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Why did mortgage rates go up after the Fed cut Rates?

Didier Malagies • Sep 20, 2024


The Federal Reserve cut rates on Wednesday and mortgage rates went up! What happened? The answer lies in the bond market.


The 10-year yield and 30-year mortgage rates have been in a slow dance since 1971 and trended together. The bond market isn’t old and slow like the Fed — it moves very quickly, and for months it has been sending the 10-year yield (and mortgage rates) lower in anticipation of a series of Fed rate cuts, not just one or two.

As I’ve said for several months on the HousingWire Daily podcast, the key to understanding mortgage rates is to focus on the labor and economic data—not rate cuts. The 10-year got as low as 3.60% yesterday, but then housing starts data came out. Housing starts beat estimates, and the single-family permits data shows that they are growing again. The 10-year yield was already higher before the Fed announcement,


The growth of housing permits is a good sign for economic expansion, and falling mortgage rates since June have helped push this data line. We would not have this conversation if mortgage rates were still in the range of 7.50%- 8% today. The bond market got ahead of the Fed, pushing bond yields and mortgage rates lower—which has already made a difference.


So what now? Today’s jobless claims data came in better than expected, sending yields higher again, which looks perfectly normal. The bond market is so far ahead of the Fed that it can sit and watch to see how the economic data trends. If housing starts, industrial production, and jobless claims were worse than expected, we would have a different discussion today. However, that’s not the case — the economic data, even retail sales this week, came in as a beat.



So, if you’re confused about why rates went up, remember that the bond market gets ahead of the Fed. And listen to the podcast — we’ve been discussing this for months. The labor market has been softer with the data’s internals since the end of 2023, and the Fed is only now worried about a risk to labor. This means they need to play catch up to the market pricing. The 10-year yield is currently at 3.74%, up from yesterday’s lows and slightly higher from the close. For mortgage rates to go lower, we need to see three things:


1. Mortgage spreads getting better
2. Economic and labor data getting softer
3. The Fed getting more dovish with their statements, showing a willingness to do more to help the economy stay out of recession

Until then, the last 24 hours make a lot of sense to me, given the economic data and where the bond market was trading before the housing starts data came out.



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Why did mortgage rates go up after the Fed cut Rates?

By Didier Malagies • 20 Sep, 2024
The Federal Reserve cut rates on Wednesday and mortgage rates went up! What happened? The answer lies in the bond market. The 10-year yield and 30-year mortgage rates have been in a slow dance since 1971 and trended together. The bond market isn’t old and slow like the Fed — it moves very quickly, and for months it has been sending the 10-year yield (and mortgage rates) lower in anticipation of a series of Fed rate cuts, not just one or two. As I’ve said for several months on the HousingWire Daily podcast, the key to understanding mortgage rates is to focus on the labor and economic data—not rate cuts. The 10-year got as low as 3.60% yesterday, but then housing starts data came out. Housing starts beat estimates, and the single-family permits data shows that they are growing again. The 10-year yield was already higher before the Fed announcement , The growth of housing permits is a good sign for economic expansion, and falling mortgage rates since June have helped push this data line. We would not have this conversation if mortgage rates were still in the range of 7.50%- 8% today. The bond market got ahead of the Fed, pushing bond yields and mortgage rates lower—which has already made a difference . So what now? Today’s jobless claims data came in better than expected, sending yields higher again, which looks perfectly normal. The bond market is so far ahead of the Fed that it can sit and watch to see how the economic data trends. If housing starts, industrial production, and jobless claims were worse than expected, we would have a different discussion today. However, that’s not the case — the economic data, even retail sales this week, came in as a beat.  So, if you’re confused about why rates went up, remember that the bond market gets ahead of the Fed. And listen to the podcast — we’ve been discussing this for months. The labor market has been softer with the data’s internals since the end of 2023, and the Fed is only now worried about a risk to labor. This means they need to play catch up to the market pricing. The 10-year yield is currently at 3.74%, up from yesterday’s lows and slightly higher from the close. For mortgage rates to go lower , we need to see three things: 1. Mortgage spreads getting better 2. Economic and labor data getting softer 3. The Fed getting more dovish with their statements, showing a willingness to do more to help the economy stay out of recession Until then, the last 24 hours make a lot of sense to me, given the economic data and where the bond market was trading before the housing starts data came out.

Aging in place could become ‘big business’ for homebuilders

By Didier Malagies • 12 Sep, 2024
By this point, the information should be second nature: Aging in place is an increasingly common desire among homeowners who want to save money, avoid costly assisted-living facilities, stay connected to their communities or all of the above. As the preference grows, one group — homebuilders — is uniquely positioned to address these desires and profit from them. This is according to an article published by Kiplinger , which took a closer look at the dynamics associated with the cost of living, and the kinds of renovations needed needed to facilitate aging in place versus another arrangement. “The cost of nursing home care is soaring: $9,000 per month, on average,” the column stated, citing data from Genworth Financial . “In big cities, where everything costs more, that figure is $13,000. Persistent staffing shortages are a major cost driver. Staying in an assisted-living facility averages $5,500 per month, or $7,000 in high-cost metros.” In-home care, meanwhile, can vary significantly between $3,500 to $7,000 per month. Staying at home is often not a cost-free option, since it often requires renovations to a home to make it more accessible for people likely to experience some kind of mobility issues as they age. But renovations can also be grander. They can include the addition of an entire room to the first floor of a multistory home, bathroom renovations that could require the replacement of a tub or shower with a more accessible alternative, or the addition of a wheelchair ramp leading to the front door.  Builders are more actively thinking about how to efficiently serve these prospective clients. Some people are more forward-thinking about what life will look like, even if they’re not in the senior demographic just yet. “More Realtors are reporting younger clients who say they want a ’feet-first house,’ a place where they can live for the rest of their lives,” the article explained. “One example of thinking ahead: Some builders are stacking closets on upper and lower floors, to create the space for a future elevator, if one is needed. Builders and contractors that are interested can be certified as an Aging in Place Specialist by the National Association of Home Builders (NAHB).” Financing these improvements can be an obstacle too. The article cites a reverse mortgage as a potential financing vehicle for older homeowners, since the debt doesn’t need to be satisfied until the home is sold.

54% of baby boomers say they’ll never sell their homes

By Didier Malagies • 11 Sep, 2024
In a traditional sense, the term “silver tsunami” refers to pent-up housing stock that older homeowners will eventually choose to sell, which would have the effect of flooding the market with new inventory. But if prior suppositions about this trend being overblown failed to convince people, new data might make things clearer. More than half (54%) of baby boomers have no intention of ever selling their homes, according to new survey data from Clever Real Estate. This cohort expects to remain in their homes for the rest of their lives, based on responses from 1,100 people born between 1946 and 1964. “There’s a wide variety of reasons homeowners made this decision,” the survey results explained. “About half say their current home fits their lifestyle needs (52%) or they prefer to age in place (47%). “The low housing expenses that come with a fully paid-off mortgage are also keeping 40% of boomer homeowners in place. Owning their house outright may also be a factor for 37% of boomer homeowners who have considered leaving their homes as an inheritance.” This also suggests that nearly 40% of baby boomers not only never plan to sell, but they also intend to pass their current home to family, barring heirs who elect to sell a property. Money does not appear to be an overwhelming driver in this decision, the results suggest. Nearly one-quarter of respondents (22%) said their emotional attachment to the home is the key reason they wish to stay put, while roughly one in five (19%) said they don’t want to give up ties to their community or the friendships they’ve built. But affordability plays a role too, with 25% of respondents saying they simply cannot afford to move to a new home. Another 16% said that staying put is the easiest option considering the cost of an assisted-living facility. “Still, almost all boomer homeowners (90%) have concerns about homeownership as they age, primarily based on growing expenses,” the results stated. “The cost of maintenance and upkeep tops the list (59%), while being able to physically take care of these tasks isn’t far behind (55%). About half (49%) worry about property tax increases, while 42% are concerned about rising utility costs.”  As evidenced in a state like Louisiana , property tax hikes also appear to be pushing more older homeowners to consider a product like a reverse mortgage . About 30% of the group surveyed by Clever plans to sell their home in the next five to 10 years, which means that some of this inventory may not hit the market until the mid-2030s.
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