Rates, BLS Head Announced, CPI & PPI Inflation, Upcoming Fed Rate Cut, and Retail Sales

Good morning and happy Friday. Jordan Keck, your lender buddy, here with your weekly market update. Kicking off, interest rates fairly steady week over week, moving from 6.57 to 6.56 this week. Because it's a fairly recent change here, drop lower in rates, and today we're getting some news that the rate's probably going to be a little bit higher today. There's still a big spread among lenders. The longer we stay in one particular rate range, the more lenders will kind of collaborate around that. But as you see them change, some lenders will hold out a little bit longer than others. And so just notice that again, this is for top-tier purchase scenarios with some portion of buydown and origination fees. This is not a quote for everybody here. Just because you're conventional with good credit doesn't mean that you or your client are going to be in this situation. So just an indication. Of where rates are moving up and down week to week. As far as a mortgage tip this week, wanted to talk about tax holdbacks. This is a tricky time of year in Oregon here where closings in September or October, their first payment isn't going to be due until the tax bills come out, but we don't know what those are going to be yet. As a result of that, lenders are going to require that we collect typically anywhere from 110% to 115% So 10 or 15% more of the total tax amount than there was for the bill last year. We know this is an overcollection, but they want to make sure that it's not going to be underpaid. So they're going to collect that much as well as typically a 2-month cushion. So as soon as the tax bill comes out before the first mortgage payment is made, there's already enough held in that account to pay that tax bill in full, and then any leftover will be refunded back to the buyer. At after that is paid typically within a month or two from the county. Now, this is going to basically make closing costs a bit higher, especially for those who are closing at the beginning of the month. So anyone closing the beginning of September, or beginning of October, those are probably going to be the highest prepaid closing cost amounts of the year as a result of this. So just another thing to make sure you set the expectations for, for your clients, that are going to overcollect upfront. When the tax bill comes out, they'll pay it and then get the difference refunded. But if you see closing cost numbers higher than usual, that is why. Next up, uh, President Trump announced a new head of the Bureau of Labor, uh, the BLS here, E.J. Antoni. Hopefully he'll bring about some positive changes here in the methodology used by the BLS because of all of these revisions that we've seen. We see headlines come out we see the market react to those and then of course massive revisions in the following 2 months here. So again, to be determined if there's going to be some changes and how quickly, but hopefully we're moving in that direction. Next up, we did get inflation out this week for CPI, the Consumer Price Index for July rose 0.2%, right in line with estimates. Year over year is up 2.7%. So no change month over month for that. The core rate, which strips out food and energy prices, was up 0.3%. To be up 3.1% year over year, slightly higher than the estimates of 3.0%, but overall pretty tame report, really much in line with expectations. We also got PPI wholesale inflation coming in really hot at 0.9% over estimates of only 0.2%. So over 4 times, about 4.5 times over the expected amount. And appears tariffs may be starting to appear in the data. But because the CPI was right in line with estimates and PPI was higher, It may be the fact that most retailers along the supply chain are absorbing those costs rather than passing them along to consumers. Headline inflation rose from 2.4% to 3.3% year over year, and the core rate rose from 2.6% to 3.7%. Next up, the Treasury Secretary Scott Bessant has been advocating for a 50 basis point, or half of a percent, rate cut in their September Fed meeting. It's unclear if other Fed members are on board with the same amount here. They're trying to catch up from not doing it at their previous meeting. But it's fairly clear that there's at least a very, very good chance of getting a quarter percent cut. So 25 basis points. The market's pricing it maybe a 3 to 5% chance of a 50% or 50 basis point rate cut. So I wouldn't plan on it. But it's nice to see more and more Fed members advocating that way, especially in light of some of these massive jobs report revisions making it weaker in the market. So pretty much assume there will be a 25 basis point rate cut in their September Fed meeting. And be sure to talk to your clients as well. Remind them a 25 basis point rate cut in the Fed funds rate does not mean an equivalent rate cut in mortgage rates. In fact, mortgage rates might go higher if the markets expect that this move will be inflationary. And lastly here, retail sales for July came in up 0.5%, below estimates by 0.1%, but the core was much stronger. One of the things that made this report a lot greater as well is even though it was 0.1% below estimates, there was a 0.3% positive revision to the month of June. And then for the core rate, that rose 0.5%, which was above estimates of 0.4%. And there was also that same 30, 30 basis point revision to the previous month higher. So coming in pretty strong. Markets don't love this data, which is one of the reasons we're starting to see As of this morning when it came out, rates starting to move a little bit higher as a result because markets see that as inflationary, rather than lower spending numbers which are going to be in line with estimates or below would be better for inflation and therefore better for mortgage rates. As always, hopefully this is helpful. Have a fantastic weekend. We'll see you next time. Take care.