Morning! This is MF Lending - the fine wine of mortgage newsletters. 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!)

Here’s what we’ve got for you today:

1. Cancellation Rates Fall to Pre-Pandemic Lows 🏗️

2. Bettors Now Think FED Will Cut Rates This Year 🔎

3. Nashville & National Housing Market Numbers for February 🔥

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Nuwave Rates Today 📈

The bond market saw major volatility Monday morning 3/27 and is down over 35bps at the time of this email.

**Remember - mortgage rates are typically inverse of the bond market. So, if the bond market goes down - rates go up.

Cancellation Rates Fall to Pre-Pandemic Lows 🏗️

In 2022, we saw the average cancellation rate on new builds swell to over 25% of contracts.

The leading driver of this was the overwhelming interest rate and payment shock felt by buyers between contract signing and the final delivery date of the home.

In February, the cancellation rate on new builds fell to 10.8%.

The main reasons for this are:

1. Most contracts were signed at the time of already higher mortgage rates, resulting in less payment shock for buyers.

2. There are fewer supply delays and mostly lower costs.

3. Inventory remains extremely tight - as we dove into last week.

4. The FED appears to be nearing the end of the current hiking cycle.

5. Builders are continuing to give massive incentives to buyers.

Bettors Now Think FED Will Cut Rates This Year 🔎

The chart below is a weighted average of interest rate expectations through the end of 2023. The data reflects how speculators and hedgers are currently positioned.

Market participants believe the FED has no idea what they are doing - and I could not agree more.

The FED held rates too low for too long. Now, the FED is continuing to hike rates in the face of banking failure and clear signs of inflation cooling.

The FED is asleep at the wheel and they are more worried about chasing where the puck is instead of where it is going.

Why does this matter to you?

Bettors believe that the FED will be forced to step in and reduce interest rates starting in May. If true, this could turn into a very busy summer.

If these projections become reality, the market could start seeing 30-yr mortgage rates around 5.5% by the end of the year.

This would improve affordability for potential buyers and encourage sellers to list their homes, increasing inventory across the market.

My personal take? I am more bearish than these bettors…

I think we will see the FED make the same mistakes they have over the last ten years. This time, I think the FED will be slow to react in the other direction by not cutting rates soon enough.

I think they will stifle this economy by keeping rates too high for too long - once again not having the foresight to guide this country forward.

_{*We will continue to update you as these projections adjust throughout the year.}

Nashville & National Housing Market Numbers for February 🔥

Nashville February local housing market highlights -

1. Active Inventory: MOM Change -4.2% | YOY Change +191.2%

   • Feb - 5,827 vs Jan - 6,083

2. Closed Sales: YOY Change -24.3%

   • Feb - 1,742

National February housing market highlights -

1. Existing Home Sales: rose +14.5% MOM | down -22.6% YOY

   *Largest monthly rise since July 2020 according to NAR

2. New home sales: rose +1.1% MOM

3. Inventory: up +15.3% YOY

_{*These numbers were provided by Bill McBride at CalculatedRisk who tracks 40 local housing markets}

The Cul-de-Sac

Schedule This Week 📆

1. Tue, Mar 28th - S&P/Case-Schiller & FHFA House Price Index (we will give details in our Thursday Edition)

2. Wed, May 3rd - Next FED Meeting

That’s all we have for today. Stay cool out there 😎