provided for general educational and entertainment purposes and may not apply to your specific circumstances.
Sean Pyles:
And with that said, until next time, turn to the Nerds.
Source: nerdwallet.com
While mortgage rates remain higher than they were during the housing market’s booming pandemic years, Moody’s Ratings has predicted them to finally start declining over the next few years in a new report.
Exactly a week ago, the Federal Home Loan Mortgage Corporation, better known as Freddie Mac, reported that the average rate for a 30-year-fixed mortgage—the most popular among U.S. borrowers—had reached 7.1 percent, a record high for this year so far.
Read more: How to Find the Right Mortgage for You
Moody’s Ratings’ experts believe mortgage rates will come down—just not as quickly as homebuyers might wish for. The financial research company is currently estimating that mortgage rates will remain higher “than the extremely low levels during the decade of aggressive central bank stimulus that preceded the past two years” in the coming months, but will likely reach around 6 percent or somewhat less by the end of 2025.
This is good news for aspiring homebuyers who have been squeezed out of the market by skyrocketing home prices and high mortgage rates, which climbed as a direct consequence of the Federal Reserve’s aggressive rate-hiking campaign to combat the rise of inflation last year.
While most analysts expect the central bank to lower interest rates this year, the Federal Reserve has so far failed to do so, as the latest data on the cost of living show that inflation remains higher than expected at 3.48 percent in March. The Federal Reserve does not directly set mortgage rates, but any rise in interest rates impacts new mortgage lending.
Read more: Compare Low Rates With the Best Mortgage Lenders
Higher mortgage rates led to a drop in demand in late summer 2022 due to the unaffordability of buying a home for many Americans; but the price correction that followed this slide in demand was rather modest. In spring 2023, prices started climbing back up across the country, as the supply of homes remained low.
While the historic shortage of homes in the U.S. can primarily be traced back to the fact that the country has under-built following the bursting of the housing bubble and the financial crisis of 2007-2008, high mortgage rates have also caused many homeowners to hold on to their homes instead of putting them on the market.
“Many U.S. homeowners have low fixed-rate mortgages that they are reticent to give up, which is constraining existing property listings and sales,” Moody’s wrote in the report.
Faced with a growing demand for new constructions and mortgage interest rate buydowns, the company’s experts expect home prices to avoid significant decline in the coming months, sliding by a moderate 5 percent this year after falling 6.6 percent in 2023.
Newsweek is committed to challenging conventional wisdom and finding connections in the search for common ground.
Newsweek is committed to challenging conventional wisdom and finding connections in the search for common ground.
Source: newsweek.com
Were the good old days really all that good? Sure, when mortgage rates were below 3%, it was a lot cheaper to purchase a house, but we were also in the middle of a global pandemic.
At the start of 2021, the average rate for a 30-year fixed mortgage was 2.65%, according to data from Freddie Mac. During the homebuying boom of 2020 and 2021, the number of borrowers taking out new mortgages reached a more than two-decade high.
Over the past two years, a combination of high mortgage rates, low housing inventory and sluggish wage growth has crippled affordability for homebuyers.
While many are holding out for mortgage rates to fall, it’s unlikely we’ll see 2% mortgage rates any time soon. In fact, experts hope we don’t.
A return to that kind of low-rate environment would indicate major problems in the economy, said Alex Thomas, senior research analyst at John Burns Research and Consulting.
Mortgage rates typically fall during a recession. But a recession also comes with widespread unemployment, increased debt, investment losses and overall financial instability.
In today’s housing market, homebuyers should have realistic expectations. Experts predict mortgage rates to inch closer to 6% by the end of the year as inflation cools and the Federal Reserve starts to cut interest rates. Record-low mortgage rates aren’t in the cards again, and that’s likely for the best.
Mortgage rates change every day. Experts recommend shopping around to make sure you’re getting the lowest rate. By entering your information below, you can get a custom quote from one of CNET’s partner lenders.
About these rates: Like CNET, Bankrate is owned by Red Ventures. This tool features partner rates from lenders that you can use when comparing multiple mortgage rates.
Economic uncertainty and market volatility — whether during an election cycle or a pandemic — impact the direction of mortgage rates. It’s often said that bad news for the economy is good news for mortgage rates, and vice versa.
A significant lever for mortgage rates is the federal funds rate, which the Fed keeps low when it needs to stimulate economic growth. For example, during the 2008 financial crisis, the Fed slashed that benchmark rate to zero to bolster the economy. When there were signs of recovery in 2015, the central bank started raising interest rates again, sending mortgage rates into the 4% to 5% range until 2020.
The COVID-19 pandemic sparked another economic crisis. To incentivize people to borrow and spend money — and avoid a prolonged recession — the Fed once again cut the federal funds rate to near zero and pumped money into the economy by purchasing government bonds and mortgage-backed securities. Mortgage interest rates fell quickly, bottoming out in the mid-2% range in 2021.
But the combination of supply shocks, record-low rates and an extreme increase in money supply from government stimulus helped send prices way up, according to Erin Sykes, chief economist at NestSeekers International.
In early 2022, the Fed had a new problem on its hands: inflation.
In a recession, the Federal Reserve tries to spur economic growth through quantitative easing, a monetary policy that consists of cutting the federal funds rate to encourage lending and borrowing to consumers, and increasing its purchase of government-backed bonds and mortgage-backed securities.
If the Fed needs to slow the economy down and reduce the money supply in financial markets, it does opposite: quantitative tightening. By increasing the federal funds rate and tapering its bond-buying programs, the central bank raises the cost of borrowing money, which puts upward pressure on longer-term interest rates, like 30-year fixed mortgage rates.
With prices surging in 2022, the Fed’s main tool was to adjust interest rates, making credit more expensive and disincentivizing borrowing. As a result of a string of aggressive rate hikes, the federal funds rate went from near zero to a range of 5.25% to 5.5%, where it’s remained since last summer. Average mortgage rates skyrocketed, peaking past 8% last October.
Although inflation has gone down, the Fed isn’t ready to start lowering rates just yet. The central bank would like to see evidence of a weaker economy (including consistently lower inflation and higher unemployment) before making any adjustments to its monetary policy.
Though the Federal Reserve doesn’t directly set mortgage rates, it controls the federal funds rate, a short-term interest rate that determines what banks charge each other to borrow money. When the federal funds rate moves up, it impacts longer-term interest rates, like 30-year fixed mortgage rates, as banks raise interest rates on home loans to keep their profit margins intact.
Economists and housing market experts agree that mortgage rates will fall over the next several years, but not below 3%.
When mortgage rates hit their record lows just a few years ago, the federal funds rate was near zero. As the Fed starts cutting rates later this year, the plan is to do so slowly and incrementally. Barring another major economic shock, the Fed projects the federal funds rate will take only modest adjustments down.
In the most recent policy meeting, Fed Chair Jerome Powell remarked that the federal funds rate “will not go back down to the very low levels that we saw” during the financial crisis, suggesting that the economy can adapt to a more “neutral” benchmark rate range of between 2.4% to 3.8% in the long run, i.e., less tightening, but not too much easing from the current range of 5.25% to 5.5%.
The Fed would be forced to lower rates close to zero only if there were a dramatic economic shock, such as a pandemic or recession, said Selma Hepp, chief economist at CoreLogic. In that case, if the central bank started purchasing government bonds and mortgage-backed securities again, there’s a possibility mortgage rates could return to those record lows.
However, without such an upheaval, there’s a floor under how low mortgage rates will go, and it’s highly unlikely they’ll ever drop to their 2020-2021 levels.
“With the Federal Reserve ending quantitative easing and stepping out of the market for mortgage-backed securities, rates will settle at a much higher level,” said Matthew Walsh, housing economist at Moody’s Analytics.
Moody’s Analytics predicts mortgage rates will stabilize between 6% and 6.5% over the next few years. That’s high compared with the recent past, yet it’s a historically normal range for mortgage rates.
The housing market is frustrating, but prospective homebuyers are starting to come to terms with this new reality. Following the pandemic, people are moving on with their lives, whether that’s building a family, relocating, downsizing or upgrading.
For some households, that means making room in their budget for a monthly mortgage payment at a 6% or 7% rate.
When you monitor mortgage rate movement, you’re usually looking at national averages determined by weekly rate information provided by lenders. While those rates give a picture of the “typical” mortgage rate, that’s not necessarily the rate you’ll get when applying for a mortgage.
It’s possible to get a better deal on your mortgage.
To qualify for a mortgage, most lenders require you to have a minimum credit score of 620, but lenders offer the lowest mortgage rates to consumers with excellent credit scores, around 740 and above.
You might also consider purchasing mortgage points, also known as discount points. This is an extra fee you pay upfront in exchange for a lower interest rate. Each mortgage point typically costs 1% of the purchase price of a home and will lower your mortgage rate by 0.25%.
A shorter-term loan like a 15-year or 10-year mortgage will have a lower interest rate than a 30-year fixed mortgage. Your monthly payments will be higher with a shorter-term loan because you’re paying the loan off in less time, but you’ll save big on interest.
Buying a home is likely the biggest transaction you’ll make in your lifetime. Regardless of the market, carefully assess your needs and what you can afford.
And don’t hold your breath for 2% mortgage rates.
Source: cnet.com
Feelings of Financial Insecurity in America Soar to Record High, Even as Consumer Anxiety About the Economy and Recession Recede Northwestern Mutual’s 2024 Planning & Progress Study finds just over half of U.S. adults expect recession this year, a significant drop from two-thirds who said the same in 2023 One-third (33%) of Americans say they … [Read more…]
It’s no secret that 2023 was a difficult year to buy a home. With mortgage rates briefly topping 8% and home prices breaking records throughout the year, many would-be sellers simply decided not to bother listing their homes, exacerbating already tight inventories.
New data from the U.S. Census Bureau published last week shows how drastically housing inventory has changed since 2020, while weekly data from Altos Research offers some insights on where it goes from here.
Census Bureau data on housing inventory estimates details two cycles this decade – the onset of the pandemic and the rise of interest rates – that have been catastrophic for the nation’s for-sale housing inventory.
The onset of the pandemic and government lockdowns sparked a frenzy for homes, especially those away from crowded downtowns and with ample space for home offices and homeschooling. Prospective homebuyers were armed with low interest rates, paused student loan payments and stimulus checks.
The number of owner-occupied homes skyrocketed, quickly depleting the number of vacant for-sale homes. Renters occupied fewer homes, and fewer vacant homes were reserved for them.
The number of homes “held off market” – second homes, vacation homes and others that are neither for-sale, for-rent or occupied – shrank. This could be because their owners snagged profits amid rapidly rising prices, because those who can afford second homes paused buying, or a combination of the two.
Seasonal housing, too, dropped considerably. This is likely due to the fact that seasonal housing – defined as homes intended for periodic occupancy such as for holiday resort guests or farm workers – could be profitably sold to meet soaring homebuyer demand and was not needed during the pandemic’s travel restrictions and weak travel demand.
Most of the trends begun in 2020 continued in 2021 except for renter-occupied homes, which rose above 2019 levels in the second half of the year. This was likely a reflection of the prolonged decline in vacant homes for sale, which made it difficult for would-be buyers to find a home to purchase.
Many of the same pandemic forces that set off the homebuying frenzy also fueled a frenetic pace of inflation. In 2022, the Federal Reserve began taking action to combat these market forces by raising interest rates, starting the second cycle of inventory changes.
Over two years, the Federal Reserve hiked rates 11 times for a total increase of 5.25 percentage points, the fastest pace of hikes in four decades. It has held rates at an effective rate of 5.33% in every meeting of the Federal Reserve Open Markets Committee since July 2023, including in their meeting last week.
Mortgage rates followed suit, walloping buyers’ purchasing power. The sudden run-up in rates discouraged would-be sellers from listing their homes, as they would be faced with much higher monthly payments for the same size home were they to sell and buy another home – if they even qualified for the same size home as they currently own.
This squeezed inventory even further throughout 2022 and 2023, pushing home prices to record highs month after month.
The high-rate environment further pushed owner occupancy up while pushing homes held off market, seasonal housing and homes vacant for sale down. That the number of owner-occupied homes rose throughout 2023 – an abysmal year for home sales – shows just how tightly recent homebuyers are holding onto their low rates.
High rates, combined with low for-sale inventories and high home prices, have also resulted in a surge in home renters. There were nearly 2 million more renter-occupied homes in the fourth quarter of 2023 than in the same quarter of 2019.
The environment has also prompted many homeowners to list their homes for rent rather than sale. The number of homes vacant for rent in the fourth quarter of 2023 was up 4% since the same quarter five years ago, while the number of homes vacant for sale was down 36%.
The extremes of the 2020s have dealt big blows to for-sale inventories. First the 2020-2021 housing frenzy took a big bite out of existing inventories, then the 2022-2023 streak of rate hikes kept would-be sellers from replenishing those inventories.
The 2020s have also seen for-sale inventory siphoned from second homes, vacation homes and seasonal homes. Homebuilders, too, have added to for-sale inventory, pushing the total number of homes in the U.S. up 8.7% since the fourth quarter of 2018. But none of these valves have alleviated the shortage of for-sale homes or the resultant high home prices.
The majority of homes that would be up for sale are being held by owners with low mortgage rates who would rather stay put or rent than sell, a phenomenon known as the “mortgage rate lockdown.” Plus, boomers are aging in place for longer, further depleting available housing stock. In fact, the number of owner-occupied homes is at an all-time high, while the percentage of homes that are owner-occupied is well above pre-pandemic levels.
The only apparent change that could induce significant for-sale inventory back into the market, then, is lower mortgage rates. How quickly would sellers return if rates were lower? We got an early test in December and January when the FOMC forecasted rate cuts in 2024.
As rates began falling steeply from October through December and hovered around 6.6% in January, new listings increased on a year-to-year basis in 14 of 15 weeks, according to data from Altos Research, which, like HousingWire, is owned by HW Media.
The data is an encouraging sign that owners with homes to sell will be responsive to mortgage rates, suggesting rate cuts this year could bring about a rapid uptick in homes for sale.
Less encouraging, however, is how soon the market might see rate cuts. Mortgage rates rose above 7% this week for the first time in 2024 following a strong jobs report and comments by Federal Reserve Chairman Jerome Powell that suggested cuts were less imminent than many bond and equity traders had assumed.
Source: housingwire.com
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Who doesn’t think swearing parrots are funny? Although you wouldn’t want your parrot talking about the clap when Aunt Beatrice comes over for Sunday dinner. I’m sure that every LO has heard their share of salty words, and they deal with much more for their clients than just a loan. Working with their client’s debts, assets, rental insurance until they buy a home, even servicing after the loan funds, you name it. Everyone across the nation is feeling the brunt of seemingly usurious homeowner insurance rates, and The Mortgage Collaborative’s Rundown tomorrow has Andrew Hellard, SVP of Products with Matic, discussing why homeowner’s insurance costs have skyrocketed. IMBs have not been retaining servicing. They needed the cash. Companies like Freedom, AmeriHome, Pennymac, and Planet Home have been buying up servicing. They will retain that customer if and when refinancing kicks in. Rate and term refis will probably go to the aggregators. They bought the servicing; they want to keep that customer. What percentage of customers will go back to the original lender, increasing the recapture rate? It may very well depend on what the customer service was like initially. (Today’s podcast can be found here and this week’s is brought to you LoanCare, successfully navigating clients and homeowners through market change for 40 years. The mortgage subservicer delivers superior customer experience through personalization and convenience via its portfolio management tool, LoanCare Analytics™, supporting MSR investors with a focus on customer engagement, liquidity, and credit risk. Hear an interview with Angel Oak Mortgage Solutions’ Tom Hutchens on his real estate market outlook for 2024 and securitizations in the Non-QM space.)
Broker and Lender Products, Programs, and Software
Mortgage leaders: The home insurance market is facing unprecedented volatility with carriers declining new business and increasing premiums to an all-time high. This can delay closings and even lead to DTI exceeding acceptable limits once insurance costs are factored in. Matic, a home insurance marketplace built for the mortgage industry, helps borrowers save time by shopping multiple A-rated carriers at once and providing transparent pricing and coverage options. With flexible integration options, Matic adds visibility and control, allowing lenders to foresee potential issues that could result in delayed closings. To learn how mortgage enterprises like New American Funding and PRMG are partnering with Matic, book a demo today.
Ready to help more borrowers tackle affordability? Click n’ Close has provided more than 1.5 billion dollars in DPA-related financing to over 6,000 borrowers through its SmartBuy suite of products, with an average of nearly $12,500 in assistance per transaction. Unlike state or municipal DPA programs, SmartBuy isn’t subject to budgetary shortfalls and offers tremendous flexibility to accommodate a wider range of borrower scenarios, making it ready to help your borrowers achieve homeownership. From start to finish, SmartBuy offers a streamlined process for all parties. With lower capital requirements and short turn times, Lenders can be up and running with SmartBuy in a snap. In addition, wholesale loan program information is available in today’s leading product pricing engines (PPEs), including Optimal Blue, MeridianLink’s Price My Loan, Lender Price, and Polly. Reach out to our wholesale (Adam Rieke, Kerry Webb and Soliman Martinez) or correspondent team (Julas Hollie) to learn more.
‘App’ [noun] – an application designed for a mobile device. ‘Optimal Blue PPE’ [proper noun] – the mortgage industry’s most widely used product, pricing, and eligibility engine. These terms probably aren’t new to you, even if vocabulary wasn’t your best subject in school. But one piece of information you won’t find in a dictionary is that the Optimal Blue PPE is now available in a native mobile app for Android and iOS. That’s right: Loan officers can put “pricing in their pocket” with complete access to scenario pricing and more, the exact moment they need it. It’s time to leave your dictionary AND your laptop behind and take the power of the Optimal Blue PPE wherever business takes you. The enhanced iOS app even includes publicly accessible pricing analysis from the Optimal Blue Mortgage Market Indices. Simply have your company’s account admin enable access today.
“Planet Management Group is your trusted and proactive partner for residential and commercial asset management. Our private clients gain access to specialized technology, expert advisory services, and clear insights into residential and commercial market opportunities. Embrace performance. Experience PMG. email or call (585) 512-1030 and discover the PMG difference today.”
Successfully managing MSR portfolios can be a lucrative endeavor, but navigating regulatory compliance, risk management, and understanding market values can be daunting. Join MQMR and MCT for a webinar on February 15th at 11am PT entitled MSR Risk Management, Compliance, and Current Market Strategies, where panelists will dive into operational and regulatory best practices, share invaluable tips to avoid common MSR management pitfalls, and provide insights into current pricing trends. The joint webinar will also explore crucial topics such as servicing regulatory developments (FHFA, GSEs, NCUA, GAAP compliance), a bulk MSR market update, trends in retained vs. released vs. co-issue, and understanding the value of your portfolio. Don’t miss this opportunity to enhance your portfolio management skills and elevate your lending income. Register today for a comprehensive session that will empower your financial strategies.
STRATMOR on Profitability
In his 1943 paper, “A Theory of Human Motivation,” Abraham Maslow identified five levels of human needs, from the most basic to the most advanced. In STRATMOR Group’s January Insights Report, Senior Partner Jim Cameron borrows from Maslow’s famed “hierarchy of needs” theory to offer mortgage lenders a real-world approach to shaping their strategies in 2024. STRATMOR’s January InFocus article, “Maslow and Mortgages – The Path to Actualization in Today’s Market,” outlines a similar hierarchy that recommends lenders get back to consistent profits before embarking on their longer-term strategic goals. Check out STRATMOR’s full January Insights Report here.
News and Industry Updates
“AnnieMac Home Mortgage is delighted to share a momentous announcement that symbolizes our commitment to progress and innovation: the unveiling of our new brand… Our new brand is a reflection of AnnieMac’s journey, capturing the spirit of adaptability and forward momentum that has defined our organization. At the heart of this evolution is the distinctive chevron symbol.” (Editor’s note: Cynics would say that “momentous” might be a stretch, reserved for things like landing on the moon, finding Amelia Earhart’s plane, or scaling Mt. Everest. But hey, if it gets more business…!)
Pennymac was recently alerted to an appraiser fraud scheme where appraisal reports were completed by an unlicensed appraiser unlawfully using the identities of other actively licensed appraisers. The appraisal reports were completed over the past two-year period and there is no evidence the appraisers whose identities were used were aware of or involved in the activity. Details are posted on the in Pennymac Announcement 24-04.
Do your clients need to access home equity? Kind Lending offers Closed End Seconds (CES) financing through piggyback and standalone programs. CES financing allows borrowers to access cash from their home equity without impacting their original loan rate.
Per the Pennymac Announcement 24-02, Jumbo LLPAs will be updated effective for all Best Efforts Commitments taken on or after Monday, January 8, 2024 as follows: Improving values on the ‘Occupancy Adjustments’ LLPA grid. Updating values for the ‘Purchase’ LLPA on the ‘Loan Purpose Adjustments’ LLPA grid.
Capital Markets
The United States cannot be an island of prosperity. This week has been an excellent example of how international events can impact domestic mortgage rates. Germany’s economy is in the doldrums. Houthi rebel attacks on ships and allied responses in the Red Sea have resulted in a spike in producer costs that is likely to be passed along to consumers, hurting the Fed’s quest to return U.S. inflation to its 2 percent target. China has ramped up stimulus, saying it will reduce the reserve requirement ratio for banks by 50 basis points in early February, a move that will add $139 billion in liquidity to the market, but also stoked fears of larger contagion. The release of flash Manufacturing and Services Purchasing Manager Indices readings from major world economies mostly showed an ongoing contraction, providing markets ammo for pricing in early and deep Fed rate cuts. And quarterly corporate earnings results for companies around the globe, with a particular focus on forward looking guidance, has investors less convinced of signs that the Fed’s historic tightening cycle will tilt the economy into recession.
In this country, bond prices, and therefore rates, are based on supply & demand and we learned yesterday that the Treasury sold $61 billion in 5-year notes to weak demand. Part of that stems from stock market highs and consumer sentiment in January rebounding to the highest level since mid-2021, but also from cautious “Fed speak” recently and stronger than expected data. Attention now turns to GDP from Q4 of last year. Real GDP growth is seen slowing from Q3’s unsustainably robust 4.9 percent annualized increase and is expected to show that the economy expanded at a 2 percent annual rate in the final three months of 2023. Household spending is expected to be the main driver of both stronger growth and overall spending than was anticipated at the start of the quarter. Those factors may keep the economy from dipping into a recession even if there isn’t much help from other sources of growth. In fact, household incomes are now outpacing inflation.
Today’s economic calendar begins a deluge of data over the next several sessions and was kicked off by advanced Q4 Gross Domestic Product (+3.3 percent). GDP was expected to increase 1.3 percent versus 4.9 percent previously, with final sales 2.5 percent higher versus 3.6 percent in Q3. The core Personal Consumption Expenditure (PCE) Deflator registered +2.0 percent, unchanged from last month’s reading. The Price Index +1.5 percent.
We’ve also received Durable Goods Orders (flat on the month, ex-transportation +.6 percent), weekly jobless claims (+214k, 1.833 million continuing), advanced indicators for December (previous goods balance…, retail inventories …, and wholesale inventories…), and the Chicago Fed National Activity Index for December. Later today brings December new home sales, KC Fed manufacturing for January, the Treasury auctioning off $41 billion 7-year notes, and Freddie Mac’s latest Primary Mortgage Market Survey. Norges Bank was out with its latest monetary policy decision overnight (no change), as well as the European Central Bank’s decision (no change) with ECB head Lagarde’s press conference. We begin the day with Agency MBS prices a few ticks (32nds) better, the 10-year yielding 4.14 after closing yesterday at 4.18 percent, and 4.35 on the 2-year.
Jobs
“Attention Mortgage Brokers: Are you feeling isolated? Are you lacking support or struggling to establish relationships in this shifting market? Take your career to new heights with RWM Home Loans, a trusted name in home financing with over 30 years of excellence. With our FNMA, FREDDIE and GNMA approvals, we offer a wide range of products and direct loan servicing, empowering our sales team to fund both in-house and with brokered solutions. Whether you’re assisting first-time homebuyers, navigating Jumbo, Non-QM, reverse mortgages, or managing construction loans, we have the solutions to meet your clients’ needs. Do you want a voice at the table and the ability to provide 5-star service, best in class technology, and competitive pricing for your borrowers? If you are evaluating your options and looking for a top tier lending partner, contact us now for a confidential conversation.”
A strategic CFO is available on short notice. Experience in conventional/conforming markets, non-QM, Fix & Flip, and DSCR products, in distributed retail and wholesale channels in public and private lenders, backed by PE and venture capital. 15+ years’ experience in start-up, high growth middle market and public companies. Fintech lender experience including AI, machine learning and predictive modeling. Comfortable working at both a strategic level and a hands-on operational level. Also open to work on M&A transactions or restructurings. Interested companies should contact Chrisman LLC’s Anjelica Nixt to forward your note.
“PrimeLending offers Branch Managers the flexibility to structure their branch for maximum growth and profitability. As a Branch Manager at PrimeLending, you’ll have the power to make operational decisions, construct your team and truly lead. Branch structures range from a traditional Retail Model to our Modern Originator Model leveraging both retail and virtual production teams to our Expense Management Model giving you unparalleled control over how you invest in your business. Don’t settle for the status quo… Explore all your options and take more control over your future. We’re looking for talented, driven Branch Managers and Loan Originators! Contact Nic Hartke today!”
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Source: mortgagenewsdaily.com
Treasury Secretary Henry Paulson said today that the Bush administration is working in a number of areas to combat the country’s ongoing mortgage crisis, but added that there is no simple solution to the complex problem.
In remarks prepared for a New York speech scheduled for later today, Paulson said the country is facing a wave of 1.8 million subprime mortgage resets over the next two years, an epidemic which could lead to market failure.
He added that the interest rate freeze plan was devised on these grounds, and would be launched soon.
“By preventing avoidable foreclosures, we will safeguard neighborhoods and communities and fulfill our responsibility of protecting the broader U.S. economy,” Paulson said in excerpts of his speech released by the Treasury.
Paulson said mortgage servicers should be prepared to implement the plan within a few weeks, ideally helping some subprime borrowers avoid foreclosure.
“However, let me be clear: there is no single or simple solution that will undo the excesses of the last few years,” he cautioned.
He called the housing correction inevitable after a five-year boom led to record sales and price appreciation, and said the housing downturn will last for some time.
“After years of unsustainable price appreciation and lax lending practices, a housing correction is inevitable and necessary,” Paulson said.
“We will likely have further indications of slower growth in the weeks and months ahead,” he warned. “The overhang of unsold houses will contribute to a prolonged adjustment, and poses by far the biggest downside risk.”
Paulson is also expected to warn that there will be no quick announcement of a fiscal stimulus package to solve the current crisis.
“Working through the current situation and getting the policy right is more important than getting the policy announced quickly,” he said.
Paulson also repeated his call for Congress to pass legislation that will allow the FHA and government financiers Fannie Mae and Freddie Mac to purchase more loans.
Source: thetruthaboutmortgage.com
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Wed, Jan 17 2024, 11:20 AM
Today I am in San Diego for the SD CAMP event. At the same latitude, a poll was taken by Texas Governor Greg Abbott’s office which asked whether people who live in Texas think illegal immigration is a serious problem. 29 percent of respondents answered: “Yes, it is a serious problem.” 71 percent of respondents answered: “No es una problema seriosa.” (Did you know that Texas even has its own pledge of allegiance?) Politics aside, Texas is home to many lenders. And many hotels. Marriott certainly has the business travel market dialed in, but just six companies in the United States control 80 percent of branded hotels, and two companies (Choice Hotels and Wyndham) may merge giving us five. Choice owns Radisson, Quality Inn and Econolodge brands; Wyndham owns Ramada, La Quinta, Days Inn, Super 8, and Howard Johnson. If a takeover/merger occurs, 16,500 hotels and 46 brands will be run by a single entity. Yikes! Today’s podcast can be found here, and this week’s is brought to you by nCino, makers of the nCino Mortgage Suite for the modern mortgage lender. nCino Mortgage Suite’s three core products (nCino Mortgage, nCino Incentive Compensation, and nCino Mortgage Analytics) unite the people, systems, and stages of the mortgage process. Today’s features an interview with nCino’s Pam Faulkner on a topic that every mortgage lender has to contend with: change management.
Lender and Broker Services and Software
Short-term rental analysis product announcement! Opteon AMC, a top nationwide appraisal management company (AMC), announced its pioneering Short-Term Rental Analysis (STRA) product last week. The first of its kind on the market, Opteon collaborated with AirDNA, a leading short-term rental (STR) data and analytics provider, on this innovative tool set to revolutionize how non-QM lenders assess properties for STR investment. It will equip lenders with accurate rental potential, occupancy rate predictions, market trends with comparables, and an expert appraiser analysis. This appraiser-approved Short-Term Rental Analysis replaces the existing 1007 form which, while widely used, falls short in addressing the unique dynamics of STR investments. Opteon and AirDNA partnered together to create a simple, comprehensive solution that promises to reshape the appraisal process for STRs. This product is exclusively available to Opteon customers as of January 8, 2023. To learn more, visit: www.opteonusa.com or contact [email protected].
“FundingShield, the market leader in wire & title fraud prevention, released its Q4-2023 report showing an all-time high 51.8 percent of transactions had deficiencies. During Q4-2023, 49.23 percent of transactions had CPL issues, 7.6 percent had CPL Validation issues and 8.45 percent had increased Wire risks. This increase highlights ongoing cybersecurity challenges such as Business Email Compromise (BEC) events and phishing attacks. “Cyber-Breach Events at First American and Fidelity National Financial are driving additional demand for funding controls, cyber-security defenses and closing-agent vetting as auditors, regulators or investors ask for evidence of controls. Our tech-driven solutions to manage payment risk, vendor selection, live monitoring of service providers and more are addressing these needs with customized solutions. These sophisticated, intentional acts of cybercrime create financial losses within impacted firms and threaten enterprise valuations of listed public firms. This creates additional motivation for short players who are looking to express their negative view in free markets,” shared Ike Suri, CEO. Contact us for demos and free trials.”
“Increase your company’s pipeline and margins with Non-QM loans through Verus Mortgage Capital. The Mortgage Bankers Association (MBA) forecasts mortgage originations to increase to $2 trillion. With mortgage rates expected to stabilize through the end of the year and the possibility of a Fed interest rate cut soon, the stage is set for growth. Give your production pipeline an extra boost by adding Non-QM loans. Now’s the perfect time to partner with Verus, the nation’s largest issuer of securitizations backed by non-qualified mortgage (Non-QM) loans. We offer flexible non-agency loans for property investors, foreign nationals, and many others. Navigate the evolving landscape with confidence, backed by our Non-QM expertise. We’re not just a solution, we are your key to unlocking new opportunities. To learn more, contact Jeff Schaefer, EVP – National Sales or 202-534-1821.”
“Wholesale lending is more competitive than ever. These lenders are competing to win a shrinking volume of loans, fighting for attention among a sea of loan originators. Giant lenders are brandishing technology tools that only the giants can afford and using them to shoulder out smaller competitors. But as the market thaws and lenders find firmer footing, there’s an opportunity to fight back. Join our webinar, ‘Mastering the Art of Mortgage Broker Engagement’ on January 24th at 10 am PST to learn best practices and strategies that wholesale lenders are using to thrive in the TPO market. This webinar will show you proven tactics and technology tools that are helping wholesale lenders create efficient sales processes that are both scalable and effective. Click here to register for the webinar and gain insight on an origination channel that needs more attention.”
Save over 20 percent on costs and gain valuable flexibility with outsourced loan fulfillment. Maxwell’s on-demand underwriting provides the agility lenders need to scale their fulfillment expenses in proportion to loan volume. With direct integration to your LOS, Maxwell’s experienced onshore team of underwriters provides a seamless, fast, and cost-effective experience. Plus, you’ll be able to maintain your operations even during gaps in in-house coverage, ensuring an uninterrupted workflow no matter the market conditions. To learn more about Maxwell’s on-demand underwriting and other fulfillment services, click here or schedule a call today.
Servicing Assistance and Software
“LoanCare®, a top U.S. mortgage subservicer, has re-imagined the homeowner digital experienced with our newly re-engineered and re-designed homeowner website: myloancare.com. Powered by LoanCare’s own proprietary software, our consumer digital experience is a fully white label capable platform designed to help you maximize your brand, recapture customers, and build lasting relationships. Frictionless functionality coupled with advanced security features, intuitive design, and comprehensive line of sight into the homeowner experience mean our clients are in the driver’s seat managing their portfolio from every angle. And did we mention? The site is available in both English and Spanish! Contact us to learn more today.”
“Delivering the Best Homeowner Experience! Cenlar is more than just a mortgage subservicer. We strive to be our clients’ trusted partner each and every day. And a big part of that is how we care for our clients’ homeowners. A home is most likely someone’s largest asset. That’s why we continue to deliver industry-leading subservicing solutions that offer the very best experience for our clients and their homeowners. Whether that’s the regular cycle of onboarding, escrow, monthly payments and year-end or challenges facing homeowners like natural disasters, we are responsive, anticipatory and always caring. Let’s discuss how Cenlar can meet the mortgage servicing needs of your organization. Call 1-888-SUBSERV (782-7378) or visit here. We want to be your trusted partner, each and every day.”
Monitoring the State of the Markets
To me, and many that I speak with, the lending biz has continued to be quiet after the flurry of activity in November. But that is just a feeling that I have. There are groups that actually provide a quantitative analysis of what is going on. Glancing around the biz…
A group of U.S. senators are calling on the Department of Housing and Urban Development (HUD) and the Consumer Financial Protection Bureau (CFPB) to review the gap in mortgage approval rates between white applicants and Black and Hispanic applicants at Navy Federal Credit Union.
Optimal Blue announced the release of its Originations Market Monitor report, looking at mortgage origination data through December month-end. Leveraging daily rate lock data from the Optimal Blue PPE, the industry’s most widely used product, pricing, and eligibility engine, the Originations Market Monitor provides a comprehensive and timely view into origination activity.
The latest ICE Home Price Index data for November 2023 showed continued home price growth resiliency, rising demand, and falling 30-year rates provided some affordability relief. ICE Vice President of Enterprise Research Andy Walden explained, “In simple dollars and cents, it requires $279 less per month to purchase the median priced home when compared to late October. Given that improvement, it’s no surprise mortgage applications have risen in recent weeks, hitting their highest adjusted levels since early September.” Annual home price growth rose to +5.1 percent in November, up from a revised +4.5 percent in October, as momentum from early year increases. On a non-adjusted basis, home prices fell by -0.46 percent in the month, but when adjusted for seasonality prices were up +0.14 percent, slightly above October’s +0.09 percent. While home affordability remains a significant challenge, falling rates in recent weeks. Due to the holidays ICE Mortgage Monitor will not publish a report in January. Reports for previous months are available online at https://www.blackknightinc.com/data-reports/. The next ICE Mortgage Monitor will be published February 5, 2024.
Capital Markets
“As a secondary marketing professional, your top priorities are managing interest rate risk and maximizing loan sale execution. But when’s the last time you stopped to consider whether your hedging software helps you achieve those goals? Optimal Blue offers the most comprehensive hedging solution in the industry, complete with exclusive API connections to the Optimal Blue PPE and aggregator bulk-bidding via the CompassPoint buy-side bid tool. This powerful combination provides you with the most accurate price discovery to drive your front-end pricing, mark to market, and best execution. Plus, optimization tools and bulk bid/AOT functionality help you squeeze every basis point out of your loan sales. Optimal Blue sets itself apart when it comes to managing risk through precise valuation and fallout modeling, use of spec pay-ups and spec durations, real-time MSR values, and much more. Contact our team to learn what this can mean for your business.”
As investors returned from a three-day weekend, corporate earnings were in focus to open the trading week. There was some optimism amongst market participants about the economy as Goldman Sachs and Morgan Stanley reported better than expected results for Q4. However, a strong economy means that the Fed is less likely to cut rates as soon as investors are predicting. Market expectations are still for up to six cuts in 2024. Fed Governor Waller yesterday urged caution for central bankers when the time comes to lower rates. He said that the U.S. central bank should take a cautious and systematic approach when it begins cutting interest rates, a process that can start in 2024 absent a rebound in inflation.
The U.S. economy continues to be resilient, with robust consumer spending. While 2024 started with expectations that inflationary pressures around the world were abating, higher military spending due to various global conflicts as well as rising healthcare costs may lead inflation to be stickier and rates to be higher than markets expect. An escalation in geopolitical tensions in the Middle East, more from incidents in the Red Sea than the war in Gaza, has introduced added costs of recalibrating shipping routes and upward pressure on energy prices. That, along with an economy fueled by large amounts of government deficit spending and past stimulus makes for a thorn in the side of central banks around the globe trying to bring inflation down.
Today’s busy economic calendar began with mortgage applications increasing 10.4 percent from one week earlier, according to data from the Mortgage Bankers Association’s Weekly Mortgage Applications Survey for the week ending January 12, 2024. Last week’s results included an adjustment to account for the New Year’s holiday. Another increase was expected after the year-end slowing, while the 10-year yield fell 9 basis points during the reporting period with 30-year mortgage rates following suit.
Markets have also received retail sales for December (+.6 percent, also +.6 percent ex auto and gas) and import prices (flat). Later today brings Redbook same store sales, industrial production and capacity utilization for December, November business inventories, the NAHB Housing Market Index for January, a $13 billion Treasury auction of reopened 20-year bonds, and the latest Beige Book from the Fed. Three Fed speakers are scheduled: Vice Chair for Supervision Barr, Governor Bowman, and New York President Williams. We begin the day with Agency MBS prices worse .125-.250 from Tuesday and the 10-year yielding 4.11 after closing yesterday at 4.07 percent after the strong retail sales figures.
Employment
A trillion dollars in credit card debt. That’s A LOT and it’s what Americans currently owe.* The good news? There’s something you can do about it. With access to a wide variety of loan products, you can help your borrowers and boost business while you’re at it. The ability to shop hundreds of loan options with dozens of lenders means you can: * help your clients consolidate debt* and *get creative with home financing so they can reach their homeownership goals.* So, how do you get all this access? By joining your local Motto Mortgage office. Motto Mortgage brokerages are hiring talented loan originators in: AK, AZ, CA, CO, CT, FL, GA, ID, IL, IN, KS, KY, MA, MI, MN, MO, MS, NC, NJ, NM, NV, OH, OK, OR, PA, SC, TN, TX, UT, VA, WA, WI. More of a “make it happen” kind of LO? Schedule a chat to learn about joining Motto HERE.
The Association of Independent Mortgage Experts (AIME) and its advocacy group and political action committee, Broker Action Coalition (BAC) and BACPAC announced they are acting independently (AIME focuses on member services and BAC on advocacy initiatives) and AIME’s CEO Katie Sweeney will be stepping down at the end of March from her current role to lead BAC full time. “AIME has been the backbone of the independent mortgage broker community since 2018, and that’s not going to change,” stated Marc Summers, President of AIME. Along with Sweeney, BAC’s leadership will include former AIME President of Advocacy Brendan McKay who will focus on growing the advocacy network’s members, donors, and programs as the co-founder and Chief Advocacy Officer. Congratulations!
Ranieri Solutions, which has been developing a platform to address the antiquated state of mortgage servicing technology, today announced the appointment of Rob Lux as its Chief Executive Officer to spearhead the company’s go-to-market efforts for its cloud-native servicing platform. The addition of a new CEO is coupled with the recent announcement of a partnership with SAP Fioneer. (The Ranieri platform’s standout feature is its elegant, uniform core and modern user interface which we believe will lower the risk of misconfiguration and incompatibilities. Servicers need the agility to quickly respond to industry changes and seize market opportunities. This modern cloud-based platform was built from the ground-up with servicers in mind.)
The Mortgage Firm announce the promotion of Sheri Nedley to the position of Chief Operating Officer. With a remarkable journey spanning 25 years at the company, Nedley’s promotion is a testament to her exceptional leadership and dedication with time spent as Closing Manager, SVP of Operations, and Head of Capital Markets. As COO, Sheri will oversee the company’s day-to-day operational strategies, aiming to enhance customer experience and drive sustainable growth. Her focus will be on leveraging technology, optimizing operational processes, and nurturing a culture of excellence within the organization.
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Source: mortgagenewsdaily.com