Don't Get Comfortable - Mortgage Rates Could Very Well Rise in 2024

Rental Property Investor · Denver, CO · Member since 2014 · 2k+ posts · 6k+ votes

Mortgage rates are about 6.9% right now, and have been trending downwards for 2H 2023.

There's a poll going on in these forums, and most of you believe that mortgage rates will decrease in 2024.

I'm not betting on it. While the Fed has signalled that it will cut rates three times in 2024, and I believe them, any projections for what will happen after that are a coin flip.

There's are plenty of good reasons to believe that there will be a nasty (er?) recession, and every reason to believe that the Fed will get their "soft landing" as they define it. One might result in rates dropping quickly. The other might not.

Right now, the yield curve is still inverted, and it has been close to flat or inverted for nearly two years. It's the longest inversion since 1980. That's important.

Normally, the 10-year treasury is ~150 bps higher than the Federal funds rate - currently about 5.3%. That implies a 10-year treasury rate of 6.8%, vs the current 3.95%.

If the Fed lowers rates, as widely anticipated, in 3 times 2024, by 25 bps each, perhaps with one 50 bps decrease if we are being optimistic, the federal funds rate will drop to 4.3%-4.6%.

In a normalized yield curve environment, with a 150 bps spread between the 10 year and the federal funds rate, that puts your 10-year at 5.8% - 6.1%. There is no historical reason why this can't happen, despite the hammering on by certain folks about how 2024 is an election year, and how the US Federal Debt can't handle interest rates being held this high. Those are points, but in my opinion, secondary and irrelevant to the Fed's charter of controlling inflation.

And, if rates stabilize and the economy doesn't crash or change much from where it is today, I think it could very well happen.

Why all this talk about treasuries and the yield curve? Well, because mortgage rates typically run at a spread with the 10 year treasury - again, about 150 bps. Right now, that spread is unusually high - about 280 bps. Probably because the mortgage industry agrees with my analysis above.

In 2024, I think that the most probable outcome is this:

- The Federal Funds Rate drops to ~4.5%. The 10-year treasury approaches, but does not quite hit, 6%.

Mortgage rates normalize to the 150 bps+ the 10-year treasury, approaching, but not quite hitting 7.5%.

Anyways, that's my complicated logic. It changes little for investors and homebuyers. It's a modest increase from where we are today, and the headline from my analysis is that it's likely that mortgage rates could climb a little, but will likely stay close to flat.

My analysis is probably wrong and there are plenty of ways that it can go in 2024. Would love thoughts and feedback, and of course completely agree in advance with the inevitable feedback about the futility of trying to predict interest rates in the first place.

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JD MartinBusiness Member

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Rock Star Extraordinaire · Northeast, TN · Member since 2015 · 10k+ posts · 16k+ votes

Rates are definitely coming down and significantly. I don't know how long that's going to take but it's going to happen, really because it's the only short-term solution for the wildfire that's going to happen if they don't come down.

- Residential real estate SFH market is frozen solid. No inventory because no one can/will give up their existing rates, no sales because no one can afford high prices and high(er) rates.

- Ancillary businesses to real estate market, especially SFHs, are getting hammered. Realtors, lenders, furniture sellers. Virtually every market related to the movement of housing has had significant layoffs in the past two years.

- MFH adjustable notes, which comprises a good proportion of all MFH lending, is getting ready to reset. Remember 2007 when individual SFH ARMs started resetting? This will be a tidal wave of defaults because most of these apartment dwellers are already maxing out on rent at 40-50% of their pay. There's nowhere to raise rents to in order to make up the difference. And there's no getting out when you're already dealing with rock bottom cap rates. Who is going to be willing to accept such paltry returns when you can go get US backed issues in the 5% range?

- REITs and other similar investments, same issue except they will be screwing their banks AND their investors. Already some well-known ones have paused or cancelled dividends or issued capital calls for large property tax increases, deferred capex they thought they would avoid by selling out before it hit, and so forth. There is a real risk that you'll see private unregulated REITs failing altogether.

Bottom line is cheap, easy money for so long has created a massive addiction. We shouldn't pretend there won't be a vicious withdrawal. I personally don't think the Fed will allow the withdrawal to happen, because it will be ugly, painful, and destabilizing. I'm willing to bet they'd rather give us another little shot of money smack and try to wean us off more gradually. They completely crapped the bed when they panicked and dropped rates to nothing at the beginning of COVID, when rates were already plenty low, and they created even more junkies than existed at that point. Now they're either going to have to try to wean us back to sobriety gradually or allow the detox to begin.

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Chris SeveneyBusiness Member
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Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes
2y
Quote from @Scott Trench:

Mortgage rates are about 6.9% right now, and have been trending downwards for 2H 2023.

There's a poll going on in these forums, and most of you believe that mortgage rates will decrease in 2024.

I'm not betting on it. While the Fed has signalled that it will cut rates three times in 2024, and I believe them, any projections for what will happen after that are a coin flip.

There's are plenty of good reasons to believe that there will be a nasty (er?) recession, and every reason to believe that the Fed will get their "soft landing" as they define it. One might result in rates dropping quickly. The other might not.

Right now, the yield curve is still inverted, and it has been close to flat or inverted for nearly two years. It's the longest inversion since 1980. That's important.

Normally, the 10-year treasury is ~150 bps higher than the Federal funds rate - currently about 5.3%. That implies a 10-year treasury rate of 6.8%, vs the current 3.95%.

If the Fed lowers rates, as widely anticipated, in 3 times 2024, by 25 bps each, perhaps with one 50 bps decrease if we are being optimistic, the federal funds rate will drop to 4.3%-4.6%.

In a normalized yield curve environment, with a 150 bps spread between the 10 year and the federal funds rate, that puts your 10-year at 5.8% - 6.1%. There is no historical reason why this can't happen, despite the hammering on by certain folks about how 2024 is an election year, and how the US Federal Debt can't handle interest rates being held this high. Those are points, but in my opinion, secondary and irrelevant to the Fed's charter of controlling inflation.

And, if rates stabilize and the economy doesn't crash or change much from where it is today, I think it could very well happen.

Why all this talk about treasuries and the yield curve? Well, because mortgage rates typically run at a spread with the 10 year treasury - again, about 150 bps. Right now, that spread is unusually high - about 280 bps. Probably because the mortgage industry agrees with my analysis above.

In 2024, I think that the most probable outcome is this:

- The Federal Funds Rate drops to ~4.5%. The 10-year treasury approaches, but does not quite hit, 6%.

Mortgage rates normalize to the 150 bps+ the 10-year treasury, approaching, but not quite hitting 7.5%.

Anyways, that's my complicated logic. It changes little for investors and homebuyers. It's a modest increase from where we are today, and the headline from my analysis is that it's likely that mortgage rates could climb a little, but will likely stay close to flat.

My analysis is probably wrong and there are plenty of ways that it can go in 2024. Would love thoughts and feedback, and of course completely agree in advance with the inevitable feedback about the futility of trying to predict interest rates in the first place.

great thought put into this. I think what this does show is "who the hell knows". I am in the team "interest rates remain / go down slightly" based on exactly what you mention on the 10 year and fed rates. Also when you look back in history when fed and 10 year are in this area, where are rates, which are in that zone you mention
I see people who believe they will go back below 5%, if that does happen then the economy is most likely in a very hard landing which its great that rates are low but the values of your assets also have most likely taken a beating.
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Jack Seiden
Real Estate Agent · Washington DC · Member since 2016 · 847 posts · 654 votes
2y
Quote from @Scott Trench:

Mortgage rates are about 6.9% right now, and have been trending downwards for 2H 2023.

There's a poll going on in these forums, and most of you believe that mortgage rates will decrease in 2024.

I'm not betting on it. While the Fed has signalled that it will cut rates three times in 2024, and I believe them, any projections for what will happen after that are a coin flip.

There's are plenty of good reasons to believe that there will be a nasty (er?) recession, and every reason to believe that the Fed will get their "soft landing" as they define it. One might result in rates dropping quickly. The other might not.

Right now, the yield curve is still inverted, and it has been close to flat or inverted for nearly two years. It's the longest inversion since 1980. That's important.

Normally, the 10-year treasury is ~150 bps higher than the Federal funds rate - currently about 5.3%. That implies a 10-year treasury rate of 6.8%, vs the current 3.95%.

If the Fed lowers rates, as widely anticipated, in 3 times 2024, by 25 bps each, perhaps with one 50 bps decrease if we are being optimistic, the federal funds rate will drop to 4.3%-4.6%.

In a normalized yield curve environment, with a 150 bps spread between the 10 year and the federal funds rate, that puts your 10-year at 5.8% - 6.1%. There is no historical reason why this can't happen, despite the hammering on by certain folks about how 2024 is an election year, and how the US Federal Debt can't handle interest rates being held this high. Those are points, but in my opinion, secondary and irrelevant to the Fed's charter of controlling inflation.

And, if rates stabilize and the economy doesn't crash or change much from where it is today, I think it could very well happen.

Why all this talk about treasuries and the yield curve? Well, because mortgage rates typically run at a spread with the 10 year treasury - again, about 150 bps. Right now, that spread is unusually high - about 280 bps. Probably because the mortgage industry agrees with my analysis above.

In 2024, I think that the most probable outcome is this:

- The Federal Funds Rate drops to ~4.5%. The 10-year treasury approaches, but does not quite hit, 6%.

Mortgage rates normalize to the 150 bps+ the 10-year treasury, approaching, but not quite hitting 7.5%.

Anyways, that's my complicated logic. It changes little for investors and homebuyers. It's a modest increase from where we are today, and the headline from my analysis is that it's likely that mortgage rates could climb a little, but will likely stay close to flat.

My analysis is probably wrong and there are plenty of ways that it can go in 2024. Would love thoughts and feedback, and of course completely agree in advance with the inevitable feedback about the futility of trying to predict interest rates in the first place.

So I’ve been with you this whole time Scott, that people were wildly underestimating how high rates could go & the Fed’s willingness to get there, but I think this year is different, pretty much every fed speaker has talked about “real rates” and I think almost it’s almost certain that inflation is well below the 5% or so it averaged earlier this year (I do think people are underestimating a resurge in inflation in the 2nd half of 2024 but even than I think it would be mid 3’s at the absolute worst) and finally I do think the fed kind of targets the 10 year, while I don’t believe any of the nonsense about an election year or the fed bailing out the stock market, I think it was pretty clear the fed was getting uncomfortable when the 10 year hit 5% earlier this year, given that inflation has already moderated I think it would be unacceptable the have the 10 year at 6% and I think deep down Powell is aware of the debt crises that would intail. I think rates will actually have a pretty narrow range in the 6-7% range most of the year, I also think many people are overestimating the MBs spreads narrowing, so much of the MBs spreads being so low this last decade was q/e and banks being relatively flush. With liquidity drying up and q/e over I see no reason to except spreads to meaningfly narrow. Now that I’ve made an incredibly detailed and well thought out prediction I can only assume rates will either be 3% or 20% because that seems to be how theses things go 😂
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Karl B.
Rental Property Investor · Erie, PA · Member since 2015 · 1k+ posts · 2k+ votes
2y
It's wild that CD rates have dropped almost a point while the Fed hasn't even had a chance to move rates. Noticing this, it appears everyone is confident rates will drop.

Of course, inflation will remain higher than 2% so we'll see if the Fed is going to keep raising until they get to their 2% target or if they'll stand pat (my gut says the latter).

The economy isn't as good as they claim as savings is down and credit card debt is way up.
The interest rate hikes have largely done what they were supposed to do - slow economic growth.
I think the Fed will stand pat at the next meeting and perhaps the next after that but of course there are outside factors such as whether or not our clown government prints more money and injects it into the system, which would of course stoke inflation yet again.
0 Reply
V.G JasonPro Member
Investor · Member since 2022 · 3k+ posts · 3k+ votes
2y
Quote from @Chris Seveney:

Quote from @Scott Trench:

Mortgage rates are about 6.9% right now, and have been trending downwards for 2H 2023.

There's a poll going on in these forums, and most of you believe that mortgage rates will decrease in 2024.

I'm not betting on it. While the Fed has signalled that it will cut rates three times in 2024, and I believe them, any projections for what will happen after that are a coin flip.

There's are plenty of good reasons to believe that there will be a nasty (er?) recession, and every reason to believe that the Fed will get their "soft landing" as they define it. One might result in rates dropping quickly. The other might not.

Right now, the yield curve is still inverted, and it has been close to flat or inverted for nearly two years. It's the longest inversion since 1980. That's important.

Normally, the 10-year treasury is ~150 bps higher than the Federal funds rate - currently about 5.3%. That implies a 10-year treasury rate of 6.8%, vs the current 3.95%.

If the Fed lowers rates, as widely anticipated, in 3 times 2024, by 25 bps each, perhaps with one 50 bps decrease if we are being optimistic, the federal funds rate will drop to 4.3%-4.6%.

In a normalized yield curve environment, with a 150 bps spread between the 10 year and the federal funds rate, that puts your 10-year at 5.8% - 6.1%. There is no historical reason why this can't happen, despite the hammering on by certain folks about how 2024 is an election year, and how the US Federal Debt can't handle interest rates being held this high. Those are points, but in my opinion, secondary and irrelevant to the Fed's charter of controlling inflation.

And, if rates stabilize and the economy doesn't crash or change much from where it is today, I think it could very well happen.

Why all this talk about treasuries and the yield curve? Well, because mortgage rates typically run at a spread with the 10 year treasury - again, about 150 bps. Right now, that spread is unusually high - about 280 bps. Probably because the mortgage industry agrees with my analysis above.

In 2024, I think that the most probable outcome is this:

- The Federal Funds Rate drops to ~4.5%. The 10-year treasury approaches, but does not quite hit, 6%.

Mortgage rates normalize to the 150 bps+ the 10-year treasury, approaching, but not quite hitting 7.5%.

Anyways, that's my complicated logic. It changes little for investors and homebuyers. It's a modest increase from where we are today, and the headline from my analysis is that it's likely that mortgage rates could climb a little, but will likely stay close to flat.

My analysis is probably wrong and there are plenty of ways that it can go in 2024. Would love thoughts and feedback, and of course completely agree in advance with the inevitable feedback about the futility of trying to predict interest rates in the first place.

great thought put into this. I think what this does show is "who the hell knows". I am in the team "interest rates remain / go down slightly" based on exactly what you mention on the 10 year and fed rates. Also when you look back in history when fed and 10 year are in this area, where are rates, which are in that zone you mention
I see people who believe they will go back below 5%, if that does happen then the economy is most likely in a very hard landing which its great that rates are low but the values of your assets also have most likely taken a beating.
I am in the bold camp. I do not believe the economy is as rosy as it appears, so the rates can't stay the same and trend up/down a little. Fundamentally, a lot of these businesses cannot operate with these rates. For that, we'll get a punch and have to move rates. Assets will lose value once the first (little) pivot happens.
0 Reply
V.G JasonPro Member
Investor · Member since 2022 · 3k+ posts · 3k+ votes
2y
Quote from @Karl B.:

It's wild that CD rates have dropped almost a point while the Fed hasn't even had a chance to move rates. Noticing this, it appears everyone is confident rates will drop.

Of course, inflation will remain higher than 2% so we'll see if the Fed is going to keep raising until they get to their 2% target or if they'll stand pat (my gut says the latter).

The economy isn't as good as they claim as savings is down and credit card debt is way up.
The interest rate hikes have largely done what they were supposed to do - slow economic growth.
I think the Fed will stand pat at the next meeting and perhaps the next after that but of course there are outside factors such as whether or not our clown government prints more money and injects it into the system, which would of course stoke inflation yet again.
The inflation fight is no longer the agenda. It's the business debt cycle that is the agenda.

If we take too long to adjust for that we'll see exponentially higher bankruptcies and layoffs. Not a light tick up, a large tick. Cliff like fall for some companies, and harsh uptick in unemployment(real unemployment).
1 Reply
Carlos Ptriawan
Member since 2019 · 7k+ posts · 4k+ votes
2y
Quote from @V.G Jason:

Quote from @Karl B.:

It's wild that CD rates have dropped almost a point while the Fed hasn't even had a chance to move rates. Noticing this, it appears everyone is confident rates will drop.

Of course, inflation will remain higher than 2% so we'll see if the Fed is going to keep raising until they get to their 2% target or if they'll stand pat (my gut says the latter).

The economy isn't as good as they claim as savings is down and credit card debt is way up.
The interest rate hikes have largely done what they were supposed to do - slow economic growth.
I think the Fed will stand pat at the next meeting and perhaps the next after that but of course there are outside factors such as whether or not our clown government prints more money and injects it into the system, which would of course stoke inflation yet again.
The inflation fight is no longer the agenda. It's the business debt cycle that is the agenda.

If we take too long to adjust for that we'll see exponentially higher bankruptcies and layoffs. Not a light tick up, a large tick. Cliff like fall for some companies, and harsh uptick in unemployment(real unemployment).

This is the point that most people doesn't get it even Jerome people I think too dumb to understand it. This rate is not just about speculation of rate anymore but most S&P company can't produce enough business to compensate with the Treasury yield.
Our S&P500 current earning yield is 4.7% only, that's the cost to make business. While 5Y Treasury is 5.3%. It's rather we bankrupt everything if we continue this permanently.
2 Reply
V.G JasonPro Member
Investor · Member since 2022 · 3k+ posts · 3k+ votes
2y
Quote from @Carlos Ptriawan:

Quote from @V.G Jason:

Quote from @Karl B.:

It's wild that CD rates have dropped almost a point while the Fed hasn't even had a chance to move rates. Noticing this, it appears everyone is confident rates will drop.

Of course, inflation will remain higher than 2% so we'll see if the Fed is going to keep raising until they get to their 2% target or if they'll stand pat (my gut says the latter).

The economy isn't as good as they claim as savings is down and credit card debt is way up.
The interest rate hikes have largely done what they were supposed to do - slow economic growth.
I think the Fed will stand pat at the next meeting and perhaps the next after that but of course there are outside factors such as whether or not our clown government prints more money and injects it into the system, which would of course stoke inflation yet again.
The inflation fight is no longer the agenda. It's the business debt cycle that is the agenda.

If we take too long to adjust for that we'll see exponentially higher bankruptcies and layoffs. Not a light tick up, a large tick. Cliff like fall for some companies, and harsh uptick in unemployment(real unemployment).

This is the point that most people doesn't get it even Jerome people I think too dumb to understand it. This rate is not just about speculation of rate anymore but most S&P company can't produce enough business to compensate with the Treasury yield.
Our S&P500 current earning yield is 4.7% only, that's the cost to make business. While 5Y Treasury is 5.3%. It's rather we bankrupt everything if we continue this permanently.

Jerome's change of tune last meeting tells me he understands this. His 3 rate cuts are wrong, or the amount of cuts per will be wrong. One of the two, if not both. We'll circle back on this thread in a year to see. By 03/2025 we need to have Fed Funds 3.75 or less, or we'll need stimulus.
0 Reply
Carlos Ptriawan
Member since 2019 · 7k+ posts · 4k+ votes
2y
Quote from @V.G Jason:

Quote from @Carlos Ptriawan:

Quote from @V.G Jason:

Quote from @Karl B.:

It's wild that CD rates have dropped almost a point while the Fed hasn't even had a chance to move rates. Noticing this, it appears everyone is confident rates will drop.

Of course, inflation will remain higher than 2% so we'll see if the Fed is going to keep raising until they get to their 2% target or if they'll stand pat (my gut says the latter).

The economy isn't as good as they claim as savings is down and credit card debt is way up.
The interest rate hikes have largely done what they were supposed to do - slow economic growth.
I think the Fed will stand pat at the next meeting and perhaps the next after that but of course there are outside factors such as whether or not our clown government prints more money and injects it into the system, which would of course stoke inflation yet again.
The inflation fight is no longer the agenda. It's the business debt cycle that is the agenda.

If we take too long to adjust for that we'll see exponentially higher bankruptcies and layoffs. Not a light tick up, a large tick. Cliff like fall for some companies, and harsh uptick in unemployment(real unemployment).

This is the point that most people doesn't get it even Jerome people I think too dumb to understand it. This rate is not just about speculation of rate anymore but most S&P company can't produce enough business to compensate with the Treasury yield.
Our S&P500 current earning yield is 4.7% only, that's the cost to make business. While 5Y Treasury is 5.3%. It's rather we bankrupt everything if we continue this permanently.

Jerome's change of tune last meeting tells me he understands this. His 3 rate cuts are wrong, or the amount of cuts per will be wrong. One of the two, if not both. We'll circle back on this thread in a year to see. By 03/2025 we need to have Fed Funds 3.75 or less, or we'll need stimulus.

another Fed Chairman yesterday said they should slow down the asset selling program. She was one of the Dallas Fed Risk Management side is I remember correctly. If Fed follows her suggestion then it's possible for MBS spread to be more normalized.
Btw this week big announcement comes from second biggest California Pension Fund that has liquidity crisis, they need to borrow 30 billion if not selling asset for cheap.
0 Reply
Jack Seiden
Real Estate Agent · Washington DC · Member since 2016 · 847 posts · 654 votes
2y
Quote from @V.G Jason:

Quote from @Carlos Ptriawan:

Quote from @V.G Jason:

Quote from @Karl B.:

It's wild that CD rates have dropped almost a point while the Fed hasn't even had a chance to move rates. Noticing this, it appears everyone is confident rates will drop.

Of course, inflation will remain higher than 2% so we'll see if the Fed is going to keep raising until they get to their 2% target or if they'll stand pat (my gut says the latter).

The economy isn't as good as they claim as savings is down and credit card debt is way up.
The interest rate hikes have largely done what they were supposed to do - slow economic growth.
I think the Fed will stand pat at the next meeting and perhaps the next after that but of course there are outside factors such as whether or not our clown government prints more money and injects it into the system, which would of course stoke inflation yet again.
The inflation fight is no longer the agenda. It's the business debt cycle that is the agenda.

If we take too long to adjust for that we'll see exponentially higher bankruptcies and layoffs. Not a light tick up, a large tick. Cliff like fall for some companies, and harsh uptick in unemployment(real unemployment).

This is the point that most people doesn't get it even Jerome people I think too dumb to understand it. This rate is not just about speculation of rate anymore but most S&P company can't produce enough business to compensate with the Treasury yield.
Our S&P500 current earning yield is 4.7% only, that's the cost to make business. While 5Y Treasury is 5.3%. It's rather we bankrupt everything if we continue this permanently.

Jerome's change of tune last meeting tells me he understands this. His 3 rate cuts are wrong, or the amount of cuts per will be wrong. One of the two, if not both. We'll circle back on this thread in a year to see. By 03/2025 we need to have Fed Funds 3.75 or less, or we'll need stimulus.

I actually think the amount of cuts exactly might not move the 10 year as much as people think, let’s say the only cut three times, by the time that becomes clear the market can just price in three cuts in 2025. I honestly think the core pce data is basically the driver of the 10 year from here on out, it’s pretty clear just based on the rent lag data that we will have really good prints though mid year, to me the question is back half of ‘24 do we get some bounce on the goods side (we’ve had outright deflation in many goods categories so just getting back to normal would be inflationary) and eventually & this is probably a 25 and beyond issue do rents start to turn positive once the new supply starts to absorbed. But I just can’t see any of that actually moving the 10 year much higher than it is now because even all of that probably still has inflation lower than any point (save for the last few months) since 2021. But in either case it’s the lower inflation driving the bond market expectations of future fed cuts, more than the actual fed cuts themselves .

3 Reply
Carlos Ptriawan
Member since 2019 · 7k+ posts · 4k+ votes
2y
Quote from @Jack Seiden:

Quote from @V.G Jason:

Quote from @Carlos Ptriawan:

Quote from @V.G Jason:

Quote from @Karl B.:

It's wild that CD rates have dropped almost a point while the Fed hasn't even had a chance to move rates. Noticing this, it appears everyone is confident rates will drop.

Of course, inflation will remain higher than 2% so we'll see if the Fed is going to keep raising until they get to their 2% target or if they'll stand pat (my gut says the latter).

The economy isn't as good as they claim as savings is down and credit card debt is way up.
The interest rate hikes have largely done what they were supposed to do - slow economic growth.
I think the Fed will stand pat at the next meeting and perhaps the next after that but of course there are outside factors such as whether or not our clown government prints more money and injects it into the system, which would of course stoke inflation yet again.
The inflation fight is no longer the agenda. It's the business debt cycle that is the agenda.

If we take too long to adjust for that we'll see exponentially higher bankruptcies and layoffs. Not a light tick up, a large tick. Cliff like fall for some companies, and harsh uptick in unemployment(real unemployment).

This is the point that most people doesn't get it even Jerome people I think too dumb to understand it. This rate is not just about speculation of rate anymore but most S&P company can't produce enough business to compensate with the Treasury yield.
Our S&P500 current earning yield is 4.7% only, that's the cost to make business. While 5Y Treasury is 5.3%. It's rather we bankrupt everything if we continue this permanently.

Jerome's change of tune last meeting tells me he understands this. His 3 rate cuts are wrong, or the amount of cuts per will be wrong. One of the two, if not both. We'll circle back on this thread in a year to see. By 03/2025 we need to have Fed Funds 3.75 or less, or we'll need stimulus.

I actually think the amount of cuts exactly might not move the 10 year as much as people think, let’s say the only cut three times, by the time that becomes clear the market can just price in three cuts in 2025. I honestly think the core pce data is basically the driver of the 10 year from here on out, it’s pretty clear just based on the rent lag data that we will have really good prints though mid year, to me the question is back half of ‘24 do we get some bounce on the goods side (we’ve had outright deflation in many goods categories so just getting back to normal would be inflationary) and eventually & this is probably a 25 and beyond issue do rents start to turn positive once the new supply starts to absorbed. But I just can’t see any of that actually moving the 10 year much higher than it is now because even all of that probably still has inflation lower than any point (save for the last few months) since 2021. But in either case it’s the lower inflation driving the bond market expectations of future fed cuts, more than the actual fed cuts themselves .

The CPE is always the key driver from long time, in the past the spread between the two was like 25-50 bps ; now it is 200bps. By doing this the Fed is basically killing the main street economy just to drive down fake inflation. From forward curve it seems they would normalize the spread into 25-50bps still. 30YFRM between five to six is here to stay.
1 Reply
Steve Vaughan
Rental Property Investor · East Wenatchee, WA · Member since 2014 · 10k+ posts · 16k+ votes
2y
You had me at 6% 10yr treasury yield. #10xNapping
1 Reply
Jack Seiden
Real Estate Agent · Washington DC · Member since 2016 · 847 posts · 654 votes
2y
Quote from @Carlos Ptriawan:

Quote from @Jack Seiden:

Quote from @V.G Jason:

Quote from @Carlos Ptriawan:

Quote from @V.G Jason:

Quote from @Karl B.:

It's wild that CD rates have dropped almost a point while the Fed hasn't even had a chance to move rates. Noticing this, it appears everyone is confident rates will drop.

Of course, inflation will remain higher than 2% so we'll see if the Fed is going to keep raising until they get to their 2% target or if they'll stand pat (my gut says the latter).

The economy isn't as good as they claim as savings is down and credit card debt is way up.
The interest rate hikes have largely done what they were supposed to do - slow economic growth.
I think the Fed will stand pat at the next meeting and perhaps the next after that but of course there are outside factors such as whether or not our clown government prints more money and injects it into the system, which would of course stoke inflation yet again.
The inflation fight is no longer the agenda. It's the business debt cycle that is the agenda.

If we take too long to adjust for that we'll see exponentially higher bankruptcies and layoffs. Not a light tick up, a large tick. Cliff like fall for some companies, and harsh uptick in unemployment(real unemployment).

This is the point that most people doesn't get it even Jerome people I think too dumb to understand it. This rate is not just about speculation of rate anymore but most S&P company can't produce enough business to compensate with the Treasury yield.
Our S&P500 current earning yield is 4.7% only, that's the cost to make business. While 5Y Treasury is 5.3%. It's rather we bankrupt everything if we continue this permanently.

Jerome's change of tune last meeting tells me he understands this. His 3 rate cuts are wrong, or the amount of cuts per will be wrong. One of the two, if not both. We'll circle back on this thread in a year to see. By 03/2025 we need to have Fed Funds 3.75 or less, or we'll need stimulus.

I actually think the amount of cuts exactly might not move the 10 year as much as people think, let’s say the only cut three times, by the time that becomes clear the market can just price in three cuts in 2025. I honestly think the core pce data is basically the driver of the 10 year from here on out, it’s pretty clear just based on the rent lag data that we will have really good prints though mid year, to me the question is back half of ‘24 do we get some bounce on the goods side (we’ve had outright deflation in many goods categories so just getting back to normal would be inflationary) and eventually & this is probably a 25 and beyond issue do rents start to turn positive once the new supply starts to absorbed. But I just can’t see any of that actually moving the 10 year much higher than it is now because even all of that probably still has inflation lower than any point (save for the last few months) since 2021. But in either case it’s the lower inflation driving the bond market expectations of future fed cuts, more than the actual fed cuts themselves .

The CPE is always the key driver from long time, in the past the spread between the two was like 25-50 bps ; now it is 200bps. By doing this the Fed is basically killing the main street economy just to drive down fake inflation. From forward curve it seems they would normalize the spread into 25-50bps still. 30YFRM between five to six is here to stay.

I’m actually possibly the final fed defender, I think overall Powell has done a fantastic job, kept the ecconmy afloat during Covid & yes we paid for that with inflation but I think the alternative scenario’s were just much worse, he probably should have hiked rates like 6 months earlier but regardless got inflation mostly under control, now he’s signaling a piviot and the economy still seems on fairly firm ground, even the mortgage rates which are slight beyond his control have been great, this last 18 months have definitely been extremely restrictive rate’s which the housing market absolutely needed to ring out the rampant speculation, seems like this year rates will be mildly restrictive which is what you want to avoid reheating the economy/housing market. And if we get rates in the mortgage in the mid 5’s over the next few years that will basically be neutral. I honestly don’t think Powell could have done any better over these crazy last 4 years, and honestly almost any other fed chair would have done significantly worse imo.
4 Reply
Carlos Ptriawan
Member since 2019 · 7k+ posts · 4k+ votes
2y
Quote from @Jack Seiden:

Quote from @Carlos Ptriawan:

Quote from @Jack Seiden:

Quote from @V.G Jason:

Quote from @Carlos Ptriawan:

Quote from @V.G Jason:

Quote from @Karl B.:

It's wild that CD rates have dropped almost a point while the Fed hasn't even had a chance to move rates. Noticing this, it appears everyone is confident rates will drop.

Of course, inflation will remain higher than 2% so we'll see if the Fed is going to keep raising until they get to their 2% target or if they'll stand pat (my gut says the latter).

The economy isn't as good as they claim as savings is down and credit card debt is way up.
The interest rate hikes have largely done what they were supposed to do - slow economic growth.
I think the Fed will stand pat at the next meeting and perhaps the next after that but of course there are outside factors such as whether or not our clown government prints more money and injects it into the system, which would of course stoke inflation yet again.
The inflation fight is no longer the agenda. It's the business debt cycle that is the agenda.

If we take too long to adjust for that we'll see exponentially higher bankruptcies and layoffs. Not a light tick up, a large tick. Cliff like fall for some companies, and harsh uptick in unemployment(real unemployment).

This is the point that most people doesn't get it even Jerome people I think too dumb to understand it. This rate is not just about speculation of rate anymore but most S&P company can't produce enough business to compensate with the Treasury yield.
Our S&P500 current earning yield is 4.7% only, that's the cost to make business. While 5Y Treasury is 5.3%. It's rather we bankrupt everything if we continue this permanently.

Jerome's change of tune last meeting tells me he understands this. His 3 rate cuts are wrong, or the amount of cuts per will be wrong. One of the two, if not both. We'll circle back on this thread in a year to see. By 03/2025 we need to have Fed Funds 3.75 or less, or we'll need stimulus.

I actually think the amount of cuts exactly might not move the 10 year as much as people think, let’s say the only cut three times, by the time that becomes clear the market can just price in three cuts in 2025. I honestly think the core pce data is basically the driver of the 10 year from here on out, it’s pretty clear just based on the rent lag data that we will have really good prints though mid year, to me the question is back half of ‘24 do we get some bounce on the goods side (we’ve had outright deflation in many goods categories so just getting back to normal would be inflationary) and eventually & this is probably a 25 and beyond issue do rents start to turn positive once the new supply starts to absorbed. But I just can’t see any of that actually moving the 10 year much higher than it is now because even all of that probably still has inflation lower than any point (save for the last few months) since 2021. But in either case it’s the lower inflation driving the bond market expectations of future fed cuts, more than the actual fed cuts themselves .

The CPE is always the key driver from long time, in the past the spread between the two was like 25-50 bps ; now it is 200bps. By doing this the Fed is basically killing the main street economy just to drive down fake inflation. From forward curve it seems they would normalize the spread into 25-50bps still. 30YFRM between five to six is here to stay.

I’m actually possibly the final fed defender, I think overall Powell has done a fantastic job, kept the ecconmy afloat during Covid & yes we paid for that with inflation but I think the alternative scenario’s were just much worse, he probably should have hiked rates like 6 months earlier but regardless got inflation mostly under control, now he’s signaling a piviot and the economy still seems on fairly firm ground, even the mortgage rates which are slight beyond his control have been great, this last 18 months have definitely been extremely restrictive rate’s which the housing market absolutely needed to ring out the rampant speculation, seems like this year rates will be mildly restrictive which is what you want to avoid reheating the economy/housing market. And if we get rates in the mortgage in the mid 5’s over the next few years that will basically be neutral. I honestly don’t think Powell could have done any better over these crazy last 4 years, and honestly almost any other fed chair would have done significantly worse imo.

We could just replace Fed with AI lol
0 Reply
V.G JasonPro Member
Investor · Member since 2022 · 3k+ posts · 3k+ votes
2y
Quote from @Jack Seiden:

Quote from @Carlos Ptriawan:

Quote from @Jack Seiden:

Quote from @V.G Jason:

Quote from @Carlos Ptriawan:

Quote from @V.G Jason:

Quote from @Karl B.:

It's wild that CD rates have dropped almost a point while the Fed hasn't even had a chance to move rates. Noticing this, it appears everyone is confident rates will drop.

Of course, inflation will remain higher than 2% so we'll see if the Fed is going to keep raising until they get to their 2% target or if they'll stand pat (my gut says the latter).

The economy isn't as good as they claim as savings is down and credit card debt is way up.
The interest rate hikes have largely done what they were supposed to do - slow economic growth.
I think the Fed will stand pat at the next meeting and perhaps the next after that but of course there are outside factors such as whether or not our clown government prints more money and injects it into the system, which would of course stoke inflation yet again.
The inflation fight is no longer the agenda. It's the business debt cycle that is the agenda.

If we take too long to adjust for that we'll see exponentially higher bankruptcies and layoffs. Not a light tick up, a large tick. Cliff like fall for some companies, and harsh uptick in unemployment(real unemployment).

This is the point that most people doesn't get it even Jerome people I think too dumb to understand it. This rate is not just about speculation of rate anymore but most S&P company can't produce enough business to compensate with the Treasury yield.
Our S&P500 current earning yield is 4.7% only, that's the cost to make business. While 5Y Treasury is 5.3%. It's rather we bankrupt everything if we continue this permanently.

Jerome's change of tune last meeting tells me he understands this. His 3 rate cuts are wrong, or the amount of cuts per will be wrong. One of the two, if not both. We'll circle back on this thread in a year to see. By 03/2025 we need to have Fed Funds 3.75 or less, or we'll need stimulus.

I actually think the amount of cuts exactly might not move the 10 year as much as people think, let’s say the only cut three times, by the time that becomes clear the market can just price in three cuts in 2025. I honestly think the core pce data is basically the driver of the 10 year from here on out, it’s pretty clear just based on the rent lag data that we will have really good prints though mid year, to me the question is back half of ‘24 do we get some bounce on the goods side (we’ve had outright deflation in many goods categories so just getting back to normal would be inflationary) and eventually & this is probably a 25 and beyond issue do rents start to turn positive once the new supply starts to absorbed. But I just can’t see any of that actually moving the 10 year much higher than it is now because even all of that probably still has inflation lower than any point (save for the last few months) since 2021. But in either case it’s the lower inflation driving the bond market expectations of future fed cuts, more than the actual fed cuts themselves .

The CPE is always the key driver from long time, in the past the spread between the two was like 25-50 bps ; now it is 200bps. By doing this the Fed is basically killing the main street economy just to drive down fake inflation. From forward curve it seems they would normalize the spread into 25-50bps still. 30YFRM between five to six is here to stay.

I’m actually possibly the final fed defender, I think overall Powell has done a fantastic job, kept the ecconmy afloat during Covid & yes we paid for that with inflation but I think the alternative scenario’s were just much worse, he probably should have hiked rates like 6 months earlier but regardless got inflation mostly under control, now he’s signaling a piviot and the economy still seems on fairly firm ground, even the mortgage rates which are slight beyond his control have been great, this last 18 months have definitely been extremely restrictive rate’s which the housing market absolutely needed to ring out the rampant speculation, seems like this year rates will be mildly restrictive which is what you want to avoid reheating the economy/housing market. And if we get rates in the mortgage in the mid 5’s over the next few years that will basically be neutral. I honestly don’t think Powell could have done any better over these crazy last 4 years, and honestly almost any other fed chair would have done significantly worse imo.

I agree.

As for your 10 year yield comment, I do think we see higher but no new peaks. Not a near 5% like October, but a 4.5% ish I can see again here in the next 2-8 weeks. If this materializes, I am going to lock in some fixed rate debt. I think mortgage rates go up for Q1 24 versus Dec23, we don't see them starting to dip sometime closer to the mid point of 2024, but will get favorable pricing going into Q2 2025. All while supply picks up.
0 Reply
Jack Seiden
Real Estate Agent · Washington DC · Member since 2016 · 847 posts · 654 votes
2y
Quote from @Carlos Ptriawan:

Quote from @Jack Seiden:

Quote from @Carlos Ptriawan:

Quote from @Jack Seiden:

Quote from @V.G Jason:

Quote from @Carlos Ptriawan:

Quote from @V.G Jason:

Quote from @Karl B.:

It's wild that CD rates have dropped almost a point while the Fed hasn't even had a chance to move rates. Noticing this, it appears everyone is confident rates will drop.

Of course, inflation will remain higher than 2% so we'll see if the Fed is going to keep raising until they get to their 2% target or if they'll stand pat (my gut says the latter).

The economy isn't as good as they claim as savings is down and credit card debt is way up.
The interest rate hikes have largely done what they were supposed to do - slow economic growth.
I think the Fed will stand pat at the next meeting and perhaps the next after that but of course there are outside factors such as whether or not our clown government prints more money and injects it into the system, which would of course stoke inflation yet again.
The inflation fight is no longer the agenda. It's the business debt cycle that is the agenda.

If we take too long to adjust for that we'll see exponentially higher bankruptcies and layoffs. Not a light tick up, a large tick. Cliff like fall for some companies, and harsh uptick in unemployment(real unemployment).

This is the point that most people doesn't get it even Jerome people I think too dumb to understand it. This rate is not just about speculation of rate anymore but most S&P company can't produce enough business to compensate with the Treasury yield.
Our S&P500 current earning yield is 4.7% only, that's the cost to make business. While 5Y Treasury is 5.3%. It's rather we bankrupt everything if we continue this permanently.

Jerome's change of tune last meeting tells me he understands this. His 3 rate cuts are wrong, or the amount of cuts per will be wrong. One of the two, if not both. We'll circle back on this thread in a year to see. By 03/2025 we need to have Fed Funds 3.75 or less, or we'll need stimulus.

I actually think the amount of cuts exactly might not move the 10 year as much as people think, let’s say the only cut three times, by the time that becomes clear the market can just price in three cuts in 2025. I honestly think the core pce data is basically the driver of the 10 year from here on out, it’s pretty clear just based on the rent lag data that we will have really good prints though mid year, to me the question is back half of ‘24 do we get some bounce on the goods side (we’ve had outright deflation in many goods categories so just getting back to normal would be inflationary) and eventually & this is probably a 25 and beyond issue do rents start to turn positive once the new supply starts to absorbed. But I just can’t see any of that actually moving the 10 year much higher than it is now because even all of that probably still has inflation lower than any point (save for the last few months) since 2021. But in either case it’s the lower inflation driving the bond market expectations of future fed cuts, more than the actual fed cuts themselves .

The CPE is always the key driver from long time, in the past the spread between the two was like 25-50 bps ; now it is 200bps. By doing this the Fed is basically killing the main street economy just to drive down fake inflation. From forward curve it seems they would normalize the spread into 25-50bps still. 30YFRM between five to six is here to stay.

I’m actually possibly the final fed defender, I think overall Powell has done a fantastic job, kept the ecconmy afloat during Covid & yes we paid for that with inflation but I think the alternative scenario’s were just much worse, he probably should have hiked rates like 6 months earlier but regardless got inflation mostly under control, now he’s signaling a piviot and the economy still seems on fairly firm ground, even the mortgage rates which are slight beyond his control have been great, this last 18 months have definitely been extremely restrictive rate’s which the housing market absolutely needed to ring out the rampant speculation, seems like this year rates will be mildly restrictive which is what you want to avoid reheating the economy/housing market. And if we get rates in the mortgage in the mid 5’s over the next few years that will basically be neutral. I honestly don’t think Powell could have done any better over these crazy last 4 years, and honestly almost any other fed chair would have done significantly worse imo.

We could just replace Fed with AI lol
Chatgpowell
1 Reply
Carlos Ptriawan
Member since 2019 · 7k+ posts · 4k+ votes
2y
Quote from @Jack Seiden:

Quote from @Carlos Ptriawan:

Quote from @Jack Seiden:

Quote from @Carlos Ptriawan:

Quote from @Jack Seiden:

Quote from @V.G Jason:

Quote from @Carlos Ptriawan:

Quote from @V.G Jason:

Quote from @Karl B.:

It's wild that CD rates have dropped almost a point while the Fed hasn't even had a chance to move rates. Noticing this, it appears everyone is confident rates will drop.

Of course, inflation will remain higher than 2% so we'll see if the Fed is going to keep raising until they get to their 2% target or if they'll stand pat (my gut says the latter).

The economy isn't as good as they claim as savings is down and credit card debt is way up.
The interest rate hikes have largely done what they were supposed to do - slow economic growth.
I think the Fed will stand pat at the next meeting and perhaps the next after that but of course there are outside factors such as whether or not our clown government prints more money and injects it into the system, which would of course stoke inflation yet again.
The inflation fight is no longer the agenda. It's the business debt cycle that is the agenda.

If we take too long to adjust for that we'll see exponentially higher bankruptcies and layoffs. Not a light tick up, a large tick. Cliff like fall for some companies, and harsh uptick in unemployment(real unemployment).

This is the point that most people doesn't get it even Jerome people I think too dumb to understand it. This rate is not just about speculation of rate anymore but most S&P company can't produce enough business to compensate with the Treasury yield.
Our S&P500 current earning yield is 4.7% only, that's the cost to make business. While 5Y Treasury is 5.3%. It's rather we bankrupt everything if we continue this permanently.

Jerome's change of tune last meeting tells me he understands this. His 3 rate cuts are wrong, or the amount of cuts per will be wrong. One of the two, if not both. We'll circle back on this thread in a year to see. By 03/2025 we need to have Fed Funds 3.75 or less, or we'll need stimulus.

I actually think the amount of cuts exactly might not move the 10 year as much as people think, let’s say the only cut three times, by the time that becomes clear the market can just price in three cuts in 2025. I honestly think the core pce data is basically the driver of the 10 year from here on out, it’s pretty clear just based on the rent lag data that we will have really good prints though mid year, to me the question is back half of ‘24 do we get some bounce on the goods side (we’ve had outright deflation in many goods categories so just getting back to normal would be inflationary) and eventually & this is probably a 25 and beyond issue do rents start to turn positive once the new supply starts to absorbed. But I just can’t see any of that actually moving the 10 year much higher than it is now because even all of that probably still has inflation lower than any point (save for the last few months) since 2021. But in either case it’s the lower inflation driving the bond market expectations of future fed cuts, more than the actual fed cuts themselves .

The CPE is always the key driver from long time, in the past the spread between the two was like 25-50 bps ; now it is 200bps. By doing this the Fed is basically killing the main street economy just to drive down fake inflation. From forward curve it seems they would normalize the spread into 25-50bps still. 30YFRM between five to six is here to stay.

I’m actually possibly the final fed defender, I think overall Powell has done a fantastic job, kept the ecconmy afloat during Covid & yes we paid for that with inflation but I think the alternative scenario’s were just much worse, he probably should have hiked rates like 6 months earlier but regardless got inflation mostly under control, now he’s signaling a piviot and the economy still seems on fairly firm ground, even the mortgage rates which are slight beyond his control have been great, this last 18 months have definitely been extremely restrictive rate’s which the housing market absolutely needed to ring out the rampant speculation, seems like this year rates will be mildly restrictive which is what you want to avoid reheating the economy/housing market. And if we get rates in the mortgage in the mid 5’s over the next few years that will basically be neutral. I honestly don’t think Powell could have done any better over these crazy last 4 years, and honestly almost any other fed chair would have done significantly worse imo.

We could just replace Fed with AI lol
Chatgpowell

Or create automatic policy , if cpe is 3 then spread is 50 , if cpe is 4 then spread is 100

I meant you and I can become Fed chairman too gahahaha they only do guesswork policy
0 Reply
Jack Seiden
Real Estate Agent · Washington DC · Member since 2016 · 847 posts · 654 votes
2y
Quote from @Carlos Ptriawan:

Quote from @Jack Seiden:

Quote from @Carlos Ptriawan:

Quote from @Jack Seiden:

Quote from @Carlos Ptriawan:

Quote from @Jack Seiden:

Quote from @V.G Jason:

Quote from @Carlos Ptriawan:

Quote from @V.G Jason:

Quote from @Karl B.:

It's wild that CD rates have dropped almost a point while the Fed hasn't even had a chance to move rates. Noticing this, it appears everyone is confident rates will drop.

Of course, inflation will remain higher than 2% so we'll see if the Fed is going to keep raising until they get to their 2% target or if they'll stand pat (my gut says the latter).

The economy isn't as good as they claim as savings is down and credit card debt is way up.
The interest rate hikes have largely done what they were supposed to do - slow economic growth.
I think the Fed will stand pat at the next meeting and perhaps the next after that but of course there are outside factors such as whether or not our clown government prints more money and injects it into the system, which would of course stoke inflation yet again.
The inflation fight is no longer the agenda. It's the business debt cycle that is the agenda.

If we take too long to adjust for that we'll see exponentially higher bankruptcies and layoffs. Not a light tick up, a large tick. Cliff like fall for some companies, and harsh uptick in unemployment(real unemployment).

This is the point that most people doesn't get it even Jerome people I think too dumb to understand it. This rate is not just about speculation of rate anymore but most S&P company can't produce enough business to compensate with the Treasury yield.
Our S&P500 current earning yield is 4.7% only, that's the cost to make business. While 5Y Treasury is 5.3%. It's rather we bankrupt everything if we continue this permanently.

Jerome's change of tune last meeting tells me he understands this. His 3 rate cuts are wrong, or the amount of cuts per will be wrong. One of the two, if not both. We'll circle back on this thread in a year to see. By 03/2025 we need to have Fed Funds 3.75 or less, or we'll need stimulus.

I actually think the amount of cuts exactly might not move the 10 year as much as people think, let’s say the only cut three times, by the time that becomes clear the market can just price in three cuts in 2025. I honestly think the core pce data is basically the driver of the 10 year from here on out, it’s pretty clear just based on the rent lag data that we will have really good prints though mid year, to me the question is back half of ‘24 do we get some bounce on the goods side (we’ve had outright deflation in many goods categories so just getting back to normal would be inflationary) and eventually & this is probably a 25 and beyond issue do rents start to turn positive once the new supply starts to absorbed. But I just can’t see any of that actually moving the 10 year much higher than it is now because even all of that probably still has inflation lower than any point (save for the last few months) since 2021. But in either case it’s the lower inflation driving the bond market expectations of future fed cuts, more than the actual fed cuts themselves .

The CPE is always the key driver from long time, in the past the spread between the two was like 25-50 bps ; now it is 200bps. By doing this the Fed is basically killing the main street economy just to drive down fake inflation. From forward curve it seems they would normalize the spread into 25-50bps still. 30YFRM between five to six is here to stay.

I’m actually possibly the final fed defender, I think overall Powell has done a fantastic job, kept the ecconmy afloat during Covid & yes we paid for that with inflation but I think the alternative scenario’s were just much worse, he probably should have hiked rates like 6 months earlier but regardless got inflation mostly under control, now he’s signaling a piviot and the economy still seems on fairly firm ground, even the mortgage rates which are slight beyond his control have been great, this last 18 months have definitely been extremely restrictive rate’s which the housing market absolutely needed to ring out the rampant speculation, seems like this year rates will be mildly restrictive which is what you want to avoid reheating the economy/housing market. And if we get rates in the mortgage in the mid 5’s over the next few years that will basically be neutral. I honestly don’t think Powell could have done any better over these crazy last 4 years, and honestly almost any other fed chair would have done significantly worse imo.

We could just replace Fed with AI lol
Chatgpowell

Or create automatic policy , if cpe is 3 then spread is 50 , if cpe is 4 then spread is 100

I meant you and I can become Fed chairman too gahahaha they only do guesswork policy

Maybe but that would be almost to easy to game, plus maybe this is too philosophical but aren’t we just all making guesses all time about everything, the difference is if your right about your guesses lol.
1 Reply
John MorganPro Member
Rental Property Investor · Grand Prairie, TX · Member since 2018 · 2k+ posts · 2k+ votes
2y
@Scott Trench
I’m in Texas and the housing market has heated up the last couple months since rates dropped a bit. And it’s January which is usually the slow time of year. If rates come down another .5 or 1%, it’ll be a feeding frenzy all over again with bidding wars. The economy seems to be doing ok and on pace for a soft landing. If rates come down much, housing affordability will shoot up again which won’t help inflation. Especially during an election year. I see the Fed lowering rates maybe .25 once or twice in 2023. But not much more than that unless we go into a major recession. And economic analysts aren’t predicting one. Only the doomers and crash bros on here. lol
1 Reply
V.G JasonPro Member
Investor · Member since 2022 · 3k+ posts · 3k+ votes
2y
Quote from @John Morgan:

@Scott Trench
I’m in Texas and the housing market has heated up the last couple months since rates dropped a bit. And it’s January which is usually the slow time of year. If rates come down another .5 or 1%, it’ll be a feeding frenzy all over again with bidding wars. The economy seems to be doing ok and on pace for a soft landing. If rates come down much, housing affordability will shoot up again which won’t help inflation. Especially during an election year. I see the Fed lowering rates maybe .25 once or twice in 2023. But not much more than that unless we go into a major recession. And economic analysts aren’t predicting one. Only the doomers and crash bros on here. lol

Last January we took off, I did about 80% of my damage in Texas in Q1 of 2023 and almost all my damage in Dallas in January of 2023. Lots of investors came into play in January cause we realized rates are not going to get better in the next 10-15 months, yet supply is hanging similar. That is certainly playing out. I am going to enter Austin here soon, just don't know when soon is. I think speculation is on the mend right now here.

If you say housing affordability is going to shoot up if rates down come too much, you mean get even lower than they already are or get better than 40 year lows?
0 Reply
John MorganPro Member
Rental Property Investor · Grand Prairie, TX · Member since 2018 · 2k+ posts · 2k+ votes
2y
Quote from @V.G Jason:

Quote from @John Morgan:

@Scott Trench
I’m in Texas and the housing market has heated up the last couple months since rates dropped a bit. And it’s January which is usually the slow time of year. If rates come down another .5 or 1%, it’ll be a feeding frenzy all over again with bidding wars. The economy seems to be doing ok and on pace for a soft landing. If rates come down much, housing affordability will shoot up again which won’t help inflation. Especially during an election year. I see the Fed lowering rates maybe .25 once or twice in 2023. But not much more than that unless we go into a major recession. And economic analysts aren’t predicting one. Only the doomers and crash bros on here. lol

Last January we took off, I did about 80% of my damage in Texas in Q1 of 2023 and almost all my damage in Dallas in January of 2023. Lots of investors came into play in January cause we realized rates are not going to get better in the next 10-15 months, yet supply is hanging similar. That is certainly playing out. I am going to enter Austin here soon, just don't know when soon is. I think speculation is on the mend right now here.

If you say housing affordability is going to shoot up if rates down come too much, you mean get even lower than they already are or get better than 40 year lows?
If weekly jobs reports remain strong like they are, I only see two or three .25 point rate drops in 2024. So far, it looks like we’re in for a soft landing. I don’t think the Fed will need to be too aggressive with rate cuts. Therefore, I see the housing market flat for 2024. Maybe appreciate 3% in growing areas.
1 Reply
V.G JasonPro Member
Investor · Member since 2022 · 3k+ posts · 3k+ votes
2y
Quote from @John Morgan:

Quote from @V.G Jason:

Quote from @John Morgan:

@Scott Trench
I’m in Texas and the housing market has heated up the last couple months since rates dropped a bit. And it’s January which is usually the slow time of year. If rates come down another .5 or 1%, it’ll be a feeding frenzy all over again with bidding wars. The economy seems to be doing ok and on pace for a soft landing. If rates come down much, housing affordability will shoot up again which won’t help inflation. Especially during an election year. I see the Fed lowering rates maybe .25 once or twice in 2023. But not much more than that unless we go into a major recession. And economic analysts aren’t predicting one. Only the doomers and crash bros on here. lol

Last January we took off, I did about 80% of my damage in Texas in Q1 of 2023 and almost all my damage in Dallas in January of 2023. Lots of investors came into play in January cause we realized rates are not going to get better in the next 10-15 months, yet supply is hanging similar. That is certainly playing out. I am going to enter Austin here soon, just don't know when soon is. I think speculation is on the mend right now here.

If you say housing affordability is going to shoot up if rates down come too much, you mean get even lower than they already are or get better than 40 year lows?
If weekly jobs reports remain strong like they are, I only see two or three .25 point rate drops in 2024. So far, it looks like we’re in for a soft landing. I don’t think the Fed will need to be too aggressive with rate cuts. Therefore, I see the housing market flat for 2024. Maybe appreciate 3% in growing areas.

I guess I mean, if rates come down too much, assuming more than those projections. You think housing prices take off-- so you mean become even less affordable?
0 Reply
John MorganPro Member
Rental Property Investor · Grand Prairie, TX · Member since 2018 · 2k+ posts · 2k+ votes
2y
Quote from @V.G Jason:

Quote from @John Morgan:

Quote from @V.G Jason:

Quote from @John Morgan:

@Scott Trench
I’m in Texas and the housing market has heated up the last couple months since rates dropped a bit. And it’s January which is usually the slow time of year. If rates come down another .5 or 1%, it’ll be a feeding frenzy all over again with bidding wars. The economy seems to be doing ok and on pace for a soft landing. If rates come down much, housing affordability will shoot up again which won’t help inflation. Especially during an election year. I see the Fed lowering rates maybe .25 once or twice in 2023. But not much more than that unless we go into a major recession. And economic analysts aren’t predicting one. Only the doomers and crash bros on here. lol

Last January we took off, I did about 80% of my damage in Texas in Q1 of 2023 and almost all my damage in Dallas in January of 2023. Lots of investors came into play in January cause we realized rates are not going to get better in the next 10-15 months, yet supply is hanging similar. That is certainly playing out. I am going to enter Austin here soon, just don't know when soon is. I think speculation is on the mend right now here.

If you say housing affordability is going to shoot up if rates down come too much, you mean get even lower than they already are or get better than 40 year lows?
If weekly jobs reports remain strong like they are, I only see two or three .25 point rate drops in 2024. So far, it looks like we’re in for a soft landing. I don’t think the Fed will need to be too aggressive with rate cuts. Therefore, I see the housing market flat for 2024. Maybe appreciate 3% in growing areas.

I guess I mean, if rates come down too much, assuming more than those projections. You think housing prices take off-- so you mean become even less affordable?
If weekly job reports keep coming in good and inflation stays sub 3%, then yes, I see home prices rise if rates come down. And now that wage growth is about 4%, that will keep consumer confidence somewhat strong. So I just don’t see the Fed lowering rates much in 2024. Maybe 2 or 3 quarter point drops, unless unemployment rates shoot up over 5% then we could see a 10% or more drop in housing prices.
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JD MartinBusiness Member
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Rock Star Extraordinaire · Northeast, TN · Member since 2015 · 10k+ posts · 16k+ votes
2y
Rates are definitely coming down and significantly. I don't know how long that's going to take but it's going to happen, really because it's the only short-term solution for the wildfire that's going to happen if they don't come down.

- Residential real estate SFH market is frozen solid. No inventory because no one can/will give up their existing rates, no sales because no one can afford high prices and high(er) rates.

- Ancillary businesses to real estate market, especially SFHs, are getting hammered. Realtors, lenders, furniture sellers. Virtually every market related to the movement of housing has had significant layoffs in the past two years.

- MFH adjustable notes, which comprises a good proportion of all MFH lending, is getting ready to reset. Remember 2007 when individual SFH ARMs started resetting? This will be a tidal wave of defaults because most of these apartment dwellers are already maxing out on rent at 40-50% of their pay. There's nowhere to raise rents to in order to make up the difference. And there's no getting out when you're already dealing with rock bottom cap rates. Who is going to be willing to accept such paltry returns when you can go get US backed issues in the 5% range?

- REITs and other similar investments, same issue except they will be screwing their banks AND their investors. Already some well-known ones have paused or cancelled dividends or issued capital calls for large property tax increases, deferred capex they thought they would avoid by selling out before it hit, and so forth. There is a real risk that you'll see private unregulated REITs failing altogether.

Bottom line is cheap, easy money for so long has created a massive addiction. We shouldn't pretend there won't be a vicious withdrawal. I personally don't think the Fed will allow the withdrawal to happen, because it will be ugly, painful, and destabilizing. I'm willing to bet they'd rather give us another little shot of money smack and try to wean us off more gradually. They completely crapped the bed when they panicked and dropped rates to nothing at the beginning of COVID, when rates were already plenty low, and they created even more junkies than existed at that point. Now they're either going to have to try to wean us back to sobriety gradually or allow the detox to begin.
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V.G JasonPro Member
Investor · Member since 2022 · 3k+ posts · 3k+ votes
2y
Quote from @JD Martin:

Rates are definitely coming down and significantly. I don't know how long that's going to take but it's going to happen, really because it's the only short-term solution for the wildfire that's going to happen if they don't come down.

- Residential real estate SFH market is frozen solid. No inventory because no one can/will give up their existing rates, no sales because no one can afford high prices and high(er) rates.

- Ancillary businesses to real estate market, especially SFHs, are getting hammered. Realtors, lenders, furniture sellers. Virtually every market related to the movement of housing has had significant layoffs in the past two years.

- MFH adjustable notes, which comprises a good proportion of all MFH lending, is getting ready to reset. Remember 2007 when individual SFH ARMs started resetting? This will be a tidal wave of defaults because most of these apartment dwellers are already maxing out on rent at 40-50% of their pay. There's nowhere to raise rents to in order to make up the difference. And there's no getting out when you're already dealing with rock bottom cap rates. Who is going to be willing to accept such paltry returns when you can go get US backed issues in the 5% range?

- REITs and other similar investments, same issue except they will be screwing their banks AND their investors. Already some well-known ones have paused or cancelled dividends or issued capital calls for large property tax increases, deferred capex they thought they would avoid by selling out before it hit, and so forth. There is a real risk that you'll see private unregulated REITs failing altogether.

Bottom line is cheap, easy money for so long has created a massive addiction. We shouldn't pretend there won't be a vicious withdrawal. I personally don't think the Fed will allow the withdrawal to happen, because it will be ugly, painful, and destabilizing. I'm willing to bet they'd rather give us another little shot of money smack and try to wean us off more gradually. They completely crapped the bed when they panicked and dropped rates to nothing at the beginning of COVID, when rates were already plenty low, and they created even more junkies than existed at that point. Now they're either going to have to try to wean us back to sobriety gradually or allow the detox to begin.

I agree with your thesis, but not necessarily why. I don't think the fed really cares if SFH and MFH crash, to them that may need to be what happens. Or really anything real estate related.

It's going to come down because businesses--small cap to large cap--cannot sustain this cost of capital. If they let these rates season, it's not a prediction. It's a fact-- infrastructure, employment, or assets will have to be cut. If not two of three, or all of the three. The degree of how much will vary from company to company, but it'll be a cliff-like change in their financials to operate under this cost of capital. Go check how much the Russell 2000 or the S&P 500 are leveraged. Right now companies are rationing out their headcount as we speak, hoping a pivot can make them do less. I don't think that pivot will come until they do more--but that's my opinion.
Nonfarm payrolls is the number we need to see break, or something substantial and it'll likely be that-- something we do not expect. Right now it makes more sense to be acquired than to tap out, so let some M&A get done too. This is a slow process.

I don't see any argument against this besides stimulus to keep them afloat, yet keep rates high. If that happens, it'll actually create more harm than good in the long-term.

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Carlos Ptriawan
Member since 2019 · 7k+ posts · 4k+ votes
2y
Quote from @V.G Jason:

Quote from @JD Martin:

Rates are definitely coming down and significantly. I don't know how long that's going to take but it's going to happen, really because it's the only short-term solution for the wildfire that's going to happen if they don't come down.

- Residential real estate SFH market is frozen solid. No inventory because no one can/will give up their existing rates, no sales because no one can afford high prices and high(er) rates.

- Ancillary businesses to real estate market, especially SFHs, are getting hammered. Realtors, lenders, furniture sellers. Virtually every market related to the movement of housing has had significant layoffs in the past two years.

- MFH adjustable notes, which comprises a good proportion of all MFH lending, is getting ready to reset. Remember 2007 when individual SFH ARMs started resetting? This will be a tidal wave of defaults because most of these apartment dwellers are already maxing out on rent at 40-50% of their pay. There's nowhere to raise rents to in order to make up the difference. And there's no getting out when you're already dealing with rock bottom cap rates. Who is going to be willing to accept such paltry returns when you can go get US backed issues in the 5% range?

- REITs and other similar investments, same issue except they will be screwing their banks AND their investors. Already some well-known ones have paused or cancelled dividends or issued capital calls for large property tax increases, deferred capex they thought they would avoid by selling out before it hit, and so forth. There is a real risk that you'll see private unregulated REITs failing altogether.

Bottom line is cheap, easy money for so long has created a massive addiction. We shouldn't pretend there won't be a vicious withdrawal. I personally don't think the Fed will allow the withdrawal to happen, because it will be ugly, painful, and destabilizing. I'm willing to bet they'd rather give us another little shot of money smack and try to wean us off more gradually. They completely crapped the bed when they panicked and dropped rates to nothing at the beginning of COVID, when rates were already plenty low, and they created even more junkies than existed at that point. Now they're either going to have to try to wean us back to sobriety gradually or allow the detox to begin.

I agree with your thesis, but not necessarily why. I don't think the fed really cares if SFH and MFH crash, to them that may need to be what happens. Or really anything real estate related.

It's going to come down because businesses--small cap to large cap--cannot sustain this cost of capital. If they let these rates season, it's not a prediction. It's a fact-- infrastructure, employment, or assets will have to be cut. If not two of three, or all of the three. The degree of how much will vary from company to company, but it'll be a cliff-like change in their financials to operate under this cost of capital. Go check how much the Russell 2000 or the S&P 500 are leveraged. Right now companies are rationing out their headcount as we speak, hoping a pivot can make them do less. I don't think that pivot will come until they do more--but that's my opinion.
Nonfarm payrolls is the number we need to see break, or something substantial and it'll likely be that-- something we do not expect. Right now it makes more sense to be acquired than to tap out, so let some M&A get done too. This is a slow process.

I don't see any argument against this besides stimulus to keep them afloat, yet keep rates high. If that happens, it'll actually create more harm than good in the long-term.

Many things that people thinking are wrong is there's unintended consequences for Fed action, for example, making interest rate higher than S&P earning yield is basically forcing company to do consolidation and industry and aka layoff of people with higher salary, it really doesn't matter if unemployment is reduced if 1 mil job is opened to flip burger by cutting 600k six digit high paying salary.
This is why I said sometimes not just Fed/ goverment is stupid but they also practically very anti business as well.
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