💸 VA Loans Lead The Way

Issue 78 - Happy Monday. I spent Saturday with the family. We took off early and went to a cars and coffee meet-up in Marin.

Then, we took a drive the long way (Lucas Valley Rd, Nicasio, and back through Novato) on our way to a small car show put on by the same group in Sonoma. The boys loved having hot chocolate and checking out the cars. 

• JJ's favorite was the one of the old Porsche 356's.

• Grayson's favorite was the 2024 Lamborgini Aventador.

  Fun-filled days, great weather all weekend except late yesterday when the smoke came rolling in from the Point fire in Dry Creek!

🪖See you in the trenches

INTEREST RATES
Rates 📢 June 17th, 2024

Rate data as of morning of publication. Unless noted otherwise, all scenarios are assuming 30 Year-Fixed mortgage, Purchase or R/T Refinance. No origination points charged, 780 FICO score, and 20% down payment. Provided for consumer education only and does not serve as a binding offer to extend lending. Payment period, interest rate, APR, and other terms subject to income, asset, and credit profile qualification. Provided courtesy of GTG Financial, Inc. NMLS 1595076. Equal housing opportunity.

• Rate Markets: Nice movement downward after that pop of the Jobs Report on 6/7. Should be a good week for active buyers and the markets hitting their Summer stride.

TECHNICALS
Slow But Steady

Not a huge surprise. The Fed is leaving the Fed Funds rate untouched again. We saw nice movement in the markets Wednesday after the CPI print, then Powell came out and said that they are only expecting 1 rate cut in 2024.

Rewind 5 months and we were expecting 4-6 cuts lol. It seems like it is taking forever for rates to come back down!

📈 Fed Holds Rates Steady, Indicates One Cut in 2024

• After eleven rate hikes since March 2022, the Fed left their benchmark Federal Funds Rate unchanged at a range of 5.25% to 5.5%.

• This decision was unanimous and marks the seventh straight meeting with steady rates.

• The Fed Funds Rate affects overnight borrowing for banks, not directly mortgage rates. It has been hiked aggressively to slow the economy and curb inflation.

• Bottom Line: While inflation has cooled after peaking in 2022, it remains above the Fed’s 2% target. The Fed's "dot plot" indicates just one rate cut expected before the end of the year, though this can change based on upcoming data.

🛒 Consumer Inflation Takes Important Steps Lower

• May’s Consumer Price Index (CPI) showed cooler than expected inflation:

  • Headline reading flat for the month; annual reading declined from 3.4% to 3.3%.

  • Core measure (excluding food and energy) increased 0.2%; annual reading declined from 3.6% to 3.4%.

• Moderating motor vehicle insurance costs contributed to the friendly Core number.

• Bottom Line: May’s data, following better-than-expected numbers in April, signals that inflationary pressures may continue to ease as the year progresses.

📉 Friendly Wholesale Inflation Numbers

• The Producer Price Index (PPI) was below estimates last month:

  • Headline PPI fell 0.2% in May; annual reading dropped from 2.3% to 2.2%.

  • Core PPI was flat in May; year-over-year reading fell from 2.4% to 2.3%.

• Bottom Line: Favorable CPI and PPI reports provide positive inflation news. PPI components factor into Personal Consumption Expenditures (PCE), the Fed’s favored measure, potentially leading to a favorable PCE report on June 28.

📉 Initial Jobless Claims Hit 10-Month High

• Initial Jobless Claims rose by 13,000, reaching 242,000, higher than the expected 225,000.

• Continuing Claims also rose by 30,000, totaling 1.82 million.

• Bottom Line: Initial Jobless Claims have risen for three consecutive weeks, suggesting a slowdown in hiring. The Fed will monitor unemployment trends as they consider monetary policy and rate cuts.

🏢 Latest on Small Business Optimism

• NFIB Small Business Optimism Index rose to 90.5 in May, the highest reading of the year but below the historical average of 98.

• Bottom Line: Small business owners have expressed low optimism for 29 consecutive months, with 22% citing inflation as the top concern. Cooler inflation readings in May are a positive development.

📅 What to Look for This Week

• Housing Data:

  • Home Builder Sentiment (Wednesday)

  • Housing Starts and Building Permits (Thursday)

  • Existing Home Sales (Friday)

• Economic Reports:

  • Retail Sales (Tuesday)

  • Jobless Claims (Thursday)

  • Manufacturing updates for the New York (Monday) and Philadelphia regions (Thursday)

• Holiday:

  • Markets closed on Wednesday for the Juneteenth holiday.

INDUSTRY
VA Issues Temp Measures on Commissions

VA Loosens Policy on Commission Payments for VA Loans

I might be biased (I totally am), but VA loans are the best loans out there, especially when you know how to use them to the Veteran's advantage.

The new circular the VA issued is more of a deterrent than anything else. 

Without the circular issued on Veterans being able to pay Realtor commissions, many VA buyers would possibly get the cold shoulder from listing agents, and others who just do not understand how these loans work.

With the circular VA, buyers will be able to maintain a competitive advantage. Let's all hope that business continues as normal (it has so far).

This is a good thing, and I do not expect it to mean Veterans will suddenly be charged more. It means they will continue to be involved in the conversation when offers are being reviewed by a seller.

Kudos to the VA for being proactive with this whole NAR mess and looking out for our Vets. This is a great move.

Key Points:

• Current Regulations: Prohibit Realtor commissions to be paid by a Veteran on VA loan originations, potentially reducing the attractiveness of VA offers to Realtors and agents.

• Temporary Measure: The VA Issued the circular linked here.

• Objective: To protect veterans' buying power and allow them full participation in the housing market.