Mortgage Rates Hit 7%! Are We Facing a Housing Crash?

Hey folks, Dan Ferro here with your closing bell for October 28th, 2024. Well, they did it. Mortgage rates hit 7%. I didn't think we'd see it this fast. So I wanna show you the trajectory of how fast, how fast mortgage rates went from 6.19 to 7%. And when did it start? That's basically what we're gonna talk about today and what's causing all this ramification in the background. So let's take a deep dive into what's happening today. So right now, mortgage rates hit 7%. We haven't seen that in a while. If you go over to here, here's what's happened to mortgage rates ever since the Federal Reserve cut rates. So I programmed this to have it the day the Federal Reserve cut rates. What started happening? Well, this is where you have it. So mortgage rates at that time were 6.19. They were on their way to five, the high 5%. Everything was kind of looking pretty good. And then all of a sudden, boof, you had the election going on and all this other stuff. You had the debt load. People were starting to now see, oh man, neither one of the candidates are talking about deficit reductions. So where are we gonna be in the debt load next year? And then we have more and more things piling on to the equation. So I wanna go over to just show you guys right through here. Here's an inside joke that us mortgage people have. It says, sir, you've been in a coma for 45 days. The guy says, oh boy, perfect timing. Can I take advantage of those refinance rates now? So just thought I'd throw a little bit of a mortgage funniness into this. Maybe you're not thinking it's that funny. So let's get to the next thing. So right through here, here's what we're seeing right now. The bond market MBSs are down 25 and that's what's basically pushing rates up to where they are right now at 7%. But what's behind it? Well, a lot of things behind it right now are the treasury. There's a report right here. I was actually gonna go through this with you guys on how much the treasury is expected to actually borrow between, well, how much they did borrow from the beginning of the year to now and then how much are they projected to borrow in 2025. And then all of a sudden, Steve Leisman popped up and he did it all for me. So let's take it over to Steve. He's gonna explain to you how much debt the U.S. is pumping out there, just the U.S. And this is causing yields on basically everything to go up right now. So Steve, take it away for us. And when we come back, I wanna show you there might be some bond vigilantes causing a little upsurge in rates as well. And then I wanna show you the projection of where rates are charting right now. And we just had a breakout and we're gonna talk about that as well. So got a lot packed in for you, but Steve, take it away for us, buddy. We're getting some news out of the treasury. I wanna just interrupt the conversation for a moment and bring in our Steve Leisman who has that breaking news for us. What did we learn, Steve? Yeah, we learned that the treasury, Scott, expects to borrow $546 billion in the fourth quarter of 2024. That's $19 billion lower than announced in July, 2024 when they put that estimate out. That's because they had a higher cash balance, as in more money in the bank of the treasury, offset by some. He said that the treasury didn't realize they had more money in the treasury than they expected, anticipated, estimated. Hmm, odd. Lower cash flows. Now, here's the forecast. $823 billion in the first quarter of 2025. That's the largest on a nominal basis for the first quarter, but it also comes with a big cash balance. We're gonna keep on talking about that in one more second. They borrowed 762 in the third quarter of 2024. That was $22 billion higher than the estimate because they had more in the cash balance and offset by higher net cash flows. One more thing, they expect to have a cash balance. I'm just looking up these numbers here of, I'll give it to you, Scott, $700 billion in the first quarter of, $850 billion in the first quarter of 2025 from $700 billion in the fourth quarter. They are kind of swirling money away, Scott, because as you know, there's another debt ceiling fight brewing for the first part of the year. Yeah, it just makes us think, Steve, thank you about the deficit and all of that. So what he was talking about there is at the beginning of the year, the debt ceiling big debate is, we're gonna be out of money once again. So are we just going to increase our national debt, just, you know, just keep running up the charge card, or is somebody gonna finally say, okay, enough's enough? We need a balanced budget. We can't overspend. We can't spend more than we're taking in as a government. So that's how you and I do it, and that's how we get in trouble by using credit cards and then not having the money eventually at some point to pay it back. The federal government, they just come in every year and just say, you know, just increase our credit line. And at some point, it's gonna really bite them in the ass. So that's what we're focusing in on. I had the report ready for you right through here, just kind of going through all those numbers. And when you look at these numbers, it's like $740 billion, and we're talking for the quarter. We're not talking years or decades. This is a quarter. This is how much money we don't have. And that's why I'm saying we can't just give it away. You can't give it away in student loans. I'm in the real estate business. I don't think you should give it away in the $25,000 for, you know, if nobody's ever in your family has bought a house, well, we'll give you 25 grand to maybe buy that first house. They don't need these things. Use it in areas where we need the money, where people need help, okay? And right now, there's not a need for, you know, some of the things that they're doing. So that's my concern with that. Bond vigilantes are back at it again. This is actually published just today. You can see that right through here. So they're concerned that bond vigilantes are coming in, kind of manipulating the market. Maybe that's what's causing a bigger run than expected as well. So just a lot of things in the background. Go to the equity markets, and it's just, they're killing it again today. These things hit record numbers. It's hard to, you know, like every day. So you have across the top, you have the Dow Jones, the S&P, and NASDAQ, and Russell 2000. Those are basically the main indices in the US that people use when they're buying and trading stocks. They're all up. The one thing down in the red, this is the VIX, basically the anxiety level of the markets. Let's get to cryptocurrency. It was teetering on $70,000. We're almost there, 69,600. So about $400 shy of a $70,000 mark. And if you guys watch a lot of my shows, we were supposed to do a stock talk Tuesday. Going to have to move that to Thursday. We had a busy day. It's month end. I'll do that Thursday afternoon with you guys. So then once we're all done, you can go ahead and take your kids or enjoy your Halloween parties out there. So we're going to talk about that. Right now, oil is plummeting as well. So oil is down over 5%, bringing the price down under $68 a barrel. That's going to help inflation quite a bit, folks. So that's what we're seeing right through there. The MBS market's telling us this. When you look at the MBS market, we go over, what is it? It's down 25 right now. So that means mortgage rates are going to tick up. So let me explain how this works. Right through here, what you're looking at is what's going on with the price, the price of a bond. Most cases, when you see what rates are or yields are on something, they'll give you the yield. They won't give you a price. But in mortgages, for some reason, they give you the price. So you have to figure out, okay, the market's down 25 today. What's the mortgage rate? Well, here's what I need you to understand. If the price of a bond is going down, okay, rates are going up, the bigger the adjustment down, well, the bigger the adjustment up. Okay, so that's what you gotta understand. There's really no, okay, if this is down five ticks, it's gonna equate out to this because a lot of different banks use different rate sheets and so forth. But just wanting to give you guys what's going on with the MBSs right now. So this is the price. Actually, what's going on with the price of the mortgage bonds. When you see these yellow things or these orange things, that's when banks are adjusting one way or another. So this is telling us, if you look down through here, it says worse, worse, worse, worse, worse. All these banks are reposted for the day, new rate sheets with higher rates. So this tells you that rates change every day, on weekdays, between nine and like three o'clock. Rates will change, could change all day long. So I bet you didn't know that as well. So my name is Dan Frio, I do this report every day. What I wanna explain to you guys next is the trends that we're looking at right now. Okay, so this is basically a trend that we're looking at to figure out what is gonna go on with mortgage rates. So I do function on charts sometimes. I used to use Fibonacci levels and all kinds of other things to kind of help me kind of predict the market. So today I took a little bit of a jump in here. Here's where we're seeing where the bond prices are going. Remember, we just looked at the bond prices just now. So we've tried to see, are they running into channels? Are they running in patterns? Okay, well, the 30-year bond was trading right through here. Here's when the prices are going down, down, down. This is where rates are coming up. So basically when the Fed cut rates, everything turned. And then we wanted to see, is it running in a channel? So we put these actually, just put them, think of them as guardrails. So as long as it's bouncing between these guardrails, we're within range of good being able to forecast fairly accurate. It's when we get out of these ranges where it's like, okay, what's the next catalyst level that might cause a ceiling or a floor? So right now we surpassed this line right here. Okay, and I've been just putting these lines in, see where I topped it off here. Okay, and topped it off here, topped it off here, and that brought me to here. Okay, we exceeded that level. So I'm going to take new tops. We got a top here, a top here, and it runs you over and it circulates over to here. So that's where kind of we are now. What they're telling us though is this could be the line. If you take the top here, the top here, this could be all the way where we go to. So prices could run all the way up to here. Only time's going to tell on that side of the equation. So last but not least, you guys need to know about credit scores, okay? I talk to so many people every day that tell me they're wrong credit score, and they're not even close some of the time. So I'm going to give you some advice today. If you don't know what your mortgage credit score is, first off, let's start with this. You probably have 35 different credit scores, okay? You probably have 35 or more. All right, which one, when I ask you, it's like, okay, what is your mortgage credit score? And you tell me a number. How accurate do you think you are? Well, let me tell you, most people are not accurate at all. So I created credit scores and more probably about 10 to 15 years ago. And millions of people use it every month because I get the stats behind it. So I just want to introduce you guys to it. Here it is, creditscoresandmore.com. I'm just going to show you two things to use, okay? You're going to scroll down here and you're going to use the free credit scoring system. And if you want, you're going to use the true credit scoring system, okay? The free credit scoring system, I usually pick between Credit Sesame and Credit Karma. I like them both. I actually have accounts with both of them. This, here, I just proved to you where that one goes to. But the next one is actually going to go to, hold on, the true credit score is going to go to MyFICO, okay? So if you use this link, you'll get a discount. But the reason why you want the MyFICO score or your true FICO score is because no lenders use any other credit scores than your FICO. No lenders are going to prove you on your Vantage credit score. Nobody's going to prove you on your Discover credit score. They prove you based on your FICO score. So I need you, if you really want to find out where your FICO score, you can do it right through here and you do get a discount by using this link right through there, 75% off. So check that out as well. But my name and who I am is Dan Frio. I'm a mortgage advisor. I've been doing this for 35 years, folks, and I'd love to work with you, okay? I'm licensed in all 50 states as well as Puerto Rico. So there's no reason not to use me. I work with purchases, refinances, reverse mortgages, debt consolidation loans, DSCR loans, bank statement loans, 1099 loans, and the list goes on and on and on. So if you're out there and you want a one-stop shop place to use, we compare your program that we get you approved in. We're a broker. So I'm going to get comparisons on a rate quote for you with up to 50 different lenders. So it's going to be one credit pool, one application, and we're going to get you basically quotes from 50 different lenders. How do you get started? Well, the first thing you need to do is if you're buying that first house, I need you to do this. Oh, there. We just put this in here just not too long ago. It's the GrantFinder. So many people call and they're like, Dan, I need money to help me maybe with my down payments, the closing costs. Now, in some cases, I have to pay my realtor. So I just don't have enough money. So check out the GrantFinder programs right through there. Other than that, you can hit the Apply Now button, or you can just scroll down below and you're going to find our contact information right down here, our 800 number, as well as my email address, and all that information is right here. So thanks so much for taking the time to watch my videos. If you would, just click over there if you haven't subscribed yet, and make sure you hit the bell so every time I do post a video or we do a live event, you get alerted. Thanks so much for watching, guys. God bless. Have a fantastic day. I'll see you here tomorrow. Bye-bye.