Morning Report: Strong retail sales

Vital Statistics:

S&P futures4,460-3.2
Oil (WTI)72.27-0.45
10 year government bond yield 1.37%
30 year fixed rate mortgage 3.07%

Stocks are flattish this morning on no real news. Bonds and MBS are down.

Initial Jobless Claims came in at 332k last week, which was above expectations. It is still a mystery why we are seeing such elevated numbers in the tightest job market I can remember.

Retail sales rose 0.7% in August, when the Street was looking for a 0.8% decline. Ex-vehicles and gasoline, they rose 2%, which was well above expectations. August and September are the back-to-school shopping months and this bodes well for the holiday shopping season at the end of the year.

The retail sales number is great news for those who were looking for an acceleration into the end of the year. Consumption is 70% of the US economy. Still, the labor market remains a headwind, especially if it lasts longer. Consumers may be willing to spend, but if the goods aren’t there to begin with then the sales won’t happen.

Consumer sentiment fell slightly in the preliminary reading from the University of Michigan.

Home sales fell in August, according to Redfin. Prices still increased 16%, however. “When it comes to home prices in this market, what goes up stays up,” said Redfin Chief Economist Daryl Fairweather. “That’s especially true in the Sun Belt; home prices are up more than 20% from last year in Austin and Phoenix. Even with these steep increases, homes in these areas are still relatively affordable, so these and other hot migration destinations are going to continue to attract homebuyers from the coasts. As workers change jobs en masse and enhanced unemployment benefits come to an end, we could see even more households relocate for affordability in the coming months.”

Chinese developer Evergrande is on the brink of default, with something like $300 billion in debt. We have known forever that China has a real estate bubble, similar to what the US went through in the 1920s and Japan went through in the 1980s. If this is indeed the end of the Great Chinese Real Estate Bull Market then the country is probably due for a Great Depression style event. IMO, this is a byproduct of decades of rapid growth. Eventually, more and more marginal projects get built and the debt crisis creates a collapse.

As far as the banking system goes, I don’t think that the US banking system has much exposure here. We can pretty much guarantee that any bailout for Chinese banks won’t extend to foreign banks, but I suspect this might be an overseas hedge fund event. I don’t see any sort of reverberation into the US markets, however I do think that this event will be bullish for US bonds. When financial markets hit credit-related stress, the first asset everyone wants is US Treasuries. We saw good demand in the 30 year auction earlier this month, and that could portend strong demand going forward.

Morning Report: FHFA suspends the restrictions on Fannie and Fred

Vital Statistics:

S&P futures4,4373.2
Oil (WTI)71.671.15
10 year government bond yield 1.29%
30 year fixed rate mortgage 3.07%

Stocks are flat this morning on no real news. Bonds and MBS are flat.

The FHFA suspended the limitations on Fan and Fred instituted by the Trump Administration in the waning days of his presidency. These are the limits on cash window sales, limits on high-risk loans and the cap on investment properties and second homes.

Treasury will study the limits and decide over the next year whether to reinstate them or not. In the meantime, this doesn’t necessarily change anything until we hear from Fannie and Fred since they were the ones who actually instituted the limits. It is probably just a formality, however nothing has officially changed yet.

The MBA welcomed the changes:

“The suspensions will eliminate several market and pricing disruptions caused by these caps that were harming lenders and borrowers alike and pave the way to restore appropriate regulatory authority to the FHFA,” Broeksmit said. “MBA looks forward to working with Treasury, FHFA and all other stakeholders on these and other ways to protect consumers and strengthen the mortgage market.”

“These problematic limits had been a focus of intense MBA advocacy since their adoption in January, and their suspension is directly responsive to recommendations made by MBA,” said Pete Mills, MBA Senior Vice President of Residential Policy and Member Engagement. “The limits on loans secured by second homes and investment properties have been particularly problematic due to the frictions they have caused in the market. The suspension of these limits should enable the GSEs to better support several important segments of the housing market.”

I found the comment by Pete Mills interesting, since the limits singlehandedly reinstated the private label MBS market, which is something that hasn’t really existed since the bubble days. The private label market is important because it takes the taxpayer off the hook for guaranteeing loans – something that has historically been a bipartisan goal. It will also increase liquidity overall in the mortgage market, which is something we should all be able to get behind as well.

Morning Report: Inflation is moderating

Vital Statistics:

S&P futures4,47513.2
Oil (WTI)71.090.65
10 year government bond yield 1.33%
30 year fixed rate mortgage 3.07%

Stocks are higher this morning after inflation data came in lower than expected. Bonds and MBS are flat.

Prices at the consumer level rose 0.3% MOM and 5.3% on a YOY basis. This monthly increase was the lowest since January. Ex-food and energy, they rose 0.1% MOM and 4% YOY. Higher energy prices have been the big driver for the index, however food has also been a big factor as well. Interestingly, owners equivalent rent (which is a function of housing prices) rose only 0.3% MOM and 2.6% YOY. While this number is an artificial construct, it should generally correlate with housing prices. According to just about every real estate index, prices are rising in the high teens percent.

Small business sentiment increased 0.4% in August, according to the NFIB Small Business Sentiment Index. “As the economy moves into the fourth quarter, small business owners are losing confidence in the strength of future business conditions,” said NFIB Chief Economist Bill Dunkelberg. “The biggest problems facing small employers right now is finding enough labor to meet their demand and for many, managing supply chain disruptions.”

Biden is expected to nominate Mike Calhoun to run FHFA. It sounds like the left is not happy with him due to his Wall Street contacts. Supposedly he is in support of the utility model for Fannie Mae and Freddie Mac.

The share of mortgages in forbearance fell 15 basis points to 3.08% last week. “The share of loans in forbearance decreased by 15 basis points last week, as forbearance exits jumped to their fastest pace since March. The fast pace of exits outweighed the slight increase in new forbearance requests and re-entries,” said Mike Fratantoni, MBA’s Senior Vice President and Chief Economist. “Servicer call volume jumped last week as summer came to an end and many borrowers reached the end of their forbearance terms. We anticipate a similarly fast pace of exits in the weeks ahead, which should lead to increased call volume and a further decline in the forbearance share.”

The housing market is beginning to cool off, according to Redfin. Redfin agents reported that 59% of all sales involved bidding wars last month. “Sellers are still pricing their homes very high, but a lot of buyers have had enough and are no longer willing to pay the huge premiums they were six months ago. Instead of 25 to 30 offers on turnkey homes, we’re now seeing five to seven,” said Nicole Dege, a Redfin real estate agent in Orlando, FL, where the bidding-war rate dropped to 57.5% in August from 78.9% in July. “Buyers are getting a bit more selective. I have one seller who recently put his four-bedroom single-family pool house on the market, but the roof was shot. He had to lower his asking price to $423,000 from $427,000 and agree to spend around $7,000 to replace the roof in order to attract bidders. Six months ago, he would have easily been able to sell that home as-is without dropping the price.”

Morning Report: GDP growth estimates falling

Vital Statistics:

S&P futures4,48128.2
Oil (WTI)70.590.95
10 year government bond yield 1.33%
30 year fixed rate mortgage 3.07%

Stocks are higher this morning as commodities continue to rally. Bonds and MBS are flat.

The upcoming week will contain some important economic data with the consumer price index, industrial production, retail sales, and consumer sentiment. We won’t have any Fed-speak this week as we are in the quiet period ahead of next week’s FOMC meeting.

Foreclosure activity picked up after the Federal Government’s foreclosure moratorium expired at the end of August. “As expected, foreclosure activity increased as the government’s foreclosure moratorium expired, but this doesn’t mean we should expect to see a flood of distressed properties coming to market,” said Rick Sharga, Executive Vice President at RealtyTrac, an ATTOM company. “We’ll continue to see foreclosure activity increase over the next three months as loans that were in default prior to the moratorium re-enter the foreclosure pipeline, and states begin to catch up on months of foreclosure filings that simply haven’t been processed during the pandemic. But it’s likely that foreclosures will remain below normal levels at least through the end of the year.”

Professional investors hoping for a 2008-style foreclosure deluge of distressed merchandise will be disappointed. Unlike 2008, hope prices are appreciating at close to a 20% clip. Very few (if any) of these properties will be underwater, and therefore will be “money good” for the lender. Given the housing shortage, there will be plenty of buyers and any foreclosure discount will be minimal.

Mortgage bankers expect profit margins to decline according to Fannie Mae’s third quarter Lender Sentiment Survey.

“Mortgage lenders appear to have adopted a more neutral posture, reporting to us via the MLSS mixed expectations for purchase and refinance mortgage demand over the next three months,” said Fannie Mae Vice President and Deputy Chief Economist Mark Palim. “In the third quarter, more lenders than not reported expectations that purchase mortgage demand will continue to grow, though the total share expecting such growth fell substantially compared to the previous quarter. Meanwhile, a plurality of mortgage lenders expects refinance activity to continue to wane from the highs of the past year and a half – even so, their outlook on likely refi volumes was improved compared to the prior quarter. Of the lenders who expect purchase mortgage demand to decrease in the coming months, high home prices and a limited supply of homes for sale were the primary reasons given – these were also among the top reasons provided by the 63% of consumers who believe it’s a ‘bad time to buy a home’, according to our latest Home Purchase Sentiment Index® result.”

“On net, mortgage lenders’ profitability outlook improved slightly from last quarter, although more lenders than not continue to expect profit margins to decline in the months ahead,” Palim continued. “The primary-secondary spread, an indicator of potential profitability, remains wider than the previous decade’s average – a positive sign for lenders – though in August it was at its narrowest since February and 53 basis points below the peak seen in August 2020. While lenders continue to overwhelmingly cite increased competition as their primary concern regarding future profitability, the share citing personnel costs for their diminished profit margin outlook increased significantly, suggesting that mortgage lenders’ ability to efficiently manage their workforces will be critical to their bottom lines as competitive pressures remain intense.”

The meta-story for 2021 was that a rapidly accelerating economy into the end of the year was going to force interest rates higher. Instead, it seems like the big second-half rebound is not materializing. According to the Atlanta Fed’s GDP Now index, growth is expected to come in at 3.7% for the quarter ending September 30. As recently as three weeks ago, the index was predicting 6% growth.

Morning Report: Big increase in wholesale prices

Vital Statistics:

S&P futures4,50118.2
Oil (WTI)69.791.65
10 year government bond yield 1.32%
30 year fixed rate mortgage 3.07%

Stocks are higher this morning on overseas strength. Bonds and MBS are up small.

Inflation at the wholesale level rose 0.7% MOM and 8.3% YOY, according to the Producer Price Index. Ex-food and energy it rose 0.6% MOM and 7.3% YOY. Foods (especially meat products) were a big contributor to the increase, as was transportation and warehousing. Building products (and lumber) pulled down the numbers. It is important to keep in mind that the annual numbers are being affected by COVID lockdowns of a year ago, so there is going to be some exaggeration in the numbers.

The 8.3% increase in prices is the highest reading going back to 2010.

The Biden Administration is going to demand that all Federal workers and contractors get vaccinated, and is going to insist that all companies with 100 or more employees require vaccination. The net result of this will probably be to exacerbate the labor shortage even more.

United Wholesale is launching an appraisal management company-free program, which will handle appraisals in-house. Not sure how their current hundred or so AMC will like this.

HUD is looking at strategies to reduce regulatory barriers to affordable housing. My guess is that their strategy will be nothing new – it will be to sue local governments to eliminate single-family zoning. “The research makes clear that there is bipartisan support for state and local reform to improve housing affordability,” said HUD Secretary Marcia Fudge. HUD and the Administration will remain hard at work to build inclusive, equitable communities through affordable housing.”

Morning Report: Job openings are at a record level

Vital Statistics:

S&P futures4,5114-2.2
Oil (WTI)68.64-0.65
10 year government bond yield 1.34%
30 year fixed rate mortgage 3.07%

Stocks are lower this morning after the European Central Bank said it would start reducing asset purchases. Bonds and MBS are flat.

Initial Jobless Claims came in at 310k which was a touch below expectations. Separately, the JOLTS report showed 10.9 million job openings, which is a record. Check out the chart below of the JOLTs data going back 20 years:

I suspect the market response to the huge number of unfilled jobs will be to increase investment in labor-saving technology. If the issue simply that expanded government benefits are driving the labor shortage, then it should reverse pretty rapidly once the extended benefits expire. If the government is keeping these expanded benefits in hopes of driving up wages, I suspect it will backfire, and any bump in wages will be temporary. The fatal flaw in that analysis is that workers don’t just compete with each other – they compete with technology which only gets better and cheaper.

Mortgage credit availability expanded last month, according to the MBA. “This expansion was heavily driven by the addition of refinance loan programs at a time when the 30-year fixed rate has been above 3% for the past month, and refinance activity has trended lower,” said Joel Kan, MBA Associate Vice President of Economic and Industry Forecasting. “Of note, jumbo credit availability increased 9% to its highest level since March 2020, as more non-QM jumbo and agency-eligible high balance loan programs were offered. In the conforming space, more lenders offered GSE refinance programs catered for lower-income borrowers to help reduce their rates and payments. There was also a slight expansion in government credit, as more investors offered streamline refinance options for FHA and VA loans.”

Mortgage applications fell 1.9% last week as purchases declined 0.2% and refis fell 3%. “Mortgage application volume fell last week to its lowest level since mid-July, as mortgage rates have stayed just above 3% for several weeks. Refinance volume has been moderating, while purchase volume continues to be lower than expected given the lack of homes on the market,” said Mike Fratantoni, MBA’s Senior Vice President and Chief Economist. “Economic data has sent mixed signals, with slower job growth but a further drop in the unemployment rate in August. We expect that further improvements will lead to a tapering of Fed MBS purchases by the end of the year, which should put some upward pressure on mortgage rates.”  

Economic growth “downshifted slightly” in August according to the latest Fed Beige Book. The decline was primarily due to decreased dining and travel, however supply chain shortages also played a part. The report discusses the labor market:

All Districts continued to report rising employment overall, though the characterization of the pace of job creation ranged from slight to strong. Demand for workers continued to strengthen, but all Districts noted extensive labor shortages that were constraining employment and, in many cases, impeding business activity. Contributing to these shortages were increased turnover, early retirements (especially in health care), childcare needs, challenges in negotiating job offers, and enhanced unemployment benefits. Some Districts noted that return-to-work schedules were pushed back due to the increase in the Delta variant. With persistent and extensive labor shortages, a number of Districts reported an acceleration in wages, and most characterized wage growth as strong—including all of the midwestern and western regions. Several Districts noted particularly brisk wage gains among lower-wage workers. Employers were reported to be using more frequent raises, bonuses, training, and flexible work arrangements to attract and retain workers.

Rapid home price appreciation has led to an increase in tappable home equity to $9.1 trillion, according to Black Knight. The average mortgage holder has $173k in tappable equity, an increase of $20,000 from the first quarter. What does this mean for originators? Debt consolidation refinances are a powerful tool for people with high interest credit card debt. Loan officers should be pitching these to their borrowers.

Morning report: Weak payroll growth

Vital Statistics:

S&P futures4,5394.2
Oil (WTI)70.240.25
10 year government bond yield 1.33%
30 year fixed rate mortgage 3.05%

Stocks are flattish after a weak jobs report. Bonds and MBS are down.

The economy added 235,000 jobs in August, which was way below the Street expectations of 740,000. It looks like the driver for the miss was leisure and hospitality, which added zero jobs in August, after adding 400k in June and July. Retail also fell, which is surprising given that we should be seeing the boost of seasonal hiring as we head into back-to-school and the holidays. Total nonfarm employment has risen by 17 million since April of 2020, however we are still about 5 million jobs below pre-pandemic levels. The two-month revision was up 134,000 which was a small positive.

The unemployment rate fell to 5.2%. The labor force participation rate was flat at 61.7% and the employment-population ratio ticked up 0.1% to 58.5%. Average hourly earnings rose 0.6% MOM and 4.3% YOY. This was again well above Street expectations, but I suspect the surprises in leisure / hospitality and retail hiring were playing a part in the numbers.

Overall, it looks like the Delta variant is depressing leisure and hospitality hiring, which makes perfect sense. It is still hard to reconcile the lack of job growth in that sector with all the “help wanted” signs out there. The labor market of the last year has been an anomaly to say the least.

The punch line is that I think we will see the Street (and the Fed) begin to take down Q3 GDP numbers, and I wouldn’t be surprised if the Fed Funds Futures begin cutting their probability estimates for a rate hike next year.

I doubt that the jobs report will affect the tapering decision, and I think the Fed will gradually begin to cut its purchases of mortgage backed securities. While MBS spreads widened significantly during the 2013 taper tantrum, I don’t think that is in the cards this time around. I think in 2013 the market expected that the Fed might sell its holdings into the market. That isn’t going to happen this time around – heck the Fed decided that even letting the portfolio run off naturally was having too big of a negative effect on the economy. So I think they will gradually reduce purchases and will almost assuredly re-invest maturing proceeds back into the market.

Where does that leave interest rates? The Fed’s projected path of inflation and interest rates was based on an assumption that economic growth would accelerate into the end of the year and through 2022. Given the economic data we have been seeing, that doesn’t seem to be materializing. If we decelerate and begin having recession fears, I suspect the 10 year yield will fall and during the next recession we will join our brethren like German and Japan in the subzero club.

The housing market is becoming slightly more favorable to buyers, as soaring prices are decreasing demand. “The housing market has clearly become slightly more favorable to buyers,” said Redfin Chief Economist Daryl Fairweather. “Homes are taking longer to sell, which gives buyers more time to make thoughtful decisions about whether to make offers. Home prices have plateaued, so buyers shouldn’t feel rushed to buy before prices rise further. And the fact that more sellers are dropping their list price is a sign that sellers have to be realistic about their price expectations.”

Morning Report: Weak jobs report

Vital Statistics:

S&P futures4,53824.2
Oil (WTI)70.141.65
10 year government bond yield 1.29%
30 year fixed rate mortgage 3.05%

Stocks are higher this morning as the Street rows to work. Bonds and MBS are flat.

Initial Jobless Claims came in at 340k last week. This is still elevated compared to historical levels and has seemed to be the new normal post-COVID. Separately, there were 15,723 announced job cuts last month according to outplacement firm Challenger, Gray and Christmas.

The economy created 374,000 jobs in August, according to the ADP Jobs Report. The Street was looking for 600,000 jobs, so this was a pretty big miss. The consensus estimate for tomorrow’s jobs report is 740,000. It does look like the big acceleration in job growth has petered out.

Manufacturing is expanding in the US, according to the ISM Manufacturing Report. New Orders and Production drove the increase, and it looks like pricing pressures are abating.  “Business Survey Committee panelists reported that their companies and suppliers continue to struggle at unprecedented levels to meet increasing demand. All segments of the manufacturing economy are impacted by record-long raw-materials lead times, continued shortages of critical basic materials, rising commodities prices and difficulties in transporting products. The new surges of COVID-19 are adding to pandemic-related issues — worker absenteeism, short-term shutdowns due to parts shortages, difficulties in filling open positions and overseas supply chain problems — that continue to limit manufacturing-growth potential.”

Productivity in the second quarter was revised downward to 2.1%, while unit labor costs increased to 1.3%.

Mortgage Applications fell by 2.4% last week as purchases increased 1% and refis fell 4%. “Despite low rates, refinance applications declined, with some borrowers still waiting for rates to drop even lower,” said Joel Kan, MBA Associate Vice President of Economic and Industry Forecasting. “Recent uncertainty around the economy and pandemic have kept rates low over the past month, which is why the refinance index has oscillated around these levels.”

New York State is going to extend the eviction moratorium until January 15.

Morning Report: Home Price Appreciation still strong

Vital Statistics:

S&P futures4,520-4.2
Oil (WTI)68.44-0.85
10 year government bond yield 1.29%
30 year fixed rate mortgage 3.05%

Stocks are lower this morning on no real news. Bonds and MBS are up small.

Home prices rose 1.6% MOM and 17.4% YOY, according to the FHFA House Price Index. We saw torrid price appreciation in several MSAs including Boise, Austin, and Salt Lake City. As we saw from the latest FOMC minutes, the Fed is focusing on home price appreciation and how its MBS purchases affect it. Separately, the Case-Shiller Home Price Index rose 2.2% MOM and 18.6% YOY.

Home Price appreciation is driving up asking rents for single family homes. They are up 13% YOY for SFR, while up only 8.3% for apartments. We have seen all sorts of institutional money flood into the SFR space over the past year, as high cap rates and home price appreciation create returns that are hard to replicate elsewhere. While eviction moratoriums have been an issue, many investors are targeting higher-income renters who have been less affected by COVID job losses.

The share of loans in forbearance was unchanged last week at 3.25% or about 1.6 million homeowners. “The share of loans in forbearance changed little once again this week, as both new requests and exits remained at a slow pace,” said Mike Fratantoni, MBA Senior Vice President and Chief Economist. “We expect a sharp increase in forbearance exits over the next month as many borrowers reach the 18-month mark and see their forbearance plans end. For those borrowers who have exited in August, the majority either enter deferral plans or obtain modifications.”

While the Federal Government’s eviction ban was shot down by SCOTUS, several states still have eviction moratoriums in place, including California, New Jersey, and DC.

Latest from Fannie Mae regarding homeowners affected by Hurricane Ida. “We urge everyone in the path of the storm to focus on their safety,” said Cyndi Danko, Vice President, Single-Family Risk Management, Fannie Mae. “Fannie Mae is committed to ensuring assistance is available to homeowners and renters in need and we encourage residents impacted by this storm to seek assistance as soon as possible.”  

Consumer confidence slipped in July, according to the Conference Board. While the employment situation remains strong, consumers were less optimistic about present and future business conditions.

Morning Report: Powell soothes the markets

Vital Statistics:

S&P futures4,5116.2
Oil (WTI)68.940.35
10 year government bond yield 1.31%
30 year fixed rate mortgage 3.07%

Stocks are higher this morning after Jerome Powell’s speech on Friday contained no negative surprises for the markets. Bonds and MBS are up.

The big takeaway from Powell’s speech on Friday is that tapering (or the reduction of asset purchases) is on the horizon, but rate hikes are not.

We have said that we would continue our asset purchases at the current pace until we see substantial further progress toward our maximum employment and price stability goals, measured since last December, when we first articulated this guidance. My view is that the “substantial further progress” test has been met for inflation. There has also been clear progress toward maximum employment. At the FOMC’s recent July meeting, I was of the view, as were most participants, that if the economy evolved broadly as anticipated, it could be appropriate to start reducing the pace of asset purchases this year. The intervening month has brought more progress in the form of a strong employment report for July, but also the further spread of the Delta variant. We will be carefully assessing incoming data and the evolving risks. Even after our asset purchases end, our elevated holdings of longer-term securities will continue to support accommodative financial conditions.

The timing and pace of the coming reduction in asset purchases will not be intended to carry a direct signal regarding the timing of interest rate liftoff, for which we have articulated a different and substantially more stringent test. We have said that we will continue to hold the target range for the federal funds rate at its current level until the economy reaches conditions consistent with maximum employment, and inflation has reached 2 percent and is on track to moderately exceed 2 percent for some time. We have much ground to cover to reach maximum employment, and time will tell whether we have reached 2 percent inflation on a sustainable basis.

Interestingly, MBS spreads remain surprisingly tight given that language. During the 2013 “taper tantrum” MBS spreads widened to 150 basis points as mortgage rates rose 120 bps ahead of the first reduction. I think we are sitting around 70-ish. I am not sure what that implies, however my guess is that in 2013, the markets were anticipating that the Fed could actually sell its portfolio into the market. They never did that, and couldn’t even go as far as to let prepayments do the job. This time around, sales are probably off the table, and the Fed will probably re-invest maturing proceeds from MBS as well, so the anticipated future shock is much l0wer. That is probably the reason why MBS investors are sanguine this time around.

The Fed Funds futures bumped up the probability of no change in rates in 2022 from 39% to 48% on Powell’s speech. Here is the latest handicapping in the markets:

The trend is looking dovish. Note the Atlanta Fed’s GDP Now index is turning down sharply as well. The index is much more bearish than the Street right now.

The upcoming week will have a lot of data, with home prices on Tuesday, ISM on Wednesday and Friday and the jobs report on Friday. The Street is looking for 740,000 jobs to have been created in August.

The Biden Administration’s end-around extension of the eviction moratorium was shot down by SCOTUS last week, so the issue goes back to Congress. It doesn’t look like Congress has the votes to pass legislation on it, so we are at the posturing and finger-pointing stage.

Pending home sales fell in July, according to NAR.

“The market may be starting to cool slightly, but at the moment there is not enough supply to match the demand from would-be buyers,” said Lawrence Yun, NAR’s chief economist. “That said, inventory is slowly increasing and home shoppers should begin to see more options in the coming months. Homes listed for sale are still garnering great interest, but the multiple, frenzied offers – sometimes double-digit bids on one property – have dissipated in most regions,” Yun said. “Even in a somewhat calmer market, a number of potential buyers are still choosing to waive appraisals and inspections.”