What inflation and a potential Fannie and Freddie IPO could mean for brokers.

Initiated by the COVID-19 pandemic, the golden era of take-out may be coming to an end. Same-store sales have been down for multiple quarters at fast-casual staples like Chipotle, CAVA, and Sweetgreen. Does this mean American consumers are finally starting to cut back on spending in a meaningful way?

The inflation conversation continued last week with the release of both the Consumer Price Index (CPI) and Producer Price Index (PPI).

Headline inflation is running at 2.7% year over year, but prices for core items (everything except food and energy) are up 3.1%. That means the drops in volatile items like gas and groceries are masking the underlying persistent inflation of most goods and services.

Some bad news for those hoping for rate cuts: Higher wholesale prices suggest inflation is sticking around, with PPI running at 3.3% over the past year, well above economists’ expectations of 2.5%.

Since the PPI is typically a leading indicator for CPI, this jump casts doubt on the idea that tariffs won’t raise prices. At the same time, with employment showing signs of weakness, the rate cuts that would normally be employed by the Fed get tougher to justify, as nobody wants hyperinflation.

While the Fed has worked to engineer a soft landing for the economy and stave off stagflation (stagnating economy with increased inflation), the threat seems to be rearing its ugly head again.

For many of us, our very first email address ended with “@aol.com,” back when using the internet could cause our parents to miss an important phone call.

However, according to the Census Bureau, as of 2023, 163,401 American households were still using dial-up to check their mail.

But all good things must end – on September 30, AOL is pulling the plug on dial up, closing the final chapter on that unmistakable 90s internet nostalgia.

In major news, President Trump announced that he is considering an initial public offering for the government-sponsored Fannie Mae and Freddie Mac later this year. Combined, the companies are estimated to be valued at $500B. The IPO may involve raising $30B while selling anywhere between 5% – 15% of the companies’ shares.

Over the weekend, President Trump posted an image on Truth Social containing a potential logo for “The Great American Mortgage Corporation”. This image was accompanied by the caption: “November 2025,” alluding to a potential launch date for this new enterprise.

William J. Pulte, the Chairman of both Fannie Mae and Freddie Mac, followed with a social media post of his own seemingly voicing support for the initiative. That being said, there have been no announcements made regarding whether the companies will be merged or viewed as separate entities.

Industry leaders and experts are already beginning to take sides and speak on the potential impact.

Hedge fund manager Bill Ackman believes a merger could allow the companies to streamline current processes, creating savings that could be passed on to consumers via reduced mortgage rates. Merging into one institution could also have an impact on government costs, as FHFA oversight would only be required for the one institution rather than two.

While some have voiced their support, others have spoken up in opposition to the potential move. Contrasting the views held by Ackman, a group of 14 U.S. senators penned a letter to Pulte voicing their concerns around the potential IPO. Their belief is that a colossal move like this could negatively disrupt the mortgage industry, citing a lack of Congressional consultation and approval as a major hurdle.

Ultimately, this is a change that could heavily transform the way our mortgage industry operates. Time will tell whether this big idea becomes our new reality.

·       August 23 – 25: NGUAS, Milwaukee, WI

·       September 2 – 5: Elevate Leadership Conference, Dallas, TX

·       September 4: Texas Mortgage Roundup, Richardson, TX

·       September 15 – 16: Arizona Association of Mortgage Professionals Expo, Phoenix, AZ