Market Update - Rates, fed rate talk, home prices, and jobs data.

Good morning and happy Friday. Jordan Keck here, your lender buddy, with your weekly market update. First off, also want to remind you that not this weekend, but the following weekend is Mother's Day weekend. So make sure you're planning accordingly. It's not technically a federal holiday, so all closings will still be happening. But want to make sure that if you're making any plans, you take those into account ahead of time. As far as interest rates go, they did drop a little bit this week for us, from 7.52% down to 7.37% per Mortgage News Daily. And weekly mortgage tip, I wanted to talk about appraisal gap coverage. And this is something where anytime your clients have more than the minimum down payment required on a transaction, they may be able to write appraisal gap coverage into their offer. For example, if you have a conventional loan where the minimum is 5% down, but your clients are doing 10%. Well, that difference there between the minimum and what they're actually doing, they could use that as an appraisal gap coverage. Because even if the appraisal comes in lower, you know, the loan-to-value is technically going to be different. Maybe instead of 90%, it's going to be 95%. But that still means they don't have to come up with more money out of pocket. They can come up with the exact same amount. And rather than 10%, it's 5%, because they're using the difference to cover the gap. So again, it's no extra money out of pocket. There might be a small change in the monthly mortgage insurance amount, but makes it look a lot stronger. And again, this is only covering if the appraisal comes in low. If it comes in at the same value, then no change at all, but it helped you have a stronger offer to get accepted in a competitive environment. So if you have more questions about that or want to run scenarios, happy to do that so that you can make sure you're putting your clients in the best possible spot. Next up, as far as news this week, it's jobs week, so a lot of data on that. First off, the Fed did meet and they had their meeting where they discussed, do we change rates? And they decided, no surprise, that they weren't going to change rates this month. No cut and no hike. Fed President Powell did go out of his way though to say that they are not planning on hiking rates, but in order to lower them, they would need to see more data confirming that inflation is headed lower. which at this point they're just not seeing good confirmation for. They're not really confident in that. He did announce, though, the one we talked about in the last week or two, that they are going to slow down their balance sheet reduction. Currently, right now, they're letting about $60 billion a month run off of their balance sheet that they're not reinvesting back into Treasuries. And he said they're going to drop that down to $25 billion, meaning that they're essentially going to take $35 billion a month and reinvest that back into treasuries, which although it doesn't change the federal funds rate, it is another tool they have which may help take up some of the supply in the treasury market, in the bond market, and help interest rates. So we'll be watching as that happens. Next up, Case-Shiller and FHFA home price appreciation data came in for the month showing 0.4% and 1.2% monthly home appreciation respectively. This is huge. And Case-Shiller, as you may remember, they take into account all homes. FHFA only takes into account homes that are financed under the maximum conventional county limit. And so Case-Shiller typically takes into account more of the higher-priced homes, FHFA taking some of the lower ones. And so to see 1.2% appreciation growth in the month alone for February is huge. And then year over year, FHFA showing 7% year-over-year home price growth, big increase since the 6.4% we saw in the previous number. And Case-Shiller now at 6.4% year-over-year. So talk to your clients about this. This is a big one here where people, almost everybody can relate that if interest rates drop, prices are going to keep going up faster. But they're already staying strong. I mean, if you're looking at $100,000 property, that's $6,000 higher. So you multiply that out, right, $400,000 property, That's $24,000 or more growth in one year. Get your clients off the sidelines, get them into the market here, because it's not slowing down. Next up, ADP first employment report here for April came in showing 192,000 jobs created, slightly above the 183,000 that was expected. March was also revised higher from 184,000 to 208,000, which added a little bit more to that headline number. And the report, they did report income for job stayers was 5% increase year over year, which is down slightly from the previous report of 5.1%. And income for job changers, those who moved jobs within the year, were up 9.3%. Still a big amount, but down from the 10.1% we saw in the previous report, showing it's helping to slow down that rate of income-pressured inflation, essentially, is what we're looking at. Next up, the BLS, the big jobs report that came out today. They came in showing 175,000 jobs created for April, which is below, quite a bit below the 243,000 that was expected. The previous two months were also revised lower by 22,000, further adding pressure downward on this headline. And that's one of the reasons why we got a little bit of lower interest rates today. The household survey component of this, because there's the birth-death model, which is the headline number, and then the household survey. Where the unemployment rate comes from. The household survey, they only showed 25,000 job gains for the month and the labor force increasing by 87,000. Because there were more in the labor force than the jobs that were gained, unemployment rate moved up from 3.8% to 3.9%. And then next, the March JOLTS job openings report showed 8.488 million job openings, down slightly, down, you know, about 400,000 from the 8.813 the 8.8 million we saw in February. This is also well off the estimates of 8.7 million job openings and the lowest we've seen since February of 2021. And lastly here, initial and continuing jobless claims were actually identical this week to last week. And this has been starting to bring in question to the validity of those reports. When removing holidays, you know, the last figures have been virtually the same for the past 11 weeks. And in an $28 trillion economy, you've got 160 million workers. This is statistically impossible to come in identical one week to the next, let alone virtually 11 weeks in a row once you remove holidays. So it's really starting to cast some doubt into what's going on here with these numbers. I mean, because you've got 160 million workers and you're telling me the unemployment applications aren't even changing by 1,000 a week. So again, a lot of doubt cast in this. Not sure if we're gonna see anything more from it, but all that to just say, I would really take those numbers with a grain of salt. As always, hopefully this is helpful. If you haven't already, be sure to check out the link below for the book club. We're gonna be meeting again, second time here this next week. If you've never read the book before, if you're getting caught up for it, that's fine. Come and join us, be a great time. And then you can also get next month, we're gonna be going through the final 7 chapters of the book. Unreasonable Hospitality, and then switching over to a new book for the following 3 months. And if somebody else may be interested in getting these weekly market updates, feel free to pass it along. Subscribe button down below so they can make sure they get a copy every single Friday and stay in the loop with all the news coming out. Hope you have a fantastic weekend. We'll see you next time. Take care.