In this weekly market update, Jordan Keck announces his upcoming out‑of‑office period (Aug 14‑19) and introduces Tyler as his temporary point of contact. He then reviews recent mortgage‑rate movements, noting a brief dip to the low‑6% range before climbing back to about 6.63% and explains why Federal Reserve rate cuts affect consumer credit more directly than mortgage rates, which are driven by bond market supply‑demand dynamics. Keck highlights the New York Fed’s household‑debt report showing $17.8 trillion in total debt and a $109 billion quarterly increase, with delinquent auto loans and credit‑card balances at 13‑year highs, and warns that adjustable‑rate home‑equity lines are now reaching double‑digit rates. He reports a 5.3% rise in July active real‑estate listings and a 37% year‑over‑year increase, while emphasizing that overall inventory remains 30% below pre‑pandemic levels. Keck discusses a California Senate‑passed bill that would cap corporate ownership of single‑family rentals at 1,000 homes, targeting firms like Invitation Homes that hold ~12,000 units, and notes the potential for similar legislation elsewhere. Finally, he analyzes the flattening of the 10‑year/2‑year Treasury yield curve, which has moved from a –1.07% inversion to a near‑flat 0.05% spread, interpreting it as a possible end to the recession signal and a sign of improving economic conditions, while cautioning that any recession would be confirmed months later. The update concludes with a reminder of the upcoming break and a wish for a good weekend.
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Good morning and happy Friday. Jordan Keck here, your lender buddy, with your weekly market update. Kicking off things, I want to let you know I will be out of the office next Wednesday through the following Monday. It's going to be the 14th through the 19th. During that time though, my team, as always, is going to be covering. So Tyler has access to all of my notes, all the files, can take care of anything needed. Even new client pre-approvals, if it's in the evenings or weekends, he's got you covered. So his email and cell phone number there, texting is an option for him, and on the phone he even sounds just like me. So hardly even notice anything different. Same last name, same voice on the phone. But appreciate that time away. I'm going to be going on a little vacation with my wife, so celebrating a bit of our 12-year anniversary. So anyway, appreciate the time away for that. As far as interest rates this week, got a lot of excitement there. We've moved up since that time though, so it was only really a couple of days that we saw that lowest point in rates getting down to, you know, 6, low 6s range. This week from Friday to Friday saw rates move up again, down from the lows of 6.4 to about 6.63%. And so still some volatility there. Nice to see that we're still lower than we were the last couple of weeks, but the lowest of those rates already gone. So hopefully that was just a little teaser of a taste of what's to come later on this year. And that kind of goes into what I want to talk about with the mortgage tip this week really has to do with understanding the dynamics around the mortgage rates. So the biggest thing people are anticipating, of course, is the next time the Federal Reserve meets in September, they're anticipating them to cut the federal overnight funds rates, the Fed funds rates. And that can be anywhere from a quarter of a percent cut to half a percent cut. But one of the biggest misnomers on this one, I want to make sure you know and can relay this to your clients, is that when the Federal Reserve cuts interest rates, that has a direct impact on things like home equity lines of credit, credit cards, and car loans. It doesn't immediately impact mortgage rates. Mortgage rates are going to be based around supply and demand in the markets for bonds and for mortgage-backed securities. So oftentimes Knowing what the Federal Reserve is expected to do, mortgage rates may fall as a result before that even happens. So by the time the Federal Reserve cuts rates, mortgage rates have likely already priced that in unless there are any surprises. That's why you saw some big volatility here this last week, is because you had a really good inflation report and some good jobs reports coming in that make it more likely the Federal Reserve will cut rates. Even though that hasn't happened yet, these reports are what dropped mortgage rates because people are anticipating that to happen. So again, good to know on that side. And then also for any clients who do have higher interest rate debt around things like credit cards, car loans, and home equity lines of credit, hopefully going to be getting some relief if and when the Federal Reserve does start cutting those rates. Next up, along the line of consumer and household debt, the New York Fed household report For our household debt report showed there's a total of $17.8 trillion in household debt in Q2, up from $109 billion— excuse me, this is in Q3— up $109 billion in Q2 alone. This is an aggregate for all consumer household debt and shows debt continues to be a problem for consumers with seriously delinquent auto loans and credit cards which have missed payments for over 90 days. Are at the highest levels in the last 13 years. So definitely, as we're seeing those higher interest rates, higher levels of the debt, especially a lot of people that took out home equity lines of credit when mortgage rates started going up, unfortunately found out most of those have adjustable rates based on the federal funds rate. And so they might have started at 2%, 3%, and 4%, but a lot of those now looking upwards of 8%, 9%, 10%, and sometimes above that. So again, hopefully some relief in the future there. Next up, active listings for real estate up 5.3% for July and up 37% year over year. Now, this might initially look like a bad thing, but keep in mind inventory is still down 30% from 2019 pre-pandemic levels. And Lawrence Yun, in our last weekly update, we talked about him saying that you are still seeing a lot more pending a lot more sales, likely because people have more options. Now, they're not so restricted as far as what they're able to get. And then, you know, we're looking at the percentages. If you go from 10 homes on the market to 20, that's a 100% increase. So if you go from 20 homes to 10, it's a 50% decrease. So even though it's the exact same number of homes up or down, the percentage always looks a lot bigger when you're increasing than when you're decreasing just for that same reason. So, you know, what they say is statistics lie and liars use statistics. So always take everything with a bit of a grain of salt on that side. Next up, a California bill— thought this was interesting— which has passed the Senate and moved to the House aims to limit the number of homes that corporations can purchase and hold for rental properties when it comes to single-family. This bill, which again already passed the House and move to the Senate, hope I said that right the first time, would prevent businesses from buying and holding more than 1,000 single-family homes and renting them out. Currently, there's only 3 companies in California that are over this limit, and the 4th is close at 977. So of those, they're really not impacting a huge number of companies. The biggest one though is that Invitation Homes, which is once owned by Blackstone, has owned the most, approximately 12,000 single-family homes as of December. So realistically, this is really, you know, kind of going towards one company in particular, you know, 1, 2, maybe 3 companies. But it would impact less than 1% of all of the transactions of California in 2023. That being said, although it's not a huge number overall, it is still huge when you consider the fact that over 50% of the people living in California don't own any homes. And so 1%, roughly, of all transactions are accounted for by 3 corporations. So interesting to see what happens with this one, because if it passes in California, it might also start to impact corporations in other states. Other states could start adopting laws similar to this. Maybe the cap is $1,000, maybe it's less than that. So again, vast majority of corporations not going to be impacted at all, but very interesting to watch what what happens with this and if other states start adopting similar ones, maybe with lower limits. And lastly here, for anyone, uh, nerding out on it like I do, the 10-year and the 2-year Treasury yield curve, which first inverted back in July of 2022, is flattening to the lowest levels since that original time. So the yield curve, you know, the 10 and the 2-year, traditionally the longer-term yields are always going to have higher— excuse me, the longer-term treasuries are always going to have higher yields than the shorter terms, because if you're investing your money for a longer time, you need to get a higher level of return in order to offset that risk. When that inverts, it means you're actually getting a higher level of yield on the shorter-term debt, typically because people are expecting harder times ahead. It's been a pretty reliable recession indicator. And so with this, we've been inverted for the last 2 years, it's gotten as big a difference as -1.07, meaning the yield is about 1% higher on the short-term debt than the long-term debt. Now we're only down to 0.05 for the difference. So very, very flat, likely come out of that inversion very soon. And as a result of that, you know, means likely better times ahead. Again, for the recession indicator, you know, that might be something that happens, might not. The Fed's talking a lot about trying to achieve that soft landing, and so it's really going to come down to employment numbers if those start spiking up, you know, inflation numbers, consumer spending, all of the data reports that we typically cover here. So very interesting to watch that happen. Of course, if there is any kind of recession, it's not until several months after it's done that it typically gets called and confirmed. So again, a lot of information coming out in real time, trying to make sense of it, trying to predict what's going to happen in the future, but always interesting to watch and see how that can impact potential mortgage rates and the housing market in general. As always, hopefully this is helpful for you. Hope that you have a great weekend. No market update next week while I will be gone. So again, we'll see you in a couple weeks. Take care.
