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Stocks are lower as global sovereign yields march higher. Bonds and MBS are down again.
Job openings rose to 9.6 million at the end of August, according to the JOLTs report. Professional and business services accounted for the majority of the increase. The quits rate was unchanged at 2.3%.
Home prices rose 0.68% in July, according to Black Knight. This pushed the annual growth rate to 3.8%. Rising home equity means there are opportunities in the cash-out refi market, provided that lenders are looking for the right candidate: “The profile of cash-out borrowers – who made up roughly 90% of all Q2 refinances – has shifted considerably in recent quarters. While the average unpaid principal balance of borrowers entering a refinance has fallen from $319K in early 2020 to $183 K in August 2023, it is even lower ($165K) among cash-outs specifically. Alongside rising interest rates, the average equity withdrawal among cash-out refinances has also risen by nearly 90% from its low in 2020. Today’s candidates are far more focused on tapping equity, and cash-outs may make sense for borrowers with lower balances (on which they give up a lower rate) looking to withdraw larger amounts of equity (at lower interest rates than what is available via a HELOC).” Even in tough environments, there is still business to be done.
Cleveland Fed President Loretta Mester said that investors should expect one more rate hike this year: ”
“The economic projections released by the FOMC in September indicate that the median participant thinks another rate increase will be appropriate this year and that monetary policy will have to be held sufficiently restrictive for a while in order to get inflation back down to 2 percent…This is consistent with my own reading of economic conditions, the outlook, and the risks to the outlook. At this point, I suspect we may well need to raise the fed funds rate once more this year and then hold it there for some time as we accumulate more information on economic developments and assess the effects of the tightening in financial conditions that has already occurred.”
Meanwhile, Jerome Powell listened to small business owners about inflation and interest rates.
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The funding structure of the CFPB is being decided by the Supreme Court, which could have an impact on the regulatory framework for the mortgage industry. The CFPB was originally intended to be immune from any sort of democratic checks and balances – the head could only be fired for cause, and the funding structure was exempt from the normal appropriations process. The MBA is warning that a ruling against the CFPB could upend the mortgage market if SCOTUS rules that the current funding structure and regulations (i.e. QM) are no longer valid.
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