Market Update - Rates, Chinese Tariffs, Oil Prices, Fed MBS Reinvestments, and Builder Confidence

Good morning and happy Friday. Jordan Keck here, your lender buddy, with your weekly market update coming at you. A little different scenery here in Arizona, actually for my sister's wedding here this weekend, but still here and available. So hopefully you have a fantastic weekend and I will be doing the same. Starting off with interest rates, a little bit down this week from 6.5% 6.34% last week to 6.23%. Again, this is the national average for lenders across the country, including a small amount for points, top-tier lending scenarios. So this is again typically $600,000, $700,000, $800,000 loan amount, 25% down or more, 800+ credit on a conventional loan, primary residence, owner-occupied, single family. So take all that into account. This isn't a rate quote, this is an indication of where rates are going over time. As far as our weekly mortgage tip, I want to talk about utilizing soft credit checks. So, uh, several times this past week, and quite often what I'll do is if clients aren't typically sure where their credit's at, they think it might not be good, maybe there are ways out, but they want to get an idea for what a game plan could be to improve their credit and get it where they need to be over time. And also just the fact that if you're looking at information online, scores you're going to see are probably not the exact same as the mortgage reports. So with that, rather than starting with a full application and a mortgage credit report, I can use a soft credit check. We'll see the exact same score we use for mortgage, but it won't show as a hard pull on their credit. And that's something very common, something that I offer, is to be able to do that for clients for free, do a video response. They can see, hey, here's what's actually on your credit, walk through some of the suggestions, suggestions on what things they can do to improve their credit over time. and if everything looks good, great, maybe we can move forward with the preapproval sooner than expected. So if that's something that would be helpful, let me know. Happy to take care of your clients in that way and build them a game plan for down the road. As far as news this week, the US has placed a 100% tariff on all imported Chinese goods. This is in response to China saying that they would not allow the US military to use their rare earth minerals. After the US responded to that, with tariffs, China retaliated again and sanctioned 5 US subsidiaries of a South Korean shipping company, continuing to escalate the situation. Goldman Sachs released a report showing that of the countries that already have tariffs placed, what's the economic impact, who's actually paying those. They found 25% of the increased cost from tariffs are being paid by the exporting countries, 25% of that's being absorbed by the supply chain, 50% of the actual cost increase is being footed by consumers. So it is impacting the consumers, it is an inflationary impact, but at least it seems like half of that is being absorbed through the supply chain and from the countries. Next, oil prices have been moving down to about $57 a barrel, which is the lowest since at least back in May, and shows that there could be continued price relief at the pump. We're already seeing some of that. If it stays low likely see more of that passed along as well. It's also a major driver of inflation because just about everything, if it's produced, if it's shipped, is going to be impacted by oil prices and capacity. So the lower oil goes, typically the lower inflation numbers as a whole because of that. Next up, Federal Reserve Chair Powell is hinting at reinvesting into mortgage-backed securities again here soon. Could be a really good thing for mortgage rates. Currently, mortgage-backed securities and treasuries are the primary assets held on the balance sheet by the Fed. Massive balance sheet with hundreds of billions, if not trillions of dollars. When those mortgage-backed securities and treasuries mature, because they're typically anywhere from 5-year, 10-year, or longer maturity date, they have the option to either reinvest back into mortgage-backed securities, back into treasuries, or let those run off and hold those funds in cash or invest in other assets. So currently, they're letting about $35 billion a month in mortgage-backed securities run off, about $5 billion in Treasuries. Now, the more demand that there is for mortgage-backed securities and Treasuries, the better the rates get for those. And so if the Federal Reserve is hinting at reinvesting back into those rather than letting that money run off, that could be a really good thing. Mortgage rates. Not a guarantee, but there's a good chance that at the next couple of meetings, the Fed, it may announce reinvesting some of those back in at either their October 29th or December 10th meetings. It's also pretty much baked in that there's going to be a rate cut at the next meeting, October 29th, of a quarter of a percent. So as I've always been saying, make sure you talk with your clients that this does not mean mortgage rates are lower. The mortgage rates are already taking that into account. But again, if they're getting excited, say, hey, rates are lower, let's get moving. Don't stop the excitement moving forward. And lastly, the National Association of Home Builders Confidence Report came in higher. The lowered rates in the last month or two, the index rose 5 points to 37, which is still below the midpoint of 50. Anything below 50 signaling contraction, anything above 50 signaling expansion. It's nice to see a turnaround after it's been pretty low for a while. And within the report, we saw future sales expectations rise 9 points to be 54, first time over expansion in a while. Buyer traffic rose 4 points to 25, still a very low number, but again increasing in the right direction. As always, hopefully this is helpful. Have a fantastic weekend. We'll see you next time. Take care.