Market Update - Rates, consumer and wholesale inflation, retail sales, and consumer confidence

Good morning and happy Friday. Jordan Keck here, your lender buddy, with your weekly market update. Want to make sure that you remember first off that not this coming Monday, but the Monday after the 27th, is Memorial Day and it's a federal holiday. So make sure to take that into account when writing contracts and looking at closing dates. Next, also want to make sure that you know I'm going to be opening up an event here. The date's still to be determined, but going to be doing a beginner's Texas Hold'em night. So for anybody who is interested, if you or any friends have always been interested in learning to play Texas Hold'em, but haven't been able to get a part of a group where you don't feel like you're going to just get, you know, eaten alive because you're with a lot of advanced players, this is the place to do it. Just a relaxed, fun environment, get a chance to learn and play and have a great time doing it. Date is still to be determined, looking at sometime in the next couple of months. So email me, shoot me a text or call, let me know if you're interested to get on that invite list and start putting together some people you want to come play with. Because again, could be a fantastic time. And starting to do more tournaments as well for people who know how to play, just a great chance to get together. So let me know if you're interested in that. Next up, as far as interest rates go, down a little bit this week from 7.15% down to 7.02%, almost breaking back into that 6 number range here. So hopefully we get a little bit more momentum moving forward and be able to break into that. As far as the weekly mortgage tip this week, wanted to talk about flow tests on wells. So this is going to be measuring the gallons per minute coming out of a well for a property. And there's a lot of confusion on this because there's oftentimes certain lenders will say that we require a flow test But it may not necessarily be required by FHA or VA or Fannie Mae or Freddie Mac on conventional loans. And so I want to get in through this. I actually had somebody reach out today asking about it. And so here's the gist. Over 1,000 transactions over the course of 10 years, I've never actually had to provide a copy of a well test. Why? Because they're not required. Unless— there's only two circumstances in which you would actually be required to provide a well test. The first one is if the lender, not the entity, not the type of loan, but the lender specifically says, we require well tests on every property with a well. Should be fairly easy to fish that one out ahead of time. Just ask the lender, hey, do you require well tests? Is that your policy or what they call an overlay in addition to the main loan requirements? The next one is that if the appraiser or something in the contract indicates that the flow might be low, an underwriter may ask for a flow test to determine if it meets the minimum requirements. So good examples, FHA. FHA does say that if there needs to be a flow test, there is a minimum. It's 3 gallons per minute for the flow in order for that to be approved. Conventional, VA, a little bit less clear on it, but basically probably go by that 3 gallons per minute across the board. But here's the thing, if they don't see it or need it, it's not going to be an issue. So kind of one of those where, you know, if the lender has a copy of the inspection report, it can cause problems, but 99.9% of the time they're never going to ask for or require a copy of it. So best just not to give them that. So anyway, if you have questions on this or running into any issues with it, happy to help. Let me know. But again, you should almost virtually never have to provide a copy of a well flow test to a lender. Next up, CPI inflation. This is a big one that came in for the month of April. It came in showing 0.3%, which is actually below expectations of 0.4%, and this was some good news that helped us continue that momentum for lower interest rates. Year over year, it decreased from 3.5% to 3.4%, which was right in line with estimates. And then the core rate, which strips out food and energy prices, that came in at 0.3% for the month, which matched estimates. Year over year, it declined from 3.8% to 3.6%, also slightly better than estimates. So right now, Pretty much anything right in line or a little bit lower than estimates for inflation is great news. And when we see that, we're going to see an improvement in interest rates in the market. Next up as well, wholesale inflation, the PPI Producer Price Index report that came up showing 0.5% or half a percent, which is slightly above the 0.4% that was expected. The core rate rose 0.5%, which was a decent amount higher than the only 0.2% that was expected. But here's the thing. The reason for this big increase from month over month is because the previous month, March, was revised lower. So it made the increase month over month look bigger. March was initially showing a 0.2%, but it was revised lower to a -0.1%. So you got 0.3% change there. So now, of course, we're seeing it rose 0.3% higher than expected. Because otherwise it would have come in exactly as expected there. So a little bit of number magic going on behind the scenes. Markets tend to react to the initial numbers more so than the revisions. So in this case, if the revision from the previous month hadn't happened, it would have been right in line with expectations. But because it came in higher, that's what markets react to, not really reading into it deeper. Next up, retail sales for April were flat versus 0.4% that was expected. And so because of that, we also have the previous month, it was revised lower. So really big miss on those retail sales numbers, which is another reason why we had interest rates help out this week. March dropped from 0.7% to 0.6% in this report, as well as again, beating the expectations by 0.4%. So ultimately, you've got a net of about a half a percent miss on those retail sales numbers between this and last month. The core rate declined 0.3% for the month, which is the number that gets factored into GDP. So you're actually seeing a decline in retail sales numbers factoring into GDP, which is that broader number we see quarterly. Lastly here, consumer confidence report for May dropped sharply from 77.2 to 67.4. Anything above 50 still signals expansion, but interesting to see a big drop there. This is well below estimates of 76.2, and the lowest reading in the last 6 months. This is a big drop in— there also was a big drop in spending intentions across the board as well for consumers. And of course, if you remember, I think it was 1 or 2 weeks ago we talked about how the delinquency rate in those buy now pay later programs being somewhere around 40% or more delinquent on those, and most consumers turning to those after already maxing out their credit cards. So starting to see a little bit more strain on consumers and that consumer confidence report likely starting to pick that up. Always, hopefully this is helpful for you. Hope you have a fantastic weekend. Let me know if there's anything I can do to help and you have a great time. I'll see you next week. Take care.