![The Texas Real Estate & Finance Podcast with Mike Mills The Texas Real Estate & Finance Podcast with Mike Mills](https://artwork.captivate.fm/655abc08-79b6-4f9c-a1bd-aca19b0d8c20/3KjynepDntB0GHoLjTI_81rR.jpg)
Mortgage rates are falling, but what does it mean for you? In this episode, Mike Mills unravels the mystery behind the mortgage rates decline, exploring its impact on housing affordability and offering expert advice on refinancing and real estate strategies for 2024. Stay tuned to navigate the evolving market with confidence.
Mortgage Rates are falling, but what does it mean for you? This episode unravels the mystery behind the mortgage rates decline and its implications for the housing market. Stay tuned for expert advice on leveraging these changes to benefit your real estate goals.
In this episode of The Texas Real Estate and Finance Podcast, host Mike Mills dives into the mortgage rates decline and its wide-ranging effects on the real estate market. We'll explore the factors driving the current rates, including the stock market sell-off, Federal Reserve policies, and global economic influences. Mike breaks down how these changes impact housing affordability and shares strategic refinancing tips for homeowners. Key topics include the future of mortgage rates, the economic forecast for 2024, and buying opportunities in a volatile market. With insights tailored for real estate professionals and consumers, this episode equips you with the knowledge to navigate the evolving landscape.
Understanding Mortgage Rates Decline
Mortgage rates have recently declined, which is beneficial for potential homebuyers and investors. This episode explains the factors contributing to this decline, including economic data, Federal Reserve policies, and global market events. Understanding these influences helps you make informed decisions in the current market.
Impact of Market Sell-Off
The recent stock market sell-off has had a significant impact on mortgage rates. Typically, money moves from stocks to bonds during a sell-off, leading to lower mortgage rates. This episode explores why this didn't happen as expected and what it means for the future of mortgage rates.
Strategic Refinancing Tips
With mortgage rates declining, refinancing could be a smart move for many homeowners. Mike provides practical advice on when and how to refinance, considering the current economic conditions. Learn about the costs and benefits of refinancing to make the best decision for your financial situation.
Housing Market Predictions for 2024
This episode delves into the economic forecast for 2024, including potential further rate cuts by the Federal Reserve. Discover how these predictions impact housing market trends and what opportunities may arise for homebuyers and investors in the coming year.
Global Influences on Mortgage Rates
Global events, such as the conflicts in Israel and Ukraine, play a significant role in mortgage rate fluctuations. Mike discusses how these geopolitical factors, along with domestic issues like the national debt, influence the real estate market. Stay informed about these global influences to better navigate the mortgage landscape.
0:00 - 2:00: Episode Introduction
2:01 - 4:00: Market Reactions and Questions
4:01 - 6:00: Current Economic Situation
6:01 - 8:00: Stock Market and Mortgage Rates
8:01 - 10:00: Factors Behind Rate Changes
10:01 - 12:00: Global Events Impacting Rates
12:01 - 14:00: Historical Context and Predictions
14:01 - 16:00: Refinancing Advice
16:01 - 18:00: Housing Market Outlook
18:01 - 20:00: Final Thoughts and Call to Action
Here are the resources mentioned in the episode for the audience to access:
Mortgage News Daily: For the latest updates on current mortgage rates.
Website: https://www.mortgagenewsdaily.com
Geneva Financial: To learn more about Mike Mills and mortgage services.
NMLS Consumer Access: For licensing information and to verify mortgage professionals.
Social Media Links: Follow Mike Mills for updates and insights.
YouTube Channel: For video content and episode updates.
(0:00) And so, of course, that brings us to today, Monday, August the 5th, when I'm recording (0:04) this episode. (0:04) The Dow opened up 1,000 points down, seeing its worst day since 2022, when rates began (0:10) their quick rise upward. (0:12) The magnificent 7 that I mentioned earlier erased $1 trillion in market cap value.
(0:17) And also, suspiciously, most of the trading platforms out there, like Vanguard, E-Trade, (0:21) Robinhood, Ameritrade, Swab, and Fidelity, all reported, quote, outages during the sell-off, (0:28) not allowing traders to buy or sell anything for several hours this morning. (0:32) And with all that, somehow, at the close of business today, mortgage-backed securities (0:36) sold off, most likely causing rates to actually go up a little bit tomorrow. (0:41) And that's not supposed to happen when the stock market tanks.
(0:44) People move money out of stocks into bonds for safer keeping. (0:48) That's what typically happens, and what would have been expected to be seen today. (0:52) So, what the hell is going on? (0:54) What caused all this? (0:55) And where does it go from here? (1:04) Hello out there to all you interest rate investigators.
(1:08) So mortgage rates are falling at a pace that we have not seen in quite some time. (1:12) But at least right now, so are stocks, so is crypto, treasury yields, and everyone's (1:18) general faith that this economy will experience anything close to a soft landing. (1:23) Have no fear, though.
(1:24) You have found your way to the Texas Real Estate and Finance Podcast Market Update for (1:28) the week of August the 6th. (1:29) And today, we're going all in on the economy and interest rates, because the world's on (1:34) fire right now, and we need to sort through all of it to make sure that you know what (1:38) all this means. (1:40) I'm your host, Mike Mills, a North Texas mortgage banker with Geneva Financial, and I come to (1:44) you each week with a healthy plate of word salad, dumping my hours of internet browsing (1:49) onto you.
(1:49) So you can spend more time doing what you do best, helping people buy and sell real (1:54) estate. (1:54) And today we're going to do things just a little differently since today is what I would (1:58) call a very special day. (2:00) So what are we talking about? (2:01) Well, in one word, rates, rates, rates, or at least where rates are, what happened to (2:07) get this big move in rates, what could possibly drive rates down further, what's coming next, (2:13) and what all this means for the real estate market for the rest of this year and into (2:17) 2025.
(2:17) But before we get rolling, if you find today's episode helpful, enlightening, entertaining, (2:22) or even just a little bit enjoyable, please do an old mortgage guy a favor and share it (2:27) with a friend. (2:27) You don't have to share it with everyone, although I would really love it if you did. (2:31) Just text it over to someone you know who might find my perspective valuable to their (2:35) business.
(2:36) And if you want some extra credit and you happen to have a client looking to refinance (2:39) or purchase a new home anytime soon, send them my way. (2:41) This podcast is my hobby, but mortgages are my specialty, and I'd love to help your clients (2:46) out. (2:46) Okay.
(2:46) Now starting off as always everyone's favorite question, Hey Mike, what are the rates? (2:51) Well, according to mortgage news daily, as of August 5th, 2024, the average 30 year fixed (2:57) conventional mortgage rate is 6.34%. (2:59) The average 30 year FHA rate is 5.75%. (3:04) The average 30 year VA rate is 5.79%. (3:08) And the average 15 year conventional rate is 5.88%. (3:12) That's right. (3:13) Fives in front of everything. (3:14) You heard that, right? (3:15) And Oh, by the way, the average jumbo rate is 6.61%. (3:19) So the 10 year treasury yield, which is a measuring stick for where mortgage rates are (3:22) headed fell to its lowest level since December of 2023.
(3:25) Now this is good for mortgage rates, but not so great for the economy. (3:29) Last week, unemployment ticked up to 4.3% reaching its highest level since July of 2017. (3:34) And this along with some weaker than expected reported earnings last week from Intel, Chevron, (3:40) Google, and Microsoft triggered a stock market sell off like we haven't seen since the start (3:44) of the pandemic.
(3:45) Again, this is all good for mortgage rates, but if homeowners don't have jobs and are (3:49) losing money in the market, lower rates won't necessarily trigger a housing boom anytime (3:53) soon. (3:53) And right now everyone is very much in a wait and see stance for this market sell off. (3:57) But last week could have been the start of the much anticipated market adjustment that (4:01) I've been talking about here for months.
(4:03) This ride's about to get a little bumpy, but if you got cash and you can hold out, there (4:07) could be some very strong buying opportunities for stocks and real estate in the coming months. (4:11) So hang in there. (4:12) Now let's just do a quick review of exactly how we got here and then where we might be (4:17) going in the coming months.
(4:19) So I've spoken on this ad nauseum on the podcast in the past, but here's what I would call (4:23) the cliff's notes version of how we got to this place. (4:25) Because it's really important to understand what happened in order to be able to get (4:30) an idea of what might happen in the near future. (4:32) So we're going to go back in time a little bit since the great financial crisis in 2008 (4:37) mortgage rates have been basically below 5% with a few periods slightly above 6% for (4:43) over a decade.
(4:44) And this was really cheap money, at least historically speaking, because prior to that (4:48) mortgage rates fluctuated somewhere between seven and 9% for the previous 20 years. (4:52) And this cheap money had millions of people all over the country buying real estate at (4:57) an unprecedented pace, which for the American consumer was a great thing. (5:00) Then in 2020 when COVID hit and the economy was shut down for almost a year, the federal (5:05) reserve and the US government felt it necessary to basically mainline Red Bull into the US (5:11) economy and make money essentially free to borrow and then issue trillions of dollars (5:16) in stimulus to business and individuals like we have never seen in the history of the country.
(5:21) And if you paid attention at all during econ 101 class, you'd understand how supply and (5:25) demand works because when you have too many people chasing after too few goods, prices (5:30) go up. (5:30) And we saw this in every aspect of the economy, cars, food, energy, and yes, housing, which (5:36) is why we saw home prices jump 40 to 50% in just a couple of years. (5:40) And because of this incredible inflation, this caused the federal reserve to react and (5:45) raise interest rates at the fastest pace that we've seen in almost 40 years, essentially (5:50) taking this economy that was humming along like a Lamborghini down the freeway and slamming (5:54) on the brakes.
(5:55) So everything's good. (5:56) Problem solved, right? (5:57) Well, a lot of people thought so. (5:59) Most Americans went about their daily lives, taking their kids to school, working their (6:02) jobs and paying their bills as if everything was fixed.
(6:05) Yes, prices were still high, but the Fed was fixing the problem. (6:08) So people just kept living their lives. (6:10) Now the problem was is people's incomes were kind of starting to slow and the costs for (6:15) living were still pretty high.
(6:16) So many folks turned to credit cards with maybe the idea that the issues that we were facing (6:20) were temporary and that things could be turned around and that once things turned around, (6:25) then they would just pay that debt off. (6:26) The only problem was the higher rates. (6:29) You see, the debt on that Visa card was now coming at a 25% interest charge, but every (6:33) single month, the average American heard that jobs were plentiful, spending was up, and the (6:38) economy was one of the best that we'd seen in a very long time.
(6:41) So people were thinking if everyone else is doing well, then it must be fine. (6:44) Even if I'm struggling a little bit now, if you've been listening to this show, you know (6:48) that I've been saying for several months now that things aren't as rosy as they have seen. (6:53) And Oh, by the way, I didn't invent this theory on my own.
(6:56) I'm not smart enough for that. (6:57) But if you pay attention to the people who are trying to tell you the truth and not just (7:01) what you want to hear, then you got a little bit of a different story, especially over the (7:05) last couple of months. (7:06) You see, slowly but surely, we all started to understand that jobs were not as strong (7:10) as they've been reported.
(7:11) We haven't added any full time employment to the economy in over a year. (7:15) And Oh, by the way, all the stated job gains were mostly part time jobs. (7:18) And those that weren't were government jobs, jobs in the medical profession and (7:22) hospitality.
(7:23) And these particular jobs are not the type that drive an economy. (7:26) But hey, GDP was up as well. (7:28) But when you dig into the numbers there, it was mostly government spending that was (7:32) holding up GDP.
(7:33) And that government spending had grown our national debt by 11 trillion dollars in the (7:38) last four years, something that previously took us 220 years to get to 11 trillion (7:43) dollars in debt. (7:44) OK, OK. (7:45) But the stock market was also breaking records.
(7:48) Retirement accounts and hedge fund portfolios were at all time highs. (7:51) However, aside from the magnificent seven stocks, Microsoft, NVIDIA, Apple, Google, (7:57) Amazon, Facebook and Tesla, the rest of the S&P 500 had only had modest gains over (8:02) the last two years. (8:03) In fact, in 2023, those seven stocks made up almost 60 percent of the entire market (8:08) gains for that year.
(8:09) And such a concentration of value in so few stocks has only occurred a few times in (8:14) history. And in most cases, it was followed by big drawdowns in the market. (8:18) Oh, and much of the value in those magnificent seven stocks was not based on (8:22) anything like price to earnings ratio or actual sales, which historically have been (8:26) how you value the company, but instead the promise of AI and how it would impact jobs (8:32) in our economy on the whole.
(8:33) But again, most people don't pay attention to stuff because how can you? (8:36) You've got your own life to live and your own people to take care of on a day to day (8:40) basis. But then last week happened and it wasn't a major event, but just a couple of (8:44) data points that drove the market in an uncertain direction. (8:47) First off, we had weaker than expected earnings reports from companies like Intel, (8:51) Microsoft and Google showing that the tech sector that had been holding the market up (8:56) wasn't quite doing as well as people had hoped.
(8:58) And that was just kind of the cherry on top from the previous weeks where companies (9:02) like McDonald's, Walmart and Dollar Tree started telling investors that their sales (9:06) were slumping and not actually that great and having to adjust future expectations. (9:12) Amazon was still doing pretty well, though. (9:13) They always seem to do well.
(9:14) Then last week, the jobs report came out for June and showed that we had added much (9:18) fewer jobs than expected and unemployment spiked up higher than anybody had (9:22) anticipated. And this caused many investors in the market to start quietly moving their (9:26) money from the stock market over into the bond market, whereas those of us in the (9:31) mortgage world were celebrating because rates actually fell almost half a point in (9:35) just a couple of days, which is incredibly unusual for mortgage rates. (9:38) And then over the weekend, we found out that Warren Buffett, the most prolific investor (9:43) in the history of the world, sold off 50 percent of his stake in Apple and is right now (9:47) holding more cash on the sidelines than at any point in his company's history.
(9:51) He's currently sitting at about 300 billion dollars in cash that's not invested (9:55) anywhere in the market. Oh, and what you also may have missed last week in the news (9:58) cycle, the leader of Hamas was killed by Israel in Iran's capital for everyone to see. (10:03) Setting off a chain of events that at the time of recording this, we don't quite know (10:07) where those are going to go.
But right now, it's looking like Iran could attack Israel (10:12) at any point in the next couple of days, dragging the entire globe into a conflict that (10:16) nobody wants. And so, of course, that brings us to today, Monday, August the 5th, when (10:20) I'm recording this episode, the Dow opened up a thousand points down, seeing its worst (10:25) day since twenty twenty two when rates began their quick rise upward. (10:29) The magnificent seven that I mentioned earlier erased one trillion dollars in market cap (10:33) value.
And also suspiciously, most of the trading platforms out there like Vanguard, (10:37) E-Trade, Robinhood, Ameritrade, Swab and Fidelity all reported, quote, (10:43) outages during the sell off, not allowing traders to buy or (10:47) sell anything for several hours this morning. (10:49) And with all that, somehow at the close of business today, mortgage backed securities (10:53) sold off, most likely causing rates to actually go up a little bit tomorrow. (10:58) And that's not supposed to happen when the stock market tanks.
(11:01) People move money out of stocks into bonds for safer keeping. (11:05) That's what typically happens and what would have been expected to be seen today. (11:09) So what the hell is going on? (11:11) What caused all this and where does it go from here? (11:14) Well, the story right now, the thing that kicked everything off this morning was the (11:18) Bank of Japan announcing that they were raising interest rates, causing investors to (11:22) panic a little bit.
Now, why did investors panic? (11:24) Well, according to those in the know, there was something called the yen carry trade. (11:29) This is probably something that you're going to be hearing about in the news quite a bit (11:32) in the next couple of days. And because of this money was moved out of U.S. (11:35) markets to pay off debts in the Japanese markets.
(11:38) So the way this works is investors all over the world used Japanese yen, (11:43) which could be borrowed at much lower rates than U.S. (11:46) dollars, and then converted those yen over to U.S. (11:50) dollars. They then use those dollars to invest and earn greater levels of interest (11:54) in the U.S. market than they could with the yen that it was borrowed from. (11:58) And see the difference in the cost to borrow the yen and the interest earned on the (12:03) invested U.S. dollar is where investors were making profits.
(12:07) So over the weekend, (12:08) when the Bank of Japan announced that they were raising the cost to borrow their (12:11) currency, (12:12) investors rushed to cash out their U.S. (12:14) investments and pay off their Japanese debts in order to not get caught owing (12:18) more when the rates spike. (12:20) And then this frenzy of buying and selling caused a panic in the market that (12:23) supposedly caused this major sell-off that we got to this morning. (12:27) Now I'm sure over the next couple of days, (12:28) we're going to find out a whole lot more about what actually happened and what (12:31) the main cause was, (12:32) which could be this or that this was just the trigger for an underlying issue (12:36) that was already there.
(12:37) My guess is it was just a trigger for an underlying issue that already existed. (12:41) But again, (12:42) I am no genius when it comes to this stuff. (12:43) So that is supposedly what happened that caused today's massive sell-off.
(12:47) And the other piece of this is that anytime there's instability in the world, (12:51) money typically does not like that. (12:52) And right now we could be on the verge of a global conflict involving Iran, (12:56) Russia, (12:57) and maybe even China. (12:58) We had a former us president have an assassination attempt against his life.
(13:02) Then the current us president stepped down for running for reelection and (13:05) basically hasn't been heard from since. (13:07) And his replacement who was selected and not necessarily elected has not had (13:12) one interview or press conference where questions have been asked of her. (13:16) And other than a few campaign rallies where she's reading from a teleprompter (13:20) has basically not been in public.
(13:22) Currently there's a hurricane or tropical storm, (13:24) depending on how you classify it. (13:26) That's tearing up the Florida coastline and working its way up the East coast (13:29) over in Europe. (13:30) The UK is rioting over immigration and what is being described as the worst (13:34) disorder that the UK government has faced in over a decade.
(13:36) And seeing as money doesn't like volatility and then having the bank of Japan (13:41) decide that they were going to raise rates led to the stock market today, (13:44) having one of its worst days in history. (13:46) So does that all mean that the world's coming to an end? No, of course not. (13:50) But things ain't great.
However, (13:52) even with all of this market sell off today, (13:55) overall on the aggregate for 2024 the market's still up. (13:58) It's just not currently headed in the right direction. (14:01) So then the real question becomes what happens from here? (14:04) Should you sell every stock that you own and liquidate your 401k? Well, (14:07) first off, (14:08) let me say that I am a mortgage guy who talks about all this stuff as a hobby.
(14:13) So don't take any advice from me. I'm learning this as I go, just like you. (14:17) So let's start there.
Second, (14:19) I have no idea where all this goes or what happens from here, (14:23) but I can easily argue both sides. On one hand, (14:27) markets go through corrections and news panics, (14:29) investors to sell all the time. (14:31) We have certainly seen much worse days in the market and given enough time, (14:35) markets always bounce back, or at least they always have.
(14:38) You had the great depression in the 1920s hyperinflation in the eighties with (14:42) black Monday in 1987, (14:44) there was Y2K and the.com bubble in the early two thousands. (14:48) And of course the great financial crisis in 2008 and most recently the COVID (14:52) pandemic. And yet we're all still here eating McDonald's and watching Netflix.
(14:57) So no need to panic. (14:58) And if you're under 65 and dollar cost averaging your investments, (15:02) most likely things will be fine given enough time. But on the other hand, (15:06) we are experiencing global turmoil at a level that we haven't seen in quite a (15:11) long time.
(15:11) And the U S government has racked up more debt in the last four years than we had (15:15) the prior 220 years. And unfortunately right now as a country, (15:20) we seem to be more divided than we've ever been. (15:23) And all of this volatility leaves room for things to happen that we just can't (15:27) see or predict.
(15:28) Now my bet is that we are just experiencing our version of the latest crisis. (15:33) And then in five to 10 years, (15:34) we're going to look back at this period of time and everything will be back to (15:37) normal, whatever that level of normal is. But in the meantime, (15:41) you need to be paying attention, (15:42) especially if you have money invested anywhere or live in an area where unrest (15:46) could be a possible concern.
Because at times like these people and governments (15:50) can take advantage of uncertainty. Never let a good crisis go to waste. (15:53) They say now considering all that really fun stuff that we just discussed and (15:56) seeing that this is the Texas real estate and finance podcast.
(15:59) I of course would not be doing my job if I didn't speak about the one thing that (16:03) I do know a lot about. And that is real estate right now. (16:06) Mortgage rates are down and they appear likely to be headed down further in the (16:10) coming months.
But housing inventory is on the rise. (16:13) And unfortunately when there's market uncertainty, (16:15) people often don't want to make any big purchases. (16:17) So what does this mean for the housing market for the rest of 2024 and going (16:21) into 2025? Well, right now with all this turmoil that's going on, (16:24) the market's now actually pricing in three possible rate cuts for the rest of (16:28) this year with some people calling for an emergency rate cut before the (16:31) September meeting.
Now, is that going to happen? I don't think so, (16:35) but ask me this question tomorrow because new events can certainly change my (16:39) mind on that. So rates are likely to keep declining this year. (16:42) And so that means it could make sense for you or your clients to refinance a (16:45) mortgage or possibly take equity out of an existing property to pay off credit (16:49) card bills or add to a house that you don't want to move out of because it's (16:53) got a two and a half percent interest rate.
(16:54) And if you want to know if that makes sense, give me a call. (16:57) I'm happy to walk you through it. But keep in mind when it comes to refinancing, (17:00) talk to a mortgage professional to get a gauge on where rates might be headed for (17:05) the immediate future.
You see, (17:06) you don't want to refinance at 6.25% and see rates fall to (17:10) 5.25% six months later. (17:13) Sometimes a wait and see approach isn't a bad idea. And Oh, by the way, (17:17) there's going to be a lot of mortgage folks out there telling you that now is (17:21) the time, but before you make your decisions, (17:24) talk through it and get more than one opinion, not just on what rates are, (17:28) but where rates are going.
Remember, (17:29) it usually costs money to refinance and you don't want to spend thousands of (17:33) dollars to just have to do it again. When rates fall, (17:37) even further rates are declining. (17:38) And I don't think that they're going to jump back up anytime soon.
(17:42) So take your time, weigh your options, (17:44) and then decide if it makes sense for you. It is a case by case basis. (17:49) So no, before you go.
And as far as buying a home is concerned, (17:53) if I had to guess, (17:54) I would say that we will probably see continued slowing of sales as we head (17:58) into the winter, partially because this is an election year. (18:01) And because there seems to be a lot of volatility in the market. (18:04) And when the market's in turmoil, (18:05) people often sit on the sidelines or decide to sell because they have to make a (18:09) move.
And this could create some good buying opportunities in the coming months. (18:14) And I do think that as long as there aren't any catastrophic events that occur (18:17) between now and then things are going to settle down as we get past 2024. (18:21) And that means 2025 could shape up to be a good buying season as (18:26) affordability becomes better and better lower rates and more inventory, (18:29) more opportunity for homebuyers.
(18:32) But remember it has to be the right time for you or your buyer. (18:36) Don't let home prices or interest rates dictate the right time for you to buy. (18:41) Personal circumstances should always decide when that right time is.
(18:45) And no, by the way, (18:46) every market's not going to be the same because we all know real estate is a very (18:50) local industry. (18:51) So it could depend on where you live or where you want to move to. (18:54) If now is the right time or if you need to wait, (18:56) but as a real estate professional, (18:57) if you can hang on tight and make it through the rest of this year, (19:01) I really think 2025 could be the turning point when we start to see this market (19:05) shift, at least as it pertains to housing.
(19:08) Now I can't say what's going to happen with the rest of all this chaos that's (19:11) going on, but I really do think housing is going to rebound next year. (19:15) And I also believe that those who keep grinding it out each week to carve out a (19:19) living in this crazy industry are going to reap the benefits when that time (19:23) comes. So things may seem a little dark right now, but I feel confident.
(19:27) We're going to make it through the other side and see that light. Well, (19:29) that's it. Just a quick one today.
(19:31) It's a little bit different than what I usually do, (19:33) but I would say today is a little bit different than most days that we've (19:36) experienced recently. (19:37) I genuinely hope everyone stays safe out there and protects their portfolio. (19:41) But remember when markets are down, (19:43) there's always opportunity on the other side.
(19:45) You just got to educate yourself and find your path through all the noise. (19:50) And if I can help you even just a little bit along that path, (19:53) then my time is so very well spent here. So as always, (19:57) be great humans, keep grinding because life is what you make it.
(20:01) So make it great. See you next time.