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Week-End Review 12/2/22

So what’s the news we have for you this week? A couple of things I’d like to point out in the industry that can help us.

First, The Federal Housing Finance Agency (FHFA) announced the conforming loan limit values (CLLs) for mortgages to be acquired by Fannie Mae and Freddie Mac (the Enterprises) in 2023. In most of the United States, the 2023 CLL value for one-unit properties will be $726,200, an increase of $79,000 from $647,200 in 2022.

The Housing and Economic Recovery Act (HERA) requires that the baseline CLL for the Enterprises be adjusted each year to reflect the change in the average U.S. home price. Earlier today, FHFA published its third quarter 2022 FHFA House Price Index® (FHFA HPI®) report, which includes statistics for the increase in the average U.S. home value over the last four quarters. According to the nominal, seasonally adjusted, expanded-data FHFA HPI, house prices increased 12.21 percent, on average, between the third quarters of 2021 and 2022. Therefore, the baseline CLL in 2023 will increase by the same percentage.

The next thing is understanding the correlation between Inflation and Interest Rates. Understanding that Fed Interest Rates do affect Mortgage Interest Rates, but not nearly as much as inflation. So watching inflation rates is a better predictor of whether Mortgage Interest Rates will go up or down. For example, the Consumer Price Index (CPI) went up 0.4% on November 10th. It was less than expected. So what happened to Mortgage Interest Rates? They went down significantly!

Next CPI report (which is a good indicator of inflation) is on December 13th at 8:30am eastern time. If it’s less than expected, rates will go down. If it’s more, rates will go up. That’s a better more tied-in indicator of inflation versus the Fed rates.

Hope this all makes sense. If you have any questions, we’re always happy to answer them here at Coastal Mortgage Solutions.