patrick.net

AD says

Wookie, please clarify and expand. What do you mean about "dip shit areas" and "year 5" ? ? ?

CA specifically. People keep saying "foreign buyers" will keep the market afloat. Prop 13 and people won't sell.

People are moving out of CA. They did it in IL and it was a 15 year process. CA is in year 5. I think TX and FL are just at the start. FL more boomers dying and those not filling in the vacancies. I think NY is dying as well. Not sure what year they're in. I think CO might die too. You can't move there into the mountains, which is 80% the reason most people move there for.

What I'm saying is there's a lot of migration in the country. You can work anywhere and make the same amount of money. The dip shit areas are where the states that are oppressive, those people move to them. Think Boise, Austin, Nashville. The prices will crash in those places at some point.

WookieMan says

You can work anywhere and make the same amount of money.

I can't.

Lawler: Mortgage Rates Have Surged Since the Federal Reserve Cut Interest Rates Last Month

From housing economist Tom Lawler:

Folks who expected that mortgages rates would decline when the Federal Reserve began cutting its federal funds rate target range have been dazed and confused over the last month and a half. Since the day before the Fed’s 50 bp reduction in its funds rate target on September 18, 30-year MBS yields have surged by 84 to 96 bp, while mortgage rates have jumped by 72 to 89 bp. At the same time intermediate- and longer-term Treasury yields have risen 53 to 67 bp.

There are two main reasons MBS and mortgage rates have risen by more than Treasury rates over this period. First, implied interest rate volatility has surged, as many market participants were caught off-guard by the string of unexpectedly strong economic releases (and slightly higher inflation releases) following the Fed’s rate decision. For example, the BofAML MOVE index, a measure if implied interest rate volatility derived from one-month options on Treasuries across the yield curve, increased from 101.58 on September 17 to 130.92 on October 28, its highest reading since October 30, 2023. (Mortgage investors effectively write a prepayment option to home borrowers, and as such higher implied interest rate volatility increases the premium over Treasuries that investors require to compensate them for prepayment risk.)

And second, MBS option-adjusted spreads, which were at the low-end of the “no Fed MBS intervention” range just prior to the Fed’s action, have since moved higher.

Based on an assessment of various measures, my best is that the neutral real interest rate in the US is between 1 ¾% to 2%. One of course needs to add inflation/inflation expectations to that range. If/when the Fed were to achieve its 2% inflation target, then the neutral nominal interest rate would be 3 ¾% to 4%.

Factor in a normal yield curve (longer rates higher than short rates), and a more normal spread from the 10-year yield to 30-year mortgage rates, and you can see why there is a new normal range for 30-year mortgages.

See from June 2023: Could 6% to 7% 30-Year Mortgage Rates be the "New Normal"? and an update in August 2023: The "New Normal" Mortgage Rate Range

https://calculatedrisk.substack.com/p/lawler-mortgage-rates-have-surged