Why are interest rates so high!? | What in the FED is going on!?

Prepare to navigate the high seas of today's real estate market with expert insights from my self Aaron Morrow &  my co-host, Bryan LaFlame. We're tackling the perfect storm of surging interest rates, and understanding their ripple effects on homebuyers' finances. We'll illuminate the often-misunderstood dynamics of Federal Reserve policies, pandemic economics, and the behavior of investors that's sending mortgage rates through the roof. As potential recession signals flash on the economic dashboard, you'll be equipped with the historical context to read the signs and strategize accordingly.

When it comes to the housing market, the terrain is ever-shifting, and we're here to help you find stable footing. Brian and I dissect the current landscape where elevated home prices meet a market still reeling from the crunch on first-time homebuyers – the backbone of the industry. We'll weigh in on how demographic tides and past events, like the 2008 financial crisis, have set the stage for today's challenging conditions. And as we peek into the crystal ball, we'll share our predictions on how the market could evolve when these crucial buyers re-embrace their homeowning dreams.

Finally, brace yourself for a reality check on homeownership, as we shatter some myths around falling interest rates and their actual impact on home availability. With properties selling faster than hotcakes, we'll stress the importance of swift, informed decision-making for eager buyers. And for those teetering between renting and buying, our conversation will provide valuable perspective. Through the inspiring journey of Katie and Chris, we showcase the rewards of preparation and flexibility in securing a home amidst fierce competition. Join us and our esteemed guest, Brian, for a deep dive into the truths of today's tumultuous real estate waters.

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Aaron Morrow Realtor Serving (King, Peirce, & Snohomish counties)
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This is my Intro to every Podcast and YouTube video 

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Transcript

Speaker 1: 0:19

Yeah Well, that was some technical difficulties. Hey everyone, it's Aaron Morrow and Brian LaFlame here, local realtor in the greater Seattle area and local resident or Washingtonian Powered by Movement Mortgage. This lender right here I'm going to replace I don't know where my background went.

Speaker 2: 1:02

I think I just do not have a good connection right now, We'll work through it, put it on the background.

Speaker 1: 1:05

Today's podcast we're going to be oh, you like that the black, you want the black?

Speaker 2: 1:11

No, no, no, I thought you just meant behind, you, behind your head.

Speaker 1: 1:14

Let's put it on, all right.

Speaker 2: 1:16

Oh, this is sleek.

Speaker 1: 1:20

Oh, behind my head, okay. Well, anyways, guys, today our podcast we're going to be talking about you will never be able to own a home. No, sorry, you will never be able to own a home. No, we are talking about why they're so high and how much they affect your home buying power. We're going to be talking about also, what it looks like.

Speaker 2: 1:41

How many of you have said that I will never be able to buy a house?

Speaker 1: 1:45

Why it might not be necessarily a good idea to wait. How many of you have said that? How many feel?

Speaker 2: 1:50

like you're between a rock. It might not be necessarily a good idea to wait. Yeah, how many of you have said that exact same thing?

Speaker 1: 1:53

How many feel like you're between a rock and a hard place where you feel like yeah, so that's what we're here for. Hey, brian, are you getting feedback on my end? Like, am I chopping up Super choppy? Are you getting feedback on my end?

Speaker 2: 2:09

Like am I chopping up Super choppy? Yeah, this is not. Oh, wow, I'm going to.

Speaker 1: 2:23

Okay, so I'm going to, I'm going to bring us right back in.

Speaker 2: 2:27

Yeah, Hold on one sec. Oh, so much better now.

Speaker 1: 3:05

Okay, I'm going to try that I reset it. We'll see if this works. It could be my internet connection, not sure, guys, hopefully it's not Another choppy day. I should have checked that first Before coming in here. I'll check it next time. Anyways, we're back. So, brian, why are interest rates so darn High?

Speaker 2: 3:31

You may remember that guy that ran for mayor of New York on the rent is too damn high. He had like the upside down boot hat. Interest rates are so high 100 percent because of Fed intervention and the effects of the pandemic on supply side economics.

Speaker 2: 3:49

Modern monetary theory might say that it's because, or most people would say it's because of all the stimulus that's been added to the system and the amount of cash that has gone into the system. Modern monetary theory would say that's not it, it's all supply side. The reality is it is both and as inflation got out of control. And you got me because you're frozen.

Speaker 1: 4:17

No, I don't think you got me. Are you super choppy? I'm frozen.

Speaker 2: 4:18

Still, I can see you. Are you back? Okay, good, yeah, good. So it's about fed intervention and whether or not, or when, they're going to pivot from a quantitative tightening position to a quantitative easing position. A lot of you guys have been in on these podcasts and we've explained what that quantitative easing and quantitative tightening is. In layman's terms, quantitative easing is a softening or a more like a stimulative economic policy. Quantitative tightening is trying to take money out on more restrictive monetary policy. So accommodative versus restrictive, putting money in versus taking money out. During COVID, the Fed's balance sheet increased from $4 trillion to almost $9 trillion. They have been slowly tapering that down, but there are other places where they have been reintroducing capital into the market. So liquidity has not really come out during this quantitative tightening period and it seems to me that it seems to me that sorry, I lost my train of thought. It seems to me that the Fed is really just loading bullets in the chamber for a recession.

Speaker 1: 5:28

Really so, just like prepping for it, huh.

Speaker 2: 5:30

Yeah, making sure that they can have their balance sheet come down a bit so that they can add to it, setting up a time where they can drop interest rates so that they can add to them. There has been four times in the past 40 years where the federal funds rate has been above the 10-year treasury yield. So even if those don't matter to you, you just know it's only happened four times in the past 40 years and each time that it has happened the fed funds rate has moved down quickly right after and we've gone into recession every single time. Now we again have a federal funds rate at 5.25% or so and we have a 10 year treasury right now at 4.4%.

Speaker 2: 6:08

So we have the fed funds rate above the treasury rate, the Fed already talking about what it needs to see happen for it to cut rates. As that happens, interest rates will come down as well. So rates are high right now, post-pandemic starting off with inflation and then moving on to a stronger than anticipated economy. Moving on to a stronger than anticipated economy, sticky inflation in a stronger than anticipated economy, having investors move out of these longer dated securities like a 10-year, a 30-year treasuries and mortgages, mortgage-backed securities and as that money moved out of it not a lot of money was left there to soak up that demand.

Speaker 2: 6:51

So there's a whole lot of reasons those are two why interest rates are high. It has to do with trade and supply. It has to do with investor appetite within the mortgage-backed security market. It has to do with the Fed buying $140 to $160 billion a month of mortgage-backed securities and treasuries during the quantitative easing period in the pandemic. It has to do with stimulation of the economy and how that affected inflation. It has to do with shutting down a supply chain. It has to do with Fed sentiment moving forward. There's a lot, a lot of factors that go into why rates are so high and people just want to know when are they going to go down or are they going to go down? And then what happens if they do go down? Right, yeah, I will put your worries at ease. Yes, they are going to go down. No, that is not going to be great for your purchasing power.

Speaker 2: 7:38

I want to share something with you guys that shows the effect of interest rates going up. Yeah, let's go ahead and do that.

Speaker 1: 7:43

If we can show You're going to have to re-put it in here. Sorry for having to refresh that.

Speaker 1: 7:50

And while you do that guys, I'm going to drop our contact info in the chat and, for anyone as a reminder, since this is also in podcast form and you're listening to some of the stuff and whenever we're showing anything off, you can always go check out what we're showing off on my YouTube channel. Or I mean, basically you could find this anywhere like LinkedIn, because we're live right now LinkedIn, Facebook, clapper, tiktok, but it's easier to, it's easiest to find on the YouTube channel because everything's indexed there and library.

Speaker 2: 8:21

So. So while you're doing that, before we get the screenshot, a lot of people think as rates go down, as rates go down, my purchasing power will go up. So let's take a look at what that means. This is a, for instance, scenario in King County of purchasing a home at $600,000 with 5% down now. County of purchasing a home at $600,000 with 5% down now. Or just waiting six months, one year, one and a half years, two years. Like you know, aaron and I, we do not strawman an argument. These are very just normal numbers with costs and benefits included.

Speaker 2: 9:03

I use historical appreciation so we're not making anything up and I used a pretty conservative rate projection of rates going down to six point, three, seven, five by the beginning of next year, five point seven, five, and then just staying there.

Speaker 2: 9:16

So I don't know. I'm going down further than that which, as the Fed moves, is not going to be the case, and we have an entire class on that. That's three hours long to talk about. Why so waiting? Purchasing a home now at six hundred thousand dollars of five percent down in King County, versus waiting six months, one year, one and a half years, two years off, historical appreciation. Look at the numbers that change here. So not only is this house going up, but you're saying, yeah, brian, but I'm buying it at 5.875 instead of 6.875.

Speaker 2: 9:44

While that may be the case, I want you to take a look at the principal and interest payments.

Speaker 2: 9:51

So our principal, interest, taxes, insurance, mortgage, so your entire payment, what that's going to look like over buying a house at 600 for 6.75, 44.17 a month versus buying a house at 670 for 5.875, 45.09 a month. So you can see that it is $45.09 a month. So you can see that it is not that much cheaper per month to wait and you miss out on all of this equity. Waiting two years will cost a person about $69,243. The monthly payment is going to be about $90 difference, but it costs you and that is appreciation gain, cumulative monthly payment difference and taking in the cost to refinance down to that lower rate. If you were just to refi to that lower rate, so even if you weren't to refi, it would cost you even more. This is the effect of higher prices, even with lower interest rates. Now if we were to be a little bit more reasonable about where we think rates are going to be in the mid to low fives at this time, this would be even more pronounced because this purchase price would go up even further.

Speaker 1: 10:50

I want to show you guys some stuff that we do that we share your family. I want to show you my family. No, I'm just kidding.

Speaker 2: 10:57

I want to show you who you're feeding when you help us. So I want to show you guys some stuff that we go over during our homebuyer classes. This is how a mortgage is made. Enough said, you guys know this now, but I want to show you that currently it's in here, somewhere here it is With interest rates in the sevens.

Speaker 2: 11:21

okay, mortgage purchase these are mortgage purchase applications. How many people are putting in mortgage applications to buy a house are at levels that are so low. We have not seen these levels since 1995. At first brush I think that's awful. I don't want to be in this market. Remember Warren Buffett's famous saying when people are scared to greedy, people are greedy to be scared.

Speaker 2: 11:44

So right now we have the last time mortgage purchase, the last time this few amount of people were putting in applications to purchase homes. Griffey was rounding third base on Edgar Martinez's double sliding into home and the Mariners won their first playoff series in franchise history, coming back down two games to none to beat the Yankees in the 1995 AFC Wild Card. Afc, that's not football AL Wildcard to go to move on, and that was 90 95?

Speaker 1: 12:17

how old were you at 95, aaron, wow oh man, don't ask me to do basic math before I've had my coffee yeah, I was Brian, you helped me. I am 34 right now 95 where were you born?

Speaker 2: 12:32

you were born in 90. I was in eighth grade. I am 34 right now 95.

Speaker 1: 12:36

Where were you born? You were born in 90. You were born in 90. It's the easiest math. No, I was born in 89.

Speaker 2: 12:40

Oh, it's still easy. You're five to six years old.

Speaker 1: 12:44

Oh my gosh, I'm cutting that part out. That's what happens, guys. Okay, so that's okay no-transcript.

Speaker 2: 12:54

Now what has that done to real estate prices? I'm so glad you asked. The Case-Shiller Home Price Index, which is the gold standard for home pricing, has gone up 6.4% year over year. Housing prices continue to increase as rates stay high, as home buyer demand comes out, as inventory has climbed. As inventory has climbed weekly available inventory you can see. Look at how much higher it is in 23, 22, 21, and 2020, but how low it is compared to the pre-pandemic levels. So we've had mortgage purchase applications plummet. We're starting to see inventory go up in a reasonable and real way and we still see home prices going up six and a half percent over historical averages of four, five, six percent. Why?

Speaker 1: 13:47

is that.

Speaker 2: 13:48

That's correct. It's because if you were to look at just inventory coming up and you'd say, oh my gosh, look at this inventory is coming up. This is bad for the market. We're going to have a whole bunch of homes in the market and prices are going to plummet. Or you can look at historical inventory trends and you can see how horribly historically low. We are so sure inventory is coming up, but it's coming in from such a low level that it has so much further to go just to get to normal. Now why are we saying that if you wait for rates to go up, it's not going to be cheaper to buy a house Right now.

Speaker 2: 14:30

Higher interest rates will continue to add more inventory to the market. Higher interest rates are gonna add more inventory. They will add more weekly and they will keep. Currently are adding more weekly inventory and will add more inventory that stays on the market. Why is that?

Speaker 2: 14:43

It's simple, demographic and it seems counterintuitive to say, hey, people have two and 3% rates, so if rates stay at 7%, there's not going to be as many houses on the market and that's no way that it can grow. But the reality people have babies, people change jobs. Things happen in people's lives that make it. So they have to move. That's always going to happen. What is happening right now, though, is first-time homebuyers, who are incredibly interest rate sensitive. 97% of first-time homebuyers excuse me, 93% of first-time homebuyers finance their house. They don't have a rich uncle that died and left their money. They don't have parents who could buy it for cash. They have to get a mortgage, so they're very interest rate sensitive. They're staying out of the market right now, and last year, for some homebuyers in an oil market, 33% of the market. Last year they are 55% of the market. Okay, so that's a big demographic that is just not moving as quickly, or in as big of droves as they had before.

Speaker 2: 15:40

Right? What happens when somebody? I'll have some other slides to share too, if you guys want to look at YouTube. So what happens when somebody puts a house on the market? Well, if that person needs to buy a house, they put a house on the market and they buy a house. So they're a net zero to inventory.

Speaker 2: 15:59

What happened during this time, with a bunch of foreclosures and inventory spiking so high, as you can see from these slides. Inventory spiked so high because in 2008, 2009, 2010, you'll remember people had bankruptcies, they had foreclosures and they had these large short sales. They had these large events. Look at this climb in bankruptcies and foreclosures pre and into the Great Recession, compared to what's happening right now. So these people who foreclosed bankruptcies, short sales, they got rid of their house. They couldn't become a buyer. They had to then be a renter buyer. They had to then be a renter. So what's happening now is you have people who had no credit events, but they need to move for whatever reason, so they can put a house on the market and then they're going to go buy another house. That's a net zero. We do not have first-time homebuyers coming in.

Speaker 2: 16:51

When first-time homebuyers come in, as interest rates go down and first-time homebuyers start to move back in the market, you and I saw it at the beginning of this year.

Speaker 1: 17:03

We saw it at the beginning of this year with interest rates had that dip Like was it January or February?

Speaker 2: 17:08

Yeah, from October last year into January of this year. So this dip right here. So, as we saw rates start to go down, we saw an influx of first-time homebuyers. It was like they were waiting and waiting and couldn't wait any longer. They're very interest rate sensitive.

Speaker 1: 17:26

When they come into the market, that is…. I guess the vast majority of them didn't scoop anything up.

Speaker 2: 17:30

No, but their interest because it didn't last long enough, their interest was peaked. Those people have nothing to add to the market as a listing. They're going to come off and just gobble up these listings that people are putting on the market for life reasons and then you have first time homebuyers coming in just taking listings off the market without adding to it. We're going to show weekly listings going way up, but we're going to show them sold incredibly quickly. I want to show you a little bit of perspective of what we have right now. This is what we had then, uh, and how, how prices are going to be affected. 2007, we had 4 million homes for sale. This is under contract and not under contract in 2024. Right now, nationwide, we have right around a million. This number I think it's like 1.03.

Speaker 2: 18:11

This fluctuates a bit less than a fourth, yeah, yeah, and we have 13 million more home buying households vying for these 3 million fewer homes.

Speaker 2: 18:21

Now, that is only going to drive prices up as rates continue to go up. This is what's happened to real estate prices post-pandemic. So I want to show what most people will look at as oh my gosh, this is such a crazy time. I can't believe prices are coming down so long. We did a class in the middle of 2022 about people calling for the market crash, and so what I did was I went back all for 10 years, from 2012, and the market rebounded from the recession until present day of 2022. At the time, and every year, I looked up what people had said the market was going to do. What we said the market was going to do, why they said it, why we set it, to show that. No, like this, if it bleeds, it leaves bad news is what's going to get people to click. But here's the reality of what's happening in the market. So people would see these prices coming down. What looks like prices coming down? This chart shows K Schiller, national Associates Realtors and the and Freddie Mac's home price index.

Speaker 2: 19:11

So it's three different data sources showing prices going down, but that's not actually prices going down. If you look at this axis, it is prices growing. It's going up less quickly. So the growth rate of these houses is going up. As we bottomed out here, a lot of people like see, I told you interest rates are earning, housing prices are gonna crash. Housing prices are gonna crash. We bounced right back up, because of course we did, because they didn't understand the actual problem we have in the housing market right now. So if you were to take out, if we could just block out this period right here, this COVID period, if you can see what I'm squaring on my screen, if you could block that out, look how smooth this would have been. We're just right back to the median, right back to the mean.

Speaker 2: 19:49

So people who are saying yeah, we can't buy a house right now. We're going to wait for rates to go down. I'm telling you. I'm telling you, as you wait for rates to go down, this is going to go up. It's just going to have to. Demand is going to be pushed into this market. I want to show you kind of an example of the demand this time versus the demand when we had our last real estate recession First-time homebuyers born in 1973. And we had our last real estate recession First-time homebuyers born in 1973. Look at this huge dip in the amount of first-time homebuyers that came to the market in 2006. Look at this large influx of population of people becoming first-time homebuyer age the average age of a first-time homebuyer in 2024. This is the amount that is on. This is sideline money. Right now, you guys Sideline homebuyers, and these sideline homebuyers continue to push rental market prices up, because we can see we have great investors, you know so great.

Speaker 2: 20:48

If you're an investor, it's great time to be you right now, Even at higher interest rates. If you can buy a house with higher interest rate and refinance to a lower rate, you can get into a market that is thirsty for you. So as interest rates come down, we will see home prices and competition continue to go up. It is a thing that we're preparing for on our team. It is a thing that we make sure that we are going to be able to handle the amount of business that is coming in.

Speaker 2: 21:22

Cause we're still incredibly busy right now, and so as this moves, like it's going to be a huge heat, like you've got to be ready. And if you're a home buyer on the sideline and you're waiting and waiting, you got to get in the game before everybody else. You got to get in it before it's crowded. We talked about hey, I can't buy a house right now and so I'll never be able to buy a house unless rates come down. Then I can jump in and buy a house. I think we've shown what it looks like when rates come down and the reasons why prices are going to go up. They're going up in a high interest rate environment with increasing inventory and diminishing demand.

Speaker 1: 21:56

Yeah.

Speaker 2: 21:57

Yeah, so as rates come down, we and it's already and Brian, it's already crowded, like on the East side.

Speaker 1: 22:05

So, like with these high interest rates, I have buyers that are trying to buy on the East side Bellevue, mercer Island. They are getting spanked when it comes to just beat up on the price. So, like there are multiple houses in these areas that they're listed for, you know, just slightly above a mil and they're going for 400, 500, 000 above list price. All of them and they're all cash or hard money deals the normal home buyer that's trying to buy these properties on financing, they have to basically waive everything to compete with it you know what I mean and fork over like a good amount of earnest money to say, here you go, seller, to take the risk of using me as the buyer versus, you know, this other cash hopper, you know.

Speaker 2: 22:53

Yeah, absolutely.

Speaker 1: 22:56

Yeah, and that's going on with the high interest rates. Imagine what's going to happen when they come back down for those areas. Like, if you've ever wanted to get in those areas like, it's a pipe dream right now with with like right now is like probably going to be the easiest time to get in those areas and it's not. It's tough. So, like I'm just thinking of all my buyers that was helping through the pandemic and pre-pandemic I mean. Gone are those easy days where you, just as a normal home buyer, can just walk right in and get a house in bellevue, like it's just, it's gonna take grit tough to be tenacious. Like you gotta think outside the box and go for the off-market deals. Um, now, that being said, every market in every city is a little bit different. On the whole, it's generally more competitive right now, but there are plenty of areas in the greater Seattle area where it's not as crazy and if you even look at it, there is still a sign of hope right now, while interest rates are higher.

Speaker 1: 24:00

Because we were just taking a look at our chart, our team, today, I think there was like 1400 new listings or something that came on this last week or something, and I might not have the numbers exactly correct, but I remember, like the general ratios, there were still over 300 houses last week, listings that had price reductions.

Speaker 1: 24:22

So there's plenty of houses out there that are still on the market, that hit the market, that didn't get a crazy bidding war happening on them, and a lot of that. A lot of the times there can be multiple factors they didn't list it properly, they didn't advertise it properly, they picked the wrong price, they're overlisted. There's numerous factors. But, guys, there's 300 homes out there currently for sale right now that just had a price reduction, meaning it's still on the market. Those price reductions go away when we go, when, when, when interest rates pop back down below five, you best believe those price reduction amounts are going to be like next to none and then you've got to change your way of thinking they're going to be like next to none yeah yeah, you have to change your way of thinking too.

Speaker 2: 25:11

If I, if I'm thinking this, everybody else probably is too. So how can I out think that, hey, I really want rates to go down so I can buy a house? I bet you do, I bet we all do. I can't control that. What I can control is my strategy for this market and where I think it's going. I want to talk a little bit about what's going to happen moving forward with rates and what matters to the Fed.

Speaker 2: 25:33

So the Federal Reserve has Favre, has a dual mandate of price stability and a robust job market. That is the reason that they exist. They are what's called the lender of last resort so they can keep the economy stable and an active and robust job market. So the two best ways that the market measures, that is, our inflation numbers and our jobs numbers, and that is what the market trades on big time. I want you guys to take a look at this Now. You don't have to understand what it means, but I just want you to see this large movement which is when April's consumer price index, which is the first inflation report of the month, and the market trades heavily on that. So this is a consumer price index and look at this trading voting. Compared to the rest of the month, it is by far the highest.

Speaker 1: 26:23

So all you got to see is what investors do with their money.

Speaker 2: 26:26

Now look at this jobs report. It was a jobs report that was positive for us and it is always the first or second highest. If it's a big miss or big beat, it will be the highest and then you can see the volume today or, excuse me, not today, this was a couple of days ago that we made this the volume. My buddy, matt Graham, made this the volume that you could see from the CPI report that just came in at expectations. Here's a little bit better. Look at the volume from the CPI report versus a jobs report and look at this difference in trading volume. What investors care about? Jobs. This is a positive job support for us. You can see interest rates come down as we added fewer jobs than expected. The consumer price index that came out a couple of days ago uh was uh, as expected. So consumer price index went down from 3.8% year over year to 3.6% year over year, Right and.

Speaker 2: 27:22

And then look at the trading volume, trading volume, trading volume this daily. Look at this trading volume and this large move down when it just came in, as was expected, and not a bit worse. So the federal reserve has a target of inflation, that their inflation target is 2% annual inflation, measured by the producer, the PCE. And that 2% I wrote a post on it the other day that 2% has not always been set in stone. It's really only like, officially, 12 years old, Unofficially it's like 30 years old, but it is just a number that the Fed needed to say hey, we need a number so people know what we're going towards and we're not just reactionary. And so that number of 2% inflation is a number that they just said hey, yeah, this is. They had their economic reasons, which we don't need to go into, but they made a number so that we could have a target and that the market would know what they were moving toward and why.

Speaker 1: 28:24

So the Fed has stated now that they've raised their federal funds rate all the way to 5.25%.

Speaker 2: 28:30

They had stated in this move down last year that we just looked at this move down in interest rate.

Speaker 2: 28:39

Right, yeah, this was the first time they stated publicly hey, we think we have some rate cuts next year. So if we have some rate cuts next year, you saw the market react to that. The weird thing is the Federal Reserve's federal funds rate is the shortest term loan available it is an overnight loan and the 30-year fixed mortgage is one of the longest term loans available.

Speaker 2: 28:59

But the Fed policy is affecting the value of our money, and the value of our money is very important in a long-term investment. If you have a fixed return and your money continues to get less and less valuable, well then that return becomes less and less valuable. Think about if you get $2,000 a month from this 30-year fixed asset that you bought three years ago. Well, three years ago that $2,000 bought you a lot more than it does now, so asset is a lot less valuable. That's why it's affecting the long-term market. As the Fed said, hey, we think we see three rate cuts next year. The market reacted yeah, right, and now, as we started to get negative jobs numbers and negative inflation numbers, you can see it right here.

Speaker 1: 29:39

You can see it right here.

Speaker 2: 29:41

You can see right here, you can really see it right here.

Speaker 1: 29:43

These are all negative jobs and positive job inflation number positive jobs number.

Speaker 2: 29:51

Yeah, you can see these huge red moves are negative. Every one of them is negative jobs and negative inflation. So the Fed now that we've had a positive jobs report here positive for the bond market, negative for the economy and a positive inflation report here positive for both the bond market and the economy you can see that the market sentiment is hey, maybe we will have a Fed rate cut this year. Now I wish I would have saved this chart.

Speaker 2: 30:18

There's a chart of Fed fund futures which is where the market thinks the federal funds rate is going to be into the future, and the 10-year treasury market and the Fed funds future is still up here, so the market isn't quite sold. They need some more data on inflation numbers and jobs reports. But if we go into June and we get another negative jobs print. It is going to be gangbusters for mortgage interest rates and that's going to push activity huge into the market and you've got to be ready for it.

Speaker 1: 30:48

This could be a head fake.

Speaker 2: 30:49

Absolutely. We can look back and we can see this head fake. I mean, look at where mortgage, uh interest rates were in march of last year and then we got some positive economic data, or no? This is actually, um, uh, silicon valley bank uh going under and the bank the commercial banking crisis we made a, we made a whole video collab on that.

Speaker 1: 31:08

Yeah, yeah, yeah, we should did.

Speaker 2: 31:11

And then you can see the fed came stepped in and getting some money. So this head fake here. We had this head fake here. Uh, this november, 10th of our first positive inflation report in two years, and we had this move down head fake, move down, head fake. We went all the way up here. This move down head fake right now as we start to move down. If this continues, is it a head fake or is it not? It this time feels like we're gonna spike of new viewers.

Speaker 1: 31:35

By the way, if you could explain head fake term for the new viewers.

Speaker 2: 31:39

Yeah, so head fake think of it like this, like think of it in basketball, like I'm going this way but I'm just gonna stay here. So the market is saying is faking this out like they're ready to go down. They're ready to go down, but they're not yet uh, and the reason is is. We had some positive Fed talk here about. Jerome Powell was very, very clear that he just needed to see more positive inflation data moving forward and right after he said that we had three consecutive months of negative inflation data.

Speaker 1: 32:08

So the market reacted.

Speaker 2: 32:09

The Fed has also said if the jobs market doesn't need to crack before they cut rates, but if it does crack they will probably cut more quickly. And now we've seen our first report of the jobs market may be showing some cracks. So if that continues, then we are on a downward trajectory. If it does not, we may come back up to this. A lot of people do think we'll see five, five and a half again. What we don't know, what we can't control, is what those numbers will be.

Speaker 2: 32:35

What we can control is how we position ourselves for whichever they are, and the only way to do that is to get out in front of the competition, and as rates go down, people are saying, oh my gosh, I'm jumping in the market now and you're way ahead of them.

Speaker 1: 32:48

That totally makes sense. This is my rendition of or my take on, jerome Powell by the way it's pretty good.

Speaker 1: 32:57

Yeah, for everyone that just joined in. What we're talking about on our podcast today we, or what we've been talking about, is just why interest rates are so high. We've explained what happens when they're higher. What's going on right now, the difference between, or how they correlate and don't necessarily equal. You know, supply and demand issues are a completely separate thing. Supply being down and demand being up, just simply having a market that's resilient to higher interest rates is still having increase in equity, increase in how much more expensive homes are getting. We've been talking about all that. And then the cherry on top, we have been hammering at home of why it's not always the best strategy to wait for rates to go down, especially in a market like this, where supply is such an issue and demand will always be up, based on the factors that are going on not only on a nation level, but also locally, their local economy here in the greater Seattle area. So we've just been chatting all about that.

Speaker 1: 34:10

I'm going to let you know. I know like this is kind of on the tail end of what Brian's been talking about. Also, for some housekeeping items, I did get a comment in here, so I'm just going to throw it on the screen. Barbara, thanks for commenting from LinkedIn. I can never tell how many people are watching on LinkedIn, but, barbara, I will reach out to you after our live to chat with you. Sure, I'm always up to meet new people, great, fantastic.

Speaker 2: 34:38

I think the thing that we want to keep in our mind is counterintuitively, we do not get more inventory as interest rates come down. We get more new listings.

Speaker 1: 34:46

No Worse, they'll get gobbled up quicker. They'll get gobbled up quicker.

Speaker 2: 34:52

We are already seeing people waiving their appraisals. We're seeing 5%, 10%, 15%, 20% above asking price. I've seen it in the $400,000 level, which is more first-time homebuyer level down in Pierce County and Thurston County, and I've seen it in the $2 million level over on Mercer Island in the east side.

Speaker 2: 35:10

It is happening and so it is not going to get better as rates go down. It just isn't. You guys, and I don't want you to look back and be like man I wish I would. I'm not. We're not saying you got to make a move. We're not saying that you should do a thing that you're not ready for. We're saying that you should absolutely explore it so that you can be ready as soon as possible, and then, once you're ready, the control is in your hands on when you make what's best for you. Just take a look, just see, don't wait. Don't wait like everybody else is waiting. And then you know the amount of money that will cost you or the amount of house that you won't be able to get because of. That is going to be very it'll be sad.

Speaker 1: 35:59

I agree. Now I will still hit home that we have plenty of other live podcasts that are on the channel that you can check out of one that goes over. It weighs the pros and cons of renting versus buying, so you should check that out. If you're trying to figure out if, whatever season you're in in your life right now, if buying is right for you versus continuing to rent, that's a good one to check out because it's a very, very we're just looking factually at the numbers. We do not lean them one way or the other in a spoiler alert for some people, it's better to rent.

Speaker 1: 36:35

Yeah, yeah, for some people it's a lot better idea to rent for them. But like, check that out, because if you're like trying to get a, but hold on what's right for you, of course. Now, if you want to talk about shameless, plug here. If you want to talk about your super specific situation and dial it in, we're here for you. So reach out to us.

Speaker 1: 36:54

You've got my contact information below in the comments so we can schedule a time, a consultation. It doesn't matter if you're here local, great. If you're anywhere in the United States, that's great too, because I'd love to get you introduced to a local team that can help you with your home buying goals. I just help this with a buddy of mine to refer to a fantastic agent in missouri, so like we can chat, have that conversation, get that ball rolling for you also, if you want to live in missouri, we will hook you up with a good therapist, because, wow, what sort of poor life choices do you?

Speaker 2: 37:29

the state is literally called misery oh, uh, misery, oh my gosh.

Speaker 1: 37:36

Well, that loves company. Um, I'm gonna bring up on the screen here, guys. So this was a recent closing of mine yeah, this is katie and chris guys.

Speaker 1: 37:45

So, katie and chris uh, past client spotlight or not even past, like this just happened. They just got the keys to their brand new home, guys, and this was four years in the making. So, finally, um, like one of my longest clients that I've worked with, helping them buy, go through the home buying process, and the reason why they were working with me is there was no pressure on a timeline, like there was no like you need to get in a house or I'm not interested in working with you. I mean, at least that's they're going to convey that in the um. They did a really nice video testimony for me that will drop on the channel in the next couple weeks. Uh, but really working with these guys it was.

Speaker 1: 38:27

It turned into a long-term friendship, helping these guys out, find something and you know what's interesting, they ended up buying a house. That, in my opinion, was what they told me they did not want originally, and now, like they're like actually, as we've grown, they had a child and this kid's now three years old what they wanted changed a little bit, you know, and we were able to find them something and it ultimately ended up being a little bit pricier than what they originally were looking at four years ago, but strategically it was actually a better time for them to buy, based on interest rates being higher, even though competition's up, it's not as bad as it was when they were looking during pandemic. So we were able to get them this really good deal. And guess what? It was off market. Market baby. Love those off market deals, yeah.

Speaker 1: 39:18

And what I mean by off market? Anyone that's watching right now that's like what is off market the term? Basically just a house that's not for sale on the multiple listing service. So, like this house was, uh, it was actually gonna go for sale soon, uh, but we were able to find this out Now. Again, this is different for any brokers that are watching this. This was not a pocket listing. I was not approached by the listing agent. I actually cut them off or got to the seller and the listing agent a week before they were going to go live. I found this out, got all this information and approached them with this offer and we made a compelling offer. That um seller decided to take the gamble and move forward with, uh, our off market deal, but it still saved them money, because there's other houses in that neighborhood that are listing for a lot higher than what this house was listening for.

Speaker 1: 40:12

So, um, I'm just, I was so yeah, this was, this was like a cinderella story or you know, one of those like happily ever after, um, I'm just glad for them. But guys, that's the, that's the whole like idea look into what's best for you, um, as far as when is a good time to buy. But, guys, they were looking for like four years and trying to figure out what worked for them. And there's plenty of clients that I meet and they're not ready for another year or two and we develop that relationship and help them, guide them through that process. So that's the thing. Everyone's home journey starts somewhere.

Speaker 1: 40:51

And I always say worst case scenario, like, if you get in touch with Brian, you. I always say worst case scenario, like, if you, if you get in touch with Brian, you know as, like a mortgage lender, um, it's always a good time to figure out if right now is a good time to buy for you. And the worst, the worst answer you're going to get from Brian because some people don't even reach out Cause, like, they're afraid of like getting rejected and not being able to buy the worst answer you're going to get is hey, guys, we just don't qualify right now.

Speaker 2: 41:18

But if you do a, b, c or d, there's no, no one mortgage.

Speaker 1: 41:21

You know, yeah, yeah, yeah, there's no, no mortgage. Yeah, that's true, that's true. So, guys, um, that's kind of what I just wanted to show you today. I hope we hit enough of it home. If you have any questions, let us know. You've got our contact information. You can reach back out to us later. Just like again. One last shameless plug. All of these guys did it. They all became homeowners.

Speaker 1: 41:48

And a lot of them are all of us. They are the, every man, the every woman, the everyday person that's just trying to buy a house, and half of them did it through pandemic just now, before. It doesn't matter, you can own a home if you want to. So this right here, the you will never own a home. In the background that, if you choose to, you know we can get you there. So reach out. We'll come up with a game plan and um figure out how to get you there. Sometimes it's just a, it's a long haul, but we're in it for the long haul.

Speaker 2: 42:24

It could be a day, it could be a month, could be a week, could be a year, could be four years.

Speaker 1: 42:28

Like those people, it doesn't matter your journey don't listen to jerome powell, you can get a house no, open up. Anyways, not gonna get sued or sued for no, jerome listens to.

Speaker 2: 42:41

I have a good authority. Jerome watches and listens to this podcast every. He watches this podcast.

Speaker 1: 42:45

Yeah, he's like aaron I don't like how you made myself look in that one thumbnail. No, no, just kidding. Um, it's here, this house on fire in the background here. Uh, pretty dramatic thumbnail, but um, anyways, guys, if you have any questions, please feel free to reach out to us again. Aaron Morrow here. Local realtor, your friendly social neighbor, social media, neighborhood realtor in the greater Seattle area. I work with home buyers and sellers, primarily in King, pierce and Snohomish counties, but I dip into Kitsap too just because I have a lot of peeps that take me over there. Brian here can work with you on a local level in Washington and like a couple of other States that I don't care about because I don't service those, but Brian could let you know what those are and again, we can call me to find them out.

Speaker 1: 43:36

Yeah, call them to find them out. We can hook you up anywhere in the United States. We will talk with you and get you over to the right people. So contact information is below this. One last reminder this will drop on YouTube and on the podcast. Check it out. And um, yeah, we'll see what we talk about in another week because we're like bi-monthly now.

Speaker 2: 43:57

so we'll find out together guys, great chatting with you.

Speaker 1: 44:02

Any lame jokes, brian, to clear us out any jokes to clear us out? No, actually any lame ones right now. Dad jokes, dad jokes, backed jokes. So I'm not gonna be clearing out you're oh, my god, okay.

Speaker 1: 44:16

Hey, have you seen this whole new chat gbt o thing? By the way, it's like freaking me out. So chat gbt. It came out with a new iteration that it's called chat gbt 4-0. And, like dude, it's so like human, like when it's talking to you, like it chuckles and laughs at you and tries to. I feel like they designed it to try to. I'm not saying flirt, but it tries to play on.

Speaker 2: 44:46

To engage, to have some sort of personality, Engage yeah, it's so weird.

Speaker 1: 44:50

You know what the cool thing about it is, though. You can use it basically like Tony Stark, where it's like your jarvis, and have it on where you're just like audibly yell out into the universe I need to know, blah, blah, blah. I know like tutor, you like math and stuff. Yeah, crazy stuff. All right, guys. Well, we are gonna take off. Talk to you later, guys.