Mortgage News

Here’s an example: if you have a $500,000 loan at a 6% interest rate, with typical property taxes and homeowner insurance, your total monthly payment would be around $3,210. That breaks down to $642 per $100,000 borrowed.

To simplify further, you can estimate that every $100,000 borrowed will cost you about $700 per month, which gives you a slight cushion to overestimate the final payment.

If you live in a State or County with lower property taxes, you might be closer to $625 per $100,000 borrowed. In higher-tax states like New Jersey or Texas, the figure could be closer to $700 per $100,000 borrowed.

It’s an easy way to get a rough idea of your total monthly house payment.

“I found a beautiful home, Sales price is $700k and I want to put $100k down. $600k loan is 6x$700 or $4,200 a month total house payment.“

Here is the actual Math if you want to pull out your calculator or just use my simple trick.

The dot plot below represents each Fed official’s projections for future Federal Reserve interest rates.

This plot is updated every three months, with the next update in December.

Now that we’ve covered that, let’s dive into how this affects you. Credit card and auto loan rates will gradually decrease, and HELOCs or home equity loans tied to these rates will start to decline as well.

What about mortgage rates? While the correlation between the Fed rate and mortgage rates isn’t exact, they generally move in the same direction. So, as the Fed rate drops, mortgage rates are likely to follow.

Mortgage Interest Rates are dropping and will continue into 2025.

The greatest challenge arises when the remedy becomes worse than the problem. Prolonged restrictive Fed rate policies lead to higher costs for everyone, ultimately prolonging inflation.

The industry is pricing in a 63% likelihood of the Fed cutting rates by 50 basis points, as reflected in the recent decline in rates over the past two weeks.

Anecdotally, feedback from the real estate community suggests that clients are waiting for a Fed rate cut, regardless of its actual impact on mortgage rates. It’s the perception of rates dropping that is motivating those on the fence to take action.

At 2pm PST the Federal Reserve will release a statement on the rate cut and a summary of economic projections.

Reach out to our team to navigate your refinance/purchase. www.YourApplicationOnline.com

William Dudley is a former NY Fed President and is calling for a 50bp Cut in the Fed Rate tomorrow.

The Federal Reserve focuses primarily on two key factors: inflation and the overall economy. Inflation, heavily influenced by shelter costs and auto insurance, can sometimes paint a misleading picture of the true inflation landscape.

The job market continues to show signs of weakening, with the unemployment rate increasing by 0.8% so far this year.

Dudley highlighted that 92% of the 4 million jobs created were part-time or self-employed positions, yet they are still counted as full-time jobs. This skews the data, masking the decline in job quality.

What to know the Power of Amazon? Last months retail sales rose 0.1% primarily due to Prime Day from Amazon. $14.2 Billion in sales on one day.

Rates continue to improve as we hold our collective breath for tomorrows Fed Announcement. I have my money on a 50bp drop then another 25×2 by the end of the year.

What will the Federal Reserve do Wednesday. We have some insight.

Former Fed Vice Chair Donald Kohn: “We are at a point where you might say, I could go either way – 25 or 50. but I think the risk management has shifted to the labor market and favors doing 50”.

When we look back, we can see that once rate cuts start, they tend to proceed rapidly.

Later today we will hear from Former Fed Vice Chair, Lael Brainard, now the Director of National Economic Council.

Her prepared remarks were released and highlights that “we have reached a milestone in the fight against inflation”.

How will this affect the mortgage rates? a picture is worth a thousand words. Mortgage rates have historically followed the Fed Rate.

Feel free to forward, copy and reach out anytime. www.YourApplicationOnline.com

What will the Federal Reserve actually do on the 18th? The market is expecting, and has priced in, a 0.25% rate cut. Personally, I believe the cut should be more aggressive—at least 0.50%.

The Fed has effectively shifted the goalposts regarding the timing and size of future cuts. The current unemployment rate is 4.2%, slightly down from 4.3% last month.

Interestingly, 16 out of 19 Fed members predicted unemployment wouldn’t exceed 4.1% this year—yet here we are.

The market is anticipating a 1% rate cut this year and an additional 1.25% next year. Let’s hope the Fed moves forward and breaks free from their analysis paralysis.

Let’s take a look at the housing market through the lens of different generations.

At age 30, the homeownership rate was 48% for Boomers, 42% for Gen X, and 33% for Millennials. People are waiting longer to get married, have kids, and buy homes. However, by age 40, those rates rise significantly, and Millennials begin to catch up with Gen X and Boomers in homeownership.

Sometimes, it’s important to step back and pay attention—specifically to the 10-year Treasury’s monthly auctions.

Why, you ask? Here’s why: if you’re an investor expecting yields to continue rising, holding off on buying bonds would seem prudent. However, bond managers who took that approach were caught off guard last month.

Yesterday, demand for bonds surged, proving them wrong.

Producer Price Index, which measures wholesale/Producer inflation rose 0.2% in August. Slightly higher than expected but going in a downward direction from 2.1 to 1.7%. Part of this drop in inflation was due to lower energy prices.

Initial Jobless Claims changed little and inline with expectations.

CoreLogic Equity Insights reported homeowners with mortgages saw an equity rise 8% year over year. 62% of all properties have a mortgage attached.

Interesting Stats:

• 136M total households in the US
• 91M homes owned – 67% homeownership rate
• 56.5M homes currently have a Mortgage – 62%
• 34.5M owned free and clear – 38%
• 45M homes rented – 33%

Time to tune up your financials for a new purchase or refinance. www.YourApplicationOnline.com

That’s a remarkable percentage and calculation for the Federal Reserve to consider when making a rate cut decision.

The Consumer Price Index (CPI) report showed overall inflation rose by 0.2% in August, aligning with expectations.

Housing, airfare, and car insurance saw increases, with airfare alone jumping 3.6% last month. While inflation has decreased to 2.5%, 89% of August’s figure was driven by just two key components. Notably, shelter or rent contributes 45.7% to the CPI.

On a year-over-year basis, auto insurance costs fell from 18.6% to 16.5%, making me curious about the profit margins of auto and home insurance companies.

Overall, this was a positive report and provides the Fed with more justification to begin cutting rates.

In our industry, we are intensely focused on data and the story it tells. At times, it shouts loudly, while other times, it only whispers.

We closely monitor technical indicators, particularly the 10-year and 2-year Treasury Notes. Until this week, the 2-year Treasury yield had been higher than the 10-year for an unusually extended period—longer than at any point in history.

If you’re holding a bond for a longer term, you’d typically expect higher yields as compensation. However, over the past two years, we’ve seen an inverted yield curve, with the 2-year bond offering higher yields than longer-term bonds.

With regards to the September 18th Fed meeting:

Yields goes down on average of 1.5% from the first Fed cut to the last. This would optimistically bring the 10-year bond down to 2.2% from its current 3.7%.

Below is the Bond activity over the last two months. Up or Green is lower rates. We expect this to continue through next week.

The question I get asked every day is: when and by how much will rates drop?

There’s a compelling case that rates will not only fall, but do so sooner than expected.

If we look at the differential between the 2-year Treasury and the Fed Funds rate, the Treasury is about 1.6% lower. This is a Large gap. Large enough that we have to go back to the 2007 gap.

The Fed aggressively cut interest rates, but ultimately lagged behind the curve, leading to the onset of the 2008 recession.

The Fed is significantly behind the curve and once again needs to take aggressive action to prevent a recession.

The Federal Reserve Meets September 18th.