Jon Grauman
speaker
142 appearances
1 recordings
1 series
first heard Nov 2024
last heard Nov 2024
Jon Grauman’s voice in public audio — every appearance, attributed to the second.
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I don't know that I could pick because it's such, I don't know I can make that generalization across so many different markets across such a large country. I would say that in general, though, the housing market's just kind of stuck in neutral at the moment. We've seen the first rate cut, which is great. The fever broke, right? At least like that part's behind us.
It hasn't really had any meaningful impact on mortgage interest rates, right? So it hasn't offered that impact. affordability that people are looking for to be able to start coming off the sidelines and reengaging. And mostly it's just this palpable sense of hesitation and uncertainty in face of the upcoming election.
That's the big thing is that most people just don't want to make big life decisions in the face of uncertainty. And this election has created so much uncertainty in all the markets, capital markets, housing markets, and so forth that everyone right now is just kind of taking this, I just want to wait and see approach. And that has resulted in a pretty stagnant market.
Yeah.
Yes, it's pretty simple. So when the Fed lowers rates, what they're lowering is or when they change rates, what they're changing is the federal fund rate. That is essentially the overnight rate at which banks can loan money to and from one another.
It does not have a direct correlation to mortgage rates unless we're talking about a second mortgage like a home equity line of credit, which is directly tied to the prime index, which is tied to what the Fed does. But mortgage interest rates are going to be based on much broader economic policies like inflation and the demand for bonds.
So we haven't really seen much of an impact on mortgage rates. They are certainly lower today than they were, say, a year ago. But they haven't gotten into that zone where I think people are going to really be motivated to start to reengage. To me, that needs to have a five handle on it. And while some mortgages are now starting to be priced in the high fives. Really?
Yeah, no, I'm definitely seeing that, particularly on the arms, seven-year arms, 10-year arms, not so much on the 30-year fixed. But we are starting to see rates in the low sixes, high fives. It's not enough, again, especially in the face of an upcoming election to get people off the sidelines yet. But we're finally going in the right direction.
I think by all accounts, we could argue that we are at the bottom of the J curve and on our way towards an ascent. It's just a question of how long it's going to take us to get there.
No. Arms are adjustable rate mortgages that are tied to certain indexes like the LIBOR index. That operates separately from the prime index. The prime index is tied directly to what the Fed does, right? So if you have a home equity line of credit and the Fed lowers their rates by a quarter of a percent, next month, your mortgage statement will reflect that quarter of a percent.
arms are going to be tied to again perhaps like the libor index and it's going to be fixed for whatever that period of time is so if you have a seven year arm it means it's fixed for seven years but amortized over 30. so at the end of that seven year period it will adjust to wherever that index is plus whatever margin the bank establishes which is generally around two and a quarter or two and a half percent so for those people that locked in arms a few years ago that perhaps may have been a little bit short-sighted and not locking in longer
they could potentially have a rude awakening here when it adjusts.
It flows slower and there isn't sort of a direct lineage of it, right? There's also other different factors, again, like the demand for treasury bonds and so forth, which is not really a part of that equation, but factors in. So look, it's obviously, it's not black or white. It would be awesome if it were, but it's a little bit more nuanced than that.
The main point is that just relative to where inflation currently sits and where the economy sits, we haven't seen that huge adjustment in rates yet. And the reality is we may not, right? We're not going back to the days of 3% and 4% interest rates. That was an anomaly tied to a global pandemic.
But it would be great if we could get rates to settle somewhere in the low to mid fives for a sustainable period that people could adjust to that new norm and feel like they were motivated and encouraged to get back into the market. And also, I said that almost as it only pertains to buyers. It pertains to sellers equally as much, right?
Sellers that feel like they have these golden handcuffs that are tying them to these 2% and 3% interest rates, but want to make a move. Either they want more space or they got a job relocation or whatever it may be. You know, the leap from three to five or five and a half is a lot more palatable than a leap from 3% to 7%. I know, they're squatting on their own houses.
It's been a real challenge in terms of freeing up inventory.
You can follow the treasury as an indicator for sure. But in terms of actually understanding how that equates and correlates to mortgage rates, reach out to your local mortgage broker. That's the simplest way to do it.
Like Christmas morning.
Potentially. What do you think? I don't know. You know, again, there's so much uncertainty right now. The jobs report in September, which was a favorable report, doesn't lend towards faster rate cuts. It actually shows that perhaps the economy is more stable and we don't need to cut rates as quickly. So it'll be interesting to see what they do.
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