[David] Good job, Matt. I appreciate you sharing all of that. Again, you can sign up for MBS Live And get up to the nanosecond updates on what’s going on in the markets. You can use LOL for licking and lending on the signup code, which allows you an extended trial period without putting in a credit card. But I’m telling you, pull out the credit card, just get signed up. It’s so affordable, and it’s got such critically good information. I have it up on my screen all the time. Ms. Kendall gives me a bad time about I love having data. Love seeing those things move around and then it draws my attention at the right moments. Let’s get into the comments. There’s a couple things about all of this, but let’s start with that one Timid Bulls. Bill, let’s start with our good friend Les Parker’s commentary
[Bill] Yeah. Timid bulls, Cautiously optimistic. Definite maybe. I think the best way to describe it is you fundamentally believe the market should rally, but you’re not willing to totally embrace it absent trends and data that supports it. In general, I think in what we’ve been dealing with specifically there’s not a lot of complexity in what the driver of interest rates is right now. And the ability to predict how the situation is gonna play out, forget month by month, how about day by day? Day by day. Is the, the- Day by day … predictability is zero. Yeah. So why would you stray very far from a middle ground position unless you’re just flat out making bets?
[David] Exactly right. Right? Which brings up the battles of the U- UWM debacle on that one, but we won’t leave, sidestep that, yes. Unless you’re making a side bet. Yeah.
[Bill] We talked about this last week, right? Pre-war, the 10-year was right around 4%, mortgages were bouncing right around at, maybe slightly below 6, right? But that’s old news, right? You’ve got the war, the risk of escalation, and the inflationary impact, which is not getting better. You have to factor all of that in, and, but then, so to take what Matt said, to go to an extreme, so if you want the economy to slow down- Yeah right, and get lower rates, which would mean retail sales and retail spending needs to go down. So if you get Bezos to cancel all future Prime Days, then that should help rates go down, right? Yep You would think. But, and then the other thing i- is, and we’ve said this for a long time, and it’s, even Trump now is starting to focus on this, Inflation from the consumer’s perspective wrong, or indifferent, is measured by what they see on the street corner. Gas prices. Exactly. It is what it is. And the reality is it’s actually diesel which is way more important to the actual inflationary impact. But- … when you start looking at the macro picture now over the next two, three months leading into the elections, it’s gas prices, and gas prices.
[David] Yeah. It is so true. One thing I was found curious about Matt’s report was about the, the impact that Amazon’s Prime Days has on things. That is quite a statement about where our, the buying habits of Americans has drastically changed. When you have that impacting or having a, a- playing into what’s going on with the rates. Could you shed some light on that?
[Bill] Amazon first has become such a large force in retail, and them, you know, driving activity and moving around, yeah that’s gonna have an impact. But you also see it in other things. first- What isn’t really understood is when you’ve got a retail sale, for example, right? There’s a lot of seasonal adjustments that are built into that model, right? So your typical, you account for back to school spending, right? That acknowledges that, i’m still old school Northeast where school starts right after Labor Day. August retail sales is expected to be higher because that’s back to school shopping. So that’s factored into the numbers, right? What get reported is not a raw month over month. It’s month over month, but allowing for the seasonal factors. Yeah. So Amazon is a big enough player, they have their own seasonal adjustment line in the model. And for years they did their Prime Day in one month, and they moved it and, if somebody was really on the ball, they would’ve accounted for it in the model instead of saying, “Oh, gee, that’s a surprise that we can explain.” But, again, it’s like back to school. It’s a significant enough event that it gets factored into the month over month, smoothing out of the numbers
[David] Good pod- Kittle, it was good having you here. Kittle, for our listeners’ sakes, came down, drove down from Louisville to spend the weekend with my fiance and I. We had a wonderful Hawaii weekend. If you have never experienced a Kittle One martini, folks, you are missing out. It is something special. But David, it’s good to have you here. Love to get your comment, not about all of that, but about the markets. What’s your thoughts, reflections as we look at the list of the reports they have today?
[Kittle] Gail and I had a good time, so thanks for having us. I sent the group here I think a week or so ago, I don’t think we mentioned it on the podcast, forgive me if I forgot if we did. But I used to do my first company, Associates Mortgage Group, just a little market update every month- Yeah. That was so fun to see. Yeah … and so 21 years ago, September the 29th, 2005, so we’re right there, 10 years at 4.27, rates were 6%. And late ’80s we were coming down from 10, coming down from the early ’80s where we were at 18 and a half percent. And not to say don’t worry about rates, but can’t worry about rates ‘ cause you can’t change And they do affect, but we’re basically the same place we were 21 years ago. Yeah. Across the board. Oil’s not gonna change unless, everybody say that we’ve all said it on here unless it gets resolved. It’s back to what, $84 a barrel I think this morning, somewhere around there, give or take. Yeah. When you say, and Bill’s right, they look at the gas prices. It’s interesting, this morning when I was out early Kroger here in Louisville, Kroger gas, is 43 cents a gallon higher than Speedway directly across the street. And I thought maybe Speedway, one of them hasn’t changed yet. But I was out right before the podcast here today and neither one of them changed. Wow. That’s a big difference. Significant. For a regular, significant difference. And Costco, just a mile away from there, ‘ cause I went out the second time to fill up, was 16 cents a gallon cheaper than Speedway. So basically well over about 60 cents a gallon between Costco and what you get at Kroger, unless you’re using your Kroger points. The point is, there’s a big discrepancy. And gas, you can find it in the low threes right now. Yeah At least here. Yeah. I know it’s regional, but here in Louisville in Kentucky. Yeah.
[David] A lot, so much of that has to do with the state tax. Our heart goes out to anyone- I know who’s driving in New York. In the blue states, the tax that they have ta- put on is on the backs of the, those driving the-
[Kittle] I had this co- last comment here, and I think Bill made it. But yesterday, talking about the war and the negotiations and everything and Trump emphasized the fact that the midterms will have nothing to do with it, and I’m a patient man. Yeah. And so he keeps saying that. And so yeah, I don’t, he… That could be the decoy to go in and hit them hard. I don’t know. But right now he’s not moving, and neither are the Iranians.
[David] No. And they’re- I think the Iranians have miscalculated this one so badly, and they’ve miscalculated the American reaction. They think that if they hold their stuff… They think everything’s going their way right now because, they got the ceasefire, and now we haven’t been pounding the heck out of them. And so they think the midterms… So I think . we should anticipate some escalation is, and beforehand. But Marc, you live in the heart of oil country, or at least you used to. Any thoughts or reflections on what you’re seeing out there?
[Marc] Yeah, I got a lot of friends in Houston in the oil business, and every time we get on the phone, this is a, conversation. And so I came up with some keywords to kinda tell you how I feel about it. So if we trust our foes, pending peace is possible. Is a successful blockade measurable? Do we have a total disaster pending? And have we created an immediate urgency in the world and in our economy? Think about all those. And if you think about all those, then I’m just gonna move. I’m gonna find another country that doesn’t use oil. You don’t need gas. You can walk where you go and move on down the road. No, seriously, my friends here basically have told me that this thing plays out… the, the piece that we miss on this is the supply and demand thing, and I think our regulators on dealing with rates and stock markets and all that don’t take into effect, from what my friends tell me, the ripple effect. When something changes, we don’t feel the results of it for four to six months on the international oil front. Yeah. And yet we’re dealing with it here and now and changing all the numbers because we think it’s gonna happen. It could be resolved where those things are sped up and put back in the pipeline and you don’t have that kind of thing. So we’re bouncing the market all over the place based on what might happen rather than what is happening. Exactly. And I don’t see that changing. It’s been that way for how many decades, gentlemen? It’s right. It’s kinda bad. But my oil friends say, “And this too shall pass.” Yep. I think that’s biblical, isn’t it? “And this too shall pass.” Yeah. “And this too shall pass.” Yes. Yeah, and that’s what they say, “And this too shall pass.” Yeah. David. I wish there was any answers. I just don’t think there’s any firm ones, and I think we all know that.
[Kittle] Yeah, so I, I had a company. I lived down in St. Croix for almost three years in the USVI, and part of the problem of kinda what Marc’s talking about, and I’m no oil expert at all, but there’s a difference between pumping millions of barrels and having it refined. And I may have mentioned it before, but there’s a refinery just next to the airport on St. Croix that’s been shut down by the Biden administration now for, I guess five, six years. He did it when he first got in office. It’s in dire need of repair, but it’s a hell of a lot faster to repair it and put it online than it is to go build one and go through all the permits. And so that’s our refinery, US territory, and we ought to be looking at that, if anybody’s listening in the energy department today
[Bill] Listening to Marc, a couple of things that popped into my head too is that folks need to understand ’cause we talk about the same things and the same expectations. You don’t really see a lot of what’s going on behind the scenes. And a good example was, several months ago that the commentary coming out of Europe was that they were about to run out of jet fuel. Again it’s not a price issue, it’s a they can’t get any more. The reality is European jet fuel has certain regulations around it that are different than, let’s say, the US. When they started looking at their tanks getting 20% full they had a regulatory epiphany and go, “Oh gee, maybe those blending requirements that we require-” aren’t really necessary because that same plane flew from the US to Europe with the US plane. So it’s not that the jets can’t handle it, that Europeans have their own requirements. Gee, maybe the US standards are okay for us, and then that tanker in the middle of the ocean can come to Europe. So there’s a lot of things happening behind the scenes. But all they’re doing with… and there’s also a lot of, new ways that oil and refined products are getting out of the Middle East, right? Saudi Arabia is the best example, right? They’re sending as much stuff as they can different ways to the east. But all of that is still it’s a shell game that’s still going to be a problem. It’s just it’s who blinks first, right? The, industry’s running out of options, Iran or the US, right? The stuff that we’re not hearing about is what keeps pushing that doomsday point, if you will, further and further out in, into the future. And, that’s what keeps a lot of things in flux. But the other thing that’s out there, and I, it, I know this is on the Fed’s radar screen, right? A lot of buyers of oil and oil products hedge their cost out into the future. They sure do. Yes. But they don’t hedge 100%, and they don’t hedge to infinity. So there’s now a lot of, pick an airline, right? They’ll say they hedge their fuel costs. The first thing the analysts ask is how far out?” ‘ Cause they stopped putting new hedges on once prices went up. But if the high prices continue, let’s say their hedges are for six months, they’re pretty happy right now. But that point where they go to unhappy is kinda getting dangerously close. So there’s a lot of things behind the scenes that when you just look at the headlines don’t really tell you anything close to the story of what’s actually going on and where the impacts could be.
[Kittle] If the impact of jet fuel really hits and it goes up, all they’ll do is they’ll start charging me a bag fee for my backpack. So they’ll make it up somehow.
[David] Area that you put under the seat. Yeah, no kidding. Yeah. They’ll be selling all that space at a premium. Yeah. Good commentary on that. We could go on and on. I do wanna get onto another topic. We’ve talked about this one before. It’s about the upcoming changes, UCDP. Bill and I were talking about that. I thought it was 70 new data elements. We looked it up in getting ready for our podcast. It’s 200 new data elements, and the number of appraisers that are saying, “Ah, this is a good time to punch out. I’ve been, I’m close to retirement. I don’t need to do all this.” You look at the, the vendors that are having to receive this data, and thinking of LOS as you think of all the software that supports the appraisers. All of this is causing for some consternation out there and some real wringing of the hands. Alan, I wanna start with you. Your thoughts on how this is coming on pretty quickly. It’s actually been around for a little while, but typical to the industry, people are not adjusting quickly. do you hear anything within your circles that this, I know you’re wrapped up in your new company, which is Sensi.ai. Brilliant company. I love the idea. But have you heard anything as you’re reading reports or running in the AI or in the technology circles about the consequences and if everyone’s gonna be ready for this?
[Allen] It’s just like all the other changes we’ve done all the time. Nobody’s ever ready. But there are over 70 new data points in there and there’s tighter fee validation, and there’s new fraud detection in there. And, your vendor, just check with your vendor. They should be testing, ready, and things should be aligned with you. And if you’re not sure that’s part of your vendor due diligence. So if you don’t do a lot of vendor due diligence in some of those areas or your vendor’s not communicating with you, now’s the time to pick up the phone and and figure that piece out. But I’m not hearing anything the, the world is collapsing, David. It’s just more of, projects go on hold as people verify that they’re able to do this and everything’s gonna be okay
[David] I agree with Allen. I think it’s, now it’s are people ready? Are they anticipating it? I think this is gonna have a consequence on what Bill and I were talking about, I think, Ken, you contributed to it, is the cost appraisals are gonna be going up exponentially, and then trying to find an appraiser that is in certain markets doing this more. Bill you had some great reflections on that.
[Bill] Yeah. So to Allen’s point everybody talks about vendor due diligence, but, don’t stop at the software vendor level, right? Your AMC level. They’re gonna say they’re ready, and they, but to be fair, they probably are. But it’s at the individual appraiser level. Are they ready? Are they engaged? And MBA has talked about this for a while. If you’re in metropolitan suburban areas- that’s an annoyance. If you start getting out into more of the rural areas- For and you have appraisers saying, “You know what? I’ve been thinking about getting out of this for a while, and I’m done.” You then could be scrambling to find appraisers willing to do the work for you, before you even get to a cost issue, do you have a vendor? And, and- It could be a total downfall … I find it fascinating talking to people just within the last couple of days about this, and usually early in the conversation, they’re like I heard a rumor from somebody who heard from somebody else who heard from somebody else that it may get delayed.” And I immediately go back to that line in Dumb and Dumber, right? When the comment, he’s asking to go on a date, and the girl says, “Hell would freeze over before I went on a date with you.” And the response was like, ” Oh, so you mean there’s a chance?” Yeah, exactly right. Yeah, I love that.
[David] Yeah, there’s some great lines out of that.
[Allen] It’s, to your point it’s already live and people are already testing. Any delay would only be not a delay in in, “Hey, you can just put this aside and wait till later.” It would be a delay in the final deadline or something like that, but it’s already live- Yeah and people are already testing it. Yeah.
[David] Yep. But there’s some consequences coming from this that I’m starting to hear about. It’ll be interesting to be, I think availability of appraisers is gonna be one of the biggest issues that we’ve been facing that. That train’s been on the tracks coming at us for a while, and I think this one’s gonna be an accelerant to that happening. So again, then it comes down to when are we gonna have true AVMs? When is the market gonna accept them? I think we got more changes coming down the line, and I think this could be one of those tipping points where we could have some consequences as a result of this. Or we just need a little bit more data.
[Bill] Yeah. And Dave, how about if you’re a lender and you’ve been working on grinding credit report costs and other costs down by five bucks here, 10 bucks there, 30 bucks here, and then appraisals turn around and go up by 100 bucks.
[David] Yeah. There it is I don’t think it’s… 200 data elements, I don’t think it’s $100. I think this is gonna give them an opportunity or a rationale to take it up further than that. Now, at least that’s what I’m starting to hear from some of the-
[Kittle] What do they hope to find in 200 data elements? And I don’t know what they are, but, most of the reasons that properties go into foreclosure, you lose money on them, probably aren’t gonna have a doggone thing to do with these data elements. So what are we doing with this stuff? Who came up with it? Who was on the committee or the task force to come up with this stuff? They probably don’t even know there’s a T in mortgage, so crazy. Yeah. Yeah. I agree. And it gets away from, on the appraisal side, what I still think is the most simple best way. And I’m very old school. If somebody asks me to look at appraisal, yep. Send me pictures. Isn’t that the truth? Yeah. It’s so true. And now we got AI analyzing the picture. We could go on and on about this, but I just wanna touch in and then give a shout-out to Alice. We wish you were here today, Alice. You’re amazing, and we miss your report, but hope you’re enjoying your time . .
[Marc] David, I wanna add a comment in there to end. But, you’re talking about the appraisal. You’re talking about the appraisal issue. Just think of what we’ve gone through the last six to eight months on all the stuff on the credit reporting and all that. And it’s like the never ending story on this stuff. It pops up, and it builds all this crescendo, and then it falls apart and goes away or turns into a disaster. But that credit reporting thing just… I gave a bunch of, testimony on that, and I also did a bunch of consulting on that. And you’re talking about a mess. Who cares? It’s just, it’s about somebody trying to make a slice of money they haven’t been making before rather than being good for the customer. Yeah. Yeah. I’m not sure what this is doing to help protect the consumer or add more insights into value. I think I like that. Yeah. Yeah. Can you just send me a picture of the property? I’d like to take a look at it. Yeah, I bought that one. Go, “Nope, this is gonna work,” or it is. All right. Good job on this. Alice can’t be here with us, as I mentioned, but Allen is.