Hello everyone and Welcome to another

episode of selling Greenville your

favorite real estate podcast here in

Greenville South Carolina I'm your host

as always Stan Mccune realtor right here in

the Greenville area you can find all of

my contact information in the show notes

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of your local real estate needs just a

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a realtor I'm your guy we have a lot

to talk about

today I I want to talk about the fed

and mortgage rates this is obviously the

one of the bigger topics in real estate

right now is what's happening with

mortgage rates everyone's trying to

predict what's happening it's

really not so much that people are

trying to predict mortgage rates I am

because this is the world that I

live in but people are trying to predict

what's going to happen with the economy

as a whole and with what the

Federal Reserve or the FED is going to

do and this past week was a very

important one with regard to mortgage

rates and all of these other things

it was one of the most significant

weeks honestly that we've had in a while

with regard to the Fed so we had a

ton of economic data released in

addition to multiple statements by the

FED as a whole and by individual fed

members most significantly chair Jay or

Jerome

Powell now we're going to go through

just because I find it interesting I but

I think it's also educational just how

volatile these markets are and we're

going to go through kind of a little bit

of an oral history of what happened at

least as I saw it because I was watching

this in real time I was in Columbia

for part of last week at a conference I

was still watching what was happening

in the bond markets and in the

treasuries while I was there because

it was like this is crazy there's a lot

going on and specifically I want to

look at the 10year treasury with

regard to the 10year treasury

market okay and there's a really

simple reason for this it's not perfect

there there's not a one-to-one correlation

exactly between the 10-year treasury

yield and the 30-year fixed rate

mortgage but it's pretty close to a

one-to-one type of translation between

the two of them really the simplest way

to know what's going to happen to

mortgage rates is to look at the 10year

yield and if you're watching on

YouTube right now I'm going to actually

show you a nice little chart here that

actually demonstrates exactly what I'm

talking

about so

here we have the relationship between a

a few different things okay we've got

the federal funds rate we've got the

that's in purple we've got in red we've

got the 10year treasury in green

we've got the 15year fixed rate mortgage

and then the top line is the 30-year

fixed-rate mortgage so you can see that

there is a clear correlation when the

10year yield goes up mortgage rates go

up when the 10year yield goes down

mortgage rates go down now there is one

thing that is not linear in here and

that is what we call the spread between

those two numbers so if you're looking

back in 2019 you'll notice the spread's

not that big we have the 10year yield at

about 2.5 something like that and we've

got the 30-year fixed rate mortgage

and this is based on the Federal

Reserves number so so sometimes the

numbers don't equate what you'll see on

some other websites that's fine just

understand that we've got the 30-year

fixed-rate mortgage at

4.3 4.4 something like that so that

would be less than what we would say a

200 basis point spread between the two

of them or if you really want to keep

things simple you think about it as less

than 2% the 30-year fixed rate mortgage

is less than 4.5% and the 10-year yield

is

2.5% basically a less than a 2%

difference technically we would call

that a 200 basis points less than a 200

basis points different what's been

interesting the past few years is that

that difference has climbed for a

variety of reasons we're not going to

get into that in the show but it's been

closer to a 300 basis point spread

between the 10-year yield and the

30-year fixed rate

mortgage and so that has been as much as

what the FED has done that has impacted

mortgage rates as much as anything

right because if we saw rates so right

now the 10year treasury is hovering

around four but 30-year fixed rate

mortgages are hovering around seven so

again if we saw what we saw back in 2019

if we saw that spread come down to less

than 200 basis points we could be we

could be seeing mortgage rates right now

in the high fives but the state of the

of the market right now is not that way

we have a much bigger spread that

probably towards the end of this year

will come down and we'll

probably go below a 250 basis point

spread I think and that's going to

contribute to rates coming down probably

at some point but regardless this is

kind of the what some people have called

the slow dance between mortgage rates

and the 10year

yield is what's going on here in that

they Loosely track with each other

so that is why this is important that's

why what is happening in the markets in

bond markets in treasuries why it's

important because For Real Estate

because it directly impacts the mortgage

rates and guess what what the FED

does directly impacts mortgage rates

right because the FED can increase

or decrease the federal funds rate so

that's what people are talking about

when they talk about the FED deciding to

increase rates or lower rates the FED

has not increased or lowered rates in

quite some time at this point the

fluctuations that we're seeing are

simply Bond markets and treasuries doing

their thing and then mortgage rates

responding to that essentially again I'm

keeping things very very simple I don't

want to get too far into the weeds here

this is more telling the story of what

happened the past week but I want to

make sure that you guys actually

understand why this is important all

right so last week started with the bond

market heating up and the 10-year yield

falling as the market anticipated that

the FED might be announcing their first

here's what we keep running into people

the markets are trying to anticipate

what the FED is doing and that is

impacting what's happening in the market

more than what the FED is doing because

the fed's not doing anything well I mean

they're doing things but they're not

doing anything things with regard to

rates they're not increasing or

decreasing the federal funds rate as

I've already said so here's what

happened job openings data came out on

Tuesday and it showed higher than

expected job openings for December

but not that much of a change from

previous months why does that matter

well the FED doesn't want to create a

recession and one recession marker is

that there aren't many job openings

right if people if you're in a

recession people are getting laid off

they have to get jobs or if layoff

layoffs are happening then job there

obviously be fewer jobs so the fewer job

openings there are the greater chance of

a recession that we're talking about if

there's more job openings then that

means that people are are fine people

are doing fine they don't need the jobs

that are open and so there's that

so the FED they don't want to create

a recession one recession marker is that

there aren't many job openings so more

job openings means a stronger economy

and potentially more inflation again

that's the thing that the FED is trying

to get under control here whereas fewer

job openings mean a weaker economy and

potentially less inflation so like it or

not the the FED wants the economy to be

a little bit weaker but not recession

weaker right they don't want us to go

into a recession they just want us to

get a a little bit weaker you know it's

kind of think about it as like when

you're taking different medications or

chemotherapy or something like that you

have to

weaken sometimes your body in order to

strengthen it that's what the that's the

fed's philosophy when it comes to the

economy in terms of getting inflation

under control so the data indicated a

stronger economy than anticipated but

it also wasn't such an eye-popping

number that people freaked out the 10e

yield went up a little and then it went

back down okay that's how we started as

we got closer last week again I'm

recording this February Tuesday, February

the 6th by the way I just want to say I

wish I I would have loved to have

recorded this earlier Tuesday is the

latest time for me to record this I'm

recording this at the end of the day on

Tuesday but I got so tired of

recording these kind of breaking news

types of podcasts and then you know

recording it like a few days before I

released it so for you guys only for

you guys I'm recording this later than I

would like to but I wanted to have the

most accurate data so I hope you guys

appreciate that all right so as we got

closer to Wednesday of last week which

is when the Fed was releasing their

decision and opinion on the economy and

what they were doing with rates the 10e

yield continued to fall inching closer

and closer to four after having sat

around 4.15 for several weeks so then we

got the what we call the Federal Open

Market Committee announcement at 2 p.m

on Wednesday this is the announcement

where they state if they're going to

increase or decrease the federal funds

rate and also they'll just say a bunch

of other random things about what they

think is happening in the economy and

what the FED wants to do etc etc and at

first when this happened

the 10-year yield started to go back up

as the statement that they made was

viewed as hawkish another hawkish in

this context means that the FED

wants to keep rates high or

potentially even increase rates they

didn't say that but it was viewed as

hawkish from the standpoint of they

didn't give any indication that rates

were going down anytime soon in fact

what they did say was or reading

between the tea leaves here didn't

give any indication the first quarter

rate cut was coming okay and that was

what a lot of people were

hoping illogically by this point if

you were still hoping on Wednesday of

last week that a first quarter rate cut

was going to be announced by the fed you

were really grasping it straws in my

opinion there was a lot of reason not to

believe in that but regardless

basically the the page that was

sent out after the Federal Open Market

Committee

released the page on basically

their

statement it was viewed as hawkish

it was viewed as okay rates are not

coming down this quarter and

so the the 10-year

yield kind of started to go up and

but not too dramatically okay then

the fed chairman Jay Powell spoke and

he too said some hawkish things most

notably he said very clearly that he did

not anticipate a first-quarter rate cut

happening okay no he

said in no uncertain terms that he would

be shocked if a first-quarter rate cut

happened and again the media took this

as a hawkish statements but

interestingly markets saw it a little

bit differently in fact I personally

felt like the tone of what he said

wasn't as hawkish as the headlines that

I kept seeing on on the media and social

media

and here's why he said if the

labor market cooled down unexpectedly

rate Cuts could come sooner than

expected so he did even though he said

he didn't anticipate a first quarter

rate cut he left the door open well if

if we see the labor market cooled down

unexpectedly maybe unemployment goes up

maybe these job openings the job

openings data comes in differently in a

future month break Cuts could come

sooner than

anticipated but I thought this was the

most interesting thing that he said is

that if inflation was stickier than

anticipated he didn't say that rates

would increase which is what quite a few

economists have been predicting I've

seen a lot of predictions that rates

would increase J Powell had the

opportunity to say that if

inflation remains sticky that's their

term for you know if it doesn't continue

to go down he didn't say that he

didn't put on the table that rates would

increase although certainly I'm sure

that is on the table but again being

very measured in terms of what he says

what he did say was that they would

simply keep rates at their current level

to me that was not a very hawkish thing

to say I would have completely

expected for ger and Powell to

say it's unlikely but very possible that

we could increase rates if the

labor

market doesn't cool down like we

expected to if inflation doesn't cool

down like we expected to he didn't say

that the most ominous thing that he

said is that rates might be higher for

longer in that kind of environment well

that's nothing new and of nothing that

we haven't heard before and so after

that the 10-year yield really started

falling going down to its lowest level

since the 1st of January and mortgage

rates which had gone up to

6.95% in January per per mortgage News

Daily website that a lot of us use that

retreated all the way down to

6.63% on February the

1st but there was one more important day

last week and that was Friday when the

US employment report for January came

out in addition to revisions for the

reports for November and December and

just about all employment and wage

numbers were substantially higher and

stronger than people

expected way way way more than people

expected with January having a

particularly monstrous employment number

and November and December getting

revised upward from the original numbers

that we had so here we have the FED is

is looking very closely at jobs data and

basically they want to see employment

weaken right that's an indicator that

inflation will be better under

control fewer people have jobs fewer

people have money to spend then

inflation tends to come down like it or

not that is the reality of the situation

and the FED basically says that now they

will never say that that they want

people to lose their jobs they'll use

familiarized versions of it such as you

know well I've used some of them we want

the labor market to cool what they're

saying is they want people to lose jobs

like that is exactly what that is code

for and so when they see that

a bunch of jobs were added in

November December and January that is an

indicator that inflation is not

yet under control again there isn't a

direct correlation between jobs and

inflation but the FED one of the key

metrics that they're looking at is these

job reports because they don't want to

be behind on the curve right they want

to you know inflation lags inflation

I should say inflation data lags and so

we look at these job reports to kind

of read the tea leaves on what might be

happening in future months when it comes

to

inflation and I've already alluded to

this but markets were ped were

predicting unemployment would go up

slightly but it didn't it remained flat

and wage growth was double what the

market expected this is again

all of these employment numbers and

this is something the FED is looking at

too is wage growth wage growth was

double What markets were anticipating it

to be and since again low Employment

High wages are some of the metrics

correlated with with high inflation the

bond market went nutty again with yields

climbing back up then we're not done 60

Minutes published an interview with FED

Chairman J Powell where he said that a

March rate cut was extremely unlikely

again that shouldn't have been a

surprise to anyone but some people that

aren't following this very closely but

perhaps Watch 60 Minutes that was a

that might have been a big deal to

some people and it sure seemed like it

was

and he additionally said that the First

Rate cut was not likely to happen until

the middle of the year and again when he

says rate cut he's talking about the

federal funds rate which does impact

Downstream all of the other rates that

we're dealing with here now middle of

the year what does that mean their

next meeting is going to be I believe

in a April or May I can't remember

exactly when their next meeting is but

we could be talking about the second

quarter or we could be talking about as

late as the third quarter and given that

many were baking on a first-quarter rate

cut as I have already alluded to that

really sent the market into a spiral as

well with the 10-year yield going up

once more in fact his interview

appeared to impact other markets that

interview impacted markets in Australia

and Germany and the UK which I found to

be very interesting addition

Al on Monday and by Monday I mean

February the 5th and I'm recording this

on the 6th so yesterday from when I'm

recording this Minneapolis FED

President made a statement in support of

higher for longer interest rates now

listen these are all calculated things

the Federal Reserve has said that they

want the bond market to kind of do the

work for them right they want the

10-year yield the 2-year yield and

whatnot they want those rates to be

to be as high as possible so that the

Federal Reserve doesn't have to increase

their rates and so sometimes they are

manip well really all the time they're

manipulating markets with what they're

saying and what you'll see sometimes is

you'll see one fed member say one

thing and markets will respond a certain

way and then the another FED President

or Governor will say something that's a

little bit more toned down in order

to see markets kind of go in the other

other direction if we see multiple fed

members kind of say the same thing and

have a hawkish tone back to back to back

that's an indicator that they're that

they're really trying to influence the

market and that was the way I understood

this

happening now what the the

Minneapolis fed president said probably

wasn't a Tipping Point for anything but

it just added to the perception that the

FED is not cutting rates anytime soon

right the result of all of this by end

of day Monday February the 5th the

10-year yield was back up to

4.62% up a whopping 30 basis points

since February the 1st and the 30-year

fixed-rate mortgage returned to over 7%

for the first time in months it it went

up to it ended the day at

7.04% to be exact now some of you

that are listening know that I came out

with a bold predictions episode where I

said that rates would be in the six

perents the entire

year well maybe I have to take a

mulligan for one day we will see

maybe February the 5th will be the

exception to the rule but I want to say

this there are 366 days in 2024 and if I

only have one day of the year when when

the 30-year fixed-rate mortgage

according to mortgage News Daily crested

7% I am still taking the W that 3 65

days of the year it was in the sixes so

stay tuned I'm not taking the L yet

on my bold prediction

so that was what happened basically

the past year but we are not done yet

okay we are not done yet today February

the 6 I told you guys earlier I wanted

The Cutting Edge the the crest of the

wave data we had multiple Federal

Reserve members give statements if I

didn't know that this was coming then

I would have been able to record this

yesterday instead of today um but I knew

that there were a bunch of statements

coming out today and guess what their

statements focused on more positives

than negatives they probably were just

like okay we need to steady the ship a

little bit they don't like all this

volatility okay so they focused a

little bit more on the positives that

inflation numbers look good and will

probably look much better in the second

quarter um that they still expect to see

roughly three the FED to decrease

rates roughly three times still this

year and guess what now treasuries bonds

are rebounding and mortgage rates are

back down below 7% at

6.99% I am going to so let's go ahead

and we're going to look at the Again by

the time you're watching or listening to

this is obviously going to be old

but it's interesting so I'm looking at

this 4:29 p.m. the 10year treasury is

back down to

4.09% so that's a pretty big movement

in Reverse now

4.89 per. so that is a big move down

we've got here the 30-year fixed rate

mortgage you can see what's been

happening with that it's like I said

down to

6.99% so here we stand now here's the

interesting thing it's going to be a

while before we get more

statements like this from the FED more

data we're not going to have a week like

this for a while right with all of these

statements 60 Minutes =all of this

data coming out we're not going to

we're not going to have anything like

this this type of a week in my opinion

happen well for at least several

weeks okay I'm not going to make any

predictions =on when that's going to

be what I think is probably going to

happen is we'll probably see that tenure

yield probably start to fall again cuz

here's what happens people start to

think you know what maybe the FED will

decrease it you know they'll made all

these statements that rate you rates are

going to stay where they are that they

they're not going to decrease rates you

know anytime soon

but who knows maybe they will and so I

think I think that we'll probably see

this come down a little bit but will

it come back down as you know as far as

it had been back down into let's see

here the the lowest that it got was

it got down to 3.81 at one point and now

it's at

4.09 that's a huge difference that's

almost a 30 basis point spread and I

don't know I think I don't think

that we'll see it come quite down that

far in the absence of some sort of data

economic data that that it would make

it look like oh maybe we are closer to a

recession than we thought but the

bottom line is the Fed right now is

being very cautious they're being very

particular with the words that they say

I loved on 60 Minutes and you

should watch it by the way you should

look it up it's only like 15 minutes the

interview great interview fantastic

questions that were asked I can't

remember who who the interviewer was

I believe it well isn't it the same

person I don't watch 60 minutes this is

a a rare one for me but great

questions that were asked to the FED

chairman and at one point he had the

opportunity to say the word recession

and he clearly skirted it and then

the interviewer was like like a

recession and and basically

forced the chairman to say the RW

which which that is the RW if you're a

in the Federal Reserve is the word

recession so so I found some some

personal humor in that because you know

they're very guarded in terms of what

they say but he's great in terms of

like in terms of someone that just

projects confidence gives good answers G

you know doesn't just avoid questions

actually addresses them I'm a fan of

Powell even if I don't think that

that they necessarily handle the

pandemic as well as they could have

I think that they there's way

too much quantitative easing easing

and now we've have way too much Quant

quantitative tighten tightening that's

happening here as a response so

the FED is creating the FED has created

some of this volatility that we'll see

that we're seeing I think in my opinion

they're to blame for a lot of that and

here we are the people that are

looking to buy now at least we don't

have those 8% rates that we were talking

about a few months ago but we're

hovering right around 7% that's tough

that's that's really tough if you're

looking to buy right now I will say

those are averages I know a lot of

lenders right now for my clients that

are that are doing much less than

that that are pre-approving people for

6.5 or lower there are a lot of

options for getting rate buy Downs as

well we've talked about that in the past

so it's not going to be 7% for

everyone on the flip side for some

people it might be more than that again

these are just averages that we're

looking at with mortgage News Daily but

there you go that's an oral history of a

very exciting past week when it came

to the Federal Reserve the 10-year yield

and the 30-year fixed rate mortgage and

here we are now after rates went way

down almost to 6.6% now they're right

back up to the highest level that

they've been in quite some time hovering

right around 7% hopefully we'll see that

taper down a little bit but we'll

just have to watch and see as more

data comes out more fed statements come

out and see how markets respond to

that's all for today's episode I

appreciate you guys listening my contact

information is in the in the show notes

I almost said the FED notes that would

be exciting my contact information is

in the show notes if you need a realtor

one that actually understands what's

going on with the market as you guys

know if you're listening to this I have

my pulse on the market I'm trying to

keep up with all of these things in real

time so I can educate you guys so

please if you need a realtor please

reach out to me you can find my contact

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talk again next time