Rates, retail sales, builder sentiment, housing permits, existing home sales, and Fed rates

Good afternoon and happy Friday. Jordan Keck here, your lender buddy, with your weekly market update. Hope you had a great week and a good St. Patrick's Day. Wanted to start this week off, got a little bit of luck of the Irish with the interest rates dropping from 6.78% last week to 6.72% this week, continuing the trend a little bit lower at a time here, getting into the mid-6s. So great news there. For our weekly mortgage tip, wanted to talk about acreage limits on conventional loans for properties And this same information kind of applies to FHA, to VA loans, before you get into more rural properties and you start looking at farm lending at that point. So there's not a specific flat acreage limit for a property to get conventional or FHA or government financing. The limit has more to do with a specific bank. If they say we're not going to do loans more than 10 acres or 20 acres or 30 acres, and some of those are going to be more strict on jumbo properties, for example, on jumbo loans. What more has to do with it is going to be what's the highest and best use of the property, what's the zoning, and can you get good comparables? Is it common for the area? So for example, I have had several clients who have had hobby farm properties with anywhere from 10 to 20 acres, and they've got some outbuildings, they might have some farms on the property, but the highest and best use is still as a single-family individual residence. The reason for that is because if the property was geared— was larger and it was more geared towards agriculture, you know, maybe it was a single-wide manufactured home on the property, highest and best use isn't going to be as a residence. It's going to be as an income-producing farm property in that case. So that's going to be one factor. Another, again, it's going to be the size. If you've got 20 acres in Sayo, Okay, I'm gonna find some good comps. It's not too uncommon. But if you've got 40 acres and you're in Lake Oswego, probably not going to get good comparables for that because there's not that many other properties in that area that's going to be that size. So there's again not a hard and fast there. The bigger you get, or the more farm-like it is, the more agriculture is the highest and best use. Specifically for properties, if you've got a horse arena on the property, that's a big indicator. Going to be looking more north, like, um, agricultural-type loans for that. Next up, retail sales numbers for February came in up 0.2%, which is much weaker than the 0.6% that was expected. Remember, good— weak— excuse me, weak numbers on retail sales is going to be good for mortgage rates. It means potentially less inflation. There was a downward revision to January's numbers as well, turning the already negative 0.9% into a negative 1.2% adding 0.3% against the numbers that were there. Core retail sales, that rose 1%, which is above estimates of 0.4%. So even though the headline number came in a lot weaker, the core was stronger. So kind of netted out in the report in this case, but there was a downward revision in January as well of 0.2%. Next, the NAHB Homebuilder Sentiment Index for March fell 3 points. Mostly due to concerns over tariffs and higher costs. The overall index fell 3 points to 39, and anything below 50 signals contraction, anything above 50 signals expansion. Within that, the sales conditions fell 3 points to 43, sales expectations held steady at 47, and buyer traffic fell 5 points to 24. Housing permits were flat for the month, but housing starts increased 11%. So permits are going to be the initial stage before ground is broken, and then housing starts is when they actually break ground to begin building on a particular home. So permits being flat, the housing starts increasing means they're getting through some of the permits that had been filed, now actually moving forward on construction. There's usually a 1 to 2 year lag on those, especially for multifamily. There's a lot of strength of starts specifically in the South and the Northeast after a harsh January. So permits might have been pulled early, but they couldn't start until then. and the Midwest continuing to be soft. Multifamily homes under construction are down 20% year over year, which could eventually weigh on rental availability with less supply coming on the market in the future. Vacancy nationally is still at 6.9%, so there is quite a room— quite a bit of room to go with fewer homes coming on the property to be able to absorb that with the current levels of vacancy before it may put pressure on rental prices going higher. Existing home sales for February rose 4.2%, quite a bit better than the 3% drop that was expected. So huge beat on this one. And then this measures those who were shopping in December and January when rates were firmly into the 7s. So to see this big of a beat over expectations, even with higher rates, very encouraging for the market. And then inventory rose 5.1% for the month to 1.24 million units. Which is up 17% year over year, still quite a bit below normal. And that translates to a 3.5-month supply. And lastly here, the Federal Reserve did meet this week. They chose not to change the Federal Reserve rates, the overnight funds rate, but they did announce some big changes to their balance sheet that could be really beneficial for mortgage rates. See, previously they had allowed only, uh, they'd allowed about $25 million excuse me, $25 billion in their balance sheet to run off and not be reinvested. Now they're only going to allow $5 billion in treasuries to run off and instead using the previous $20— the difference of $20 billion to reinvest that back into treasuries starting next month. Because of that, that's going to add additional demand, and that supply and demand balance in the treasury and the bond market is what affects mortgage rates. So as a result of that, that is going to be helpful for mortgage rates and the markets got a little bit better today as a result of that news. Hopefully gonna see that trend continue into the future. As always, hopefully this is helpful for you. Have a fantastic weekend and we'll see you next time. Take care.