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Goldman Sachs Still Buying Homes; Rates Dropped The Most In 2 Years Last Week – Why?

Goldman Sachs Still Buying Homes

Goldman Sachs-Backed Funds Bought Entire Housing Development

I saw this recent New York Post article on Twitter yesterday and thought it would be another nice share for any potential buyers who might have cold feet.

TLDR: Two Goldman-backed ventures just spent $45 million to buy up an entire housing development in Florida. The big funds still think housing is a buy because rents and homebuying demographics continue to rise – while inventory remains short.

MBS Highway reminded us today that rents rose over 13%, on average, over the last year alone.

U.S. Mortgage Rates Posted The Biggest Drop In More Than Two Years, Last Week

30-year-mortgage rates dropped last week, surprising many in light of the Fed’s efforts to push rates up.

While the drop was not that large, it is a reminder that the Fed only really controls the short-term rates.

Long-term (30-year) rates can move independently of the Fed, and last week was case in point.

If stocks continue to fall and the economy continues to soften, we will likely see long-term rates fall again – no matter what the Fed does.

Mortgage Market Roiled By Fears Of Fed Selling (Per The WSJ Today)

There is a $5.5 trillion mortgage bond market because the vast majority of mortgages are turned into securities (called MBS) that are sold on Wall Street.

The Fed holds $2.7 trillion of MBS – because they were buying them en masse via its “Quantitative Easing” program, in an effort to keep rates artificially low.

The fake demand from the Fed pushed up MBS prices, which pushed down yields and therefore rates.

The Fed, however, is no longer buying mortgage-backed securities at the same pace, and that is partially why mortgage rates are so much higher now.

What is scaring the daylights out of mortgage bankers is the Fed’s threat to not only stop buying MBS, but to also actually start selling its vast holdings of MBS early next year.

If the Fed starts to sell, some analysts say we could see rates shoot up another 2%.

I know this contradicts my many comments about rates likely falling in the coming months, but I still stand by my conviction.

This is because I think the Fed will “chicken out” and not sell MBS because the economy will be too soft to absorb the MBS and/or the higher rates.

In addition, Jeff Snider also often points out that Quantitative Easing does not impact rates as much as many other analysts believe.

But, I nonetheless want to convey other possibilities when it comes to mortgages and interest rates.

View mortgage rates for July 4, 2022

Jay Voorhees
Founder/Broker | JVM Lending
(855) 855-4491 | DRE# 1197176, NMLS# 310167