Morning! This is MF Lending - 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. What Happened to Rates Last Week? 🧮

2. Realtor Cheat Sheet 🕵🏻

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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[Read Time: 3-4 min]

Rates Today 📈

What Happened to Rates Last Week? 🧮

If you have been reading MF Lending for the last few months - you may have started seeing a trend. CPI - consumer price index - moves the market in a MAJOR way every time it is printed.

This is the Fed’s favorite measure of inflation and is one of the main drivers of their decision-making.

On Wednesday, CPI month-over-month and year-over-year both came in higher than forecasts. On paper, the printed numbers were only .1 higher than forecasts - but the impacts were massive.

Bond traders immediately began selling. This resulted in the 10-yr Treasury price to rise past 4.5% and the bond market ultimately fell 119 bps. That is an enormous number.

The Fed Futures market also began to move back the first rate cut expectation. If you look at the chart below - the forecast by CME group is now for the first cut to not be until September.

What does this all mean for your borrowers?

Here’s what it means:

1. Current interest rates have risen above 7% - If they were previously preapproved, be sure to reach out to their LO to get a new preapproval - especially if they were tight on DTI. Mortgage rates have risen over .25% in the last week.

2. Prepare buyers for a higher payment - the market flirted with 6.5% at the beginning of March. We are now far from that number. Agents and lenders need to, once again, reset expectations for clients on interest rates and payments.

3. Rates are not going down this summer - for clients that may be on the sidelines waiting for rates to come down…they be on the sidelines longer than they think. Mortgage rates are likely not going to start falling until July in a best case scenario. If the trend of bad data continues, that could get pushed past the Sep meeting.

4. Buydowns are back in play - the silver lining is that leverage may have shifted slightly back to buyers. Some sellers may struggle to get homes sold with the elevated mortgage rates. That leaves room for clients who want a 2-1 buydown. When rates fall to 6.5%, it’s much more difficult to get 10-15k from a seller with 10 offers. But with rates over 7%, the window opens to get massive concessions from builders and home sellers. If clients can swallow the monthly payment, they could get a good amount of help from sellers.

This week has not gotten off to a good start. As I write this, the bond market is down 50bps. Retail sales smashed expectations (not good for rates) which is continuing the negative snowball that started last week.

With little impactful news this week, I’m hoping the bleeding stops in the next 48 hours. But as the dust settles on this new landscape, it is more important than ever to be a knowledge agent for your clients.

Realtor Cheat Sheet 🕵🏻

Clients I work with are more payment-conscious than ever. Most of my conversations are centered around, “Michael I want X payment, what should I be looking for?”

Here is a cheat sheet you can use as a starting point for clients who have that same question.

These options are all with 10% down. The payments are PITIA (including all escrows, mortgage insurance, etc). These payments are not guaranteed, as things like credit score, DTI, etc will affect this, but these should be good ballpark estimates.

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