Mortgage Rates (1 Viewer)

[DevilDog919]

I got 6.75 VA loan in July. Did not buy down because I assumed rates would drop before I got value with the buy down. I would like to try and time it to where I get at or near the bottom of what will be the new normal. Where do you see that being? 4%?

 

[Chadstroma]

I got 6.75 VA loan in July. Did not buy down because I assumed rates would drop before I got value with the buy down. I would like to try and time it to where I get at or near the bottom of what will be the new normal. Where do you see that being? 4%?

That is a hard game to play.

If you told me that I would have refinanced my 3.25% mortgage anytime before 2019.... I would have laughed at you and then went on to explain how ridiculously low that rate was and we haven't seen anything like before... likely not again ever.... blah blah blah I am so smart blah blah blah and I then refinanced. The point being... who knows what rates will do. I don't. The further out the harder it is to guess. And the best guesses, including mine, can be way off. I usually hit more than miss but still, it is a gamble.

I don't think there is a normal let alone a new normal. I am not a fan of that phrase when I see it because the reality is that there are so many factors that play into what cost loans are that they will go up and down and all around.

Overall, the big decision on refinancing is will I save money before I plan on paying off the loan? If you think that rates will go down further then you can always hedge your bets by taking a higher rate than what you would normally get, take lender credits to cover the costs and then any change in rate is savings and if rates go down further, you can refi again.

With a VA loan, the IRRRL is a beautiful thing. It is much easier, faster and less costly loan than the purchase. As long as you are 210 days out from the loan and have made all your payments on time... you can refi it. You are prob about 2 months or so away from that 210 days. You can sign up for this https://usafe.finlocker.com/pfm/registration/invite?key=b29d7f89-f596-42b1-9b51-9cf2fd2a4339 which is a financial app my company provides with bank level security and your info is never shared or sold. There are two sides to it, USafe which has features like Credit Karma, Mint, etc have but more and then the HomeScout side which is provides information on your home such as value and can help you keep an eye on when it makes sense to refinance. Once you hit that 210 mark (actually a tad before) you can reach out and we can walk through to figure out if it makes sense to refi or not for you.

 

[Chadstroma]

10 year treasury yield below 4% (lowest since July)
I have been getting intraday rate improvement notifications from our lenders all day today.

 

[Chadstroma]

The Tide Turns for Renters as Asking Rents Post Biggest Decline in Over 3 Years

The median asking rent fell 2% year over year in November—the biggest decline since 2020—as landlords grappled with rising vacancies.

www.redfin.com

 

[-OZ-]

Will mortgage rates ever fall to 3% again?

Could a 3% mortgage rate come back soon? Here's what homebuyers should know now.

www.cbsnews.com

Maybe? But not soon.

I do like seeing that I apparently qualify for a 5.73% mortgage. Not bad. We’re not buying any time soon but hopefully that’s indicative of better rates in the future.

 

[stbugs]

10 year treasury yield below 4% (lowest since July)
I have been getting intraday rate improvement notifications from our lenders all day today.

I have that other guy on ignore but I guess rates have come down but shame on you for suggesting they might come down as they have.

 

[stbugs]

I will be looking to move to our semi-retirement lake lot in a few years so definitely hoping for some nice improvement by then. Main hope is that current equity covers everything but if it gets down low enough, might be worth a 30 year lock in and keep some of the equity to invest. It’s going to be hard to leave the 2.375% current rate but we’ll have to at some point.

 

[Chadstroma]

I will be looking to move to our semi-retirement lake lot in a few years so definitely hoping for some nice improvement by then. Main hope is that current equity covers everything but if it gets down low enough, might be worth a 30 year lock in and keep some of the equity to invest. It’s going to be hard to leave the 2.375% current rate but we’ll have to at some point.

Pretty much the same for everyone except the semi-retirement and lake lot parts.... as rates come down that loosens things a bit. No one wants to give up a 2.375% for anything higher but it is an any decision when the rates was 7-8% and then it gets harder to make as that number comes down. The lower the mortgage rates, the more I inventory and buyers to enter the market.

 

[Chadstroma]

10 year treasury yield below 4% (lowest since July)
I have been getting intraday rate improvement notifications from our lenders all day today.

I have that other guy on ignore but I guess rates have come down but shame on you for suggesting they might come down as they have.

Markets have loved the Fed indicating 3 rates cuts for 2024 and most experts are saying they expect 4-6. Though the Fed Funds rate doesn't directly impact rates, it does have an influence and those rate cuts will help push mortgage rates down.

 

[Stoneworker]

It is being widely reported that the bond markets have gotten way too far ahead of the Fed re: potential rate cuts. CNBC reported the market has currently priced in 150 bps in 2024 vs. the Fed's dot plot of 75 bps. Rates will back up if Fed actions fall short of mkt expectations (all else equal).

The chorus of Federal Reserve officials who say interest rates will remain higher for longer than investors believe is getting louder.

The presidents of the Chicago and Cleveland regional Fed banks on Monday said Wall Street should not count on interest rates being reduced anytime soon.

Cleveland Fed boss Loretta Mester, in an interview with the Financial Times, said markets "got a little bit ahead" of the Fed on when to expect rate cuts.

The cacophony of comments by other senior Fed officials indicates they hope to readjust the expectations of investors.

While inflation has come down quite a bit, the large service side of the economy continues to suffer from elevated prices, including rents, transportation and recreation. Medical costs are also rising again.

That's why Fed officials are trying to warn markets off.

Morningstar - Interest rate cuts coming soon? Bah humbug says Fed officials

 

[Chadstroma]

Mortgage rates could fall below 5% next year, emboldening US consumers and allowing banks to 're-liquify,' Fundstrat's Tom Lee says​

Story by jsor@insider.com (Jennifer Sor)

• Mortgage rates could fall as low as 4.75% next year, according to Fundstrat's Tom Lee.
• Lower rates could be a positive for consumers and "re-liquify" banks, he told CNBC.
• Markets are expecting the Fed to cut interest rates next year, which could lower home borrowing costs.

Mortgage rates could fall more than 200 basis points next year as the Federal Reserve slashes borrowing costs, boosting US consumers and banks, according to Fundstrat's head of research Tom Lee.

In an interview with CNBC on Wednesday, Lee predicted mortgage rates could fall to around 4.75%-5.2% next year. The 30-year fixed rate is currently around 6.95%, according to Freddie Mac data, down from a high of around 8% in October.

"That 200-basis-point drop in mortgage rates we know would stimulate the consumer and re-liquify regional bank balance sheets, which is an earning story too," he added, noting that would be a normal spread compared to the current 10-year yield.

Markets are eagerly anticipating the Fed to slash interest rates sometime next year, and rate cut expectations have already started to lower borrowing costs across the economy.

The 10-year Treasury yield has tumbled below 3.9% after hitting 5% two months ago, bringing down mortgage rates and other borrowing costs.

Most real estate experts only see a slight dip in mortgage rates next year. Redfin, for instance, is forecasting mortgage rates to hover around 6.6% by the end of 2024.

Still, falling rates are likely to jump start home sales activity, real estate economists say, after high rates sidelined prospective home buyers from the market for most of the past year. And that could end up being a boon for lenders and corporate earnings overall, Lee said.

Meanwhile, banks have been under pressure from the Fed's aggressive tightening cycle. In fact, a new working paper from researchers at USC, Columbia, Stanford, and Northwestern estimated that commercial real estate sector is at risk of seeing its biggest crash since 2008, and that could slam US banks with up to $160 billion in losses.

 

[Chadstroma]

One thing I am watching is how strong and effective the Biden administration moves to shut down the Houthis harassing shipping going through the Red Sea. 10% of the world's global trade goes through those waters. Several large shipping companies have decides to go around instead of through. This does a few things but directly impacting rates is that those goods will end up being more expensive as it will take more time and money to transport them the long way around. That cost will be passed on to consumers and could end up being a not insignificant inflationary pressure which would then push rates back up. This will also go to destabilize Egypt as something like a quarter of it's economy is based on the transit fees that it gains from the Suez Canal. At current levels, I don't think it ends up being that much of a factor as well as it seems we and allied nations have been moving for assets into the region to combat this. I hope the administration will stop playing defense and go on the offense to put the pressure on the Houthis to stop.

 

[Chadstroma]

Fed’s favorite inflation gauge shows prices rose at 3.2% annual rate in November, less than expected​

PUBLISHED FRI, DEC 22 2023 8:31 AM EST UPDATED 2 HOURS AGO
Jeff Cox

KEY POINTS

• The core personal consumption expenditures price index rose just 0.1% in November and was up 3.2% from a year ago, both close to expectations.
• On a six-month basis, core PCE was up 1.9%, below the Fed’s 12-month target.
• Including food and energy costs, so-called headline PCE actually fell 0.1% on the month and was up just 2.6% from a year ago.

A gauge the Federal Reserve uses for inflation rose slightly in November and edged closer to the central bank’s goal.

The core personal consumption expenditures price index, which excludes volatile food and energy prices, increased 0.1% for the month, and was up 3.2% from a year ago, the Commerce Department reported Friday.

Economists surveyed by Dow Jones had been expecting respective rises of 0.1% and 3.3%.

On a six-month basis, core PCE increased 1.9%, indicating that if current trends continue the Fed essentially has reached its goal.

“Adding in the further sharp slowdown in rent inflation still in the pipeline, it’s hard to see any credible reason why the annual inflation rate won’t also return to the 2% target over the coming months,” wrote Andrew Hunter, deputy chief U.S. economist at Capital Economics.

Markets reacted little to the report, with Wall Street set for a mixed open Friday in its last session before the Christmas holiday.

Elsewhere in the report, consumer expenditures in November climbed 0.3% while income rose 0.4%, numbers that were in line with expectations and indicative that spending was continuing apace despite ongoing inflation pressures.

Including food and energy costs, so-called headline PCE actually fell 0.1% on the month and was up just 2.6% from a year ago, after peaking above 7% in mid-2022. That was the first monthly decline since April 2020, according to Fed data.

The 12-month numbers are significant in that both show inflation making continued progress toward the Fed’s 2% target.

“The Federal Open Market Committee is not yet ready to declare victory on inflation, but the outlook is much better than it was just a few months ago,” wrote Gus Faucher, chief economist at PNC Financial Services. “The slowing in core inflation opens the door for fed funds rate cuts in 2024; the timing will depend on core PCE numbers over the next few months.”

The Fed prefers PCE as an inflation measure over the more widely followed CPI as the former focuses more on what consumers actually spend rather than the latter’s measure of what goods and services cost. Though policymakers watch both measures, they are more concerned with core prices as a longer-run inflation gauge.

November’s report reflected a shift in consumer appetite, as prices for services increased 0.2% while goods slumped 0.7%. A 2.7% slide in energy prices and a 0.1% decrease in food helped hold back inflation for the month.

Much of the market’s focus lately has been on the Fed’s inflation view and what that will mean for interest rates.

For each of its last three meetings, the Federal Open Market Committee has held the line, keeping its benchmark overnight borrowing rate targeted between 5.25%-5.5%. At its meeting last week, the committee indicated it is done raising rates and expects to implement cuts totaling 0.75 percentage point in 2024. Markets expect the first rate reduction to happen in March.

 

[Chadstroma]

Rent growth to slow further in 2024 as more inventory arrives.
(HousingWire by Sarah Marx). Housing experts expect that a boost in apartment inventory in 2024 will dampen rent growth. However, affordability woes will persist.

Commercial property firm CBRE estimates that rent prices will only grow 1.2% this year, bringing the vacancy rate above the pre-pandemic level, the Wall Street Journal reported. However, the occupancy rate will remain above 94%, according to CBRE's U.S. Real Estate Market Outlook 2024.

About 900,000 units are currently under construction, and 440,000 new units are expected to be completed in 2024, according to the report. Construction completions have already peaked in Chicago, Washington, D.C. and Las Vegas. In 2024, Austin, Dallas, Nashville and Atlanta will add the most units to their markets.

Overall, 2023 saw the largest number of apartments under construction ever recorded since 1973, according to Robert Dietz, the chief economist of the National Association of Homebuilders.

 

[massraider]

Canadian household debt (Oct. 2023):
Surpassed GDP
Highest % among G7 nations

In the past decade (2013-2023):
Household debt surged from $1.79T to $2.90T (62%)
Main driver: Mortgage debt soared from $1.18T to 2.16T (82%)

https://twitter.com/HanifBayat/status/1744506623131844742?t=SYCEwndDbbulLN-1a5dSRQ&s=19

 

[Chadstroma]

Canadian household debt (Oct. 2023):
Surpassed GDP
Highest % among G7 nations

In the past decade (2013-2023):
Household debt surged from $1.79T to $2.90T (62%)
Main driver: Mortgage debt soared from $1.18T to 2.16T (82%)

https://twitter.com/HanifBayat/status/1744506623131844742?t=SYCEwndDbbulLN-1a5dSRQ&s=19

I saw something yesterday about the largest annual increase in consumer debt with the US. This isn't what I saw but it touches on it https://www.msn.com/en-us/money/per...s-on-jump-in-credit-card-balances/ar-AA1mECMi

 

[Chadstroma]

I mentioned this before.... the US needs to act more decisively to end the Houthi annoyance as if they do not, it will have a real and strong influence on the economy and inflation thus mortgage rates. The current second joint strike with the UK does not seem to me to be enough to instill confidence again in the shipping lanes.

The heads of two international banking groups at the World Economic Forum in Davos also privately warned that the ongoing crisis could result in dire inflationary pressures that could reverse interest rate cuts and otherwise jeopardize the US economy.

 

[Chadstroma]

Inflation numbers out earlier this week higher than expected and spooked the markets pushing rates up a bit.

 

[Chadstroma]

Americans are paying nearly as much interest on credit cards and other debt as they are on their mortgages.
(Business Insider International by Joe Raedle). Non-mortgage interest payments have jumped. Americans are paying almost as much interest on credit cards and other debt as they are on mortgages.
Nearly equal debt service costs haven't been seen in any of the data stretching back to the 70s. Homeowners have locked in low rates, but other debt has become more costly as interest rates rise.
New data reveals that Americans are spending nearly as much on interest payments for credit cards and other kinds of consumer debt as they are on mortgage interest.

According to the US Bureau of Economic Analysis, non-mortgage interest payments soared to a record $573.4 billion annually in January, narrowly trailing the $578.3 billion spent on mortgage interest in the fourth quarter of last year. Other debt costs may be rising, but mortgage debt is still most Americans' largest financial obligation.

The average American debt load hit $104,215 in the fourth quarter of 2023, fueled by $12.25 trillion in mortgage debt. That amount far surpasses other types, including credit card debt, which stood at $1.13 trillion at the end of last year.

 

[matttyl]

@Chadstroma

I heard a stat (or maybe misheard a stat) on some financial podcast the other day, which blew my mind. Something like 95% of homeowners with a mortgage today have a rate lower than current rates. I mean I knew the number would be high, but that seems exorbitantly high.

 

[Runkle]

@Chadstroma

I heard a stat (or maybe misheard a stat) on some financial podcast the other day, which blew my mind. Something like 95% of homeowners with a mortgage today have a rate lower than current rates. I mean I knew the number would be high, but that seems exorbitantly high.

Makes sense, rates haven't been this high in like 17 years, so the 5% have old mortgages that never refinanced or brand new ones.

 

[ghostguy123]

@Chadstroma

I heard a stat (or maybe misheard a stat) on some financial podcast the other day, which blew my mind. Something like 95% of homeowners with a mortgage today have a rate lower than current rates. I mean I knew the number would be high, but that seems exorbitantly high.

Seems like that is also what is causing lower inventory and higher prices.

 

[BeTheMatch]

So much for rates coming down

 

[Chadstroma]

@Chadstroma

I heard a stat (or maybe misheard a stat) on some financial podcast the other day, which blew my mind. Something like 95% of homeowners with a mortgage today have a rate lower than current rates. I mean I knew the number would be high, but that seems exorbitantly high.

I have seen data over the last few years that would touch on this and though I have fuzzy on the details I would say it probably is around that, give or take.

To get to a rate environment which was higher/equal you have to go back to basically 2000 so that is 23 years worth of loans.... not many loans go the full 30 years, in fact, That vast majority of 30 year fixed loans don't go past 7 years in general.

 

[Chadstroma]

@Chadstroma

I heard a stat (or maybe misheard a stat) on some financial podcast the other day, which blew my mind. Something like 95% of homeowners with a mortgage today have a rate lower than current rates. I mean I knew the number would be high, but that seems exorbitantly high.

Seems like that is also what is causing lower inventory and higher prices.

Absolutely impacting inventory. 100%
Inventory impacts values.

 

[The Z Machine]

@Chadstroma

I heard a stat (or maybe misheard a stat) on some financial podcast the other day, which blew my mind. Something like 95% of homeowners with a mortgage today have a rate lower than current rates. I mean I knew the number would be high, but that seems exorbitantly high.

Seems like that is also what is causing lower inventory and higher prices.

Absolutely impacting inventory. 100%
Inventory impacts values.

True, but the opposite effect of pent up demand and bidding wars may come back if rates fall and inventory goes up. Balancing act and all, but right now the market is at such low volume that it's frozen.

 

[Chadstroma]

@Chadstroma

I heard a stat (or maybe misheard a stat) on some financial podcast the other day, which blew my mind. Something like 95% of homeowners with a mortgage today have a rate lower than current rates. I mean I knew the number would be high, but that seems exorbitantly high.

Seems like that is also what is causing lower inventory and higher prices.

Absolutely impacting inventory. 100%
Inventory impacts values.

True, but the opposite effect of pent up demand and bidding wars may come back if rates fall and inventory goes up. Balancing act and all, but right now the market is at such low volume that it's frozen.

NAR says for every full percentage rates drop 3 million buyers enter the market.

This is why I don't see any significant property value drops anytime soon.

Up and up.

 

[Chadstroma]

So much for rates coming down

They have.
Still expecting them to come down more.

 

[Stoneworker]

The NAR theory that lower mortgage rates drives increased demand (i.e. 3 million more buyers entering market) has not proven out in the real world.

Mortgage rates, home prices and supply all decreased from 11/23 to 1/24. Therefore demand also decreased during that period.

- 30-yr mortgage rate decreased approx 1 percentage point from 7.7% to 6.6% (1)

- Existing Home Inventory (i.e. supply) decreased from 1.13 million units to 1.0 million units (2)

- Existing median home price decreased from $387,300 to $379,100 (3)

(1) Federal Reserve Database - 30-yr Fixed Mortgage Rates

(2) Federal Reserve Database - Existing Home Inventory

(3) YCharts - Existing Median Home Sales Price (from NAR)

 

[The Z Machine]

Mortgage rates are gonna have to drop to the 4s in order to put more supply into the market. Too many people don't want to leave their cheap rates even if they might want to change house (upgrade, downsize, move for schools, etc.)

 

[STEADYMOBBIN 22]

Mortgage rates are gonna have to drop to the 4s in order to put more supply into the market. Too many people don't want to leave their cheap rates even if they might want to change house (upgrade, downsize, move for schools, etc.)

We would consider moving but it would be financial malpractice to do so.

 

[Chadstroma]

The NAR theory that lower mortgage rates drives increased demand (i.e. 3 million more buyers entering market) has not proven out in the real world.

Mortgage rates, home prices and supply all decreased from 11/23 to 1/24. Therefore demand also decreased during that period.

- 30-yr mortgage rate decreased approx 1 percentage point from 7.7% to 6.6% (1)

- Existing Home Inventory (i.e. supply) decreased from 1.13 million units to 1.0 million units (2)

- Existing median home price decreased from $387,300 to $379,100 (3)

(1) Federal Reserve Database - 30-yr Fixed Mortgage Rates

(2) Federal Reserve Database - Existing Home Inventory

(3) YCharts - Existing Median Home Sales Price (from NAR)

I am not going to defend NAR's numbers, I have no idea if that number is accurate or not. But what I can say as someone who lives this on a daily basis, you picked the most ridiculous time period which is the slowest in RE. I know many RE agents who take all their vacations during this period because this is the best time to do so because very few people are looking to put their homes up for sale during the winter and even more so during the holidays. Likewise, not many people are motivated to look and buy a home during this period of time.

I can further say, without a single ounce of doubt, that yes, lower rates do increase demand. They will, also increase supply. Not only is this something that I have witnesses and studied for the last couple of decades but I can see it NOW in real life personally, through my company and in the industry in general.

 

[Chadstroma]

Mortgage rates are gonna have to drop to the 4s in order to put more supply into the market. Too many people don't want to leave their cheap rates even if they might want to change house (upgrade, downsize, move for schools, etc.)

I don't think 4 is the magic number really. I think it is on a more sliding scale. I absolutely agree that people don't want to give up their 3% mortgage to buy with a 7% mortgage with they have the optionality to make that choice. Hence, a major factor of why supply is so low currently. The calculus will be different for different people but as the rates lower then the decision becomes harder and harder to make. Also, time plays a role too... as the clock ticks, the optionality may become not longer an option (think a family of 4 living in a 2 bedroom condo with a 5th kid on the way... it was workable with two kids but a third is going to make it very hard and put pressure on them to make that choice to buy for a larger home) or at least increases the pressure to do something now versus before. (think parents with a 1 year old who want to move to a better school district but didn't because the kid wasn't in school.... a few years later, the kid is about to enter school and they either have to stay with the school district they are in or finally make that move).

 

[Stoneworker]

The NAR theory that lower mortgage rates drives increased demand (i.e. 3 million more buyers entering market) has not proven out in the real world.

Mortgage rates, home prices and supply all decreased from 11/23 to 1/24. Therefore demand also decreased during that period.

- 30-yr mortgage rate decreased approx 1 percentage point from 7.7% to 6.6% (1)

- Existing Home Inventory (i.e. supply) decreased from 1.13 million units to 1.0 million units (2)

- Existing median home price decreased from $387,300 to $379,100 (3)

(1) Federal Reserve Database - 30-yr Fixed Mortgage Rates

(2) Federal Reserve Database - Existing Home Inventory

(3) YCharts - Existing Median Home Sales Price (from NAR)

I am not going to defend NAR's numbers, I have no idea if that number is accurate or not. But what I can say as someone who lives this on a daily basis, you picked the most ridiculous time period which is the slowest in RE. I know many RE agents who take all their vacations during this period because this is the best time to do so because very few people are looking to put their homes up for sale during the winter and even more so during the holidays. Likewise, not many people are motivated to look and buy a home during this period of time.

I can further say, without a single ounce of doubt, that yes, lower rates do increase demand. They will, also increase supply. Not only is this something that I have witnesses and studied for the last couple of decades but I can see it NOW in real life personally, through my company and in the industry in general.

I didn't cherry pick anything. Those are just actual numbers chosen to begin when interest rates started declining. I'm sorry you can't explain why the theory doesn't match the reality.

A lowering of interest rates should have been an impetus for bringing marginal buyers off the sidelines. And with a decreased supply that marginal increased demand should have driven up home prices. That didn't happen, in fact the opposite happened.

Maybe the dynamics will change going forward.

But something else was going on driving down demand in the first three months of lower interest rates to counteract that (supposedly) positive stimulus.

 

[Chadstroma]

The NAR theory that lower mortgage rates drives increased demand (i.e. 3 million more buyers entering market) has not proven out in the real world.

Mortgage rates, home prices and supply all decreased from 11/23 to 1/24. Therefore demand also decreased during that period.

- 30-yr mortgage rate decreased approx 1 percentage point from 7.7% to 6.6% (1)

- Existing Home Inventory (i.e. supply) decreased from 1.13 million units to 1.0 million units (2)

- Existing median home price decreased from $387,300 to $379,100 (3)

(1) Federal Reserve Database - 30-yr Fixed Mortgage Rates

(2) Federal Reserve Database - Existing Home Inventory

(3) YCharts - Existing Median Home Sales Price (from NAR)

I am not going to defend NAR's numbers, I have no idea if that number is accurate or not. But what I can say as someone who lives this on a daily basis, you picked the most ridiculous time period which is the slowest in RE. I know many RE agents who take all their vacations during this period because this is the best time to do so because very few people are looking to put their homes up for sale during the winter and even more so during the holidays. Likewise, not many people are motivated to look and buy a home during this period of time.

I can further say, without a single ounce of doubt, that yes, lower rates do increase demand. They will, also increase supply. Not only is this something that I have witnesses and studied for the last couple of decades but I can see it NOW in real life personally, through my company and in the industry in general.

I didn't cherry pick anything. Those are just actual numbers chosen to begin when interest rates started declining. I'm sorry you can't explain why the theory doesn't match the reality.

A lowering of interest rates should have been an impetus for bringing marginal buyers off the sidelines. And with a decreased supply that marginal increased demand should have driven up home prices. That didn't happen, in fact the opposite happened.

Maybe the dynamics will change going forward.

But something else was going on driving down demand in the first three months of lower interest rates to counteract that (supposedly) positive stimulus.

I already explained why in my response but yet again you come back with a condescending tone in replies though this is seemingly an example of which on your best behavior. Disagreeing with me is one thing that I am fine with. Ignoring what I responded with and in a way that is dismissive and arrogant is just tiresome. You have already made it clear what you think of my profession and have taken tons of personal shots at me. I am done. I am really going to just ignore you from now on. You bring no value to an adult conversation.

 

[Stoneworker]

The NAR theory that lower mortgage rates drives increased demand (i.e. 3 million more buyers entering market) has not proven out in the real world.

Mortgage rates, home prices and supply all decreased from 11/23 to 1/24. Therefore demand also decreased during that period.

- 30-yr mortgage rate decreased approx 1 percentage point from 7.7% to 6.6% (1)

- Existing Home Inventory (i.e. supply) decreased from 1.13 million units to 1.0 million units (2)

- Existing median home price decreased from $387,300 to $379,100 (3)

(1) Federal Reserve Database - 30-yr Fixed Mortgage Rates

(2) Federal Reserve Database - Existing Home Inventory

(3) YCharts - Existing Median Home Sales Price (from NAR)

I am not going to defend NAR's numbers, I have no idea if that number is accurate or not. But what I can say as someone who lives this on a daily basis, you picked the most ridiculous time period which is the slowest in RE. I know many RE agents who take all their vacations during this period because this is the best time to do so because very few people are looking to put their homes up for sale during the winter and even more so during the holidays. Likewise, not many people are motivated to look and buy a home during this period of time.

I can further say, without a single ounce of doubt, that yes, lower rates do increase demand. They will, also increase supply. Not only is this something that I have witnesses and studied for the last couple of decades but I can see it NOW in real life personally, through my company and in the industry in general.

I didn't cherry pick anything. Those are just actual numbers chosen to begin when interest rates started declining. I'm sorry you can't explain why the theory doesn't match the reality.

A lowering of interest rates should have been an impetus for bringing marginal buyers off the sidelines. And with a decreased supply that marginal increased demand should have driven up home prices. That didn't happen, in fact the opposite happened.

Maybe the dynamics will change going forward.

But something else was going on driving down demand in the first three months of lower interest rates to counteract that (supposedly) positive stimulus.

I already explained why in my response but yet again you come back with a condescending tone in replies though this is seemingly an example of which on your best behavior. Disagreeing with me is one thing that I am fine with. Ignoring what I responded with and in a way that is dismissive and arrogant is just tiresome. You have already made it clear what you think of my profession and have taken tons of personal shots at me. I am done. I am really going to just ignore you from now on. You bring no value to an adult conversation.

All you did was offer up some lame version of "seasonality" (vacations and such). That doesn't explain anything. Every year there is seasonality so that is a constant.

 

[Chadstroma]

The NAR theory that lower mortgage rates drives increased demand (i.e. 3 million more buyers entering market) has not proven out in the real world.

Mortgage rates, home prices and supply all decreased from 11/23 to 1/24. Therefore demand also decreased during that period.

- 30-yr mortgage rate decreased approx 1 percentage point from 7.7% to 6.6% (1)

- Existing Home Inventory (i.e. supply) decreased from 1.13 million units to 1.0 million units (2)

- Existing median home price decreased from $387,300 to $379,100 (3)

(1) Federal Reserve Database - 30-yr Fixed Mortgage Rates

(2) Federal Reserve Database - Existing Home Inventory

(3) YCharts - Existing Median Home Sales Price (from NAR)

I am not going to defend NAR's numbers, I have no idea if that number is accurate or not. But what I can say as someone who lives this on a daily basis, you picked the most ridiculous time period which is the slowest in RE. I know many RE agents who take all their vacations during this period because this is the best time to do so because very few people are looking to put their homes up for sale during the winter and even more so during the holidays. Likewise, not many people are motivated to look and buy a home during this period of time.

I can further say, without a single ounce of doubt, that yes, lower rates do increase demand. They will, also increase supply. Not only is this something that I have witnesses and studied for the last couple of decades but I can see it NOW in real life personally, through my company and in the industry in general.

I didn't cherry pick anything. Those are just actual numbers chosen to begin when interest rates started declining. I'm sorry you can't explain why the theory doesn't match the reality.

A lowering of interest rates should have been an impetus for bringing marginal buyers off the sidelines. And with a decreased supply that marginal increased demand should have driven up home prices. That didn't happen, in fact the opposite happened.

Maybe the dynamics will change going forward.

But something else was going on driving down demand in the first three months of lower interest rates to counteract that (supposedly) positive stimulus.

I already explained why in my response but yet again you come back with a condescending tone in replies though this is seemingly an example of which on your best behavior. Disagreeing with me is one thing that I am fine with. Ignoring what I responded with and in a way that is dismissive and arrogant is just tiresome. You have already made it clear what you think of my profession and have taken tons of personal shots at me. I am done. I am really going to just ignore you from now on. You bring no value to an adult conversation.

All you did was offer up some lame version of "seasonality" (vacations and such). That doesn't explain anything. Every year there is seasonality so that is a constant.

Thank you for confirming I was making the right choice in ignoring you from now on. Good luck to you.

 

[HomerSimpson]

Mortgage rates are gonna have to drop to the 4s in order to put more supply into the market. Too many people don't want to leave their cheap rates even if they might want to change house (upgrade, downsize, move for schools, etc.)

I would love to sell my house and move but im locked in at 2.68%

 

[Chadstroma]

Today was a real ugly day for rates. REAL UGLY.

 

[HellToupee]

Just signed the P & S this week selling our house. Hope there are no hiccups with all this mortgage news

 

[Stoneworker]

It is being widely reported that the bond markets have gotten way too far ahead of the Fed re: potential rate cuts. CNBC reported the market has currently priced in 150 bps in 2024 vs. the Fed's dot plot of 75 bps. Rates will back up if Fed actions fall short of mkt expectations (all else equal).

Yep.

12/20/23 10-yr = 3.85%

4/11/24 10-yr = 4.57%

 

[Schmeabs]

It is being widely reported that the bond markets have gotten way too far ahead of the Fed re: potential rate cuts. CNBC reported the market has currently priced in 150 bps in 2024 vs. the Fed's dot plot of 75 bps. Rates will back up if Fed actions fall short of mkt expectations (all else equal).

Yep.

12/20/23 10-yr = 3.85%

4/11/24 10-yr = 4.57%

I think we end the year around 3.50%

 

[Stoneworker]

It is being widely reported that the bond markets have gotten way too far ahead of the Fed re: potential rate cuts. CNBC reported the market has currently priced in 150 bps in 2024 vs. the Fed's dot plot of 75 bps. Rates will back up if Fed actions fall short of mkt expectations (all else equal).

Yep.

12/20/23 10-yr = 3.85%

4/11/24 10-yr = 4.57%

I think we end the year around 3.50%

So pray tell what is it you know that the market doesn't?

Futures contracts tied to the federal-funds rate show traders see rates ending the year around 5%, according to FactSet, implying just one or two quarter-point cuts this year. Entering January, traders had expected the Fed to cut interest rates six or seven times.

Source: 4/11/24 WSJ

 

[Schmeabs]

It is being widely reported that the bond markets have gotten way too far ahead of the Fed re: potential rate cuts. CNBC reported the market has currently priced in 150 bps in 2024 vs. the Fed's dot plot of 75 bps. Rates will back up if Fed actions fall short of mkt expectations (all else equal).

Yep.

12/20/23 10-yr = 3.85%

4/11/24 10-yr = 4.57%

I think we end the year around 3.50%

So pray tell what is it you know that the market doesn't?

Futures contracts tied to the federal-funds rate show traders see rates ending the year around 5%, according to FactSet, implying just one or two quarter-point cuts this year. Entering January, traders had expected the Fed to cut interest rates six or seven times.

Source: 4/11/24 WSJ

I am talking about 10 year Treasury rates, not Fed Funds rate

 

[Stoneworker]

It is being widely reported that the bond markets have gotten way too far ahead of the Fed re: potential rate cuts. CNBC reported the market has currently priced in 150 bps in 2024 vs. the Fed's dot plot of 75 bps. Rates will back up if Fed actions fall short of mkt expectations (all else equal).

Yep.

12/20/23 10-yr = 3.85%

4/11/24 10-yr = 4.57%

I think we end the year around 3.50%

So pray tell what is it you know that the market doesn't?

Futures contracts tied to the federal-funds rate show traders see rates ending the year around 5%, according to FactSet, implying just one or two quarter-point cuts this year. Entering January, traders had expected the Fed to cut interest rates six or seven times.

Source: 4/11/24 WSJ

I am talking about 10 year Treasury rates, not Fed Funds rate

Um. They are positively correlated .

The primary reason the 10-yr dropped so much in the first place since last Nov/Dec was because of anticipated rate cuts from the Fed.

And the primary reason for yesterday's spike was the change in anticipated rate cuts due to recent inflation reports

Regardless, what's your rationale for the 10-yr dropping almost 110 bps in eight months from current levels?

 

[Nugget]

It is being widely reported that the bond markets have gotten way too far ahead of the Fed re: potential rate cuts. CNBC reported the market has currently priced in 150 bps in 2024 vs. the Fed's dot plot of 75 bps. Rates will back up if Fed actions fall short of mkt expectations (all else equal).

Yep.

12/20/23 10-yr = 3.85%

4/11/24 10-yr = 4.57%

I think we end the year around 3.50%

I don't see how this is possible. I don't see supply increasing or demand decreasing.

 

[Schmeabs]

It is being widely reported that the bond markets have gotten way too far ahead of the Fed re: potential rate cuts. CNBC reported the market has currently priced in 150 bps in 2024 vs. the Fed's dot plot of 75 bps. Rates will back up if Fed actions fall short of mkt expectations (all else equal).

Yep.

12/20/23 10-yr = 3.85%

4/11/24 10-yr = 4.57%

I think we end the year around 3.50%

So pray tell what is it you know that the market doesn't?

Futures contracts tied to the federal-funds rate show traders see rates ending the year around 5%, according to FactSet, implying just one or two quarter-point cuts this year. Entering January, traders had expected the Fed to cut interest rates six or seven times.

Source: 4/11/24 WSJ

I am talking about 10 year Treasury rates, not Fed Funds rate

Um. They are positively correlated .

The entire reason the 10-yr dropped so much in the first place since last Nov/Dec was because of anticipated rate cuts from the Fed.

Regardless, what's your rationale for the 10-yr dropping almost 110 bps in eight months?

I expect growth and inflation will slow and apply downward pressure on interest rates. If we have a hard landing with a recession the 10 year could fall as low as 2.50%. If growth is strong I see it at 4% year end. However, the likely outcome is around 3.50% at year end. The labor market and wage costs have started to slow and I expect that to continue.

 

[Stoneworker]

It is being widely reported that the bond markets have gotten way too far ahead of the Fed re: potential rate cuts. CNBC reported the market has currently priced in 150 bps in 2024 vs. the Fed's dot plot of 75 bps. Rates will back up if Fed actions fall short of mkt expectations (all else equal).

Yep.

12/20/23 10-yr = 3.85%

4/11/24 10-yr = 4.57%

I think we end the year around 3.50%

So pray tell what is it you know that the market doesn't?

Futures contracts tied to the federal-funds rate show traders see rates ending the year around 5%, according to FactSet, implying just one or two quarter-point cuts this year. Entering January, traders had expected the Fed to cut interest rates six or seven times.

Source: 4/11/24 WSJ

I am talking about 10 year Treasury rates, not Fed Funds rate

Um. They are positively correlated .

The entire reason the 10-yr dropped so much in the first place since last Nov/Dec was because of anticipated rate cuts from the Fed.

Regardless, what's your rationale for the 10-yr dropping almost 110 bps in eight months?

I expect growth and inflation will slow and apply downward pressure on interest rates. If we have a hard landing with a recession the 10 year could fall as low as 2.50%. If growth is strong I see it at 4% year end. However, the likely outcome is around 3.50% at year end. The labor market and wage costs have started to slow and I expect that to continue.

And in all those slowdown scenarios there is 99.9% certainty the Fed will cut the Fed Funds rate as a response.

So basically you're just saying the current market view about future rate cuts is wrong (because "growth and inflation" expectations are exactly the factors driving those as well).

Nothing inherently bad about being different, just it would be more convincing if it came with some economic links to back it up or it's just a random prediction.

 

[Schmeabs]

It is being widely reported that the bond markets have gotten way too far ahead of the Fed re: potential rate cuts. CNBC reported the market has currently priced in 150 bps in 2024 vs. the Fed's dot plot of 75 bps. Rates will back up if Fed actions fall short of mkt expectations (all else equal).

Yep.

12/20/23 10-yr = 3.85%

4/11/24 10-yr = 4.57%

I think we end the year around 3.50%

So pray tell what is it you know that the market doesn't?

Futures contracts tied to the federal-funds rate show traders see rates ending the year around 5%, according to FactSet, implying just one or two quarter-point cuts this year. Entering January, traders had expected the Fed to cut interest rates six or seven times.

Source: 4/11/24 WSJ

I am talking about 10 year Treasury rates, not Fed Funds rate

Um. They are positively correlated .

The entire reason the 10-yr dropped so much in the first place since last Nov/Dec was because of anticipated rate cuts from the Fed.

Regardless, what's your rationale for the 10-yr dropping almost 110 bps in eight months?

I expect growth and inflation will slow and apply downward pressure on interest rates. If we have a hard landing with a recession the 10 year could fall as low as 2.50%. If growth is strong I see it at 4% year end. However, the likely outcome is around 3.50% at year end. The labor market and wage costs have started to slow and I expect that to continue.

And in all those slowdown scenarios there is 99.9% certainty the Fed will cut the Fed Funds rate as a response.

So basically you're just saying the current market view about future rate cuts is wrong (because "growth and inflation" expectations are exactly the factors driving those as well).

Nothing inherently bad about being different, just it would be more convincing if it came with some economic links to back it up or it's just a random prediction.

No, I think we see 50-75 basis points of rate cuts this year. That is in line or a little short of expectations.

 

[Stoneworker]

It is being widely reported that the bond markets have gotten way too far ahead of the Fed re: potential rate cuts. CNBC reported the market has currently priced in 150 bps in 2024 vs. the Fed's dot plot of 75 bps. Rates will back up if Fed actions fall short of mkt expectations (all else equal).

Yep.

12/20/23 10-yr = 3.85%

4/11/24 10-yr = 4.57%

I think we end the year around 3.50%

So pray tell what is it you know that the market doesn't?

Futures contracts tied to the federal-funds rate show traders see rates ending the year around 5%, according to FactSet, implying just one or two quarter-point cuts this year. Entering January, traders had expected the Fed to cut interest rates six or seven times.

Source: 4/11/24 WSJ

I am talking about 10 year Treasury rates, not Fed Funds rate

Um. They are positively correlated .

The entire reason the 10-yr dropped so much in the first place since last Nov/Dec was because of anticipated rate cuts from the Fed.

Regardless, what's your rationale for the 10-yr dropping almost 110 bps in eight months?

I expect growth and inflation will slow and apply downward pressure on interest rates. If we have a hard landing with a recession the 10 year could fall as low as 2.50%. If growth is strong I see it at 4% year end. However, the likely outcome is around 3.50% at year end. The labor market and wage costs have started to slow and I expect that to continue.

And in all those slowdown scenarios there is 99.9% certainty the Fed will cut the Fed Funds rate as a response.

So basically you're just saying the current market view about future rate cuts is wrong (because "growth and inflation" expectations are exactly the factors driving those as well).

Nothing inherently bad about being different, just it would be more convincing if it came with some economic links to back it up or it's just a random prediction.

No, I think we see 50-75 basis points of rate cuts this year. That is in line or a little short of expectations.

Well in that case the 10-year won't move. Because the 50 bps of future cuts is already priced into the current 10-yr rate of 4.6%. It won't go to 3.5% as you predict without new information that significantly changes existing economic expectations. That's how markets work.

The only reason the 10-yr rates have backed up from December is because expectations of the Fed Funds rate have changed. It's right there in my first post in bold underline.