Hello everyone and welcome to another episode of Selling Greenville your favorite real estate podcast here in Greenville South Carolina I am your host as always Stan McCune Realtor right here in Greenville South Carolina you can find all of my contact information in the show notes if you need to reach out to me for any of your real estate needs and please just take a second if you enjoy this content at some point right if this is your first time listening or watching you might not know if you enjoy it or not but once you've come to that conclusion please like if you're on YouTube you can hit the little thumbs up button if you're on Apple Podcast Spotify you can leave a rating or a review any of those things would be fantastic you can download episodes all sorts of ways you can support the show without ever using me as your realtor and I would appreciate if you would take a second to do so today we need to talk about mortgage rates and I'm gonna be honest with you guys I have zero notes for this episode I normally have I normally have some something to go off of but in this case I don't and that's because I'm busy it's been a very busy last few weeks I actually had for those of you in my leadership academy that that listen to or watch the show I was at a retreat last week for the South Carolina Association of Realtors I am a part of a 15 Realtor group from all over the state that we get together once every month or so and they're just training us to be leaders in our Realtor association and it's a lot of fun and it's growing me as a person as a communicator in in a lot of different ways but last week was insanely busy and I had two days where I was in Columbia South Carolina doing the Leadership Academy thing and needless to say it kept me it kept me busy I worked straight through Memorial Day weekend which by the way happy Memorial Day and thank you to those who serve and have served and those who have you know I know that we have different holidays for observing different things military wise but I always say those who also have given their lives obviously it doesn't matter we don't need to be in Labor Day or July 4th or Memorial whatever like whether you serve have served or have passed away serving those people deserve our respect in my opinion for every single one of these military related holidays so I hope you guys had a good Memorial Day weekend for me it was a working Memorial Day weekend and I'm not complaining about that because a lot of realtors right now are complaining that they don't have a lot to do and I'm grateful to not be in that category excuse me that being said we do need to talk about mortgage rates cause I am hearing so much misinformation with regard to the state of mortgage rates in the country right now and there there's just a lot of different opinions right now and often times it weirdly falls on the political divide where depending on if you're Republican or Democrat might determine your opinion on what direction mortgage rates are going if you guys have listened to very long you know that I'm pretty non partisan in in my own personal political views or at the very least my views don't neatly fit into either party and so I don't approach it at all from the standpoint of well who's in charge and you know do I trust them or not quite frankly I don't trust anyone in in in DC and so if you do that that is certainly your prerogative and I'm gonna try not to offend you on this episode but we need to be honest about something okay there is now a new Federal Reserve chairman okay Kevin Warsh took over was confirmed he is now the chair of the Fed okay and what I have seen some people say is this means that rates are going to come down okay and usually when people say that they mean specifically mortgage rates I want to explain to you guys why that's not going to happen at least not right now right I'm recording this on May 26th we're not in an environment where Kevin Warsh is going to bring rates down now the reason why you'll hear that narrative out there is because President Trump has made a big deal about Jay Powell the former Fed chair who was sitting Fed chair for a long time that he did not drop rates when the president felt like he needed to now remember the Fed dropping rates does not necessarily mean that mortgage rates are coming down okay I'll try to I'll try to come back to that again I don't have any notes so we'll see if I if I successfully make it back to that but here's the thing okay he brought in his own person although Jay Powell was also a Trump appointee to the Fed chair back way back in the day Biden kept him and then you know Trump reinherited him he's been putting a lot of pressure on Jay Powell that rates need to come down rates need to come down rates need to come down and he and Jay Powell had had a big dispute it's kind of nasty kind of in my opinion unprofessional by both parties and I have been very critical about Jay Powell on this podcast I do feel like he misread a lot of the economic indicators and was I I do think that he was overly partisan in in terms of trying to stick it back to Trump now in in his defense Trump was suing him and criticizing him like a lot there's a lot going on there but Jay Powell needed to have the country's best interest in mind and I'm not suggesting that he didn't but I do think there may have been a little bit of pettiness that seeped into some of his decision making into some of how he approached his job I'm pontificating on that I can't say that for factually I don't know for sure there there's no way for me to know one way or the other when it comes to that but the part that I struggled with when it came to Jay Powell was that he was so focused on just a few economic indicators in my opinion that he kind of missed the big picture the hope is that Kevin Warsh will take a more holistic approach to the economy and consider a lot more than just a handful of indicators and I'm oversimplifying things here but that's a very simplistic way of thinking about it very simplistic way of approaching it okay so all of that to say the reason why Kevin Warsh is not going to reduce the Fed benchmark rate is because we just had an inflation print just a week or so ago yeah it was last week that was very very high inflation is heating up and that is not good that is not good at all if you remember that's why Jay Powell hiked rates and one of my biggest criticisms with Jay Powell is that he reduced rates for way too long because he was too focused he was scared of Covid scared of all these things and there's still debate there will be debate for a long time over what he did during Covid and whether what he did was the correct thing and then whether he was too late to then to then go back to increasing rates right cause if you remember during Covid rates went way way down that included mortgage rates okay guess what that's messed up the housing industry for the for the past several years because we had all that stimulus functionally in the system once that stimulus got pulled out then it kind of collapsed the real estate market and a lot of people have been looking for a real estate crash guys we already had the real estate crash it already happened it's been basically the past three years three and a half years depending on how you think about it the crash already happened people are expecting a 2,008 style crash well there's a lot that goes into a 2,008 style crash that's not happening in our current environment however what is happening in our current environment is now we have inflation skyrocketing again okay why is that why is inflation skyrocketing again I'm not an economist however the ones that I trust that have a good track record they all say it's a combination we still have tariffs in the system that are still increasing still increasing costs in a lot of different categories but then we also have the war in Iran which is causing energy costs to go up plus you have all of these data centers being built for AI that's also causing energy costs to go up and all of these things contribute to inflation guess what when the cost of diesel goes up when the cost of gasoline goes up guess what when things are being moved around by truck by plane by ship we've got the straight of Hormuz that there's been all sorts of drama over there when you have all of these different pressure points energy wise where goods are being delivered to all over our country and we've got a very large country right we import not just from other countries but from other states we send things around other states and that when it costs you know when the cost of gasoline goes up dramatically that money has to be paid somewhere in terms of when we're moving stuff around from one location to another from store to store like someone's got to bear that cost guess who bears that cost it's the consumer at the end of the day the people buying those goods end up enduring that cost and footing that Bill and so when you have that happen then that means that the cost of those goods go up and that is inflation okay here's the unfortunate thing about inflation people talk about prices going down that's very very rare that that nominal prices on goods or services go down right we see gasoline at some point will most likely come back down okay that's an exception but will the cost of coffee go back down will the cost of beef go back down will the cost of name whatever it is that has seen a tremendous amount of inflation recent years you can pick whatever good is out there and the odds are that the price of those things is not going to come down there will be exceptions but when we talk about inflation coming down that simply means that the rate at which things get more expensive is slowing that doesn't necessarily mean prices are coming down so you need to understand all of that to understand how this all affects mortgage rates all right so let's get to the mortgage rate situation here's the thing that I find that a lot of people don't fully understand the fact I didn't understand it for much of my career as a Realtor I've been a realtor for over a decade now and for a majority of that time I didn't fully understand this mortgage rates tend to track the bond market specifically the 10 year yield okay the 10 year Treasury yield that's essentially government debt that you can buy and make a rate of return on okay you know it used to be back in the day when we had a war they would issue savings bonds okay it's a similar kind of concept except there there's you know if you have any sort of a a generalized portfolio look at say that you have a 4 O 1 k or an IRA or whatever you have government bonds most likely as a fraction as a part of that portfolio that you have and the reason is that they are they don't bring you as much year over year it's not going to be typically in in any given year as much of a of a rate of return as just investing in the stock market would but it is stability right it is considered that our government will not default on the debt payments that it's making okay and so those bonds become a part of a portfolio in order to balance it out you've got the high risk you know if you're if you're investing in a bunch of AI stocks or if your portfolio has a bunch of AI stocks that it's invested in that's high risk right the those may boom or they may bust whereas if you invest in in government bonds then the thinking is well unless the entire United States fails you're going to get that money back in some way shape or form and it's not going to be negative for you whereas the stock market could very well be negative one year or multiple years in a row and so what happens is when people buy more Treasury bonds t bills when they buy more of them then the rate at which they pay out such as the 10 year yield comes down and when more and that's simple supply and demand right you're there's more buyers for the government debt so the government's not offering as high of a rate of return whereas if there are more sellers people are selling those Treasury bonds and not as many people buying then the rate goes up right they want more people to buy them so the government is now willing to pay more in order to in order to get more people to buy our debt as a nation okay where the Federal Reserve factors into all of this is they set overnight lending rates right the Fed funds rate has nothing to do with these bonds the rate of you know like right now I'm staring at the ten year treasury rate right now is 4.50 2% okay the Federal Reserve doesn't set that the Federal Reserve sets overnight lending rates between banks overnight a lot of people don't think about this but they need a place to store their money and the Federal Reserve offers a functionally again I'm oversimplifying things but basically a marketplace whereby they can do that and basically keep the bank's money safe and still making a rate of return and that's what the Fed funds rate is well the Fed funds rate does indirectly influence these different bond yields because the at the end of the day you're as if you're an investor you're looking at okay where how can I get the highest rate possible right what's the what's the highest rate possible and often times that gets reflected in the 10 year yield now here's where sometimes the Fed funds rate can stay the same but the 10 year yield will differ and bond yields as a whole will differ it's when the market determines that the Federal Reserve is behind in the game okay and so we've seen this happen a few times we've seen it happen and basically what the bond market is looking at is a few things they're looking at inflation they're looking at jobless claims and they're looking at the broader economy those are loosely speaking the main things that they're looking at to determine OK is the Fed behind or in front of all of this and so if they feel like the Federal Reserve is behind from the standpoint of well actually the labor market is getting weaker the and inflation is going down and all of that and maybe the economy is actually not very strong and maybe we're about to see stocks drop off fall off a cliff more people are gonna buy those safer assets like those Treasury bonds and they might say you know what we don't care that the Federal Reserve has a number out there that indicates that the economy is strong we're looking at the data and we feel like the Federal Reserve is behind on the flip side when we had last week that inflation print that came in super hot the bond market responded whoa The Federal Reserve is behind in a bad way they've got rates too low and so the bond market they saw those inflation numbers well guess what typically high inflation for a variety of reasons that means people are still buying people are still selling things are still theoretically hot in the economy that means that stocks theoretically should do well that's not investment advice this is just general what you hear people say and so well why do I want to invest in the bond market offering 4.5% when I can get stocks that might get 12 15 20% this year maybe more and so that's the calculus that that investors are doing at the end of the day when it comes to all of this and so that's exactly what we saw we saw last week when that inflation print came out we saw the Treasury bills the bond market the Treasury bond market ended up going up in terms of in terms of the yield and so it went all the way up to on the 19th it closed at 4.66% that is the highest it had been let's see trying to go back I have to pull back 5 years that is the highest that it had been since roughly December of 20 or no January of 2025 okay and so that is people saying listen inflation is taking off the labor market is not weakening the economy is not immediately at risk here so why are we going to invest the safe assets we're gonna take some chances here we're gonna take some chances as long as inflation is where it is now if inflation started to come down and jobless claims went up so more people are losing jobs and unable to replace those jobs that tells you the economy is weakening the stock market is gonna do poorly and now as a result of that people are going to invest in those safe haven assets like Treasury bonds okay hopefully you're tracking with me on all of that now the 10 year yield currently set at 4.5% is functionally what sets the 30 year fixed rate mortgage so again you have to think about this from the standpoint of an investor right and banks that issue mortgages are investors they need to consider basically how much rate of return they can get with the Fed funds rate versus how much that they can get issuing mortgages and then also bake in a little bit for uncertainty in the marketplace right uncertainty in the economy they'll kind of give themselves a little bit of a buffer for that and so that ultimately is what and again I'm being very simplistic in all of this alright talk to an economist if you want a much more specific explanation of all of this but basically that's why the when the bond market when the 10 year yield went up to 4.66% on the 19th no surprise that same day we got the highest 30 year fixed rate mortgage print per Mortgage News Daily which is an aggregator of 6.75% now since then both the 10 year yield has gone down like I said it's at 4 now it's currently at 4.5 you know there's active trading going on has come down a little bit today and the current 30 year fixed rate mortgage on Mortgage News Daily again May 26 2026 it's 6.61% so it's come down a little bit but that is still you know higher than what we had we went all the way down to 5.99% not that long ago right before the war with Iran and gas prices shooting up and all of that and then as soon as that happened we saw mortgage rates go up and so what does this mean for the future here's basically my very very basic explanation or prognostication as long as we have this war going on as long as gas prices are where they are mortgage rates are probably not going to get below 6.4% on Mortgage News Daily and it's gonna be you know we had them we did have them go down to like 6.29% in April over a month ago but gas prices have gone up since then they continue to go up and I think as long as that is happening and particularly while these inflation prints are so high which again that's all tied to gasoline this is all tied you are you seeing the connection it's this big domino effect and it's all tied it's tied primarily to tariffs and the war with Iran it's until we start to see something normalizing inflation coming down which I don't see that happening until gas prices come down or unless tariffs are revoked and honestly I think it's probably too late on the tariff side because there's always so much of that in the system I think we'd probably take six months like if the president revoked all the tariffs that he instituted on quote unquote Liberation Day I still think it would be about 6 months before we probably fully saw that change anything in terms of inflation prints now the war with Iran that is one that if we can find a a solution a resolution that that works with all parties with regard to that war that could be a very quick going back to the norm now I say very quick it still takes a while for inflation and all of these different like CPI PCE these different metrics of inflation it takes a while for us to get that data right they don't publish it daily it's published usually monthly and so we wouldn't know right away that inflation is going down but what would happen is the market investors would start to make the Assumption right investors are always trying to predict what's going to happen that's how you make money right you don't make money by seeing what happened you know if I'm investing in the stock market do you what do you wanna do you wanna hit on the next big thing or do you want to invest in in the thing that is already super inflated you wanna hit on the next big thing so that's what investors are always trying to do so as soon as there is something that happens that makes investors think okay inflation or the job market is going in one direction or the other they're going to then respond in kind okay and they're not waiting for the Federal Reserve to do anything or to say anything and if they disagree with the Federal Reserve then these rates that we're talking about are not going to change anyway now what does change which I've already talked about on the show is that adjustable rate mortgages and home equity lines of credit are tied to what the Federal Reserve does very directly okay and so if the Federal Reserve were to increase or decrease rates we would see adjustable rate mortgages follow accordingly with what the Federal Reserve is doing either up or down at the moment we don't know what exactly is going through the new Fed chair's head Kevin Warsh but we do know that he's already starting with a difficult situation obviously the president wants him to reduce rates that affects a lot more than just mortgage rates it's not you know the president's not super concerned about mortgage rates he's aware of them he he's talked about them but that's really not a super high priority for him but he does want rates to go down for a lot of reasons mortgage rates being one of them and so he made it very clear he wants Kevin Warsh to reduce rates the problem is that Kevin Warsh like he can set the Fed agenda but he can't unilaterally say rates are going down he can say we should reduce rates but he's got a committee that has to vote on that and unfortunately in my personal opinion Kevin Warsh was not the right person to be nominated for that position in order to convince that Federal Reserve Committee of voting members to do anything he does not he's not considered a particularly credible Fed chair I'm not gonna get into all the politics of that but you can certainly do your own research and look into that there is a Fed governor Waller who the president was seriously considering to put into the Fed chair and unfortunately in my opinion I felt like that would have been the best person he already had rapport with the Federal Reserve voting members unfortunately that the president for whatever reason I looked over him and chose Kevin Warsh instead and so now Kevin Warsh has this uphill battle on two fronts he's got both the uphill battle of in terms uphill in terms of reducing rates he's got the uphill battle of there's no justification for reducing rates like he should not there have been times I've come on this show and said the Federal Reserve should reduce rates not right now not with the inflation prints the way it is not with job the you know the job market the employment market being the way it is he shouldn't honestly he may need to increase rates and that's what the bond market is pricing in the bond market is assuming that there will be a rate increase sooner than later so sorry I'm getting a random call coming through into my headphones even though very frustrating I tried to silence every single thing on my phone and on my Mac and I will still have things come through in here I don't think that you guys can hear that but anyway that's neither here nor there but Kevin Warsh has the issue of the economic data the inflation data all of that says don't reduce rates but on top of that let's say that that were to change and the economic data were to get kind of nebulous and it's like well maybe there's justification for reducing rates now he has to convince the members of the Federal Reserve to do that when he doesn't really have credibility with them and this is well known and so we are really not in a great situation with all of that and so at the end of the day it's gonna come down to what the bond market thinks should happen and the bond market because those are investors who care about their rate of return they're going to do again what they think the direction of the economy is going and at the moment they think the economy is on the hotter side of things with inflation all of that and that when they feel that way that means mortgage rates go up bond yields go up mortgage rates go up etcetera and it's hard to see that dynamic changing anytime soon unless we can wrap up this war with Iran and so we all hope for that not I don't hope that we wrap up the war for Iran because of mortgage rates I hope for I mean that's like very low on the list that's like the 50th thing on the list 50th reason why I'd like them to wrap up that war and not I'm not trying to get political on here I think we all would like that war to be wrapped up like war is never a good thing for anyone people lose their lives people lose their livelihoods their homes get bombed infrastructure gets destroyed like there's so many terrible things that happen in a war and we need that we it needs to end obviously needs to end in in the right way not just pulling out and destabilizing an area and then you know everything goes crazy over there we I'm not suggesting that I'm just saying all you and again very being very simplistic here it would be better to not have war than to have war and if they can find a way to wrap it up and to keep you know everything safe and to keep the peace between all these different countries over there in the Middle East that would be the ideal scenario how quickly or feasibly they can do that I don't have those connections obviously so I have no idea and as such I am assuming the worst here I am assuming that we're going to continue to be in this environment where probably mortgage rates are going to be higher than they've been in a little bit of time because I it's hard for me to see the off ramp for the war in Iran at this very moment if that changes tomorrow and when I release this podcast everything I've said is out of date nobody will be happier than me to have a podcast go out this out of date I really really hope that happens because that would be better for everyone but there you go I hope you guys enjoyed that not a Greenville specific episode but I felt like we needed to cover this topic because I keep getting questions on it I keep seeing misinformation online and it turns out this is something that I watch and track very closely and so I felt like I would share that information with you guys if you have any questions let me know my contact info is in the show notes and of course if you like this content please like rate review subscribe all of those good things use me as your realtor I would love that I'm I said I'm busy I'm not too busy to pick up another client if you need a help home sold if you need help buying a home please let me know I'd love to help you out with that so thank you guys so much for watching and listening we'll talk again next week I I've got at some point coming up soon it might be this upcoming week I need to look at my schedule I need to do a a recapping of my bold predictions for 2026 a mid year recap to see how I'm doing so that'll be coming up pretty soon I always enjoy that episode so please be on the lookout for that subscribe to the show to make sure you don't miss it and I'll talk to you guys again next time!