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Over the years, there’s been a popular argument that it’s better to buy a home when mortgage rates are high.

The logic is that home prices should be lower if rates are high, and thus you get a property for less.

And the cherry on top is that if/when mortgage rates fall, you can get a lower interest rate too!

When all is said and done, you basically get the best of both worlds. A lower purchase price and low mortgage rate.

But is this scenario actually reality? And do home prices and mortgage rates even have such a relationship?

Buying a Home When Interest Rates Are High

On the surface, buying a home when interest rates are high seems like a pretty bad deal.

After all, your monthly mortgage payment is going to be more expensive if the interest rate is higher.

For example, imagine a $500,000 home purchase with 20% down. That’s a $400,000 loan amount.

  • 7% mortgage rate: $2,661.21
  • 4% mortgage rate: $1,909.66

The difference in PITI payment each month is a whopping $750! That’s not a small amount by any measure.

*You can quickly compare other monthly payments on my mortgage rate charts page.

Anyway, this large difference in payment could make many would-be home buyers ineligible for a mortgage.

Remember, you have to qualify for a home loan, so if your income doesn’t cover that big jump in payment, you could be shut out completely.

For some, the argument to buy when rates are high stops right here. But shouldn’t home prices be cheaper if mortgage rates are higher?

Again, you would think so since expensive items might reduce demand and lead to increased supply.

But if you look at history, there isn’t a strong correlation between home prices and mortgage rates.

In other words, when one rises, the other doesn’t necessarily fall. Or vice versa. So if you’re looking for a bargain, don’t expect one simply because mortgage rates are “high.”

You’ll Get More Payment Relief with a Lower Mortgage Rate

Another issue is that a reduced purchase price doesn’t translate to much of a lower payment.

For example, let’s compare a $500,000 home purchase and $450,000 home purchase at 6% mortgage rates with 20% down.

  • $400,000 @6%: $2,398.20
  • $360,000 @6%: $2,158.38

In this scenario, the monthly payment is just $240 less per month. And that assumes you can get a home for 10% off.

Remember, there’s no inverse relationship historically between mortgage rates and home prices.

So you might not even see such a discount just because mortgage rates are high.

Instead, you could face both a higher mortgage rate and higher home price, as we’ve seen over the past few years.

This also debunks the idea that home prices will go up when interest rates fall. Again, no clear relationship on that front.

They could fall together if the economy tanks and lower rates become less helpful to prospective buyers now facing bigger issues, like unemployment or reduced wages.

Your Home Buying Decision Shouldn’t Be Dictated by Mortgage Rates

Simply put, a home buying decision goes well beyond available mortgage rates.

It doesn’t matter if the 30-year fixed is 3% or 8%, it matters if you can afford the home, if you can make payments consistently for the next decade, and if you love/want/need the home.

If you’re making the purchase based on the mortgage rate, you’re either trying to time the market or you’re potentially just squeaking by.

And you could face affordability issues if property taxes rise, or insurance premiums increase.

You certainly don’t want to bank on the marry the house, date the rate strategy, which hasn’t worked out great the past few years.

Some seem to think they can buy now and perform a rate and term refinance later to lower their payment.

But there’s no guarantee mortgage rates will fall by a large amount, or that you’ll qualify when that time comes.

So instead of focusing on the rate, look at the big picture. Is it the right home for you? Is the price affordable? Do you picture yourself living there for the next 5-10 years or longer?

Does it make sense financially based on your income, assets, and employment? If yes, great, proceed. If not, maybe take a harder look at the situation.

And remember not to make the false assumption that there’s a strong relationship between rates and prices.

Should You Sell Your Home When Rates Are High or Low?

Again, mortgage rates are just one piece of the pie. There are many different factors to consider when buying or selling a property.

One needs to study supply/demand, home price outlooks, and the wider economy. As noted, there isn’t a strong relationship between prices/rates historically.

So if rates are low, you can’t just assume prices are going to skyrocket and that it’ll be a great time to sell your home.

Sure, it could be a good time to sell if demand increases. But what if rates fall because the economy is in the dumps? Fewer prospective buyers, lower prices, right?

It’s not so simple. If you’re selling and buying a replacement property, that’s another consideration.

Will it be easy to find a replacement? At the moment, selling a home is somewhat scary because inventory is so low in most places.

You could find yourself renting until a suitable property comes along. And who knows where rates will be then?

I know several people who sold at the supposed “height of the market” a few years ago to lock in profits.

But since then haven’t been able to find a new home to purchase. In the process, they’ve missed out on years of ownership and they face significantly higher interest rates today.

Long story short, don’t try to time a home purchase or home sale based on mortgage rates.

Before creating this site, I worked as an account executive for a wholesale mortgage lender in Los Angeles. My hands-on experience in the early 2000s inspired me to begin writing about mortgages 18 years ago to help prospective (and existing) home buyers better navigate the home loan process. Follow me on Twitter for hot takes.
Latest posts by Colin Robertson (see all)

Source: thetruthaboutmortgage.com

Apache is functioning normally

Well, here we are. It took longer than expected, but mortgage rates have finally strung together a decent rally after nearly three years of increases.

They fell below year-ago levels a week or two ago, per Freddie Mac, and took another big leg down after a softer-than-expected jobs report on Friday.

As for why, fewer new hires, increased unemployment, and slowing wage growth all point to a slowing economy. And interest rates tend to drop when the economy cools.

In addition, the Fed is expected to pivot and begin cutting rates, which could act as another tailwind for lower mortgage rates.

This has many thinking we’ll see another surge of home buyer demand, and potentially a big jump in home prices. But is it true?

Do Lower Interest Rates Actually Increase Home Prices?

It’s entirely logical on the surface. If something people want becomes cheaper overnight, demand for it should hypothetically increase.

And if demand increases, the price might rise as supply decreases, especially if there are already too few homes for sale.

But if that were true for single-family homes, why didn’t asking prices crash over the past year and change?

After all, rates on the 30-year fixed mortgage nearly tripled from its record lows in the mid-2s in early 2021 before peaking at just above 8% last fall.

Using the same logic above, home prices would surely nosedive as buyers fled the market, leading to a massive supply glut.

Instead, home price appreciation simply cooled off and home prices continued to increase in most parts of the country.

In fact, if you look at many home price indices, we have new all-time high home prices pretty much every month.

Home Prices Continued to Rise as Mortgage Rates Nearly Tripled

Just take this chart from the Federal Housing Finance Agency (FHFA), which oversees Fannie Mae and Freddie Mac.

Their latest report released on July 30th revealed that home prices increased a solid 5.7% from May 2023 to May 2024.

However, home prices were flat month-to-month from April after rising 0.3% a month earlier.

Still, if you look at the chart, you’ll see that home prices didn’t slow much as mortgage rates began their ascent at the start of 2022.

There was a brief pause as the housing market digested the near-tripling in rates, but then prices continued their ascent unabated.

So if we want to argue that there’s an inverse relationship between rates and prices, this last few years wouldn’t be a good example of that.

All we’ve really seen is a positive correlation between rates and prices, in which BOTH have risen together.

And now that mortgage rates appear poised for a bit of a rally, should we ignore that and say they have a negative relationship?

Can we say prices should have fallen when rates went up, but now that rates are falling they should go up even more?

Maybe There’s Just Not Much of a Correlation at All

Instead of trying to invent a relationship between mortgage rates and home prices, maybe we should just come to terms with the fact there isn’t a strong one.

And there’s nothing wrong with that. If you look at history, changes in mortgage rates and home prices are weakly related, this according to the Urban Institute.

I’ve posted this chart before, but here it is again if you don’t believe it. You’ll see all types of combinations of annual mortgage rate and home price changes.

These little dots won’t make it easy to make the argument that when mortgage rates fall, home prices rise. Or vice versa.

Instead, you’ll see instances when they rose together, fell together, or sometimes, to fit the popular narrative that isn’t necessarily true, went in opposite directions.

Of course, nominal home prices (not adjusted for inflation) rarely go down to begin with, so we don’t even have that many examples to look at.

Why Would Home Prices Fall If Mortgage Rates Got Cheaper?

Well, just look at the economy…sure, mortgage rates are important because they can make a big impact on affordability.

The lower the rate, the more a home buyer can afford, all else equal. In fact, a 1% drop in mortgage rates is worth an 11% decrease in price.

But this simplistic view ignores cash buyers. And it ignores the financial health of prospective home buyers who need to get approved for a mortgage.

Just consider the last few days. The stock market has gotten hammered, with the Dow Jones falling more than 1,000 points today and the Nasdaq off nearly 600 points.

This sell-off was sparked by concerns about the health of the economy, with weaker data expected to usher in Fed rate cuts.

There’s a good chance that softer data will be accompanied by lower mortgage rates too.

Simply put, signs of a slowing economy improved the odds for a Fed rate cut, and also gave bonds a boost, which are a safe haven for investors when times get tough.

But if households are in worse shape because of said data, you’re going to have fewer home buyers out there. You could also have more sellers, perhaps even distressed ones.

Taken together, we might have a situation where the supply of homes for sale rises and prices fall, despite a big improvement in mortgage rates.

So yes, home prices could in fact go down, even if mortgage rates are lower!

But that’s not a foregone conclusion either, and will likely be highly variable based on economic strength and individual market dynamics throughout the country.

The main message here is there’s no strong correlation any which way. Thinking otherwise might simply lead to disappointment.

Before creating this site, I worked as an account executive for a wholesale mortgage lender in Los Angeles. My hands-on experience in the early 2000s inspired me to begin writing about mortgages 18 years ago to help prospective (and existing) home buyers better navigate the home loan process. Follow me on Twitter for hot takes.
Latest posts by Colin Robertson (see all)

Source: thetruthaboutmortgage.com

Apache is functioning normally

I got active on Twitter over the past year and change and to my surprise (not sure why it’s surprising really), encountered lots of housing bears on the platform.

Many were/still are convinced that the next housing crash is right around the corner.

The reasons vary, whether it’s an Airbnbust, a high share of investor purchases, high mortgage rates, a lack of affordability, low home sales volume, rising inventory, etc. etc.

And the reasons seem to change as each year goes on, all without a housing crash…

So, now that we’re halfway through 2024, the obvious next question is will the housing market crash in 2025? Next year’s got to be the year, right?

But First, What Is a Housing Crash?

The phrase “housing crash” is a subjective one, with no real clear definition agreed to by all.

For some, it’s 2008 all over again. Cascading home price declines nationwide, millions of mortgage defaults, short sales, foreclosures, and so on.

For others, it might just be a sizable decline in home prices. But how much? And where?

Are we talking about national home prices or regional prices? A certain metro, state, or the nation at large?

Personally, I don’t think it’s a crash simply because home prices go down. Though it is a pretty uncommon occurrence to see nominal (non-inflation adjusted) prices fall.

Over the past few years, we’ve already experienced so-called home price corrections, where prices fell by 10%.

In 2022, we were apparently in a housing correction, defined as a drop in price of 10% or more, but not more than 20%.

Ostensibly, this means a drop of 20%+ is something much worse, perhaps a true housing crash.

But you have to look at the associated damage. If home prices fall 20% and there aren’t many distressed sales, is it still a crash?

Some might argue that there’s simply no other outcome if prices fall that much. And maybe they’d be right. The point is a crash needs to have major consequences.

If Homeowner Joe sells his home for $500,000 instead of $600,000, it’s not necessarily a disaster if he bought it for $300,000 a few years earlier.

He’s not happy about it, obviously, but it’s not a problem if he can still sell via traditional channels and even bank a tidy profit.

Of course, this means others who had to sell wouldn’t be so lucky, since their purchase price would likely be higher.

Still, this hinges on a major decline in prices, which historically is uncommon outside of the Global Financial Crisis (GFC).

Stop Comparing Now to 2008

One thing I see a lot is housing bears comparing today to 2008. It seems to be the go-to move in the doomer playbook.

I get it, it’s the most recent example and thus feels the most relevant. But if you weren’t there, and didn’t live it, you simply can’t understand it.

And if you weren’t, it’s hard to distinguish that time from now. But if you were, it’s clear as day.

There are myriad differences, even though they’re quick to mock those who say “this time is different.”

I could go on all day about it, but it’s best to focus on some main points.

At the moment, housing affordability is poor thanks to a combination of high home prices and equally high mortgage rates, as seen in the chart above from ICE.

Despite a big rise in prices over the past decade, the high mortgage rates have done little to slow down the party.

Yes, the rate of home price appreciation has slowed, but given the fact that mortgage rates rose from sub-3% to 8% in less than two years, you’d expect a lot worse.

It’s just that there’s really no correlation between home prices and mortgage rates. They can go up together, down together, or move in opposite directions.

Now, proponents of a housing crash often point to buying conditions right now. It’s a horrible time to buy a house from a payment-to-income perspective. I don’t necessarily disagree (it’s very expensive).

But that completely ignores the existing homeowner pool. And by doing so, it’s a totally different thesis.

You can say it’s a bad time to buy but that the average homeowner is in great shape. These statements can coexist, even though everyone wants you to take one side or the other.

Look at the Entire Homeowner Universe

To put this perspective, consider the many millions of existing homeowners coupled with prospective home buyers.

Your average homeowner today has a 30-year fixed-rate mortgage set somewhere between 2-4%.

In addition, most purchased their properties prior to 2022, when home prices were a lot lower.

So your typical homeowner has a rock-bottom interest rate and a relatively small loan amount, collectively a very attractive monthly payment.

To make matters even better for the foundation of the housing market, which is existing homeowners, most have very low loan-to-value ratios (LTVs).

They’ve also got boring old 30-year fixed-rate loans, not option ARMs or some other crazy loan program that wasn’t sustainable, as we found out quickly in 2008.

These homeowners also haven’t tapped their equity nearly as much as homeowners did in the early 2000s, despite home equity being at record high levels (see above).

This is partially because banks and mortgage lenders are a lot stricter today. And partially because of mortgage rate lock-in. They don’t want to give up their low mortgage rate.

In other words, the low mortgage rate not only makes their payment cheap, it also deters taking on more debt! And more of each payment pays down principal. So these loans (and their borrowers) become less and less risky.

Some have turned to home equity loans and HELOCs, but again, these loans are much more restrictive, typically maxing out at 80% combined loan-to-value (CLTV).

In 2006, your typical homeowner did a cash-out refinance to 100% CLTV (no equity left!) while new home buyers were coming in with zero down payment as home prices hit record highs.

Take a moment to think about that. If that’s not bad enough, consider the mortgage underwriting at that time. Stated income, no doc, you name it.

So you had virtually all homeowners fully levered along with a complete lack of sound underwriting.

Slumping Home Sales in the Face of Poor Affordability Is Actually Healthy

That brings us to home sales, which have slumped since the high mortgage rates took hold. This is normal because reduced affordability leads to fewer transactions.

The worry is when this happens supply could outpace demand, resulting in home price declines.

Instead, we’ve seen low demand meet low supply in most metros, resulting in rising home prices, albeit at a slower clip.

While housing bears might argue that falling volume signals a crash, it’s really just evidence that it’s hard to afford a home today.

And the same shenanigans seen in the early 2000s to stretch into a home you can’t afford don’t fly anymore. You actually need to be properly qualified for a mortgage in 2024!

If lenders had the same risk tolerance they had back in 2006, the home sales would keep flowing in spite of 7-8% mortgage rates. And prices would move ever higher.

That spike in home sales in the early 2000s, seen in the chart above from Trading Economics, shouldn’t have happened. Fortunately, it’s not happening now.

At the same time, existing homeowners would be pulling cash out in droves, adding even more risk to an already risky housing market.

Instead, sales have slowed and prices have moderated in many markets. Meanwhile, existing owners are sitting tight and paying down their boring 30-year fixed mortgages.

And with any luck, we’ll see more balance between buyers and sellers in the housing market in 2025 and beyond.

More for-sale inventory at prices people can afford, without a crash due to toxic financing like what we saw in the prior cycle.

Before creating this site, I worked as an account executive for a wholesale mortgage lender in Los Angeles. My hands-on experience in the early 2000s inspired me to begin writing about mortgages 18 years ago to help prospective (and existing) home buyers better navigate the home loan process. Follow me on Twitter for hot takes.
Latest posts by Colin Robertson (see all)

Source: thetruthaboutmortgage.com

Apache is functioning normally

By now you’ve heard the news. President Biden dropped out of the 2024 presidential race and paved the way for current VP Kamala Harris to run in his place.

That was big news that shook up the election overnight, and now there is a renewed focus on Harris, including her financial disclosures.

The WSJ ran a story today about how she manages her money, pointing out her penchant for index funds and her ultra-low rate 2.625% mortgage.

I dug a little deeper to see what kind of mortgage she had, along with when and where she got it.

And it turns out it’s an adjustable-rate mortgage, which we all know aren’t for the faint of heart.

Kamala Seems to Really Love the 7-Year ARM

With regard to that 2.625% mortgage Kamala Harris holds, it turns out it’s a 7-year adjustable-rate mortgage (ARM).

This is a popular type of ARM these days because it provides 84 months of interest rate stability before the first adjustment.

In that respect, homeowners can take one out and not worry about their rate increasing for many years.

And in the meantime, either sell their property or refinance the mortgage if need be.

Harris obtained her latest mortgage in 2020 and was able to get a very low interest rate set at 2.625% until the year 2027.

It’s unclear what the exact loan amount is, but it was revealed to be somewhere between $1,000,000 and $5,000,000.

We also know that the lender in question is Wells Fargo, which has had its share of controversies over the past decade, including improper mortgage lock fees.

What’s even more interesting is this isn’t Harris’ first 7-year ARM. A prior financial disclosure revealed that she took out the same type of loan in 2016 as well.

It featured the same exact mortgage rate, 2.625%. And you guessed it, also came from San Francisco-based bank Wells Fargo.

But wait, there’s more! If we go back to 2012, she took out another 7/1 ARM set at an even lower 2.5%.

In total, that’s three 7-year ARMs in a row dating back about 12 years. Based on that timing, you’d expect a fourth around now, but mortgage rates are no longer cheap.

Unfortunately, a typical 7-year ARM might now go for closer to 5% or higher, making it a pretty terrible deal. So until rates improve, she’ll likely be holding onto the 2020 loan.

She’s Got Another Three Years to Figure Out Her Next Move

It’s not uncommon for homeowners to take out ARMs and refinance them over and over into new ARMs.

The logic is that an ARM is typically cheaper than a fixed-rate mortgage, and if you refinance it before it becomes adjustable, you get the upside (lower rate) without any of the downside (higher rate adjustment).

The one caveat is the closing costs each time you refinance, though a no cost refinance can work if rates remain cheap.

There’s also the time aspect, as it can take about a month to get a mortgage, and it can be a pain to go through the process.

But if you don’t mind all that, you can get a cheaper mortgage and allocate the savings elsewhere, such as an index fund.

You also get a smaller payment over time if you refinance into a new 30-year loan term since the loan amount will be smaller thanks to several years of paying it down.

Anyway, it seems Harris employed this strategy for the past decade while mortgage rates hit record lows and it worked out favorably.

However, it appears her next move won’t be as easy now that mortgage rates have more than doubled in the past few years.

Her Mortgage Rate Could Jump to 4.625% in 2027

Come 2027, her 7-year ARM will see its first adjustment, and that means it’ll likely rise from 2.625% to 4.625%.

There are typically caps in place that limit initial movement by 2%, and subsequent adjustments by 2%, with a lifetime cap that can’t be exceeded.

So beyond that first adjustment, it could go even higher than 4.625%, perhaps to 6.625% if the associated mortgage index is still inflated at that time.

Assuming that happens, she’d want out of the loan and into something cheaper.

But if mortgage rates are still high then, it might remain her best option, despite being more expensive than her original loan.

This is the big risk of taking out an ARM vs. a fixed-rate loan. With the latter, you never have to worry about a rate adjustment, though you do pay a premium for that assurance.

If all else fails, there’s always the option to sell the property, which solves the adjustable-rate problem.

And if she’s living in the White House, that might work out just fine.

Read on: Are adjustable-rate mortgages finally a good deal again?

(photo: Gage Skidmore)

Before creating this site, I worked as an account executive for a wholesale mortgage lender in Los Angeles. My hands-on experience in the early 2000s inspired me to begin writing about mortgages 18 years ago to help prospective (and existing) home buyers better navigate the home loan process.
Latest posts by Colin Robertson (see all)

Source: thetruthaboutmortgage.com

Apache is functioning normally

Stocks hit fresh all time highs as the latest economic data showed the economy is still holding up as inflation recedes and the Federal Reserve nears a start to rate cuts.

Once again, smaller firms rallied, with the Russell 2000 poised for its biggest five-day run since April 2020. Conversely, the megacap space that has powered the bull market came under pressure. An equal-weighted version of the S&P 500 — where the likes of Nvidia Corp. carry the same heft as Dollar Tree Inc. — largely beat the US equity gauge. That index is less sensitive to gains from the largest companies — providing a glimpse of hope that the rally will broaden out.

The resilience of the equity market has been underpinned by optimism the economy has withstood the worst of Fed tightening. In this regard, Tuesday’s retail sales report was a “healthy” development, according to Bret Kenwell at eToro. It’s better to see the Fed cutting rates on falling inflation than to see the central bank rushing to bolster a weakened economy, he noted.

“While we are not ‘most preferred’ on small caps, they are historically cheap on a relative basis, and could snap back quickly should interest rates fall and growth remain resilient,” said Solita Marcelli, at UBS Global Wealth Management. 

The S&P 500 hovered near 5,650. The Dow Jones Industrial Average rose 1.5%. The Russell 2000 gained 2%. The Nasdaq 100 was little changed. Amazon.com Inc., which kicked off its Prime Day event, outperformed. UnitedHealth Group Inc. climbed on strong results. 

Traders also waded through financial earnings. Morgan Stanley dropped as results from its key wealth business fell short of estimates. Bank of America Corp. rose after saying net interest income would climb by the end of the year. Charles Schwab Corp. sank as new brokerage accounts missed estimates. 

Treasury 10-year yields fell three basis points to 4.20%. Gold hit a record high on bets the Fed will soon be able to pivot.

“Retail spending in June was expected to confirm signs of an economic slowdown, but instead has breathed new life into the argument that Fed officials don’t need to worry about a sluggish real economy yet,” said Mark Streiber at FHN Financial. 

U.S. retail sales, excluding the impact of a cyberattack on auto dealerships, rose in June by the most in three months, a sign consumers regained their footing at the end of the second quarter. Total retail sales were unchanged, restrained by a 2% slide in receipts at auto dealers. The figures aren’t adjusted for inflation.

“This report doesn’t negate expectations that the Fed will cut rates at its September meeting, unless of course inflation-related data releases indicate an uptick in prices,” said Quincy Krosby at LPL Financial.

Fed Chair Jerome Powell said Monday that second-quarter economic data has provided policymakers greater confidence that inflation is heading down to the central bank’s 2% goal, possibly paving the way for near-term interest-rate cuts.

Source: nationalmortgagenews.com

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Pleasant PPI Paradox Leaves This Week’s Big Victory in Focus

By:
Matthew Graham

Fri, Jul 12 2024, 4:44 PM

Pleasant PPI Paradox Leaves This Week’s Big Victory in Focus

The Producer Price Index (PPI) introduced a brief but disconcerting threat to this week’s relative level of triumph (courtesy of yesterday’s CPI) by suggesting a big, unexpected surge in core inflation at the wholesale level.  Bonds initially panicked, but quickly got back on track and never looked back.  Thankfully, the components behind the PPI surge are not the same components that would translate to PCE inflation in 2 weeks.  We can also consider PPI’s notorious volatility and conclude it would take more than one of these surprises to raise a serious eyebrow. With that, the focus of the week remained squarely on yesterday’s big CPI victory.  

    • Core PPI M/M
      • 0.4 vs 0.2 f’cast
      • last month revised to 0.3 from 0.0
    • Core Annual PPI
      • 3.0 vs 2.5 f’cast, 2.3 prev
    • Consumer Sentiment
      • 66.0 vs 68.5 f’cast, 68.2 prev
    • Consumer inflation expectations
      • 1yr down 0.1
      • 5yr down 0.1

08:43 AM

Slightly stronger overnight but giving back gains after PPI.  MBS unchanged.  10yr up 0.3bps at 4.216.

10:31 AM

healing continues.  MBS up an eighth.  10yr down 1.6bps at 4.197

01:07 PM

Flat and sideways at the same levels as the last update.

04:43 PM

Bonds heading out at or near best levels with MBS up nearly 3/4ths and 10yr down 2.6bps at 4.187.

 Download our mobile app to get alerts for MBS Commentary and streaming MBS and Treasury prices.

Source: mortgagenewsdaily.com

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As financial targets pave the way for interest rates to (finally) fall, the real estate industry is cautiously optimistic about a late-year boost.

At Inman Connect Las Vegas, July 30-Aug. 1, 2024, the noise and misinformation will be banished, all your big questions will be answered, and new business opportunities will be revealed. Join us.

Each week on The Download, Inman’s Christy Murdock takes a deeper look at the top-read stories of the week to give you what you’ll need to meet Monday head-on. This week: As financial targets pave the way for interest rates to (finally) fall, the real estate industry is cautiously optimistic about a late-year boost.

It’s rare for sometimes-dry economic forecasters to get what you might call “giddy,” but this week’s economic news seems to have done the trick. Inflation numbers began to reflect already-falling rent rates, creating the circumstances that might (finally) lead to a drop in interest rates — and a commensurate boost to the real estate market.

“It’s finally happening,” wrote Jay Parsons, a real estate economist who has noted for over a year that falling rents showed national inflation would plummet.

EXTRA: ‘It’s finally happening’: Cooler inflation opens the door to rate cut

In his testimony to lawmakers, Fed Chair Jerome Powell sounded a cautiously optimistic tone regarding the “considerable progress” the economy has made toward the Fed’s 2 percent inflation goal. “Reflecting these developments, the risks to achieving our employment and inflation goals are coming into better balance,” Powell said.

Rates are once again trending down after spiking following the June 27 presidential debate, as bond market investors who fund most mortgages are increasingly convinced the Fed will cut rates in September.

After flirting with 7 percent, rates for 30-year fixed-rate mortgages began to retreat, pulling back to an average of 6.96 percent on July 3, according to rate lock data tracked by Optimal Blue. Subsequently, rates on 30-year fixed-rate conforming loans have come down another 20 basis points, to 6.76 percent, as of Thursday July 11.

The CME FedWatch Tool on July 5 put the odds of a September rate cut at 78 percent, up from 74 percent on Wednesday and 64 percent on June 28. By Friday, July 12, futures markets put the odds of a September rate cut at 94 percent, and investors are pricing in a 52 percent chance that the Fed will cut rates by more than 50 basis points this year.

EXTRA: FHA, VA requests drive pickup in purchase mortgage demand

If lower rates bring on-the-fence buyers and sellers into the market, you’ll need to be up to speed on post-settlement rules and best practices. Fortunately, you’ve got expert Inman contributors to draw on for the real-world implementation and transaction advice you need now.

This week, we’ve got advice from a broker on outsourcing some aspects of due diligence to the experts, a coach on drilling down and finding a niche and, as Luxury Month rolls on, a tight-turnaround case study from an NYC agent.

5 easy ways to stay in your lane during a transaction

Stop trying to be all things to your clients, broker Joseph Santini writes. Focus on the things that fall within your purview and direct traffic as needed on your transactions.

Here’s why specialization matters for buyer’s agents

Developing areas of specialization enhances service, efficiency, and effectiveness and results in greater professional success for both teams and individual agents, coach Verl Workman writes.

How I secured a Soho penthouse for clients after a 4-day search

In this luxury case study, learn how The Agency’s Daniel Blatman overcame multiple offers and a short timeline to help his clients meet their goals.

Source: inman.com

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In a pair of rulings, the U.S. Circuit Court of Appeals for the District of Columbia has rejected the National Association of Realtors petition for a rehearing in its case with the Justice Department.

The latest actions follow a 2-1 split decision that allowed the Biden Administration to reopen a case the trade group thought it had settled while Donald Trump was president.

But the Biden Administration never finalized the agreement and looked to reopen the investigation.

“This ruling stands in opposition to years of precedent on the interpretation of government contracts and the bedrock principle that the government must honor its word,” a NAR spokesperson said. “We are evaluating all remaining legal options and are committed to exploring all avenues to ensure the DOJ is held to the terms of our 2020 agreement.”

Some speculated that the April ruling could lead to more involvement by the Justice Department in cases involving real estate broker commissions and multiple listing services activities. Most recently, the Department filed an amicus brief, albeit in support of neither side, calling on Ninth Circuit Court of Appeals to reopen a case filed by Real Estate Exchange, also known as REX, against NAR and Zillow.

NAR has also entered into settlement agreements with some of the various plaintiffs in the buyer’s real estate broker fee commission cases, with a number of observers speculating that it wouldn’t have taken the action without the Justice Department’s blessing. But the DOJ’s actions since then have dispelled that conjecture.

After the April decision came out, NAR filed an appeal asking for both a rehearing among the three judge panel that initially decided the matter, as well as for an en banc hearing, where all members of the court would then rule on the case.

Both motions were rejected in single-page rulings without detailed explanation.

“Upon consideration of appellee’s petition for panel rehearing filed on May 20, 2024, it is ordered that the petition be denied,” wrote the unanimous three-judge panel consisting of Judge Karen Henderson, Judge Justin Walker and Judge Florence Pan.

The entire court, with the exception of Judge Bradley Garcia, participated in the unanimous ruling denying NAR’s request.

“Upon consideration of appellee’s petition for rehearing en banc, the response thereto, and the absence of a request by any member of the court for a vote, it is ordered that the petition be denied,” the unsigned ruling said.

Source: nationalmortgagenews.com

Apache is functioning normally

While there’s no way objectively quantify the political ramifications of the failed assassination attempt on former President Trump over the weekend, history suggests–at the very least–that such occurrences are not damaging for a candidate’s political capital.  As one example, Reagan’s approval rating immediately jumped 8 points after being shot in 1981.  There does seem to have been an initial market reaction in the overnight session, but much like with the presidential debate reaction, it was very underwhelming in the bigger picture.  This doesn’t preclude a bigger reaction in November, but as in 2016, the most important political change would be one that results in a one-party sweep (House, Senate, Oval Office).

Source: mortgagenewsdaily.com