The Fed lowers rates…… BUT Rates are up?? Yes, that is the case, and it is not as unusual as some have been making it seem. Keep in mind how rates move. Investors buy and sell bonds and mortgages in the secondary market just like stocks and bonds. Investors are basically a bunch of gamblers that are buying based on what they think is going to happen…. All that improvement we saw in rates over the past month or so was based on the anticipated Fed move, buying ahead of the news, driving the price up and the yield down. So as soon as the Fed lowered rates, we did see the market begin to sell off. Wall Street buys the rumor and sells the fact…. Effectively: Profit taking. This profit taking stepped up a little more than usual during the Fed Comments after the meeting starting when Powell said that there is no guarantee they will lower rates at the December meeting. Yesterday the odds makers had a 90+% chance we would see another 25-basis point drop in December. As of today, that is flirting around 60% chance we will see a drop.
So why did Chairman Powell say that? A big reason is the absence of data. Remember that Federal shutdown that we are now on day 30 of? A majority of the economic data reported comes from the Federal government. Effectively the markets are flying blind. Love him or hate him, Powell can’t commit in any direction without that data. The Fed’s purpose is to keep inflation at manageable levels and maintain healthy employment. There is no one compiling that data now and no one knows how long it will take to get accurate data and much of it will be very old news by time it is reported.
The Good parts of the meeting:
- There were only 2 governors that did not like the cut, one of them wanted it to be 50bp and the other did not want a cut. So, the overwhelming vote was to cut rates.
- They did also say they would reinvest the money coming in from bonds and mortgages the Fed owns but they used the word “bills” vs “notes”. The market knew the reinvestment was likely to be in Treasuries and NOT in mortgages but anticipated it in the longer end of the curve. The choice to use the word “Bills” suggest that the reinvestment will be at the short end of the curve… One year or less. That is not likely to help push long-term rates down but may serve to steepen the yield curve, making ARMS more attractive.
Rates never move straight up or straight down… Life always tosses a few speed bumps in the way.
LET’S NOT FORGET ABOUT THE SHUTDOW, everything below still holds true. Pay special attention to anything in a Flood Zone.
Federal Shutdown, what does it mean? The federal government shutdown is already affecting key parts of the housing market – and if you’re buying, selling, or refinancing, here’s what you need to know.
Several government-backed programs are facing delays or suspensions:
- USDA rural home loans are currently paused.
- FHA and VA loans are still being processed, but reduced staffing could slow down approvals and appraisals.
- The IRS may be delayed in processing tax transcripts, which is a common requirement for many mortgages.
- National Flood Insurance Program (NFIP), managed by FEMA. However, there are private flood insurance alternatives available that could provide coverage options. If you have clients buying in flood zones, be sure to get that going ASAP to avoid delays.
All of this could mean longer timelines, more uncertainty, or even delayed closings for some transactions.
For Conventional loans (Fannie and Freddie) there will be no issues.
If you are interested in following me on social media, I am on just about every platform as @RobRauf or @RobertRauf
If you are looking to purchase or refinance a home in NJ, please give me a call, I can also help you in all 50 states, CMG is licensed throughout the country.
Robert Rauf
Mortgage Loan Originator NMLS# 248937
http://www.RobertRauf.com
or my blog: http://activerain.com/blogs/rrauf
Cell (732)740-0175
RRauf@CMGhomeloans.com
www.RobertRauf.com
Since 1987 I have been helping my clients fulfill their dream of home ownership! CMG Home Loans is located at 222 Commons Way Toms River, NJ 08755. NMLS #1820. Visit www.RobertRauf.com for more information. NJ Mortgages, New Jersey Mortgages, Mortgages in NJ, mortgage in New Jersey, Mortgages in New Jersey, Toms River NJ 08753, Toms River NJ 08755, Brick NJ 08723, Brick NJ 08724 Mortgage in Ocean County NJ, Mortgage in Monmouth County NJ, Jackson NJ 08527, Howell NJ 07731, Lacey 08731 08734, Beachwood 08722 Bayville 08721,
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