Good morning, let's dive into the Fedheads and their updated talks and forecasts.
On Tuesday, Barr started the trending by sharing he'd be down for a rate hike if inflation doesn't cool. Williams joined on Wednesday saying he no longer supported the stay. Warsh already shared in Jackson Hole that he was worried about inflation and that was on them, so combined with Jefferson and Cook, that has us at 5 voting for a rate hike.
Waller went wild-card and shared that he was down to keep rates as-is if we saw their fancy new PCE (3-month annualized) metric hit 2.8%. Currently it's at 3.03%, and unless my math is way off means we have very little chance of hitting that.
There's a slight chance they'll wait one month for a wait-and-see, but my bet is on the September rate hike. Boo.
Silver lining? There's actually a decent chance that a rate hike will inspire the global market to believe that the Fed is controlling inflation. That restored credibility could actually cause long rates down, so a rate hike could cause mortgage rates to bump down.
There was lots of other data this week, but none of it moves the needle. Construction spending was -.5% MoM, JOLTS job openings came in almost perfectly in line, rates bumped up and applications were essentially flat (.8%).
In exciting job news, ADP came in 8K below consensus and Challenger job cuts showed a bigger increase in announced cuts (mainly from tech/AI). However, today's BLS data was big: 162K versus the 58K consensus, the strongest since March. Unemployment still at 4.1%, and July revised from that negative to +21K.
FNMA released this doozy of an update for rental income. Lots in there for operators to read through: Updates to lease requirements, updates to short-term rental income calculations, new landlord requirements, and departing residence.
The departing residence is probably the biggest: No more magical lease for 75% of that rental income. Now they want 6 months reserves if the buyer doesn't have a 12 month landlord history, and wants at least 3 comps used for the rental calculation. Those comps can come from an appraisal, schedule, or other various sites, but they want real comps, not magical Zillow numbers. For all the loans that produce a magical lease with huge numbers to a totally-not-BFF-or-family for offsetting a payment, this should be fun.