Rate cut ... unleash the buyers

First cut only brought us back to 6.0x% level which is where we were 2 years ago at the tail end of the last buying cycle before it fizzled out.

The next cut or two (especially if they add up to more than 50bps, as is quite possible) will lead to a transaction pickup again.

Although by the time that happens its going to be end of year so we may not see the effects until March arguably.

I might be a side-grade buyer, or simply sell & become a renter maybe 2 years out once the market is liquid again.

We are heading into a time of year, 4Q, when volume traditionally picks up (kids are starting to be settled in school, freeing up parental energy; people in bonus-related jobs start to smell their bonuses, even those may not get paid out until 1Q. So even if volume does pick up, it will be slightly tough to know whether we can attribute it to the rate cut or not.

Steve,

Rates are down closer to 5% once you factor in appx 50 bps discounts most jumbo buyers in NYC are able to get. Asset transfer or private bank may even get you higher discount. While the forecast is for fed to cut more, how much the 10y treasury will come down absent recession or go up is not clear.

What Fed seems to have done is make a dent in "T bill and chill" as people are thinking in 4 more month we will be below 4% yield as per the forecast.

https://www.wellsfargo.com/mortgage/rates/

https://www.yardeniquicktakes.com/powell-co-slams-the-pedal-to-the-metal/?ref=yardeni-quicktakes-newsletter

The attached article indicates there are doubts that any rate cut was needed.
Yardeni said a few weeks ago that the economy is too strong for a rate cut.

I am not so certain that the cuts will keep coming.
I have a wholesale lender whose rate is 5.375% and with a buydown, no cost to the borrower.

Chase quoted me 4.75% on a 15-year fixed rate mortgage today. This was over the phone while I was out, let's see if there's any fine print.

Keith, seems believable given this at 6am from Yahoo News:

Here are the current mortgage rates, according to our latest Zillow data:
30-year fixed: 5.77%
20-year fixed: 5.43%
15-year fixed: 4.92%

30-year hitting anything below 5.0 would seem like close-enough psychologically for most people I suspect.

I find it amazing as to how many real estate brokers simply do not want to hear about financing a home.
And when rates are quoted whether on yahoo, Zillow, etc., knowing what the APR is very important because that indicates additional fees or points the lender will be charging. If the APR is higher than the interest rate quoted, fees will be charged.
As far as buydowns, developers and sponsors have said that without them, their sales would be dismal. As an example, I quoted a 30 year fixed rate of 5.375%. With a buydown, the rate for the borrower for the first year is 2.375%. For the second year, the rate is 3.375%, third year 4.375%. Then the mortgage reverts to the fixed rate of 5.375%. If rates go lower, then a borrower can refinance anytime. The borrower pays no fees for the buydown. Wells Fargo is not offering this program. Wells Fargo may still have control on the big brokerages since numerous brokers told me they send their buyers to Wells Fargo; they have no desire to enlighten buyers to any other financing options.

@streetsmart - I recall being heavily steered to Wells with bad rates at any new construction construction I visited, so not surprised

Streetsmart, In the example below, is the Lender paying for the buy down? What is their 30y rate without the buydown? 25 bps lower to 5.125 vs 5.375%? Also, who pays the mortgage broker or underwriting if any? Borrower or the lender? I assume zero points.

As an example, I quoted a 30 year fixed rate of 5.375%. With a buydown, the rate for the borrower for the first year is 2.375%. For the second year, the rate is 3.375%, third year 4.375%. Then the mortgage reverts to the fixed rate of 5.375%.

Seller buy Downs are lower prices in disguise

One thing not being mentioned is that Fed rate cuts doesn’t mean lower mortgage rates. Rates fully anticipated the cuts and in fact have been rising since the Fed meeting.

On average, over the past 50 years, the 30-year mortgage rate has been 3% above the Fed Funds Rate. Today the mortgage rate is 1.25% higher than Fed Funds (6.08% Freddie PMMS vs. 4.83% EFFR). The recent rate cut is built into mortgage rates and in fact many more rate cuts are built into mortgage rates.

Mortgage rates will only go down if the Fed cuts more than expected or inflation is lower than expected. Keep in mind some of those scenarios where this occurs are recessions. The market has gotten used to an inverted yield curve, but six cuts are needed to normalize the inversion in the first two years of the curve before it would start pulling the long rates down.

Mortgage rates are near long term averages, to expect lower rates is to expect quantitative easing, deflation, recession or ZIRP.

Woodside Paul, why the long post to say that Fed rates are short term and mortgage rates are long-term?

Nobody wants to talk rates today?

@300_Mercer
Interested parties can pay for the buydowns. Lenders will not, neither mortgage brokers.
The seller can do a sellers concession. The price of the property can be raised to accomplish this.
However it gets to be expensive if you’re talking about a million dollar loan. One can do a buydown with 2% for the first year. Mortgage brokers get paid the same as without a rate cut.
Most predictions for rates including one from Fannie Mae indicate that by the end of 2025, rates will still be hovering around 6%.
The ten year note went up a lot on Friday due to the excellent job report. If the next crucial report, CPI shows an inflationary trend, it won’t be good for the rates, and the Fed may not cut rates for the rest of the year. As it is the forecasts for rate cuts are down to 25%.

@Steve123,
Thanks for your feedback. I didn’t know it was that bad concerning Wells Fargo.
Wells Fargo also holds up closing docs so they can charge for rate lock extensions.
Wells Fargo was once great for loans and I was a mortgage broker partnering with them. Then in 2012 they fired all the mortgage brokers blaming them for their legal problems. It didn’t help as they have only gotten worse, opening accounts for customers without their permission, etc.
I would not trust them to do a loan for me.
.

Sorry Woodside Paul, my "next-up" buyers are cash. The last two commitment letters I saw were 6.05% and 5.875%, both for co-ops, but I don't do a lot of volume, and those are two-three weeks old at this point.

ali r.
{upstairs realty}

>Then in 2012

too old for relevance

Mortgage rates really haven't improved