Morning! This is MF Lending - We’re the fool-proof way to serve up mortgage and real estate market knowledge without any of the guesswork. So you’ll look like the smartest agent in the room (and you are!)

I hope you had a wonderful 4th of July, I can confidently say Tuesday 4ths are the worst day of the week - I’m all thrown off…

Here’s what we’ve got for you today:

1. Fed Minutes Reveal More Hikes to Coming in July 🎒

2. Jobs Report Slams Mortgage Bonds This Morning ☀️

3. Why the “Airbnb Collapse” could be just what this market needs 🏡

By the way, this article on Fed Coffee Corner is the most clicked link in this newsletter, you should check it out if you are interested.

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Nuwave Rates Today 📈

With rates rising so aggressively today, it should be assumed that clients will pay for at least 1 discount point. Best case - get the seller to pay for it.

Fed Minutes Reveal More Hikes to Coming in July 🎒

Yesterday, the Fed released its minutes from the June meeting where they chose to skip a rate increase for the first time in over a year. Here were some of the key insights -

1. The Fed is very concerned about the sluggish process toward lower inflation and the staying power of the US economy. Most notably, the jobs market remains extremely strong in the face of constant rate hikes.

2. Core inflation (inflation after taking out food & energy) is remaining sticky. Until that number starts falling at a much faster pace, the Fed will continue to raise rates.

3. The Fed is not as aligned as we are led to believe. All 11 voting members “unanimously” voted to skip a rate hike. But, the minutes revealed that the other 7 non-voting members were leaning towards a rate increase.

   Many members say “There are few clear signs that inflation was getting back on track."

Today, we are seeing rates over 7% for the first time since March. With the upcoming meeting July 26th, we will have more interest rate hikes. That probability currently sits at an 89% likelihood.

Jobs Report Slams Mortgage Bonds This Morning ☀️

As I was writing MF Lending this morning, I had the bond market pulled up on my other screen. After each paragraph, I would look over, and watch as the market fell off a cliff.

As of this morning, the market is down nearly 80bps…a typical day sees swings between 10-15bps.

See that big red candlestick on the right…that’s today. That’s saying rates are about to be a lot worse than they were yesterday.

Why?

This morning, ADP released their employment report which signals to the Fed the strength of the US economy. Remember - strong jobs mean rates need to rise higher to curb inflation.

Market Forecasts: 228k jobs added in June

Actual Numbers: 497k jobs added in June

This absolutely exploded past expectations. The initial reaction is simple - the Fed has a long way to go.
This is why you are seeing an immediate response by the MBS market. They are immediately pricing in large rate hikes to come as we are not close to the finish line.

You can expect rates to get a lot worse through the end of the week and into next week. This is very bad news for clients who have been preapproved.

If a client wants a second opinion on their interest rate or their preapproval - have them send their rate quote to [email protected] and Nuwave Lending will show you how we can get you a better deal.

I had a client reach out last week and we were beating his current bank by 1%. It could save your client hundreds of dollars a month by going with the right lender.

Why the “Airbnb Collapse” could be just what this market needs 🏡

By now, I’m sure you have seen this viral tweet from Nick Gerli, CEO of Reventure Consulting.

In the 2020 & 2021 post-pandemic housing craze. One batch of homebuyers made up nearly a third of buyers…investors.

These clients looking for limited down payment, STR programs took on a massive amount of debt to purchase large Airbnb’s all over Nashville for STR’s. They are seeing a huge pullback in their revenues.

The good news? This could mean an increase in inventory over the next 12 months.

Some of these buyers brought on more debt than they can handle, with the hope of lower interest rates in the future, or a rise in potential revenue, these over-zealous clients may turn to their only option - selling.

The Cul-de-Sac

Thanks for reading - that is all we have for today 😎

Please forward this to your friends and colleagues if you found it valuable.

— Michael F DiLucchio