Mortgage Rates and the Fed
Rich Cercone provides an update on mortgage rates following the Federal Reserve’s decision to maintain current interest rates. Key points include:
- 10-Year Treasury Yield: Currently fluctuating between 4.39% and 4.41%, up from the mid-4.20s earlier in the month.
- Current Rates: 30-year fixed mortgage rates are averaging between 6.25% and 6.5%. FHA and first-time buyer loans may still see rates around 5.9%.
- Fed Sentiment: For the first time since 1992, four Fed governors dissented, favoring a rate cut. This could signal lower rates in the future, though market sentiment ultimately dictates mortgage pricing.
Real Estate Market Dynamics
Jaysen Barlow highlights current listing trends:
- Seasonal Peak: The market is entering its peak spring season.
- Pricing Strategy: Properties priced correctly are selling within 28 to 35 days, while overpriced homes remain stagnant.
- Market Disparity: The luxury market ($800k+) remains strong and moves easily. Conversely, the entry-level market ($200k and below) is struggling, likely due to the economic pressures on first-time buyers.
Economic Variables
The team discusses several external factors impacting the market:
- Employment: The job market remains surprisingly strong, with unemployment peaking near 4.5%.
- Gas Prices: Prices in the Columbus, Ohio area are averaging around $4.25/gallon, with some variation based on membership cards (e.g., Giant Eagle, Costco).
- Geopolitics: Ongoing conflict in Iran is viewed as a significant variable that could impact oil prices and general market stability.
Video Transcription
Dave Barlow: Hey there everyone, Dave Barlow here with part of the gang from Sell for 1 Percent and Equitable Mortgage. It is the 30th of April, the last day of the month already. This is crazy how time has flown by so far this year. As you see Jay driving there, all the trees have turned green, the bushes, the flowers are starting to pop. Rich looks like he’s in Siberia with his winter jacket on and his hat. They must have the AC turned on high at the office, Rich.
Rich Cercone: Yeah, yeah. Well, you know, as far as—it’s end of April, beginning of May. It’s like the military and the “Mayday” warning. Mayday, Mayday! You better look out because the Fed did not lower rates yesterday. They took a wait-and-see approach. The 10-year Treasury bond does not like it. We were at 4.41 last night, went down to 4.39. But just for context, we were in the mid-4.20s a week or so ago. We were below 4% back before the war started and we had the 5.9 rates. It might not sound like a lot, but when you’re almost a half a point higher right now than what we were on the 10-year Treasury, that does affect mortgage rates. We’re more in that 6 1/4, 6 1/2 range on a 30-year fixed right now. FHA, you might still get into a 5.9 rate; first-time homebuyers might get into a 5.9 rate, but the average person, we’re 6 1/4 to 6 1/2 depending on your down payment.
Dave Barlow: All right. Well, it could be worse. It could be two years ago when we were 8%.
Rich Cercone: Could be. The good old days of 8 1/2 and transitory inflation.
Dave Barlow: Yeah, now you just have a stubborn Fed head that doesn’t want to do anything. He looked a little disheveled yesterday, I thought.
Rich Cercone: Might have been his last one. Another interesting fact about that meeting yesterday: four of the Fed governors dissented. So we had an 8 to 4 vote. That’s the first time since 1992 that there have been four Fed governors dissenting from the prevailing thought of keeping rates the same. Four of them wanted to lower rates out of the 12. That’s maybe a sign that we will see rates go lower sometime once the new Fed governor takes over. But again, that doesn’t necessarily mean rates are going to go down for mortgages. It depends on what the market sentiment is.
Dave Barlow: You’re exactly right. We saw that before—they lower rates and everybody’s like “okay, mortgage rates are going to drop” and mortgage rates went up. There are so many things going into the pot to make the soup, and if one thing is just out of sync a little bit, it impacts everything. I thought it was interesting that Powell announced he was going to stay on as a governor. So my question is, then, with Warsh coming in, who is he replacing? Is it a set number? I wasn’t really clear on that.
Rich Cercone: You know, I’m sorry, I missed that. I had a lot going on yesterday. I don’t know what Powell said, but I’m interpreting what you’re asking—that maybe Powell is going to be a Fed governor, like of one of the regions, but he’s not going to be the Chairman. The Fed Chair will be Warsh. That may be the case, but again, I didn’t catch that.
Jaysen Barlow: He’s staying on, as I predicted last week on this show, and it’s mostly because of this lawsuit with—I forget her name—but that’s why he’s staying on, because of Trump and the lawsuit. Trump can’t really seem to stay out of his own way. But what governorship is he taking over? They were already on there. He’s the Chairman, but he’s also a governor of which district?
Dave Barlow: I don’t know which district he’s in charge of. I just thought the Chairman was his own man, he wasn’t a governor as well.
Jaysen Barlow: The four dissents are very interesting. I mean, the meeting minutes that are going to come out of their next meeting—because he’s going to get in around May 11th, the new Chairman—and he’s going to be pounding the table about it. It’s going to be interesting to see the meeting minutes and what they say after the meetings and how things go.
Dave Barlow: And all that will impact future rates. But again, it could be worse. It could be a year and a half, two years ago when it was 8%. Will it be like it was five years ago and get back down to 3%? I don’t think any of us sitting here believe that.
Jaysen Barlow: No, and it shouldn’t. If it does, something bad is happening.
Dave Barlow: Where would a “normal” rate be, all things being equal?
Rich Cercone: I think we’re there. If you took the average of the last 25 or 30 years, somewhere between 6% and 7% is kind of an average.
Dave Barlow: The average is still around 7 1/2 over 30 years.
Rich Cercone: Throughout the period from 2011 to 2019, before the COVID thing and the really low rates, we would see something in the 5s, then we’d get down into the 4 to 4 3/8 range, then back up to the 5s. We’d have a 15-year fixed sometimes with a 3 in front of it. It would be nice if we could just get back to those 2010s levels where we see the 4s and the 5s. That seems like a nice sweet spot. I don’t think we can hope for any more than that.
Jaysen Barlow: Wasn’t the overnight funding rate back then 0% when they were doing quantitative easing? That just goes to show people that the Fed can drop their rates, but it doesn’t necessarily mean mortgage rates are going to be 3% or 4%. The Fed’s mandate is to control inflation and the job market. Right now, jobs are actually really strong, which is amazing to me. If the job numbers start tanking, that’s when I think you’ll see rates get below 6% again—5.8, 5.7. Something has to break in the labor market to see that happen.
Dave Barlow: Well, and the new Fed Chairman kind of touched on this during his hearings: doing business the old way in today’s world may not be the best way to do things. You have to evolve. Otherwise, we’d be stuck in the 1920s with the issues they had then. They have their mandate to watch jobs and inflation, but how do you mix that? It’s going to be interesting to see. These guys like the Treasury Secretary, Scott Bessent—these dudes are financially pretty—I mean, they are operating in the world. They’re not some MIT or Harvard theory guys; these guys are actually doing it. They know the inside game much more than you and I will ever have the opportunity. So it’s going to be interesting to see what happens. I think a lot relies on what’s happening in Iran. How fast can Trump get this wrapped up?
Rich Cercone: That is a big variable right now. That is the elephant in the room for sure.
Dave Barlow: Yeah, I think they kind of thought maybe by taking out 40 leaders and bombing the crap out of them, it would pound them into submission, and that hasn’t quite happened. It’s going longer than they wanted it to go. We’re seeing some fallout from that. As soon as they can get this thing wrapped up, you’re going to see like a pressure cooker—there’s a lot of pent-up energy that’s going to explode. Trump’s a business guy too; he understands the numbers. How do you bring them all together to make it work for us out here on the street trying to make a living? Jay, on the listing side, what are you seeing there?
Jaysen Barlow: Listings are strong right now as far as the number of new listings coming on and ones going into contract. We’re at that seasonal peak time around May 1st. Things look good for sellers. I don’t have the current stats in front of me, but I’d guess around 4,500 or a little above that. Things are coming on the market and selling at a pretty good velocity right now. For my sellers, if you’re overpriced—which we talk about seemingly every week—you’re probably not going to sell right away unless you’ve got something spectacular about the property. If you come on and you’re underpriced, you’re going to sell in like a day. It’s about trying to find that “sweet spot.” That’s why you pay me the big bucks to come in there—where can you get the most amount of money and have it not take forever? The average days on market is around 28 to 35 depending on the suburb and price point. The one phenomenon I’m seeing here that you’re seeing in other parts of the country: the luxury market ($800k plus) seems to be moving pretty easily. The ones that are $200k and lower—that first-time buyer part—those ones are a struggle. People in the luxury market probably aren’t as affected by the economy as people getting crushed at the gas pump. Which, we’ll let Dad talk about his gas meter and hear what kind of propaganda he has.
Rich Cercone: Yeah, Dave, what are you seeing out there with gas prices?
Dave Barlow: The whole world is falling apart. It’s all coming tumbling down, it’s all crashing. Gas is up to $4.25 a gallon. I think we’re still lower than the previous administration’s gas prices, but you get spoiled. Gas gets down to less than three bucks—you’re paying $2.89, $2.79—then all of a sudden it’s up to $3.99, now $4.25 seems to be the number. People get spoiled and they’re going to be mad about it. I’m still trying to figure out how our gas prices are going up when only 2% of our oil comes from the Middle East, and we just conquered Venezuela, which is the second or third largest oil producer in the world.
Jaysen Barlow: I don’t think they are producing gasoline from there. They have sticky crude, sweet crude. Ours is sweet, which is why we’re not built for it. Ours gets exported mostly. I think Venezuela is heavy. I don’t want to argue with you, my father whom I love so much, but I follow GasBuddy. GasBuddy is saying $4.99 everywhere.
Dave Barlow: No, they’re not. On my drive up here, I saw $3.85 at a Giant Eagle. I saw multiple $4.99s and I saw a lot of $4.30s.
Jaysen Barlow: You have to be careful at the Giant Eagle with that $3.85. That’s only if you use your Giant Eagle Advantage card. They have two prices there. It’s the old bait and switch.
Dave Barlow: No, it’s not. If you have a Giant Eagle Advantage card and you attach your credit card to it, then you get that $3.85 price, which is like, why wouldn’t you do that? It’s a hell of a deal. I typically go by what Kroger gas is. They tend to be the ones that lead the way. If Kroger is up, I know everybody else is up. They’re on 23, right there at Lewis Center Road. We call it the “Blue Kroger.” Then if you’re fortunate enough, you go further south on 23 to BJ’s Wholesale, and they’re normally 30-40 cents below even Kroger. When you become a gas connoisseur such as myself, you know these things.
Rich Cercone: Useless information other than when gas is $4.25. I wonder if rates are lower if you’re near a Costco as opposed to a Giant Eagle.
Dave Barlow: Well, if you’re near Equitable Mortgage, the rates are lower. And if you have your Giant Eagle card! Yeah, you guys should start a club like that—at Equitable, you have your “Equitable Rewards Card.” The more mortgages you take at Equitable, the better your rate. I’m an idea man!
Rich Cercone: We used to have something called the “Free Refinance Card.” That’s how we started our company. We literally would refinance people for no cost back before the regulations and costs completely skyrocketed on mortgages.
Dave Barlow: Well, it’s the old Ray Kroc thing at McDonald’s. If you can get the kids to want to come to McDonald’s, they have to bring the parents. It’s the same thing. If you come and get a mortgage at Equitable, I’m going to tell all my friends and family. It’s a good business model. And we’re kind of in the same boat here at Sell for 1 Percent. People see what we do, which is at the very minimum the very same that you’re going to get with any other Realtor, and you get more. You get me with 27 years of experience, you get Jaysen with 20 years of experience. Not many people have sold the number of houses that we’ve sold. So you’re bringing a ton of experience of how to get properties sold for the maximum amount, and you’re paying 1%. So we get a crapload of referral business. And it’s great.
Anyhow, we are just about out of time. It’s 10:27 here on a Thursday morning. Rich has got to go, I’ve got to go, Jaysen is trying to show up here at the house.
Rich Cercone: Jaysen is banging on your door, yeah.
Jaysen Barlow: I’m here to pick up some more real estate signs to put in yards. And I have a quick answer for you on your oil question. Oil is priced like gold; it’s a global commodity. Those prices are based on the 20% of oil getting cut off from Iran coming through the strait. The analogy used was that if 20% of the homes globally disappeared, it would affect prices in Columbus even though Columbus housing wouldn’t change. It’s a global commodity. It’s called supply and demand, and the traders bid the futures up.
Dave Barlow: I don’t agree. I think Congress ought to have some real meetings, drag in these oil execs and find out what in the world is going on. That’s what I want to know.
Rich Cercone: Imagine my shock! Bernie Sanders for President, that’s what I say. Listen, it’s transitory, okay? Don’t worry about it.
Dave Barlow: All right you guys, I appreciate you showing up this morning. Rich, I’ll see you tomorrow about 1:00 at your office. We just got cleared to close, by the way, while I’m talking to you.
Rich Cercone: Well, that’s good. I figured you guys were having like roosters or something, I didn’t know you were actually getting work done.
Dave Barlow: No, we wouldn’t leave you out on a food thing. I hope not! All right you guys, thanks for being here this morning and we’ll see what happens next week with the war, oil, housing, mortgage rates. Any other questions that you guys have, post them here on the video and we’ll be happy to address those for you.
Rich Cercone: We’re going to “Warsh” everything out and make lower rates.
Dave Barlow: There you go. All right guys, have a good one. See ya later. Bye-bye.