The Fed cut the Fed Funds Rate a full 1% last year, and mortgage rates went UP by 1% (a point I’ve made about 700x in this blog).
Over the 11 months prior to the Fed’s rate cuts, mortgage rates fell by a full 1% even though the Fed did nothing (another point I make often).
So, is there ever a situation when cuts in the Fed Funds Rate result in a reduction in long-term (mortgage) rates?
Yes, per Barry Habib with MBS Highway: when the “Yield Curve” is NOT inverted (and it is currently NOT inverted).
Simply put – shorter-term Treasury bonds now have lower yields than longer-term Treasury bonds. The 2-Year is about 3.9%; the 10-Year is about 4.5%; and the 30-Year is about 5%.
Longer terms are supposed to have higher yields, because it is riskier to loan money for longer terms.
BIANCO VS. HUNT (High Rates Vs. Low Rates; Tariffs Cause Inflation Or Deflation)
Adam Taggart of Thoughtful Money has an excellent finance podcast, and he recently interviewed Jim Bianco and Lacy Hunt. Both guests are excellent and have opposite views.
Bianco thinks the economy remains relatively strong, we won’t have a recession, and that tariffs will be inflationary – and rates will go much higher.
Podcast: Jim Bianco: Think 5% Bond Yields Are High? You Ain’t Seen Nothing Yet…
Hunt thinks the economy is very weak, that a recession is likely, the Fed will cut several times this year, and that tariffs are NOT inflationary (because they weaken consumer spending and the economy).
Podcast: Lacy Hunt: The Economy Is “Far Worse” Than Wall Street Thinks. Recession Odds Are Actually Over 50%
I think Hunt is more convincing (lower rates are coming), but both podcasts remind us of how little anyone knows in these unprecedented times when government debt and spending dominate everything like never before.
500,000 More Sellers Than Buyers- Oh My! Or Good Gravy…
Redfin released this “terrifying data” over the weekend, and the crash bros were gleeful: “That’s the most homebuyers have outmatched home sellers in over a decade.”
A. Where’d Redfin get its numbers? MBS Highway points out that total inventory is 1.45 million with about 500,000 pendings, giving us about 960,000 active listings. Redfin, however, says there are 1.94 million sellers – “only off by about 1 million,” per MBS Highway.
B. How do they count buyers? How can Redfin possibly even begin to estimate the total number of buyers in the market? JVM alone has over 1,500 pre-approved buyers on the sidelines, waiting to jump into the market with even a slight rate-drop or any other impetus, such as a forced move, an inheritance, a larger family size, a large bonus/windfall, etc.
Sign up to receive our blog daily
