If the Fed were a doctor, they'd be writing a prescription to lower the patient's fever right now.

Consumer demand is about 68% to 70% of the economy, and the gross domestic product (GDP). 

If things have a higher cost and there are higher interest rates because of the Fed's action, then the demand for those goods and services that are interest rate sensitive will come down.

And when inflation comes down mortgage interest rates come down. So it's this whole domino effect. 

The MBA forecasted a recession for the first half of 2023.

They forecast interest rates to be 5.2% by Q4, which would be below the current rate, let's call it 6.15%, the Freddie Mac rate.

So in this fight against inflation, the $1.7 trillion bill that the government passed doesn't exactly help with that, although government spending has been coming down.

#KPTalks

The 40% debt-to-income ratio is impossible to manage.

The Federal Housing Finance Agency (FHFA) announced further changes to Fannie Mae's and Freddie Mac's single-family pricing framework by introducing redesigned and recalibrated upfront fee matrices for purchase, rate-term refinance and cash-out refinance loans.

The good thing is that the Mortgage Bankers Association is going to push back on that.

34% were the savings rate in China for their Zero-COVID policy or lockdown in 2022.

China has saved $2.7 trillion. JPMorgan Chase estimates that there's over $860 billion in excess money by Chinese citizens ready to be spent.

#KPTalks #savingsrate #Chinasavingsrate #excessmoney #highsavingsrate #GDP #FannieMae #FreddieMac #LLPAs #debttoincomeratio #MBA #loanpricing

There's a massive lack of supply.

There are old neighborhoods that need to be gentrified. There's people that are moving from much larger markets to sell their higher-priced stuff.

So we're trying to build supply. So we've seen home prices come down.

Revolving debt increased to $1.2 trillion.

A pretty high amount in the month of November to December, like a 68% increase.

So we're starting to see some balance sheets feel a little strapped.

We have not seen the job market really take a hit yet. There are layoffs that are going on out there, but there's still 10.4 million jobs open in America with a 3.5% unemployment rate. So the economy and job market are still strong.

#lackofsupply #inflation #buildsupply #homeprices #springpurchaseseason #KPTalks #revolvingdebt #revolvingdebtincrease #inflation #wageinflation #wagegrowth #jobmarket

We had a Goldilocks jobs report.

So a little bit more jobs were created than expected, but not a lot more.

We seem to have eased off a bit because it wasn't a super hot, tight job market.

A lot of those jobs created were temporary jobs and wage inflation actually got reduced a little bit.

So is inflation softening? We're going to find out with some more data on Thursday this week with the CPI (Consumer Price Index). 

It's not the Fed's preferred measure, but almost 40% of it is based on housing, owners' equivalent rent, lodging away from home, and all kinds of things that our housing industry has to do with.

#KPTalks

The amount of our budgets are estimates.

You get either less money coming in or overspend. On this last round, we were like 5.5% equivalent GDP, either underfunded or over budget. And 2.5% of that came from the Department of Education because we've been forgiving or canceling or pushing back the payment of student loans to our government.

The equivalent of 2.5% of our GDP is unfunded by the government. It's something called fiscal drag. When there's less money coming in and there's less money being spent by our government, it is a drag on the economy.

Inflation could be a little stickier when we're overspending.

All we need is for the economy to snap back. And so we're doing our part. We're trying. 

#KPTalks #budgets #governmentbudget #GDP #studentloans #overspending #fiscaldrag #inflation #stickierinflation #fourthindustrialrevolution

We have a shrinking negative money supply because of the actions of the Fed to fight inflation.

And that hurts interest rate-sensitive industries like our industry. And so people in their relationship with money have a lot to do with how well they do in life or with their businesses.

Some people are more aggressive with their money. Some people don't like to lose money. We've seen companies fold up tents, shut down entire wholesale channels, or some of the non-QM lenders not have enough liquidity and go bye-bye overnight.

Home affordability is a big deal.

Our administration and all the housing think tanks are really trying hard. We're all trying hard to serve our communities.

With interest rates high and home prices high, 80% of people under the median income cannot afford a house and that's a sad state of affairs considering that two-thirds of America almost own a home.

So we have a mission.

#moneysupply #shrinkingmoneysupply #fightinflation #interestratesensitiveindustry #homeaffordability #homeprices #interestrates #housing #KPTalks

CPI was good!

Two CPI prints in a row were showing inflation to roll over. 

39% to 40% of the CPI print is housing. Rent, owner equivalent rent, lodging away from home. It's a big portion and it's lagging data over the last 12 months.

Housing isn't a big component of the PCE. If there's a beat on this PCE, then that's yet another piece of data that shows inflation is rolling over and coming down, which is generally positive for the markets.

When inflation and the price of goods come down, our wages have more strength and they're worth more. 

And that is a tailwind for the economy, considering and assuming that inflation continues to come down. 

Productivity has been increasing. If jobs are being lost in the economy and the people that are left are working harder with that amount of work, productivity is a boost and it helps our economy.

#KPTalks #inflation #wages #wagepower #spiralinflation #productivity #tailwind #CPI #rent #ownerequivalentrent #laggingdata #housing #PCE #homeprices

December is generally a very good month for the stock market.

If the market has been bearish and we know our CME tool that we look at all the time. You can go to CMEGroup.com and you can see what the Fed's future rate outlook is.

Everyone thinks it's going to be like a 73.5% chance as I'm recording this that there'll be a 50 basis point rate hike announced and only a 26.5% chance that it will be 75 basis points.

The CPI could change dramatically, depending on what the Fed says and what the CPI says. That could kick off a rally.

Since 2019, 11 states saw their homeownership rate drop, including California.

Do you know why? Because there's a 40% gap between their prices of the cheapest and the most expensive markets.

Price matters. Rates are coming down. Home prices have been coming down. And that matters to get people off the shelf.

#KPTalks #homeownership #homeownershipdrop #pricematters #homeprices #stockmarket #CMETool #CMEGroup #CPI #Fedfuturerate

The Fed is trying to mold and shape inflation.

Which then molds and shapes our interest rates.

They have blunt tools. They have quantitative tightening. They can sell off their balance sheet that they have or let it run off and buy less mortgage-backed securities and treasuries. They can raise the Fed funds rate.

The Fed has said they are going to be data-dependent. And that data is showing that things have rolled over.

We might end up with maybe a 4.5% terminal rate, maybe as high as 5%.

If we get more hot data reads coming out here and that's a really high rate. That rate that we just went up since March of this year, is the fastest ever.

And there have been other times when these rates have been raised by the Fed and have broken things in our system.

#KPTalks #moldinginflation #shapinginflation #quantitativetightening #Fedfundsrate #peakinflation #terminalrate #hotdatareads #higherrates 

Barry Habib and his team at MBS Highway really break down the PCE number.

He said that the PCE has less waiting on housing, which we all know there is still inflation there.

There's certainly inflation year-over-year. It's a lag effect.

But the PCE is more of a consumption expenditure. So people are spending less on rent. There's less owner-equivalent rent.

There were over 280,000 jobs lost for the October jobs report.

It didn't come out as a net loss because there is this wonky birth/death uptick in that report.

And remember it was right before the midterm election. I'm not a conspiracy theorist, but data can be played with.

It was a very positive jobs report. So we could have a surprise, maybe less good news again on this jobs report.

#KPTalks #PCE #housing #inflation #lageffect #lessownerequivalent #stockmarket #jobsreport #Octoberjobsreport #birtdeathuptick #positivejobsreport #jobslosses