EP184 - Lower Rates Will Have a HUGE IMPACT On Home Sales

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One of the most popular
questions Josh and I both get is

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when are mortgage rates going to
head lower?

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So in today's episode, we're
going to dive into that question

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exactly.
We're going to tell you exactly

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what has to happen for mortgage
rates to move down.

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I know a lot of you are sitting
on the sidelines looking to

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purchase, potentially looking to
refinance, and this is at the

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top of your list.
So Josh, when you get this

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question, what's your typical
answer?

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What's funny, Jeb, is it almost
always is precipitated by Trump

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is going to do XY or Z and then
that that tips your hand as to

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whether they're Trump supporters
or Trump haters.

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But they believe that that's
going to change the economy,

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force the hand of the Fed, which
there's some truth to all of

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that.
So we're going to go back and

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walk you through all of the
things that have to happen

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yesterday as we're recording
this.

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Yesterday we got the Fed
meeting.

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So you get all the talking
heads, lots of experts.

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You have two talking heads here,
the yammering on to you about

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what's going to happen with
interest rates or what has to

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happen.
And probably the most

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interesting one that I saw
yesterday, Steve Leishman, very,

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very smart bond follower, and he
was just making a statement that

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the futures markets over the
next 12 months are pricing in

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100 basis points of Fed cuts.
So Trump wants that.

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There's things that they're
doing behind the scenes.

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There's things that a new Fed
Fed president will come into

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play at some point in the next
year.

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And we are likely to get 100
basis points of cuts.

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He said at the same time, the
futures markets are projecting

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10 basis points of Treasury
reduction.

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Yesterday we were at 4:35 and
saying down to 425.

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So that's that's interesting.
We've been way below that just

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in this, in this calendar year
when we don't really have

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inflation under control, when we
don't have unemployment breaking

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in our favor.
So I think there's this

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expectation that there's sort of
a not, not a new normal, but a

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return to normal.
And when I hear that return to

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normal, it's people looking back
from say 2005 prior say 2005 to

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to to 1985 Jeb, as crazy as that
sounds, we're 20 years past

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2005.
Look at the 20 years prior to

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that and even possibly the 20
years prior to that.

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Normal meant interest rates,
mortgage rates somewhere between

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5 and 7%.
We're under 7% right now.

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So people think, well, this is
just normal.

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We've just returned to normal.
That time frame also was noted

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for having a much higher rate of
growth in our economy.

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So when you have GDP growing at
4 to 5%, those rates may be

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normal.
We are unlikely to ever return

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to those levels.
That's one of the elements that

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we're going to talk about today.
But when you hear this question

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and you hear thought what, what
is the, the, the thing that

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kicks it off in your brain of
what has to happen for mortgage

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rates to potentially move lower
and increase affordability for

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homebuyers?
Well, I think for me, when I

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think of lower interest rates,
I, I typically think of a, a

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slower economy.
I think of something happening

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in the economy where interest
rates would need to be lower in

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order to stimulate growth,
right.

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One reason, you know that we saw
the Fed funds rate at 0 during

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the pandemic and we saw these
emergency rate cuts.

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And all of that was because of
all the uncertainty, all the

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volatility out there in the
market.

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And that's one way.
That's one tool that the Fed has

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in order to kind of stimulate
growth, right?

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They lower the Fed funds rate,
makes money really cheap to

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borrow.
Businesses can go out there and

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get money for, you know,
basically next to nothing and

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then they can go out and push
that into the economy.

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And then that money gets
circulated.

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People spend it and, and buy
goods, all of these different

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things.
But the, the, the opposite side

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of that is, is or, or I guess
the, the, the con side of that

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is that growth leads to
inflation in many cases.

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So when interest rates are
really, really low, typically

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means a slower economy.
So right now we have interest

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rates higher than a lot of
people want to see a fed funds

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rate higher than Trump wants to
see then I think we want to see.

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But why?
Why is it like that?

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Well, because at the moment we
have, you know, pretty, pretty

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stable employment when, when
looking at the numbers, what

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we'll talk about the contracting
numbers and, and that sort of

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thing.
But when you're looking just

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face value at the number by in
and of it itself, it looks

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strong.
On top of that, inflation is

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still pushing high twos
depending on what measure you're

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looking at.
And you know, we've got

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uncertainty with tariffs.
And so all of those things are

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playing into why we're not
seeing that pull back in rates.

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Now, I'll be the first to tell
you, I thought, you know, we

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would have seen a break in the
economy more than a year ago,

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right?
All of that stimulus that

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happened, all of that money
pumped in was getting spent.

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And at some point I thought the
consumer was going to run out of

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that money.
Businesses were going to start

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to have to pull back and we
would see this slow down and

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potentially A recession.
We're not there.

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We haven't been there.
And therefore, I think that's

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the reason that rates are
staying high.

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Well, I know a lot of you guys
out there are waiting for lower

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rates.
Some of you can't wait because

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you're already under contract.
You have to move, you have to do

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something.
So if you're one of those people

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and you're an educated
homebuyer, want to know more,

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want to talk to the team, make
sure you use that link in the

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description of the video, get in
touch with Josh, guide you

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through the process, quote your
mortgage rates, and ultimately,

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you know, just give you
information so that you feel

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confident that you're making the
right decision.

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Again, the link is the
educatedhomebuyer.com/start.

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Check that link in the
description.

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Let's let's pick up with that
question or that thing that you

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just said.
I thought we would have a

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recession.
Recessions are by definition

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deflationary.
Deflation or at least inflation

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area if not outright deflation
area and that leads to lower

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interest rates as we try to
avoid that.

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Those are bad things.
Deflation is is outright really

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negative.
Disinflation for an extended

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period of time would be
negative.

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So the Fed would want to
stimulate us out of that.

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Markets would also, it would
just would react with lower

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interest rates.
So a recession is by definition

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2 consecutive quarters of
negative GDP growth and it

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doesn't look like we're going to
get that anytime soon.

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Jeb, we just got GDP yesterday.
So I was talking, talking about

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growth and growth being lower,
much lower than the historical

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long run averages and unlikely
to ever return to those long run

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averages.
And when we look at that

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yesterday, we got the first look
at Q2 GDP and it came out at 3%

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and the market shrugged it off.
3% would be high relative to

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what we've had over the last
five, 6-7 years.

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That would tell us we got a hot
economy and rates would probably

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be going up.
Why did the market shrug it off?

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It was an artificially high
number, just like the first

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quarter we had an artificially
low number because of the

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tariffs.
Importers front loaded all of

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their bringing goods in ahead of
the tariffs in the first quarter

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and that has a negative impact
on GDP.

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So we had negative, I think 1/4
percent and now we just followed

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that up with a positive 3%
because we didn't have nearly as

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many imports as normal in the
second quarter.

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The the best approach to that is
we average the two of them and

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it tells us we've got 1 1/4%
growth that is well, well, well

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below historical averages.
It tells you we do not have an

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overheated economy.
We don't need restrictive

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monetary policy.
So remembering here Jeb, the Fed

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does not control mortgage rates.
They control short term interest

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rates.
They control the the the rate

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that banks lend to each other
overnight and they have the

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greatest impact at the shortest
end of the curve, meaning 2 year

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treasuries or less.
So when we see that this is

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telling us, depending on
anyone's measure right now, they

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are 1/2 percent to 1 1/2%
restrictive.

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They're not neutral, they're not
accommodative.

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They're restrictive to the tune
of 1/2 percent to 1 1/2 percent.

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Trump thinks 2 to 4%, but most,
most reasonable experts

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somewhere between 1/2 to 1 1/2%
with one and a quarter growth.

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Is there a reason to be
restrictive?

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No, there's not.
Let's move on to the the sort of

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the second point, the thing
that's important that you talked

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about and in the press
conference yesterday, Powell

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leaned really heavily on this.
Hey, we don't we, we've got some

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time.
We can be patient.

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He leaned heavily into tariffs
and inflation.

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So we'll we'll talk with that.
But what he was saying is we

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haven't had an employment break.
We haven't had unemployment

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shoot up.
And he was kind of jabbing at

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Trump saying, hey, you want me
to lower rates, but you've given

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me cover to not lower interest
rates.

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We've reduced immigration, we've
reduced the labor pool.

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So even though we are not
growing nearly as many jobs as

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what we were a year ago,
unemployment hasn't gone up.

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So for right now, we look there,
there's other data, the JOLTS

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data.
We see there's less job

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openings, so less employers
advertising jobs.

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We see the Challenger layoffs
every month continue to go up.

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We get the weekly claims,
continuing claims are at the

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highest level since COVID.
They're not off the charts.

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This isn't telling us we have a
terrible jobs market, but it's

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telling us all the underlying
data.

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The higher frequency data is
telling us that the labor market

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is weakening.
The only thing that isn't is the

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unemployment rate.
If the unemployment rate was at

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4.8 right now instead of 4.1,
we, we would have much lower

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interest rates.
And Jeff, we'll get a look at

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that tomorrow.
We're recording Thursday.

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You guys are going to get a
chance to listen to or watch

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this video on Monday.
But tomorrow we get the July

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jobs report on the 1st, 1st
Friday of of August and we're

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going to see and the
expectations are maybe it bumps

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to 4.2.
But anyway, you cut it, that's

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still historically really low
unemployment.

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Yeah.
And on top of that, I mean,

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like, I think it's important to
know that, you know, we have

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slower job growth, things are
slowing down, but what happens

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is it takes weeks, months,
potentially years, I guess in

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some cases for this data to
continue, you know, I guess in a

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trend that actually impacts
rates.

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So what we've seen over the last
year to year and a half is all

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of a sudden it looks like weaker
data, you know, maybe for a

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month, maybe 2, and then all of
a sudden looks stronger and then

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it stays stronger, right?
So there's this up and down

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sideways movement.
We haven't had any consistency.

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So when you start looking at
averages, you know, four week

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averages, whatever it averages
out where numbers look to be,

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hey, look, the economy still,
you know, puts it along.

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Everything looks to be OK.
There haven't been any major

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breaks with anything.
And, and I think that's

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important to know, you know, one
thing the Fed has been through

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this entire process is very,
very transparent about

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expectations, about the
direction that they're headed.

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And at the moment, you know,
when you start looking at the

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Fed funds futures, you know, we
started the year, Josh, with I

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think somewhere between 3:00 to
4:00 rate cuts.

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I think it was like 3 is, is
what they were expecting.

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And up until last month, I think
we were, we were, we were close

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to 2 the latest after yesterday,
we're thinking one, right?

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So Fed traders are thinking 1.
So now like we're kind of

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pulling back.
The economy tends to or, or on

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paper looks to be going the
other direction.

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So when we talk about what needs
to happen for rates to move

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lower, you need, you know, ADP
is probably the most useless of

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the jobs reports to come out.
But tomorrow with non farm

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payrolls, we need a break there.
You need those numbers to come

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00:11:14,440 --> 00:11:16,640
in less than expectations then
forecast.

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00:11:16,720 --> 00:11:20,760
You also need revisions to to to
the previous months, probably

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00:11:20,760 --> 00:11:24,680
moving downward on top of
jobless claims trending higher.

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00:11:24,960 --> 00:11:28,720
You know, all of these things,
Josh, it just we haven't seen

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00:11:28,720 --> 00:11:30,680
it.
And that's what truly has to

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00:11:30,680 --> 00:11:33,120
happen for this to to get any
real movement.

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00:11:33,960 --> 00:11:36,880
It's funny, in terms of interest
rates, in terms of market

234
00:11:36,880 --> 00:11:40,480
watchers, you're 100% correct
that ADP is relatively useless

235
00:11:40,840 --> 00:11:44,240
in on a monthly basis.
It has a very low correlation.

236
00:11:44,480 --> 00:11:47,720
It comes out on the Wednesday
before the Friday where they

237
00:11:47,720 --> 00:11:51,320
deliver the, the monthly jobs
report, the the non farm

238
00:11:51,320 --> 00:11:54,240
payrolls and there's a very low
correlation in the short run.

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00:11:54,480 --> 00:11:58,520
But you talked about revisions,
we get revisions all the way

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00:11:58,520 --> 00:12:03,080
throughout the year in the
monthly NFP non farm payrolls

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00:12:03,080 --> 00:12:06,080
data and they've been for the
last three years consistently

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00:12:06,080 --> 00:12:09,320
revised down and long run ADP is
very accurate and very

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00:12:09,320 --> 00:12:13,280
predictive of what happens with
with that data.

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00:12:13,280 --> 00:12:17,280
So in the short run, the market
would do well to follow ADP and

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00:12:17,280 --> 00:12:20,680
pay less attention to to the non
farm payrolls on Friday.

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00:12:20,680 --> 00:12:24,480
But it's just not what they do.
To put that into context, these

247
00:12:24,480 --> 00:12:26,440
are not the exact numbers.
We went through it on the live

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00:12:26,440 --> 00:12:30,400
show last night, but the 12
month average per ADP I believe

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00:12:30,400 --> 00:12:32,640
is 107,000 job creations a
month.

250
00:12:32,920 --> 00:12:36,360
The six month average is about
67,000 and the three month

251
00:12:36,360 --> 00:12:40,000
average is down to 37,000.
So we're not losing jobs,

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00:12:40,320 --> 00:12:43,840
economy still creating jobs, but
a rapidly slowing pace.

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00:12:44,320 --> 00:12:47,240
And when you look back a couple
months, those revisions in the

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00:12:47,240 --> 00:12:51,680
NFP data, we're likely going to
get an an inaccurately high

255
00:12:51,680 --> 00:12:55,040
number tomorrow and we'll likely
get more revisions down to the

256
00:12:55,040 --> 00:12:57,600
previous months.
And then a couple times a year

257
00:12:57,600 --> 00:13:01,120
we get this QCEW data where they
take a bigger look and they go,

258
00:13:01,120 --> 00:13:03,800
well, OK, that was what we were
compiling quickly on a monthly

259
00:13:03,800 --> 00:13:05,720
basis.
Today is the last day of July

260
00:13:05,720 --> 00:13:08,640
and tomorrow, the first day of
Friday or first day of August,

261
00:13:08,640 --> 00:13:10,880
1st, Friday of August, they're
going to give us that data

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00:13:11,120 --> 00:13:13,520
that's compiled really quickly.
So it makes sense that they

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00:13:13,520 --> 00:13:16,200
would continue to look and
refine and and revise that data.

264
00:13:16,480 --> 00:13:19,320
But we're going to find out that
ADP is more closer to accurate.

265
00:13:19,480 --> 00:13:22,000
It's expanding.
We are creating jobs because of

266
00:13:22,000 --> 00:13:24,680
the reduction in immigration.
Less jobs need to be created to

267
00:13:24,680 --> 00:13:26,400
keep the unemployment rate where
it's at.

268
00:13:26,680 --> 00:13:30,440
But bigger picture, what it's
telling us, this is not an

269
00:13:30,440 --> 00:13:35,080
overheated economy where we have
employers having to compete with

270
00:13:35,080 --> 00:13:39,360
higher wages to get people to to
switch jobs that ADP data

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00:13:39,560 --> 00:13:41,120
should.
We've had nice wage growth.

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00:13:41,280 --> 00:13:42,760
We're not.
We're not having people losing

273
00:13:42,760 --> 00:13:46,680
money, losing income power.
But we also don't have these big

274
00:13:46,680 --> 00:13:49,680
bidding wars that we had for
employees during COVID that led

275
00:13:49,680 --> 00:13:52,480
to higher wages, massively
higher wages and higher

276
00:13:52,480 --> 00:13:54,320
inflation.
So really this comes back to

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00:13:54,320 --> 00:13:57,080
inflation, Jeb.
And that if we look at what

278
00:13:57,080 --> 00:13:59,280
Powell said yesterday in the
press conference, like 10 then

279
00:13:59,280 --> 00:14:02,560
quotes I showed on the live show
last night were related to

280
00:14:02,560 --> 00:14:06,160
inflation and tariffs.
So why don't we talk about

281
00:14:06,160 --> 00:14:10,120
tariffs and inflation?
Because in simple terms, tariffs

282
00:14:10,120 --> 00:14:12,800
don't cause inflation.
Tariffs cause a one time

283
00:14:12,800 --> 00:14:15,680
readjustment to prices.
So it gets picked up in that day

284
00:14:15,680 --> 00:14:18,040
that that it reflects inflation
in the short run.

285
00:14:18,240 --> 00:14:21,880
But after one year, if we stay
at the same rates, inflation

286
00:14:21,880 --> 00:14:24,040
isn't going up.
We just had to reset the prices

287
00:14:24,040 --> 00:14:26,520
at a new higher level.
Yeah.

288
00:14:26,800 --> 00:14:29,440
And that's something that you, I
mean, you, you did a survey, you

289
00:14:29,440 --> 00:14:31,000
showed a survey last night as
well.

290
00:14:31,000 --> 00:14:33,520
And it was like, what is the one
thing that's bothering the

291
00:14:33,520 --> 00:14:37,480
consumer out there the most?
And it was inflation and for.

292
00:14:37,480 --> 00:14:39,640
Four years running, that's been
the number one thing for

293
00:14:39,640 --> 00:14:41,920
consumers.
And, and I think we we talk

294
00:14:41,920 --> 00:14:44,840
about it off air a lot, but
people don't truly understand

295
00:14:44,840 --> 00:14:48,400
what inflation is.
Inflation is this continual

296
00:14:48,400 --> 00:14:52,080
growth year over year in prices.
For example, like, you know,

297
00:14:52,080 --> 00:14:55,840
eggs go from your $4.00 to five
dollars, $5 to six, six to

298
00:14:55,840 --> 00:14:57,720
seven.
You know, every single year they

299
00:14:57,720 --> 00:15:00,320
just go up and up and up, not 4
to 8.

300
00:15:00,320 --> 00:15:03,240
And now you're pissed because
they're $8 and they've been $8

301
00:15:03,240 --> 00:15:05,880
for three years.
That's no longer inflation.

302
00:15:05,880 --> 00:15:09,040
That's just the price of eggs.
Right, so high prices are the

303
00:15:09,040 --> 00:15:11,080
consumers gripe, not high
inflation.

304
00:15:11,080 --> 00:15:14,000
Inflation is slightly elevated
right now, but their complaint

305
00:15:14,000 --> 00:15:16,600
is high prices not.
Inflation trust me I jump on

306
00:15:16,600 --> 00:15:18,280
board dude when it I'm at
restaurant.

307
00:15:18,360 --> 00:15:21,480
With the average with.
A family of five, and it cost us

308
00:15:21,480 --> 00:15:24,120
$200 to eat.
I'm like, what are we doing?

309
00:15:24,120 --> 00:15:26,880
Like this is nuts, like
everything is more expensive.

310
00:15:26,880 --> 00:15:29,560
So I I'm griping along with
everyone else, don't get me

311
00:15:29,560 --> 00:15:32,400
wrong.
So I and, and I understand the

312
00:15:32,400 --> 00:15:35,800
impact that has on, on the
wallet and everything else.

313
00:15:35,800 --> 00:15:40,800
And so going back to tariffs
right now at the moment, Josh,

314
00:15:40,800 --> 00:15:44,840
it looks to be that, you know,
most of the countries are going

315
00:15:44,840 --> 00:15:47,520
to be somewhere around 15%, give
or take a little bit.

316
00:15:47,520 --> 00:15:50,240
There are some countries out
there that we're still griping

317
00:15:50,240 --> 00:15:52,160
with and saying, hey, if you
don't do something, you're going

318
00:15:52,160 --> 00:15:55,760
to be at 30 and whatever else.
But I think when, when, when all

319
00:15:55,760 --> 00:15:58,440
things are said and done, we're
going to be probably be around

320
00:15:58,440 --> 00:16:01,800
15%.
So when, when you hear those

321
00:16:01,800 --> 00:16:05,560
numbers versus where we were
starting this whole process

322
00:16:05,560 --> 00:16:09,240
somewhere at 50, somewhere at
100, right, we're, we're a long

323
00:16:09,240 --> 00:16:12,840
ways from that, but it is going
to have some sort of impact.

324
00:16:13,000 --> 00:16:19,320
So is the Fed doing the right
thing at the moment, waiting, or

325
00:16:19,480 --> 00:16:22,840
are we kind of in this normal
thing for the Fed where they

326
00:16:22,840 --> 00:16:26,480
hang on too long for too late
for too long and swing the

327
00:16:26,480 --> 00:16:29,520
pendulum too far in One
Direction and then they do all

328
00:16:29,520 --> 00:16:31,640
this catch up and then it's
almost too late?

329
00:16:33,280 --> 00:16:36,720
I believe they're absolutely
waiting too long, just like they

330
00:16:36,720 --> 00:16:39,160
waited too long to raise rates
coming out of COVID.

331
00:16:39,160 --> 00:16:41,560
But the risks are much less than
than than.

332
00:16:41,560 --> 00:16:44,560
So it was pretty high stakes
game and they lost their wager

333
00:16:44,560 --> 00:16:47,960
was bad and they lost badly.
I don't think there's a huge

334
00:16:47,960 --> 00:16:51,120
amount of risks to waiting too
long now, like pushes off the

335
00:16:51,120 --> 00:16:54,120
Cliff into a horrific recession
or a recession when they're

336
00:16:54,120 --> 00:16:56,280
otherwise wouldn't have been
one.

337
00:16:56,560 --> 00:17:00,280
But Jeb, yesterday we got this
morning we got we got PCE data.

338
00:17:00,560 --> 00:17:04,440
And the PCE data is showing that
inflation is moderating.

339
00:17:04,640 --> 00:17:09,119
The inflation that we saw in the
GDP data yesterday was

340
00:17:09,119 --> 00:17:12,160
essentially limited to
healthcare and pharmaceuticals.

341
00:17:12,400 --> 00:17:13,800
So is that important?
Yeah.

342
00:17:13,800 --> 00:17:15,680
We all want to be healthy.
We all have to insure ourselves.

343
00:17:15,680 --> 00:17:18,200
And if you have a condition, you
need your drugs, right?

344
00:17:18,560 --> 00:17:21,200
So from that perspective, I'm
not saying it's not a problem,

345
00:17:21,480 --> 00:17:24,000
but the last few years, the
problem has been services

346
00:17:24,000 --> 00:17:26,079
inflation.
It's almost all in services and

347
00:17:26,079 --> 00:17:27,920
goods.
For the better part of a year,

348
00:17:27,920 --> 00:17:31,080
we saw outright deflation in
goods prices.

349
00:17:31,480 --> 00:17:34,360
So now we're seeing all of the
inflation that we're seeing is

350
00:17:34,360 --> 00:17:37,360
in goods primarily the only
services inflation is in

351
00:17:37,360 --> 00:17:40,440
healthcare services.
We've seen apartment list came

352
00:17:40,440 --> 00:17:43,200
out with their data.
Rents are up .8% year over year,

353
00:17:43,200 --> 00:17:46,720
decelerating, slowing down.
So all of the things that go

354
00:17:46,720 --> 00:17:50,680
into the measures tell us that
we are well on our track to 2%

355
00:17:50,680 --> 00:17:54,200
inflation because the that goods
inflation that we're picking up

356
00:17:54,200 --> 00:17:57,080
right now is is transitory and
related to those tariffs.

357
00:17:57,080 --> 00:17:59,280
If it weren't for the tariffs,
goods would be cheaper.

358
00:17:59,280 --> 00:18:02,400
We're not seeing input costs
increasing massively.

359
00:18:02,400 --> 00:18:05,280
What we're seeing is the the
threat of these tariffs and

360
00:18:05,280 --> 00:18:09,520
realistically the it's by the
rumor sell the fact the fear of

361
00:18:09,520 --> 00:18:12,080
these tariffs is probably bigger
than what the actual impact is.

362
00:18:12,320 --> 00:18:14,960
If you're right, if we're right,
that 15% is where almost

363
00:18:14,960 --> 00:18:17,640
everyone shakes out.
Some of that's going to get in

364
00:18:17,640 --> 00:18:20,760
absorbed by the exporter, Some
of it's going to get absorbed by

365
00:18:20,760 --> 00:18:23,000
the importer and some of it's
going to get absorbed by the

366
00:18:23,000 --> 00:18:25,600
consumer.
Consumers are are fed up with

367
00:18:25,600 --> 00:18:27,040
high prices.
We just talked about that.

368
00:18:27,040 --> 00:18:29,680
They're not, they're not open to
absorbing these costs.

369
00:18:29,680 --> 00:18:32,680
So are there instances where
certain goods and services they

370
00:18:32,680 --> 00:18:37,120
will, yes, But across the board
consumers, you know double

371
00:18:37,120 --> 00:18:38,560
deuces, we're done with this.
We're not.

372
00:18:38,560 --> 00:18:41,080
We don't want anymore of your
high prices should be really

373
00:18:41,080 --> 00:18:45,400
hard to pass those prices on.
So from that, where, where is

374
00:18:45,400 --> 00:18:48,920
the Fed at?
Like we don't have massive job

375
00:18:48,920 --> 00:18:50,760
growth that would risk
inflation.

376
00:18:51,040 --> 00:18:54,040
We have full employment.
So lower in rates wouldn't

377
00:18:54,040 --> 00:18:56,640
wouldn't risk that.
And we don't really see a risk

378
00:18:56,640 --> 00:18:59,280
of, of wage based inflation
kicking back off.

379
00:18:59,680 --> 00:19:02,400
Inflation is absolutely
moderating in their direction.

380
00:19:02,400 --> 00:19:04,760
Every number they, they look at
these, they don't look at the

381
00:19:04,760 --> 00:19:07,320
headlines like you see in the
Wall Street Journal or on CNBC.

382
00:19:07,560 --> 00:19:10,280
They dig granularly down into
this data and the granular data

383
00:19:10,280 --> 00:19:13,760
is telling us we are slowly
drifting towards where we need

384
00:19:13,760 --> 00:19:15,680
to be.
The tariffs give them cover.

385
00:19:15,920 --> 00:19:18,800
The immigration and and
unemployment staying lower gives

386
00:19:18,800 --> 00:19:20,760
them cover.
And I think at this point,

387
00:19:20,760 --> 00:19:25,240
Powell just wants to be right
and say no, no risk, no downside

388
00:19:25,240 --> 00:19:28,680
to, to me not cutting.
So there's a very good chance,

389
00:19:28,680 --> 00:19:32,560
like as of yesterday, we talked
about targets pricing in one cut

390
00:19:32,560 --> 00:19:35,400
for the rest of the year.
Prior to, you know, 2-3 weeks

391
00:19:35,400 --> 00:19:37,920
ago, it was pretty solidly in
the camp of two cuts before the

392
00:19:37,920 --> 00:19:39,680
end of the year.
I still think we get 2 cuts

393
00:19:39,680 --> 00:19:42,680
before the end of the year.
We have a ton of data coming out

394
00:19:43,240 --> 00:19:44,720
between now and the next Fed
meeting.

395
00:19:44,720 --> 00:19:46,360
There's no August meeting
because we just had the meeting

396
00:19:46,360 --> 00:19:49,480
here on the 30th of July.
So we got like 7 weeks before

397
00:19:49,480 --> 00:19:51,320
the next meeting.
We're going to have two PCE

398
00:19:51,320 --> 00:19:54,640
readings, 2 CPI readings, 2 jobs
reports.

399
00:19:54,800 --> 00:19:57,760
And I don't think any of that
data is going to go, Oh my God,

400
00:19:57,760 --> 00:19:59,320
you can't cut.
Things are getting hot.

401
00:19:59,520 --> 00:20:01,200
Also by the same token, nothing
in that.

402
00:20:01,360 --> 00:20:04,920
Is going to say hey the economy
is cratering we have to cut so

403
00:20:04,920 --> 00:20:07,400
could they they could but I
don't think they're they're

404
00:20:07,400 --> 00:20:09,720
going to but leads us back to
Jeb.

405
00:20:09,720 --> 00:20:11,360
What was a month ago we did this
episode?

406
00:20:11,600 --> 00:20:13,640
the Fed doesn't dictate your
mortgage interest rates.

407
00:20:14,240 --> 00:20:17,560
Bed only controls the short end
of the curve, the very shortest

408
00:20:17,560 --> 00:20:20,480
end of the curve.
And that is probably going to

409
00:20:20,480 --> 00:20:23,440
move in in your favor over the
rest of the year.

410
00:20:23,800 --> 00:20:26,400
If you're enjoying the content,
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411
00:20:26,400 --> 00:20:28,520
home buyer.
Make sure you like the video,

412
00:20:28,520 --> 00:20:31,240
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413
00:20:31,240 --> 00:20:34,680
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414
00:20:34,680 --> 00:20:37,120
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415
00:20:37,120 --> 00:20:40,880
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416
00:20:40,880 --> 00:20:42,200
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buyer.

417
00:20:42,320 --> 00:20:45,280
So my question to you, Josh, and
and it's one that a lot of

418
00:20:45,280 --> 00:20:49,160
viewers listeners have is, is
that what we're waiting on?

419
00:20:49,160 --> 00:20:50,680
Are we waiting on the Fed to
cut?

420
00:20:50,680 --> 00:20:52,920
Is that is?
Is that what's going to send

421
00:20:52,920 --> 00:20:56,920
interest rates lower?
Well, we had this, we, we get

422
00:20:56,920 --> 00:20:58,680
this question all the time on
the live show Jeb.

423
00:20:58,680 --> 00:21:02,200
We had that paradox last year.
The Fed cut 4 * 100 basis points

424
00:21:02,200 --> 00:21:05,920
and rates went up, Treasuries
went up, mortgage-backed

425
00:21:05,920 --> 00:21:08,760
securities sold off, and we
ended up with higher interest

426
00:21:08,760 --> 00:21:12,560
rates than where we started.
It wasn't because the Fed cut.

427
00:21:12,560 --> 00:21:15,600
the Fed was very restrictive and
they went to moderately

428
00:21:15,600 --> 00:21:18,480
restrictive.
And at that time, we had some

429
00:21:18,480 --> 00:21:21,280
inflation data giving
conflicting readings and showing

430
00:21:21,280 --> 00:21:24,680
that it popped up for the next
two 3-4 readings after the Fed

431
00:21:24,680 --> 00:21:27,040
cutting.
And so the market not saying I

432
00:21:27,040 --> 00:21:29,640
don't care what the Fed says if
I'm going to loan someone money

433
00:21:29,880 --> 00:21:34,840
for 7/10/30 years, which
mortgages recently have followed

434
00:21:34,840 --> 00:21:36,240
more close to the seven-year
treasury.

435
00:21:36,240 --> 00:21:39,040
Historically, we look at the 10
year you're loaning someone for

436
00:21:39,040 --> 00:21:41,800
for quite some time.
So if you think, hey, this

437
00:21:41,800 --> 00:21:44,440
inflation thing is not licked,
it's going to kick back off.

438
00:21:45,160 --> 00:21:47,880
If that's what your thought is,
then you're going to say, hey, I

439
00:21:47,880 --> 00:21:52,040
need a higher rate of return.
I think we are slowly starting

440
00:21:52,040 --> 00:21:57,720
to see that we don't have a new
regime of higher rates of

441
00:21:57,720 --> 00:22:00,320
inflation that require higher
rates of return.

442
00:22:00,600 --> 00:22:03,840
I think we are going to see over
the long haul that in the short

443
00:22:03,840 --> 00:22:07,040
run, over the next three, 5-7
years, there's not any

444
00:22:07,320 --> 00:22:09,840
catastrophe coming from these
massive U.S. government

445
00:22:09,840 --> 00:22:11,280
deficits.
Long run there is.

446
00:22:11,560 --> 00:22:15,840
So there will continue to be
buyers of Treasuries and we're

447
00:22:15,840 --> 00:22:18,760
likely to see interest rates
move lower, but we're also

448
00:22:19,240 --> 00:22:22,680
likely to be less volatile to
the downside, meaning we're not

449
00:22:22,680 --> 00:22:25,960
likely to get this big drop in
the matter of a week or two

450
00:22:26,200 --> 00:22:28,720
because we've had a couple of
them over the last few years and

451
00:22:28,720 --> 00:22:31,480
the market has been burned.
I think the market is saying

452
00:22:31,720 --> 00:22:35,720
we're open to this concept of
lower interest rates, but the

453
00:22:35,880 --> 00:22:40,040
economy itself has to prove it
over time. the Fed has to prove

454
00:22:40,040 --> 00:22:43,120
itself over time.
And it's just one voice.

455
00:22:43,120 --> 00:22:46,280
The Fed is just one voice, but
probably the loudest voice

456
00:22:46,680 --> 00:22:50,120
saying out loud where the
economy is at, what we're

457
00:22:50,120 --> 00:22:52,840
watching and where we are and
where we need to be.

458
00:22:52,840 --> 00:22:56,040
So from that perspective, simple
terms, Jeb, I think it's going

459
00:22:56,040 --> 00:22:59,040
lower, but I think it's going to
be a low slow grind in that

460
00:22:59,040 --> 00:23:02,320
direction.
Yeah, I think in like looking at

461
00:23:02,320 --> 00:23:04,760
it from a broad overview, you
don't need a perfect economy.

462
00:23:04,760 --> 00:23:06,280
You don't need a full on
recession.

463
00:23:06,640 --> 00:23:10,040
You just need clear signs that,
hey, the data is trending in the

464
00:23:10,040 --> 00:23:12,120
same direction that the economy
is cooling.

465
00:23:12,360 --> 00:23:15,080
You need that transparency from
the Fed that hey, listen, we're

466
00:23:15,080 --> 00:23:16,680
seeing it.
This is our plan.

467
00:23:17,080 --> 00:23:19,920
And I think with all of that,
that they take some of that

468
00:23:19,920 --> 00:23:23,240
volatility out of the market and
you probably start to see

469
00:23:23,760 --> 00:23:26,440
spreads contract a little bit,
you start to see mortgage rates.

470
00:23:26,440 --> 00:23:27,760
Which we have seen over the last
few.

471
00:23:27,760 --> 00:23:30,640
Weeks and I think there's an
opportunity for lower rates in

472
00:23:30,640 --> 00:23:32,320
the future.
So if Josh and I can be of any

473
00:23:32,320 --> 00:23:34,040
assistance to you in this
process, you're going through

474
00:23:34,040 --> 00:23:36,080
the pre approval process.
You're looking for that second

475
00:23:36,080 --> 00:23:37,760
quote.
Make sure you use that link in

476
00:23:37,760 --> 00:23:41,560
the description of the video,
the educatedhomebuyer.com/start.

477
00:23:41,560 --> 00:23:43,800
It'll get you in touch with the
team helping hundreds and

478
00:23:43,800 --> 00:23:45,880
hundreds of people here on
YouTube guide you through that

479
00:23:45,880 --> 00:23:47,560
process.
A lot of positive feedback.

480
00:23:47,560 --> 00:23:50,600
We're happy to be a part of it.
So if you'd like the same

481
00:23:50,600 --> 00:23:52,480
assistance, make sure you click
that link.

482
00:23:52,560 --> 00:23:55,120
But until next time, make sure
you buy right, borrow smart, and

483
00:23:55,120 --> 00:23:56,280
build wealth.
Adios.

484
00:23:56,880 --> 00:23:57,640
Amigos.