Morning! This is MF Lending - welcome to the sweet sweet month of June! 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.

Here’s what we’ve got for you today:

1. Rate Expectations Have Shifted for June FED Meeting… 🎒

2. Investors Have Left the Market: Great News for First-Time Buyers 🏡

By the way, this article on Opt-Out Prescreen Form is the most clicked link in this newsletter, check it out if you are interested.

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Nuwave Rates Today 📉

Over 100 basis point move in two days…as I keep saying - YOUR LENDING PARTNER IS MORE IMPORTANT THAN EVER.

If you are working with LOs who aren’t in tune with the market and only lock deals when they get a contract in…they are leaving money on the table for your clients.

If you had clients go under contract Thursday of last week - they could have 75bps better pricing today. That’s more than .5% in the interest rate.

Trust who you are working with. End of rant.

Investors Have Left the Market:
Great News for First-Time Buyers 🏡

One of the key reasons for the bidding wars we saw in 2021-2022 was the entrance of big money Wall St and private investors in the market with “all cash” and going way over list price to secure homes.

In cities like Nashville, Atlanta, and all over Texas & Florida, investors made up over a third of home purchases. Now that rates have risen sharply over the last year…the investors are bailing in a big way.

This Redfin study looked at investors in the market this year. Real estate investors purchased 49% fewer homes year-over-year.

Where did they leave the most?

Atlanta: -66% | Charlotte: -66% | Phoenix: -64% | Las Vegas: -60% | Nashville: -60% |

This is driven by…you guessed it…mortgage rates, as it is now much harder to make the same ROIs these big-money investors need.

This is amazing news for your buyers - Why?

2 in 5 homes bought by investors were starter homes (1,400 sq ft or fewer) and the median purchase price for those homes was $340,000.

Does that sound like some of your clients’ budgets? 🤔

Now is the best time for someone at that price point to enter the market. ‘

Yes, their interest rate will be above 6.5%. But if they wait for rates to come down - these investors will reenter the market and price out the families who will actually live in the homes.

If clients wait until interest rates fall over the next few years, investors will reenter the market as well. They will once again come in over list, all cash, and price out the families that are actually a part of the community.

*Note - you can see the full list of Metros in the Redfin study to see the numbers where you live.

Rate expectations have shifted for June FED Meeting… 🎒

Just 3 weeks ago, it looked like near certainty that the FED would be pausing rate hikes in their June 14th meeting.

After the strong jobs report released Tuesday, and the FED’s inability to look at new data rather than trailing 12-month data, those expectations may have shifted…

Cleveland FED President Loretta Mester stated in an interview that she sees no “compelling reason” why they should pause interest rate hikes.

Of course she doesn’t - she’s looking at data that is a trailing 12 months - not actual data on rental rates, credit tightening, and the impending CRE collapse.

After this interview, the FED rate expectations shifted 36% to a potential rate hike of another 25bps in June - this would mark the 10th interest rate rise in a row.

Luckily, the CPI Print for May comes out Jun 13th - one day prior to the FED announcement. So this is by no means set in stone. I expect the expectations to bounce around until we see the CPI numbers.

Additionally, there is still a strong chance rates are paused in June, which would be much-needed relief in the market.

What should realtors be doing?

If you have clients out looking who want to get into a home in the next few months - you should be even more aggressive with your offers on homes.

As rates rise, it will be more costly for buyers’ monthly payments. It may be beneficial to offer 5-10k more on a property now, than to wait for rates to rise…even if it means you can get a lower purchase price in the future.

If rates do in fact rise by 25bps in the June meeting, we can expect mortgage rates to be about .25%-.5% higher throughout June. That would mean rates hover at or above 7%.

Look at the breakdown below:

Look at the monthly payment comparisons -

If you were to offer 10k over asking with today’s interest rate, you would have a LOWER payment ($2,939) than someone who offers at list price when interest rates are at 7% ($2,994).

To get about the same payment when the rates rise - you would need to offer 10k below asking on the same house.

But, are prices even coming down?

All the data we have - CoreLogic, Zillow, BlackKnight, FHFA, Case-Schiller - show home prices are not coming down. They have risen every month of this quarter. 

In fact, even from the peak of last summer - prices are higher per FHFA and Case-Schiller (which includes cash buyers) is down only 2.3% from the absolute peak.

My point is simple - if you have clients that are looking to buy something in the next few months, time is of the essence.

The Cul-de-Sac

Mark your GCal 📆

1. Jun 13th - CPI Print

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