Happy Mortgage Update! |
Some of you are new to my newsletter, welcome! We are adding a new audience, and I am super grateful to have you here along with my gratefulness to those of you who’ve been around for almost 5 years. So, in the spirit of continuing this newsletter with our past and loyal readers as well as our newcomers, I wanted to provide a quick background on me:
I’ve been in the mortgage industry for over two decades. I was a loan officer through the Great Financial Crisis (Housing Crisis), Covid shutdowns, and even this current mortgage industry recession. I’ve either owned my own mortgage company (as I do today) or have run branches for more than a decade. I’ve even made the list of top 1% loan officers in the country more times than I can remember. Hell, I’ve been in sales since I was asking people to “supersize (their) fries” at age 15…so that’s 35 years in sales. None of this…and I mean zero percent of this make me a mortgage expert. What? You are asking. Why am I reading this update then?
Well, hold on. I am an expert…but it was through the sweat, tears, lower back pain, long days/nights, and love that helped me through to this time of my career. I’ve helped close over a billion dollars in mortgages helping people with primary home purchases and investment home purchases. I’ve been a coach to other people, including loan officers, operations staff, and first-time homebuyers. The list goes on. That said, my real passion for this industry came from wanting to help everyone buy homes and grow wealth, because I truly believe that your home, and the appreciation from it, is one of the best and only ways a lot of people in this country will build wealth.
I am a proponent of self-made wealth. Yes, it’s a grind. I’ve been a part of it since I was 17. But while I am self-made…I had a lot of help and coaching from some very amazing people. In fact, I am still receiving coaching and friendship from some powerful people in my life. So, I want to offer the same thing to you and whoever you seem fit to forward this to. This newsletter is to show you what I see as a person who advises people on when to lock a mortgage, what prices will do, and what the future holds. See, people always say, “I know you don’t have a crystal ball, but where will rates be next June?” Well…the truth is, I do have a crystal ball. It’s called researching the markets and yeah, it can work. |
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Quick note: I majored in Political Science in college and yes, politics impacts markets and thus, mortgages. I do not care for DC…it’s not a red or blue thing…it’s a stay out of my business thing. So there will be conversations about things happening around the world. I mean, talk about nukes this past week moved our interest rates down here, briefly. So how could I ignore that?
Without further ado… |
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Let’s start with inflation. How are we doing? Well it’s okay for now…at least that’s what the Fed tells us. But check out this chart…the blue line below is inflation from the late 60s through the early 80s. The green line is from 2014 through now, roughly. You remember that spike in 2022, right? Of course you do…you still go to the grocery store and complain, right? I sure do. But my real concern is that second bump up…which would be ahead of us if history rhymes. Yikes. That would be moving rates up and for sure…not moving them back down. So maybe a 6% interest rate on a 30yr fixed sounds better now? |
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CPI: Why does this look the way it does? This next chart is your CPI chart…consumer price index. See that nice rounding red line I drew? That is showing that we are not heading to the 2% that the Fed told us, originally, they wanted. I say originally because they are not focused on that anymore…but on jobs, according to J Powell this past summer. I think because they knew they couldn’t get to 2%. Well, it’s going the wrong way for me! You too, I’m sure. |
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What else doesn’t help? This chart from @Kobeissiletter on X shows that consumers are getting rejected for new debt, revolving and fixed, and the highest rates in 10 years +. As a mortgage company owner, I can assure you that this chart is NOT misleading at all. And by the way, those lines are moving up…not down or even sideways. Meaning? We are not done yet…we are just getting started. |
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Since 10yr yields imply…and can show where interest rates are…have a look at this chart. Let me explain first. This shows that normally after the Fed begins cutting their Fed Funds Rate, the 10yr does NOT do what it is currently (in red) doing now. This is not normal…which means we are not living in normal times. Hell, we aren’t even in the 75 percentile of median. So if you are trying to buy a house or know someone who is…and feeling pain…it’s not you. It’s them. But we suffer. |
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And the government isn’t helping either. This next chart shows you how DC is masking real problems. By the way, real problems would bring down interest rates…but if you mask them to show the economy is strong or fine, we live with the pain. This is a change in employment if you remove government jobs. Yeah…the jobs report would be negative most of 2024. But Tim, government jobs count. Okay, sure. But if you wanted to inflate job numbers as a government, wouldn’t you just make jobs you couldn’t afford? (And no…we cannot afford them…check out our debt!) |
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Don’t worry about it…I checked it out for you. This chart is from the Fed itself. That is the amount of public debt (you and me…YOU and ME)…that our government owes. We can’t afford a stick of gum as a nation, let alone create paying jobs or building weapons. I’ve drawn a red line to show you the extreme…and a crescent moon so you know where the debt is headed. (Crystal ball!) |
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But not all government has been bad…this is my one slide to thank DC…do you know what a trigger lead is? When you apply for something and you get 1000 calls, texts and emails from other lenders reaching out…that’s a trigger lead. How is that even legal? Sure you can opt out…but not everyone follows the law (shocked I know). So at least they are trying to help us…even when the data industry is trying to stop them. Lobbyists… |
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This is my transition gif. This is where I tell you about the 10yr and mortgage-backed securities (the things that drive interest rates).
10yr: This is a daily candlestick chart of the 10yr yield. When bond prices go up, yields go down. I have drawn an orange line across the top 3 high levels. That is a downtrend. Currently (the right end), we are sitting at the top of the down trend. You can see the huge move up to the current level from September. That is important because that is when the Fed lowered their Fed Funds Rate by 50 basis points. So yes, rates went up…quickly. If we break above that orange line, there is a good chance we move towards the 4.70 area which is where that previous high in April sits. Yikes. |
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MBS: This is the mortgage backed securities daily candlestick chart for the past year. In this chart…up is good. If MBSs are rising, rates are moving down. Overall, the past year has been sideways at our high rates. A little low…then a little high, etc. You can see the swift move down on the right side…matching higher rates we see on the 10yr above. It’s not as pronounced as the 10yr which is why Freddie Mac reports our rates are in the upper 6s right now and not the low 7s like the 10yr would lead us to believe. Either way, not good for now. |
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So that’s it. I’ve got a lot to say and not enough room…because I want you to come back. In fact, check us out at Bearmtg.net if you have questions about rates, our team, me…whatever. I was called “transparent” this week.. and that’s exactly what I am… sometimes bluntly, like in this newsletter. I hope you are sticking around. You can subscribe to us by emailing us directly at bear@bearmtg.net and we will add you to our mailing list.
What doesn’t kill you makes you stronger. |
Tim |
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