Market Update 5/16/2023
Navigating the Real Estate Market: Key Economic and Regulatory Insights for the HungryRealtor Podcast audience.
Hey there, Hungry Realtor Podcast listeners! In today's blog post, we're diving into the latest economic, housing, and regulatory news that shapes our ever-changing real estate market. Buckle up as we provide you with valuable insights to help you stay ahead of the curve in this competitive landscape.
Lower Mortgage Rates Amid Economic Uncertainty
Despite the volatility rocking the financial world, last week mortgage rates took a downward turn. Why? When the economy teeters on the edge of uncertainty, investors often turn to bonds as a safe harbor, causing bond prices to rise and, in turn, interest rates to fall. This gives potential homeowners an opportunity to lock in lower mortgage rates. Mortgage experts are divided about rate trends in the coming week. In response to Bankrate’s weekly poll, 50 percent say rates are going up, 17 percent say rates are going down and 33 percent say rates will remain the same. My gut tells me they could be on the rise.
Mortgage Applications on the Rise
In the week ending May 5, mortgage loan applications experienced a 6.3% increase. Purchasing activity rose by 4.8%, while refinancing activity saw a 10% upswing. Despite being down from last year's levels, this rise in activity is a positive sign. The average fixed-rate mortgage loan has been on an upward trajectory, marking its seventh consecutive month of growth.
Lenders Increase Scrutiny
In response to economic uncertainty and deteriorating collateral values, lenders are tightening their standards, according to a quarterly Federal Reserve survey. This trend is expected to continue throughout 2023. We are seeing lenders become risk-averse and collateral values deteriorate and concerns increase over banking liquidity.
Inflation and the Economy
The Consumer Price Index (CPI), rose at an annual pace of 4.9% in April, the slowest since April 202. Excluding volatile factors like fuel and energy, increased 5.5% annually. The Producer Price Index (PPI) – a measure of what producers pay for goods and services – saw a moderate increase, .2%, offering hope that inflation may be trending downwards. Traders lowered the odds of a June Fed interest rate hike to 20%.
The Debt Ceiling Debate
A crucial meeting to negotiate the debt ceiling, initially scheduled for May 12, has been postponed. The President and congressional leaders are at a standstill over raising the ceiling to cover already-approved spending. The outcome of these negotiations could significantly impact the financial landscape, and we'll be keeping a close eye on it. Some economists have predicted extreme consequences should the US default. One expert went as far as to predict 8% mortgage rates by the fall.
Regulatory Changes
The Federal Housing Finance Agency (FHFA) has rescinded upfront fees on DTI ratios for GSE loans after postponing implementation in March, following industry concerns about borrower confusion. In other regulatory news, the FDIC has proposed a bill that would require banks with over $5 billion in yearly deposits to pay a two-year "special assessment." If approved, payments would commence in June 2024. The assessment would cover the agency's repayments to depositors at failed Signature and SVB banks.
What Lies Ahead?
The future of the economy is under scrutiny as key inflation readings were lower than expected last week. These figures will likely play a role in upcoming Federal Reserve policy decisions. There's a hint that the rate hikes may soon pause, but as Fed Chair Jerome Powell noted, these decisions will remain data-dependent.
In a world that's continually evolving, keeping up with the latest real estate trends, economic updates, and regulatory changes is crucial. Stay tuned to www.hungryrealtorpodcast.com for more valuable insights and strategies designed to help real estate agents navigate this dynamic industry.
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