Federal Reserve Chairman Jerome Powell said Friday that it was too early to declare victory over inflation, watering down market expectations for interest rate cuts next year. “It would be premature to conclude with confidence that we have achieved a sufficiently restrictive stance, or to speculate on when policy might ease,” Powell said in prepared remarks.

But that’s not stopping some analysts and money managers from saying the Fed needs to cut rates starting as soon as March 2024 and possibly have to cut rates 5 times throughout the year.  The base case is that they need to do this is in order to avoid an extreme and protracted monetary tightening cycle. The markets are largely concluding that the fed is done with its tightening cycle, but they will have to give up on the goal of getting back to 2% inflation. So already, 2024 is making ripple effects and we’re not even there yet!

It’s looking like we’ll end 2023 with higher housing inventory than this time last year. Home prices will also be up and we have more homes under contract than we did at the end of 2022. All told, these signs position 2024 for a turnaround from one of the slowest home-sale years in decades.

Price reductions are receding now for the new-year cycle, with 38.7% of the homes on the housing market taking a price cut in the last week. That’s a lot, but it’s less than the same week a year ago, and it’s not deteriorating. Basically, the extremely low volume of sales isn’t causing overall home prices to even take a dent.

And Home prices held up surprisingly well in 2023 despite very few transactions. The median price of single-family homes in the United States was $425,000 for the week, which is unchanged from the week prior and 2% higher than the same period in 2022. That’s right, higher…again. So no collapsing home prices on the horizon…sorry internet trolls.

So in the end, we’re going into 2024 with slight home-price gains, somewhat easing inventory constraints, slightly increasing transaction volume and elevated but decreasing price cuts.

Did you hear about the new conforming loan limits for 2024? Recently Fannie Mae and Freddie Mac released their revised loan limits for 2024. This increase reflects a 5.5% uptick in conforming low limits that will allow homebuyers and refinancers to acquire a lower mortgage rate compared to jumbo or high balance offering of this same loan balance.

Nationwide the new conforming loan limits are as follows:

• The 1 unit loan limit is $766,550
• The 2 unit loan limit is $981,500
• The 3 unit loan limit is $1,186,350
• The 4 unit loan limit is $1,474,400

For areas considered “high cost” across the country the loan limits are even higher. For example, in San Diego County:

• The 1 unit loan limit is $1,006,250
• The 2 unit loan limit is $1,288,200
• The 3 unit loan limit is $1,557,150
• The 4 unit loan limit is $1,935,150

If elevated rates and lower conforming loan limits were the reason you were sidelined in 2023 take heart, because it looks like 2024 could be the year that affordability opens up for you once again

Any of you watching this that are looking to buy a house in 2024, send us a DM or drop a comment so we can help you get qualified.

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I hope everyone enjoyed a great Thanksgiving with friends and family and we can also give thanks to lower mortgage rates which increased demand AGAIN last week. Purchase applications were up 3.9% and refinance applications increased 1.6%. This is beginning to prove the point we have been making – when rates go down demand will come up and home prices will remain stable, or even increase. There just does not seem to be an argument where rates will go down and home prices will also go down. So if you have not yet accepted the “new normal”, we are now in the new normal. So if you hoping to get into a home in 2024. START. NOW. Let us help you sort out where you’re at and where you need to be in order to get in the market!

It appears that existing home sales may have hit their bottom in the fall of 2023. Not only are we seeing an increase of existing home sales get listed on the market but coupled with lower mortgage rates you are starting to see increased demand on existing homes. This is also a force function of less new home builds hitting the market compared to the new build rate of the past. It looks like 2024 could see an uptick of even more existing home sales coming to the market as buyer and seller sentiment is starting to believe that we may have reached the rate limit as well as the final gridlock between whether or not to sell or not sell.

In case you have missed some of our most recent mortgage solutions on our weekly podcast show jump over to that playlist and listen in on some of the monthly cost saving solutions Brian and William have helped borrowers obtain in this current market. Two specific instances have clients saving $1200 and $1300 a month in out-of-pocket expenses by redistributing debt against the home equity versus continuing to pay down their consumer debt out of pocket on their own against lines of credits and credit card interest rates in the 20s. So if you are watching this and you have home equity begging to help bring you some monthly financial relief there are solutions that exist for you, yes even today.

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So with that, let’s take a quick look at what’s coming up in the markets this week.

Monday: We have New Home sales coming out

Tuesday:  Consumer Confidence is released and we have 4 Fed members speaking

Wednesday: Preliminary GDP Quarter over quarter comes out and it expected to be at 5.0%….WAAAAAAY higher than the “below trend” growth that the Fed has been telling us they need to see. So, in an odd way, a really good GDP could spell trouble for the Fed’s plans.

Thursday: Core PCE month over month and unemployment claims come out, but don’t sleep on Pending Home sales. THAT is going to really shed light on the Fall/winter health of home sales that’s unfolding right in front of our eyes.

Friday: we get some manufacturing data, and couple more fed members speaking, but the biggie is Jerome Powell himself. He’ll be participating in a fireside chat Spelman college in Atlanta to close out the week. So Jerome end us off on a high note ok!?!

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It’s a short week this week but did you see that mortgage rates we’re down again last week? Yeah hard to believe but mortgage rates were trending down for their third straight week and the timeliness of this being Thanksgiving week definitely gives us something to be thankful for. Although we can’t claim that we are heading toward the fives or even the low sixes yet, this dramatic change in market sentiment is very much welcomed and has created a lot of new mortgage demand during a time of year where things are traditionally cooling off. And remember how I’ve been telling you about the 10 year yield? Well, typically the gap between the 10 year treasury yield and the 30 year fixed rate is around 1.8% difference but the current 30 year mortgage rate is approximately 2.8% higher than the bond yield which some are arguing means there could be room for further declines. Whether that happens will be will remain to be seen but at least for this week coming into Thanksgiving we are definitely grateful to be able to help more people than we were just a few weeks ago.

And turning our focus to the National Association of Realtors, their chief economist Lawrence Yun forecasted that existing home sales will rise by 15% in 2024. He also believes that mortgage rates will stay between 6% and 7% by spring of 2024 and expects more sellers to enter the market as they adapt to prolonged higher rates. Additionally, he mentioned that he expects home builders to ramp up new construction as a reaction to housing inventory being the tightest it has been in decades. All of this leads us to believe that home prices are going to stay stable or maybe even increase in 2024. As crazy as that might sound with so much pent up demand still ready to enter the market and mortgage rates coming off of their highs, if supply shows up you can bet your bottom dollar that those houses are going to get swept up very quickly.

The future of real estate commissions is definitely up in the air. The fallout of the Sitzer Burnett Commission lawsuit is dominating the talking points in the mortgage and real estate industry, and will eventually lead to material change in the transactions of buyers and sellers. Although the appeal will not be heard until spring of 2024 there are a wide range of opinions right now that are shaping what the outcome could eventually look like. The majority of Realtors surveyed are very unhappy that they’re industry is being compared to non sales professions such as accountants, lawyers and other pay by the hour industries. The irony here is that the massive case was won by plaintiff representation that supposedly will have a 30% payout of the $1.8 billion settlement. So the question I’m asking is how mad are the sellers in this class action lawsuit that so much money is going to the attorneys? I mean 30% sure is a heck of a lot more than 6% now isn’t it? They’re whole argument was that realtors Fix prices….watchout lawyers there’s a growing group of people starting to think that the going rate of 30% is feeling oddly fixed….

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So with that, let’s take a quick look at what’s coming up in the markets this week. It’s a short week in the markets, but there’s some really important things happening.

Tuesday:  Existing Home Sales & the FOMC Meeting Minutes are released. Even though this is a holiday week and a short week in the markets…THIS ONE is gonna really tell the story about the Fed’s chatter regarding inflation, employment, and interest rates moving forward. Like always…lets see how close their public comments 3 weeks ago match their notes that come out this week.

Wednesday: Unemployment claims, Revised Consumer sentiment and revised inflation expectations come out. Let’s see how the sentiment correlates to unemployment coming into the shopping season. Remember this data is lagging, but will maybe clue us in on what to expect this Black Friday and into December.

Thursday: is a Bank Holiday – Happy Thanksgiving everyone!!!

Friday: Flash manufacturing PMI & Flash Services PMI come out.

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The agent lawsuit drama didn’t calm down at all last week, in fact it might have actually heated up. The conversation about the verdict turned its attention to FHA and VA borrowers. Which of course are both important to us as a VA mortgage focused lender. Some of you watching this might know that seller concessions for VA borrowers are capped at 4% of the home purchase price or appraised value and can also cover some closing costs including the VA funding fee and prepaid taxes. But the VA rules prohibit VA borrowers from paying real estate commissions – So does this mean that active duty and veterans are going to find themselves on the outside looking in when the dust settles from the fallout of the lawsuit? Is there unintended consequences here that inadvertently harm or make it more difficult for FHA and VA buyers to obtain homeownership? Yes I know these questions on the surface seem simple and they are not answerable right now but there will be a solution for this, it just may not just be pretty. What we would really like to see is terminology that allows for commissions to still be built into the purchase price which allows VA borrowers to still use any concessions towards closing fees and third party costs during closing on a real estate transaction. It’s already that way now because buyer commission is baked into the price of the sale.

Also last week mortgage rates plunged and demand inched back just a little bit. Before you get too excited we’re talking about rates going to the mid sevens and low sevens again only briefly and we’re still not anywhere close to being back in the fives but it is notable because relative to where rates peaked out at 8% just a few short weeks ago any news for the better will still take as better. in general though the consensus is that mortgage rates will continue to be in this range for some time because that is exactly the same terminology we’re getting from Jerome Powell and the Federal Reserve. “We will have keep rates elevated higher for longer and remain there for some time” Those of you looking to buy a home in 2024 get a head start right now by getting a full financial assessment and knowing what your affordability is prior to hitting the streets looking for homes. Those of you looking to tap into your home equity with a home equity line of credit or a cash out the time is now to close your transaction before the end of the calendar year and get any tax benefits that could come from doing so.

Last week Jerome Powell said the Fed is not confident it has done enough to bring down inflation at the International Monetary Fund conference in Washington DC. Jerome Powell admitted that more work could be done ahead in the battle against high prices. He said the Federal Open Market committee is committed to achieving a stance of monetary policy that is sufficiently restrictive to bring down inflation to 2% overtime. We are not confident that we have achieved such a stance. I’m sorry, you’re not confident? Why are you saying that now? If we’re going to stay well above where the Fed hoped we would have rates while also describing your policy stands as significantly restrictive, then it really sounds like you are preparing us for an end of year rate hike coming up on December 13^th. Is that what’s going on here Jerome?

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So with that, let’s take a quick look at what’s coming up in the markets this week. Inflation, Jobs, and Housing are in focus

Tuesday: We get CPI and CORE CPI month over month, and CPI year over year. These are going to be really important readings, ESPECIALLY because last week Jerome Powell said the Fed is “not confident” it has done enough to bring down inflation.

Wednesday: Then on Wednesday we will get PPI and Core PPI month over month, Retail Sales and Core Retail Sales month over month and the Empire State Manufacturing Index. Again, super important if the Fed’s confidence is on the line.

Thursday: Unemployment claims come out, the National Association of Home Builders Market Index is released and we get the Philly Manufacturing Index

Friday:  Finally on Friday we get Building permits and Housing starts

And for the sake of wanting to see some good news heading into Thanksgiving season…I really hope we get some good housing data in this week.

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Thanks again for tuning in to Monday Mortgage Minute.

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By now you probably already heard that Jerome Powell and the Federal Reserve paused interest rate hikes at their meeting last week. The market at large was expecting this to be the meeting that would announce this pause so there was no real surprise. However it is still concerning that they are actively communicating that rates will have to remain higher for longer in order to achieve their numerous mandates. While some would say they are self-imposed, it seems that the headwinds facing them achieving an inflation target of 2% continue to steamroll ahead and that at some point that narrative will have to change as very few believe they will achieve that goal with the current set of monetary policy decisions upon us.

In the world in the real estate a very large Commission based lawsuit concluded last week with a $1.7 billion penalty being handed down to the defendants of the case. The bottom line in this case claims that agents uphold elevated Commission fees to conspire and impose higher costs on sellers by requiring them to offer buyer agent incentives which ultimately become baked into the final price of the home sale. Which makes me ask so what’s the difference between that and when I go buy a car, or a couch, or a watch, or shoes at Nordstrom? Isn’t the cost of paying the salesperson at those jobs baked into the cost I pay at the shelf? It’s literally how they make their commissions.  The answer is yes everybody knows the answer is yes and all this will lead to later is an adjustment in the listing agreement and real estate policy language that generates how buyer agents will be compensated in the future and by who. All this hub-bub about it crashing the real estate market, buyers agent’s futures, and all that is novelty right now. Like all other broad sweeping changes in Real estate and mortgage they take a long time, no matter if the changes are at the federal, state, or local level. More on this one as new information becomes realized in the day-to-day operations of the industry.

I’m a little bit rusty when it comes to this next topic because guess what rates have declined. Yes yes i understand that seeing an interest rate go from 8 to 7.5% or 7.25% or 7% may not seem like it’s really good news because it’s still proportionately higher than what we’ve experienced for the last decade and a half. However, I will let you know that because of the federal reserves decision to pause interest rates, the market has had a very favorable response very quickly and last week we started the month of November off by watching mortgage rates decrease for three consecutive days. The next question is will they continue or will they flatten out and find a local bottom for the remainder of 2023 and to start off 2024. The answer to this question broadly relies on the Fed’s confidence in the data driving their decisions and the resiliency of the economy at large as opposed to only looking at real estate and mortgage through the lens of those industries alone.

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So with that, let’s take a quick look at what’s coming up in the markets this week.

This week if filled to the max again with Fed members speaking at a variety of engagements. I’d be really surprised if they make any comments that deviate from Jerome Powell’s delivered remarks at last Wednesday’s Rate Pause decision.

Monday: Monday FOMC Member Cook Speaks

Tuesday: We get 3 more Fed members speaking, the US trade balance, and month over month Consumer Credit come out

Wednesday: Fed Chair Jerome Powell speaks as well as 3 more Fed members

Thursday: We will see unemployment claims, mortgage delinquencies and Fed Chair Jerome Powell speaks again.

Friday:  Preliminary Consumer sentiment and preliminary inflation expectations come out and another Fed member speaks.

All in all, it’s a bit light on the economic side, but like we always say watch out for that left hook from some seemingly ambiguous data point that wildly shifts the markets in one fail swoop.

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Thanks again for tuning in to Monday Mortgage Minute.

Remember to like, subscribe and turn on notifications so you see this show right when it posts each week.

Share this video with someone you care about so they can WIN in mortgage and real estate in 2023.

We’ll see you again next week!