← The David Greene Show
The David Greene Show
Mortgage Monday | Fed Exploring New Tools to Lower Mortgage Rate | Episode 92
00:34:45
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- [00:00]
A
Hey. Hey everyone. Welcome to Real Talk Real Estate. Back at it again with another mortgage Monday. And boy, am I excited to talk with you guys about interest rates, the economy and real estate overall. I'm joined today by the handsome, the daring, and might I even say dashing Kristen Bashelder. Known as Kristen Dashelder today. You combed your hair, you put on your chain. Was this all just for me?
- [00:23]
B
All for you, David. Everything.
- [00:24]
A
I do appreciate it. Christian and I were up until about 3 o' clock in the morning last night talking about mortgages and our clients. And now we get to bring this love to you guys here in the podcast. And we've got a pretty cool episode today about what's going on in the economy, something that you may have not heard about quantitative tightening, how this relates to quantitative easing, what you could expect for the economy, and how you could avoid getting in trouble for mortgage fraud. All that and more on today's show. Christian, how are you doing today?
- [00:52]
B
Pretty good. Pretty good. Yeah, we're, I think this is kind of a, a topic. Usually people hear the alternative stance of quantitative easing. We're going to explain a little bit about what it's its evil twin is its counterpart.
- [01:05]
A
Yeah, it's exactly right. Is it evil? Is it not evil? I guess it depends on the subjectivity. Speaking of that side note, in my faith based mastermind, Spartan League, we are talking about right now if evil is objective or subjective. So in essence, if is cancer evil? Because to cancer, the surgeon or the medicine would seem evil. So if you guys are interested in that, just DM me the word faith on Instagram. We'll get information. But enough about that. In today's show show, we're gonna be starting off with an article about the Fed chair, old Jerome Powell, his surprising words that could cause mortgage rates to tumble. If you guys are not listening to this on YouTube, no problem at all. You should consider subscribing on YouTube because we share the screen. We share pictures of houses at different times. We share what we're talking about. So if you guys want that, you got to go to Spotify or YouTube, especially if you're having a problem on Apple podcasts with the the volume while we work that out. All right, let's get into it here. Fed chair pal. Surprising words could cause mortgage rates to tumble. Those who've been priced out of the housing market because of sky high mortgage rates. Christian, in your opinion, do you think mortgage rates have been sky high?
- [02:16]
B
Yes. Everything's relative, right? No. Historically, yes. Compared to Covid, there you Go.
- [02:24]
A
It's subjective, right?
- [02:25]
B
Yeah, we had it. We had a historical swing in interest rates. Right. Where they doubled, going from three to more than double three to above seven.
- [02:33]
A
Yeah, they got into the eights.
- [02:34]
B
Yeah. But I mean, you know, those who, you know, remember the 90s would not say they're high right now. Right. So all things are relative. They, they are high in, you know, in relation to what we were.
- [02:46]
A
What they were. Exactly Right. While the Fed doesn't directly control mortgage rates, it does control the federal funds rate, which indirectly impacts them. The ffr, if you want to sound cool, is the rate at which bank lend excess reserves overnight to one another. And movements up and down cause similar movements in treasury note yields which are used by banks to set loan rates, including mortgages. So this is the three degrees of how the Fed is indirectly related to mortgage rates. The Fed controls the federal funds rate. I think this is often also referred to as the prime rate, where banks that lend money to each other depending on what they need at the time, they, the government controls what they can charge for, that wants to kind of keep harmony amongst the banks. We don't want a game of thrones situation where they're all fighting to get to the top and lying to each other. That federal funds rate impacts treasury note yields and treasury note yields is what mortgages compete with. So then the treasury note yields impacts the mortgage rates, which is where we get to where we are today. This year has been frustrating for homebuyers hoping for a friendly Fed. After three rate cuts in late 2024 that totaled 1%, the Fed chair Jerome Powell shifted to the sidelines and worried that more cuts along newly enacted tariffs would cause inflation to soar. I'll pause there for a second. I'll share my opinion in a minute. But Christian, is it your opinion that if interest rates went down that inflation related to home prices would soar out of control?
- [04:21]
B
It's really interesting because if that is true across the board, what we would have seen is the opposite. Which means when rates increase, we should have seen significant property devaluing. We didn't. Those who have followed most markets, there's been some that have pulled back a little bit. Now, you know, the Austin's, the markets like that. But in total across the country, houses are worth more now than they were during COVID even though rates have more than doubled. So I don't just want to say a blanket yes, from a common sense standpoint, it makes sense that if rates go down, therefore more people can purchase property, therefore should drive Growth, therefore should, you know, increase demand for property, therefore pushing property values higher, that is inflation. But I actually think it will have kind of a counteracting impact where I talk to people, it seems like every single day who are in like the classic like golden handcuff situation. Hey, Christian, we really want to buy a new house. We really want to move. We really want to get into a better school district or, you know, upgrade our property or even, you know, older people who want to downgrade. Right. Empty nesters. Right. But they don't want to leave their 3% and get a 6%, which is completely fair. If rates do come down, the closer they get now, I don't think we're going to get to 2% again, but the closer they get to where they were, the more loosening we'd have of those like, golden, golden handcuff people. So that may actually increase supply on the market. That will counteract the demand that comes from lowering interest rates. And that's really the thing that drove, you know, when prices continued to go up, when rates were going up after Covid. It's, I, I don't think rates solely impact the market. It's, it's really the, the biggest contributor and it's like not even close in my mind is supply and demand and how that balance weighs. If there's not enough houses, like the rates could have kept going up and like the people who were capable of buying would have still bought. Now, obviously there's a breaking point where if rates get to the point where nobody qualifies, obviously that's like a, that, you know, that's like a, an economy breaking problem. Like if rates get to 15.
- [06:34]
A
Right.
- [06:35]
B
But within the threshold of what borrowers can still qualify with or investors can still cash flow, with which, believe it or not, we were finding cash flowing properties for our investors at 8 and a half percent. We were doing it every day. They did exist. Are they working in Southern California? Not really, but they work in a lot of markets. Right. So I don't just want to say, yes, it will drive appreciation, it will have an impact, but I think there will be counteracting impacts as well that come from lowering interest rates.
- [07:05]
A
I always thought that the interest rates determine home prices argument was ridiculously simplistic and kind of showed, I don't want to say it showed ignorance because that sounds mean, but it showed an unawareness of what drives markets. I think that interest rates contributed to the housing boom we had, but it was less about interest rates and it was more about available capital.
- [07:27]
B
Correct.
- [07:27]
A
When the government prints a bunch of money and money is cheap and it changes hands all the time, everybody feels rich. They're making money, then they're spending money. And so when you're accumulating tons of money, like, businesses are all doing really good. Our businesses were doing really good because everyone was buying houses, right? It's less about what a house costs to us and more about how many people are doing this, how many transactions are happening. Most businesses work that way. Sure, you'd rather sell a more expensive car, but you probably are more interested in selling a whole bunch of cars versus just a car. And because there were so many transactions that were happening, money needed to find a place to go. And real estate was the safe haven. And when everyone caught on, oh, man, there's a lot of inflation. This is bad. Now real estate's your only safe haven because bonds can't keep up, a lot of safer stocks can't keep up. Real estate was the only thing outperforming inflation. When you look at the 10 ways it makes you money, you're saving in taxes, you're paying off a loan, you're getting cash flow, you're getting equity, you're getting. You're taking advantage of appreciation, you can force equity. You put all that stuff together, real estate's your only option. So that pushed all the money into real estate. It was not just because interest rates were low. So when you hear people talk about that, the reason we bring it up, and it's dangerous, is it's easy to think when interest rates go low, you're going to have a crazy real estate market when. When interest rates go up, you're going to have a bad one. And to your point that you just made Christian. Now, that didn't happen. We didn't see a terrible market when interest rates went up. So let's not assume we're going to have a bonzo market when rates go down. It could very well not happen. Getting back to the article here, Powell gave his latest thoughts on interest rates in a speech at the national association for Business Economics conference. Boy, could you come up with a more boring way to name your conference. The national association for Business Economics. The name.
- [09:09]
B
Yeah. Choices were made.
- [09:14]
A
I've been to one of these before. I received an award at a. It was like the national association of Real Estate Economic Advisors or something like that. And boy, let me tell you, it was like sitting in the middle of a brand muffin. There's not a whole lot of personality going on in a place like that. It is. They weren't dashing like Christian Dashielder. In his remarks, he suggested that another tool at the Fed's disposal could be used to provide even more relief to borrowers. The Fed's monetary policy is governed by a dual mandate requiring it to encourage low low unemployment and low inflation. And this is always tricky because typically if you are trying to keep inflation low, what the Fed does is it puts interest rates high. But when you put interest rates higher, people spend less money, which means ultimately there is less need for businesses to hire employees. So you have this stupid teeter totter effect that goes back and forth between, ah, we've got too much unemployment, we better lower rates so that people spend money up that caused inflation, we better raise rates. And we just use these, this one tool for the most part because it's the easiest. This is now subjective David's opinion, the easiest thing to tinker with. You don't have to think at a very big level. That mandate is easier said than done because policy decisions have conflicting impacts on employment and inflation. When rates rise, inflation slows, as it did in 2022. But unemployment increases when rates fall. The opposite is true. For this reason, the Fed has been reluctant to cut interest rates in 2025 despite heavy pressure from the White House. President DJT's newly enacted tariffs aren't being fully absorbed by companies. So many, including Nike, Levi Strauss and autozone, are increasing prices for consumers, which fuels inflation. In August, the CPI, the consumer price index, showed inflation clocking in at 2.9% from a low of 2.3% in April before the tariffs. The Fed, however, finally cooperated in September, cutting the federal funds rate to a range of 4% to 4.25 from 4.25 to 4.50, following a steady increase in unemployment. According to the Bureau of Labor Statistics, the unemployment rate was 4.3% in August, the highest of 2021. And if you want to know what it's like to be at the conference, I just told you about the last two minutes of me reading is exactly how the entire conference felt. The shutdown in Washington has delayed September jobs data, but independent reports from payroll processor adp. And funny because I get letters from ADP for the one brokerage like 12 times a week. It feels like sent to my house and then I forward them to our assistant who then probably forwards them to you and you get drowned in it. And bank of America suggests the job market has even further weakened. To prevent more joblessness and reduce the risk of recession, the Fed is likely to continue lowering rates. The CME's Fed watch tool places odds of another quarter point cut on October 29th at 97%. All right. I've never heard of the Fed Watch tool and odds of cuts. Is this something you're familiar with, Christian?
- [12:09]
B
Yeah, this is, this is basically the, you know, we've talked a lot about on the show, on the, on the prediction models. This is, you know, I've always made the analogy of like the, the sports bookies set in the lines. These are the lines. Right. Like the, you know, when Tom Brady was playing, the patriots had a 99% chance of beating the Browns every year. Right, Right. That's basically all they're doing. They're predicting, based on all of the historical data and market, you know, impacting factors that we have. They believe, and I believe that the Fed will cut another quarter percent. Right. That's basically what they're saying.
- [12:41]
A
So we have, or at least I have frequently criticized the Fed for doing nothing to fix the economy but tinker with the interest rates because we needed to get money flowing, but we couldn't because they didn't want to lower rates. And so we were just stuck. From my perspective, and I think real estate is in a much more precarious position right now than most people do. Most people wait to see, oh, look, the numbers show it's going down. But it's kind of like when you're watching something really heavy starting to lean, you don't wait for it to be falling before you take action. It's too late. You're going to get crashed. You stop before it actually goes. That's kind of how housing in the economy works. So another cut will help. But that's not the only lever the Fed can pull. It can also make changes to the number of bonds that it owns on its balance sheet. Now we're Talking in Powell's Oct. 14 speech, he suggested that he's about ready to flip that switch. Bond prices and bond yields move opposite one another. When the number of bonds for sale rises, it increases supply, causing bond prices to fall and yields to rise. Do you want to explain briefly what these phrases mean? Bond supply, bond prices and bond yields.
- [13:48]
B
Yeah, I mean, you think of bond yield is like this is as a buyer, right. Bond yield is cash flow. So, like, how much property is renting for? The bond price is the purchase price of the property. So when the purchase price of the property goes high, I guess I should say, like your noi, right. Is your, is your, your net income, is the bond yield when the purchase Price of the property goes high, the return is usually lower. Right. For a lower price, the return is.
- [14:18]
A
Typically higher and the return is yield. That's what they're referring to, correct?
- [14:21]
B
Yeah. So the more you have to buy that bond for, the less return you typically make for it, whereas the opposite is true. The less you can buy the bond for, the higher the return.
- [14:30]
A
Good point. Kind of like cap rates with commercial real estate. The higher the price, the lower the cap. Yeah.
- [14:34]
B
So basically what that's saying is that the more buyers there are in demand to buy bonds, the higher their price goes. Therefore, the lower their yield goes because they don't have to pay investors as much because there's a surplus of them, and vice versa. When nobody wants bonds, they have to raise the. Pay the yield to, which lowers the price, enough investors to buy it. Yeah.
- [14:56]
A
And if you can learn that fact, folks, this rhythm and pattern of how life and business works, it'll make sense in real estate, too, when there's a lot of people that want to buy houses. Content. Like the last run that we had, the price of the house went up and the cash on cash return went down. If less people are interested in buying houses, you will see the prices of them come down, which makes the cash on cash return go up. Which is why you need to be buying houses when everybody else is scared to and trying to avoid buying a ton of them or the wrong ones when everyone else is buying.
- [15:24]
B
Or the house that nobody else wants.
- [15:25]
A
Right. That's a great example, too. That house is going to have the higher yield because nobody else wants it. Yes, it's a Great point. Since 2022, the Fed's been a net seller of Treasuries by choosing not to reinvest proceeds from the maturing bonds on its balance sheet. This pressures rates higher and in turn elevates borrowing rates, which includes mortgages. I just love that we're having the conversation right now. I do not want to see a massive run of quantitative easing. I was very critical of that the last time, and we're going to talk about what that means. But I like that the conversation is being had about more than just the prime rate, because the prime rate does not directly affect housing a whole lot, but the talks that they're having right now would. In Powell's speech, he suggested that that may soon change. He said the banking system reserves remain abundant, but they are declining and will continue to do so. In short, there are some signs of tightening credit. And as a result, he suggested that it may soon be time to Pause. The Fed's selling of Treasuries. If so, it should help yields decline. All right, Christian, can you turn into plain English what all this talk is of the. The Fed's holding of Treasuries and buying new ones and maturing bonds?
- [16:32]
B
Yeah. So calling it like quantitative easing and quantitative timing makes it sound like, you know, quantum physics, like rocket science. It's not, guys. Basically, what it is is this idea was cooked up during crash of 2008 when nobody wanted bonds. Mortgage backed securities were defaulting because everybody was foreclosing. Like, bonds were. Were, like, really in a bad spot. Right. Nobody wanted them. So just like we explained, one option is to just increase interest rates to incentivize those people who didn't want to buy them to buy them. The problem is they had to, like, they didn't want to increase rates so much because that would impact, remember, like, this isn't just an investment. This is an investment for the buyer. But it's like somebody's home for the. For the client, right? So, like, sure, they can crank rates and give investors a bunch of payoff, but then the home buyer suffers there. So instead, what they cooked up is, hey, instead of just pulling this interest rate lever back and forth and increase rates, decrease rates, what if, you know, however you want to define the Fed, whether it's the government or an independent body. Right? But they cooked up this idea of, hey, how about we just buy our own bonds? What if we just buy them? What if the government and the Fed by proxy, just artificially simulate interested buyers and bonds? So this is. This is basically. Let me explain it this way, because, David. Yes, for plain English, this is a Honda dealership who said, hey, instead of just toying with the lever of how much we can list our Civics for, we're going to go buy every other Civic in the state. Mm. Therefore, we can increase prices and we're just going to hold on to all the Civics.
- [18:16]
A
So you're taking supply out of the market?
- [18:19]
B
That's exactly.
- [18:20]
A
And you're saying I'm just going to. Because I'm the government, I have this big storehouse. I'll just hold them all myself so that you can't buy them. So there's less of them for you to buy. But yeah, that's exactly right. We're. We're literally doing this with our money supply. But because they can't go into your wallets and take out the dollar bills you have, they indirectly do it by these options to buy government bonds. And this is how they create money out of thin air. If you've ever heard me say it's not really printing money, but use the phrase printing money, this is what we're actually doing. I just didn't want to nerd out on everyone and make my audience fall asleep in the middle of a, of a podcast. Especially when I've got a dashing co host and we need to be focused on his good looks and not boring economic talk. But this is what happens is they're like, look, there's treasuries for sale. We decide how many treasuries we're going to sell. We decide of what we put out there, what we're going to buy, what other people aren't going to buy. It's. If you've ever heard of the. What's that book that everyone talks with? The creature on Jekyll Island. I think that sounds familiar. You ever heard of it before?
- [19:17]
B
I don't remember, though.
- [19:18]
A
It's a very like, insightful book on how the Fed itself was created and this. And when you really realize everybody, that money itself is not real. It is a lit. It's not a whole lot different than crypto. It is a made up idea that we call a currency. But because it had a paper form, it is easier for our brains to associate it with something being real. But it's not real. We've all just agreed that we're going to accept it as currency and it's going to function as a store of value. The minute that happened, the Fed was able to make more of it, try to make less of it. And this is why investing in real estate builds wealth. This is the secret to the sauce of why it works. Because you can make more money or make less money. You can make more crypto or make less crypto. You can even do what Christian was saying, where you could try to like increase the diamond supply or lower the diamond supply. It's hard to do that with gold because it's a lot of freaking work to get gold out of the ground. This is why people consider gold a stable store of value, because it's hard to inflate it. You can't just go grab a bunch of gold. Right? This is the same theory that bitcoin was built on. If you've ever understood why people say bitcoin is better than other cryptos, it's hard to get more of it. Well, you know what else is hard to get more of? Housing. You need a lot of people to do a lot of work. There's a Lot of labor. There's a lot of government oversight that makes it really hard. The materials cost money. You got to get people to build the materials and ship them somewhere. It is a laborious, lengthy, painstaking process to build a property. So once you have it, it's going to hold its value better. Much better than just keeping money in the bank. That doesn't mean to go recklessly buy real estate, but when you understand the concepts we're talking about here, it should click, oh, this is why real estate appreciates in value, especially when you throw in the fact you can leverage money to go buy it so you don't have to save up all the cash. And you can sort of play that game, which some people do in the stock market. But the Fed is talking about manipulating the money supply right now. So if they make more of it, if they basically, like, allow people to buy more Treasuries, they are. The government is. Now, how do I want to put this, Christian? Like, they're. They're collecting currency for themselves to push back into the environment that didn't exist before by creating something called a treasury and saying, if you let us borrow your money, we'll pay you back. Is that a good description?
- [21:34]
B
Yeah, it's just that you're lending the government money to do whatever they want to do with it.
- [21:37]
A
But it's debt that they made up out of nowhere. Like, they didn't have something securing that debt. They just said, we're just going to sell Treasuries now. At least that's my understanding.
- [21:46]
B
If you really get down to the core of it, it's the collateral is the U.S. military. Like, when it all really breaks down to absolute nothing else. It's like the, the. The guarantee behind America's debt is the power of its military.
- [21:59]
A
That's such a smart point. Did you make that up yourself or did you hear someone say that?
- [22:03]
B
I'm sure somebody said it before me, but if you, like, what is the value of America? Like, sure, there's the physical, tangible assets.
- [22:10]
A
Yeah.
- [22:11]
B
But it's not like we're, like, insanely producing anything right now. Like, most of what we create, we eat, you know, things like that. But, like, the one thing that, like, we can actually go and control things with is, like, that's why America's bonds are as strong as they are. Right?
- [22:25]
A
Yeah. Because we back up what we say.
- [22:27]
B
Yeah, that's a.
- [22:28]
A
That's a. And that is one of the reasons that people have a certain political perspective, want a strong military. It is not always. We want to be bullies. We want to rock, walk around punking people. We like the feeling of planes flying over football fields. It's the understand that in order to have a strong economy, you have to have a strong amount of force. Great point there. This is not where I thought mortgage Monday would go, but this is solid. If ending quantitative tightening similarly means reducing the runoff of mortgage backed securities or halting them altogether, it could help mortgage rates tumble, which is what we're talking about today. In mid September, a report from Goliath asset manager Pimco suggested the Fed and quantitative tightening via mortgage backed securities to lower mortgage rates. Reinvesting the roughly 18 billion in current monthly roll off into new mortgage securities could compress mortgage spreads by 20 to 30 basis points in our view. Christian, can you explain?
- [23:19]
B
Yeah, let me explain this real quick. So we explained quantitative easing, that's going and binding, buying all the Civics. They did that. They did that a while back. They did that during COVID They did that during 2018 because they pushed all.
- [23:30]
A
The money into the market, into the dealers and then the dealers spread the money out.
- [23:34]
B
Correct. What they've been doing the last, I don't know the timelines, but I think there's a chart in here that actually tracks when they were quantitative tightening. But let's say for the last two to three years they've been fire sealing the Civics that they stockpiled. So the Fed has been doing the exact opposite. They have been flooding the market with bonds instead of buying them. That's a portion of why rates increased. There is a supply outweighing of demand of the amount of bonds available in the market. Okay, what bond? So people don't really know what bonds are. Bonds are either short term or long term, which means they expire. Like the Fed just doesn't buy a bond and it's gone forever. They'll buy like a two year, a three year, a five year, a ten year, some expiring bond. Right. When they do that and it comes time for it to expire, the Fed has an option of reinvesting those funds. So in 2022 we're in 25. Now if they bought a three year bond, it's expiring this year. And like David said, about $18 billion expired this year. The Fed then has a decision. 18 billion is now back in our pocket. We don't own that bond anymore. Do we repurchase that bond or do we let that bond go to the market and we keep our money? The Fed has been keeping their money. What this article is discussing is the Fed is now toying with the idea that of hey, let's not do quantitative easing where we increase the amount of bonds we buy. But what if we just hold the same amount so for every bond that expires, we buy a new one. They're not doing that right now. They are not reinvesting the proceeds. Guys, this is the same concept as a 1031. The Fed is letting those properties that they invested in sell. And a 1031 keeps your money in real estate. What you could also do is you could just take your money back and let the real estate flood the market. Right. Most investors that have a bunch of capital gains or some sort of desire to keep their money invested will go buy a replacement property. Or if you guys are rolling over your 401k because you changed employers, you could just cash your 401k. But then all those stocks that you owned would go back to the market. Now, you're probably not big enough to impact the market, of course, but the Fed is. The Fed can impact the market. Right. And the US Government by proxy. Right. So all this article is saying is that instead of letting those bonds go back and flood the market, what if we just retain our current basis that we hold and just reinvest the funds, which is not quantitative easing. I'll call it quantitative holding.
- [26:03]
A
Right.
- [26:03]
B
Quantitative easing is buying. Quantitative tightening is selling. Quantitative holding is. Let's just stay the same, right?
- [26:09]
A
Yeah. This article is saying that it could possibly deliver 100 basis point cut which would be the equation of like a drop in interest rates from 6 to 5, correct?
- [26:17]
B
Yeah. One pretty big.
- [26:19]
A
Yeah. Pimco suggested that embracing quantitative easing by selling legacy. They always use such big words. That just means old mortgage backed securities, like previously held ones and buying newly issued mortgage backed securities could push mortgage rates down by 40 to 50 basis points, which is about half of a full percent. Historically, the 30 year mortgage rate runs 1 to 2% higher than the 10 year treasury yield according to Brookings Institute. And currently the 10 year treasury note is yielding 4.02. So that means that this would put rates at 5.02 to 6.02 and the 30 year mortgage rate is 6.3. So it's about 2 points higher. I'll keep my opinion myself for a minute about what this will do to housing. But Christian, what's your. What's your thoughts on what the future of real estate looks like? If indeed Jerome Powell does do what he's saying and finally pulls a lever other than just freaking Interest rates.
- [27:13]
B
Yeah, I think, I mean here's really if everything is working well, like if we have what America has defined as a healthy economy, unemployment rates are between 2 and 5% and 30 year mortgage rates are between 4 and 6%. That's like really where we want to be. Like if you really try to understand when Jerome Powell talks and the Fed's desire, it's to get in those two ranges now we're above that right now in interest rates we're above 6 still. I think the Fed's goal, like they would be totally fine with rates settling four and a half to 5%. I think they'd be very happy with that. We have some work to go to get there. But the problem is unemployment. It said it in sort of, I think it's a little bit over 4% right now. They want to make very, you know, they really want to make sure that that doesn't balloon up to 6, 7, 8% because you start getting close to 1 in 21 in 10 people unemployed. Like that's also really bad. Right. So it's, it's a delicate balance and I think, you know, quantitative reasoning and quantitative, like regardless of your opinion on it, there's a lot of pundits, there's a lot of, you know, people who, who criticize it. It is another tool.
- [28:20]
A
Yes.
- [28:20]
B
You know, and, and I think you are correct. There is only so much the Fed can do with just tinkering rate up, right down, right up right now, like quantitative.
- [28:30]
A
Especially when it's concerned to housing in specifics. Correct. Yeah. Would I, would I be correct?
- [28:36]
B
Would you agree, you know, moving the.
- [28:39]
A
Moving the prime rate up and down would have a bigger impact on things like revolving credit, business credit and consumer spending and housing would be like maybe one degree of separation from being impacted. Would you see a issue with that statement?
- [28:54]
B
Yeah, I mean if all, usually all consumer pricing will trend in similar directions. I mean credit card rates are like 28, I think is the national average right now. So obviously we're talking about much different correlation factors. You know, they're not 2% above it. Right. But yeah, I mean it'll, you are correct that, you know, if the Fed rate, you know, is overnight borrowing. So it's like what banks can get their money for.
- [29:15]
A
Right.
- [29:15]
B
That of determines how everything scales off of that. So absolutely. Consumer spending would be brought into the fold as well. 100%.
- [29:22]
A
But it would be more impacted than a mortgage rate. If we want to affect mortgage rates, we have to talk about quantitative easing, quantitative timing because that impacts the 10 year treasury, like you're trying to fight through the forest of stuff to get to the treasury yield. If you're trying to affect mortgages, that is, that's true.
- [29:38]
B
The mortgages have much more things that impact them than like, credit cards. Because there's not like a demand market for credit cards. Like, credit cards are like basically an unlimited supply. They can print however many credit cards they want.
- [29:49]
A
Right.
- [29:50]
B
Like, Visa's not running low on plastic, you know. Right. But there's only so many houses you can buy, you know, so, yeah, there are absolutely multiple, multiple factors in, in every aspect.
- [30:02]
A
Yeah. So this could be really good for housing. I think, I think we need it pretty bad. I think it's good we're talking about it. I, my hope would be that we do not go crazy with quantitative easing. That is what I think the problem was in the past. We used it for political reasons.
- [30:16]
B
Yes.
- [30:16]
A
Hey, it's election year. I want to be popular. Both Donald Trump did it and Barack Obama did it, and they both. And Biden did it. Just open the gates, let the thing flood, make the economy better. Nobody really knows why they feel so good. It's because we were putting cocaine in their Coca Cola. They just know they're in a good mood and they want more of it. Now, in hindsight, we're like, ooh, that was really bad. Everybody was high on coke, literally. And that's why they were buying all of the soft drinks. And we're paying the price for it. So if we're going to do that, it needs to be done responsibly, it needs to be done in tiny increments, and it almost needs to be like, with a surgeon's level approach, like, we're trying to get mortgage rates down, but we are not trying to get the price of like, everything else to skyrocket. We want to affect housing. We don't want to affect everything in the economy. We need to quit, like, looking at things that only that affect everything and look at them that only affect one thing. The analogy that I use when you're talking about trying to slow the economy down by raising rates is like, if you're in a really big truck, like a semi truck, and you're going down a hill. You ever seen those, like, runaway truck ramps that they have? Right. You don't want to just sit on your brake the entire time you're going downhill. You will wear out your brake pads and you'll get a runaway truck. What you do is you shift into a lower gear and it like, forcefully Stops your, your axle from being able to turn as many times when it's in a lower gear and prevents the truck from going faster on its own. It's healthier. That's what we're talking about the Fed doing here. This is a healthier way from what we can understand right now, of affecting mortgage rates rather than, let's just raise the interest rate. This is going to like slam on the brakes. It's going to stop everything. But it comes at a big price because now people aren't spending money. Businesses are hurting. I mean, people listening. When's the last time your boss gave you a raise? You ever even heard about a raise lately? Businesses are struggling right now. People are having a very hard time earning income. We get, get messaged by people all the time that want a job, like, I got laid off. I got laid off, I got laid off. I get this every week. I get people messaging me saying, I just lost my job. The market's really bad. Hopefully this turns out around and we can lower unemployment. Now on that note there, Christian, would you like to share about the one brokerage and the loan officers that we're looking to hire?
- [32:26]
B
Yeah, absolutely. If you guys are in the industry, even real estate agents as well. I know David's interested in, in, in talking to you guys. We are actively hiring loan officers. Experience and experience. We're willing to talk to you. We're in all 50 states. So no matter where you are, we can help you out. Work remote. There's no, you know, in office requirements currently. So if you do know a little bit about mortgages or want to learn, or of course, if you're an interested client and want to reach out to us, you can find out more on our website theonebrokerage.com little contact us tab in the top right click that somebody will be reaching out to you shortly. Whether you're a client, interested loan officer, interested investor, whatever you got going on, we're willing to talk to you.
- [33:06]
A
We feel very confident. If you are a loan officer and you're licensed and you talk to us, you'll be like, oh, yeah, that makes a lot of sense. May not be the right time. Maybe you're not ready to get married yet, you just want to date. You want to get to know us a little bit, that's fine. But you'll be very interested when you talk because the, the support systems that we have here to make you successful are probably, I don't know, I haven't seen it anywhere else. I think, Christian, you probably agree that there's no other brokerages have as strong of a support in a family environment as what we've got going on now.
- [33:32]
B
I agree. Yeah, we've built Spot.
- [33:35]
A
If you would like to get a hold of me, you can head to davidgreen24.com, use the chat feature. Get a hold of me directly. I can give you my email there. I don't want to put it out here because people will sell it to some Chinese marketing company and my inbox will become overrun with terribly worded English AI marketing scams. I hate it. But message me there or you can follow me on instagram @david green24. I do check my DMs. In fact, one of you heard me talking about needing signs for cabins that I manage and you put me in touch with Jen. I believe so. Jen, if you're listening to this, thank you. We're working on a design for some of my cabins and incorporate the cabin names if that's something you guys are interested in. Reach out. I'll get you connected there. Christian, if people want to get a hold of you, where can they go?
- [34:20]
B
Obviously at our website, the one brokerage.com like I mentioned earlier. You can also follow me on Instagram @the1 broker is my handle. We put out clips of Mortgage Mondays and different things that are going on in the market. So follow me there and you can find out more about what we do.
- [34:36]
A
There you go folks. Make sure you subscribe to the channel, Apple, Spotify and YouTube and leave us a comment of what you thought of today's show. And if you loin something, we'll see you guys next week on Mortgage Monday.