WMU - 1.24.25 - Trump DEMANDS Lower Interest Rates

[@mortgagesincolorado]

NOTE: my email address has changed to [e-mail] Luminate Bank has been the bank through which NEO Home Loans ranits branch. I have stayed with bank as NEO has moved over to another partner. My buisness has not changed, just my email address.
THE FACTS FOR THE WEEK OF 1.20:
-On Thursday President Trump speaking at Davos said, ‘With oil prices going down, I’ll demand that interest rates drop immediately….’
-The Fed makes a rate decision on Wednesday - the Fed is expected to not lower rates. The feds reasoning for pausing on lower rates is that we are seeing higher inflation and unemployment has stabilized.
-However, data tells a little different story over the past 2 weeks:
-Wednesday January 15th - year over year CPI came in a 3.2% vs 3.3% projected (lower CPI equals lower inflation)
-Today - January PMI cams in at 52.8 vs 56.5 -yes, anything above 50 shows an expansion of manufacturing - however, this is down significantly from 58.5 in December
-Oil prices - oil prices are down $12 a barrel since April - as oil is used pretty much everything - as oil prices come down, so does inflation.
-Trump has said he is going to request OPEC and Saudi Arabia to lower prices, which brought down crude oil futures.
WEEKLY MBS CHART BELOW:
-The higher the candle stick the lower the rates - the circle is the last 5 days

WHY HOUSING PAYMENTS ARE SO MUCH HIGHER WHEN BUYERS PURCHASE IN A LOWER INTEREST RATE MARKET:
-In 2023 and 2024 Nerd Wallet did a survey that showed 28 million people wanted to purchase a home in the past 18 months
HOWEVER, in 2023 - there where only 6million total closed transactions
-Add to the fact that for every 1% drop in interest rates, 5,000,000 renters become eligible to purchase a home
What this means - when rates come down, all of the buyers that have been sitting on the sidelines come to purchase a now home, combined with the number of renters to become eligible to purchase a new home - which leads to a lot fewer homes than home buyers.
Limited supply with high demand = bidding wars, which equals higher purchase prices.
The higher the purchase price, the higher the down payment. In addition, a higher purchase price has a much more significant impact on monthly payments as do interest rates.
-Why does all of this matter?
-More inventory allows more options
-More inventory will allow one to purchase at or below purchase price
-More inventory will allow the option of negotiating a 2/1 buydown
-Once the fed drops rates, we will again see record number of loan applications. Buyer will flood the market and we will again see bidding wars.
-IT IS CHEAPER TO PURCHASE A HOME WITH A 7% RATE AT PURCHASE PRICE, THAN IT IS TO PURCHASE A HOME AT 6% RATE AT 10% ABOVE PURCHASE PRICE
-The most important thing to consider is WEALTH ACCUMULATION.
-Those that have recently purchased, are under contract to purchase, or go under contract prior to September 2024 are going to reap the rewards of bidding wars going on in 4th quarter 2024 through 2026.
-When we have bidding wars, home sales prices are driven higher.
-For those that already own a home, the sales prices determine the value of the home you just purchased.
-If the average bidding war is 10 to 15% above sales price. That is 10 to 15% appreciation in the home you already own.
-Finally, those that already own a home are going to end up with the lowest rate anyways as they will refinance into that low rate. (I personally do a 3 year refinance guarantee that covers all closing costs except title charges).
LONG TERM PROJECTIONS:
-The Fed will continue to lower rates so long as unemployment continues to rise and inflation continues to cool

WEEKEND AVAILABILITY:
Brian Pintar
Branch Manager
Luminate Bank
[e-mail]
303-478-1425 (call or text)
MLS: 289801