Rates, US/China Trade Deal, Israel Strike on Iran, CPI and PPI Inflation, and Jobless Claims

Good morning and happy Friday. Jordan Keck here, your lender buddy, with your weekly market update. Remember, first off, that next week, the 19th, Juneteenth, is now a federal holiday, so no closings that day. Does not count towards loan estimate and CD waiting periods, so remember to keep that in mind as closing and plan accordingly to either close a day earlier or a day later. As far as rates this week dropping a bit from 6.97 to 6.85, by the end of today, probably see that a little bit higher because some news we got that we'll cover today here. But week over week as a whole, looking a little bit lower. As far as our weekly mortgage tip, I wanted to talk about how credit scores can increase the maximum approval amount for your clients. See, a lot of times people will look at what you're approved for as a basis of debt-to-income, or DTI. Now, each loan program has certain maximums they'll go up to. So for example, FHA or conventional—conventional, under the right circumstances, can go up to a 50% debt-to-income ratio, cannot go above that. But it doesn't necessarily mean every client gets approved up to that 50% DTI. Your credit score can play a big part of that, whether it's your score or your history. So when you run it through automated underwriting, that's going to be Fannie Mae, Freddie Mac, FHA, and VA and USDA's way to determine if the overall loan profile meets in their guidelines and what they're looking for. So even though you might have somebody with a good 700 credit score, if their profile is just a single credit card that they opened up last year, they're probably not getting approval up to that 50% debt-to-income ratio. They might get approved up to 45%. 5, maybe 40, maybe even below. So the best thing that they can do is continue to work on their credit score, whether that's getting added as an authorized user to show a higher score and longer history and some more trade lines. So just know that if somebody has a good credit score, that's helpful, but it's just the score alone or just the history doesn't mean they're going to get approved for the most. So if you have specific situations I can help with on that, let me know. Happy to chat through it. As far as details this week, a couple more political headlines, but I'm really just interested in how they're affecting the market. First one is the US and China have actually reached a trade deal framework that is just subject to presidential approval for both the US and for China. The deal would allow China to release and send the US rare earth minerals, and in exchange, we would be sending aerospace parts and semiconductor programming tech to China. The markets are receiving the news very well after the uncertainty we had from the prior proposed deal. And then there was talks about that deal not going through, increasing tariffs again and bringing a lot more uncertainty to the market. So now that this has actually seemingly been settled, subject to presidential approval, markets are liking that news. And next, of course, unfortunately, you probably already heard about Israel, who has had missile strikes. On several nuclear sites in Iran. I believe that was yesterday or last night, causing a lot of fear of increasing oil prices. Now, normally, whenever there's uncertainty like this globally, that usually is a good thing for interest rates because the more fear, people move money out of stocks and into more secure bonds to be able to have longer-term investments. Unfortunately, in this case, because there was fear about this strike causing increases in oil prices, which would be inflationary— inflation is bad for bonds and for mortgages— We're seeing both stocks and bonds lower as a result of this strike. Next, May's Consumer Price Index, the CPI inflation report, came in up 0.1%, which is half as much as expected. Year over year, it rose from 2.3% to 2.4%, but still below the 2.5% expectation. So even though we saw an increase year over year, we still saw less than we were expecting. And so that was good news for markets. This is also great for mortgage rates because remember, if any time you're looking at those expectations, you don't really care what the number is. You just care if it's better or worse than expected. The core rate also rose 0.1%, but came in a full 0.2% lower than the 0.3% expected. So really good beat on the core side. PPI wholesale inflation also beat expectations, coming in at 0.1% versus the 0.2% expected. April was revised higher though by 0.3%, which mitigated some of the gains in the headline number. From a -0.5 to a -0.2. So still saw going backwards last month, but not by as much year over year. PPI inflation rose to 2.6, right in line with expectations, and the core rate rose 0.1% below the 0.3 expected. So very similar numbers to what we saw in the CPI. The core year over year was up 0.3%, a tenth below estimates. And lastly here, initial jobless claims were unchanged last week But we did see continuing claims rise to 1.96 million, which is a 4-year high. This is a third week that continuing claims have been above 1.9 million, which is already a fairly elevated number. And we're consistently seeing higher initial claims coming in at 248,000 again this week, as well as the week prior. And the concern on this is continuing claims is as it continues to grow, some people are dropping off. You know, a lot of states have a maximum of 26 weeks of benefit time. So once somebody goes through that, they're no longer counted in continuing claims, even though they might not have found work yet. So seeing that continuing claim number be at the highest in the last 4 years might be a little bit more concerned about the stability on the job side, showing that when people are let go, either more people are being let go, and when they're let go, they're staying off for longer. This is something to watch for, especially as unemployment rises. That's one of the mandates for the Federal Reserve. But in the past, they have said they're willing to put that aside and see unemployment rates higher if it means keeping inflation under control. As always, hopefully this is helpful for you. Have a fantastic weekend. We'll see you next time. Take care. Mm-hmm.