What Caused Mortgage Rates To Plummet After The Latest Job Numbers?

Hey folks, Dan Ferrier here with your closing bell for December 6th, 2024. So they did it. Mortgage rates finally started to drop once again. So what happened to today? Well, the jobs report came in and that basically skewed the market and helped it. But there are some concerns in the background. So we're gonna get to that in a second. But over here, these are the top six programs people use when they're buying their first house. Now, these aren't my rates. These aren't any individual bank's rates. Who am I? Well, my name is Dan Ferrier. I do this report every day. I'm actually a mortgage loan officer. And I'm a loan officer for my real job and my full-time job. I just do this to help you guys understand the markets. And we talk about real estate and stocks and equities and so forth, but my concentration is on real estate. So let's get to that today. So the news that we had out today was right through here. Payrolls increased 227,000, but it popped up the unemployment rate because the participation rate went down a little bit. That's basically what's going on right now. But I wanna take a deeper dive into this. Rick Santelli is gonna give us some context on how this number is basically causing this reaction in the market. So if you don't know what this is right through here, this is the bond market that we follow here on our channel. And the reason why we do that is we're a mortgage channel because I'm a mortgage person. And this is the chart that we follow. It's up at the top, it's called the MBS. And what MBS is, is it's a mortgage-backed security. Basically, it's a mortgage bond that trades on Wall Street that determines what your rate is. So it's this, the yield on this bond, as well as kind of what we call LLPAs. And I have some videos on that. So check those out. Or you can even Google, what are LLPAs? And you'll figure that part out. And then the profit margins at the banks. So this is the biggest component of your mortgage rate. So let's get over to Rick Santelli and see how the bond market reacted today. Then I'm gonna show you with the CME FedWatch tools telling us what the Federal Reserve's gonna do at the next meeting. And then with the rates coming down to where they are today versus last year, I'm gonna show you how much more affordable homes are getting, or maybe you can afford just a little bit of a bigger house with that same payment. So I'm gonna go over that here in a second with you with one of the mortgage calculators that we have that I share with you guys down below as well. So let's get to Rick Santelli. This guy actually lives in the town just north of me, but I've never met him. I would love to. So if anybody knows him and you know me, please try to link us together. I'd love to meet him. He seems like a cool guy and I'd like to pick his brain. So without further ado, let's get to see what Rick has to tell us for today. Turn to Rick Santelli now for the bond market reaction to the jobs report, which is good news for anyone trying to buy a house right now, Rick. And what do traders think about the odds of a cut? You know, it may be good news. It's still maybe too early to tell. Let's start with the Fed, okay? Here's a two-day chart of Fed fund futures for January next month. And we don't need to get into percentages or numbers or anything. All I want you to look at is that it rallied. It rallied strong right when the data came out. When Fed fund futures rally, it means less Fed. So all's I'm trying to demonstrate with that chart, we haven't changed. We're still 70 plus percent for a cut at the December meeting. January is nowhere near. It's probably hovering around 25% and it's at the end of the month. What this tells us is, is that on a snap view from the market and all its participants, the minute that report hit, it was that it wasn't a hot report and it's not gonna make the Fed proceed in probably any different way. But when it does rally, that is a sign of easing. So that is something you wanna pay attention to. Now. So like he said, it's a sign that things are easing because that's where the price is going. So as the price goes up in bonds, yields come down. And I'm gonna show you how the CME FedWatch tool or FedWatch is actually responding to this. But let's get back to Rick Santelli. Now, if we consider what the big numbers in the report were as you were just discussing with your guests, average hourly earnings. Well, yeah, they were solid. The fours were wild. Four tenths on the monthly view, 4% on the year over year view. These are good numbers. And if you look at the rate, yes, it ticked up. And that is something to pay attention to because there's very little doubt as you look at that chart of the unemployment rate that it has slowly turned. It's now just a question of the intensity and the speed of the increase. Finally, the big story here is how differently twos and tens reacted to this number. If you look at the two year, the two year was a very aggressive drop and it has stayed down. As it sits now, it's down seven basis points on the week, which means probably not much has changed with regard to the Fed based on this report. Not more aggressive, not less aggressive, pretty much as it was before the report. Okay, so what I wanna explain to you guys is the Federal Reserve controls the federal funds rate, okay? And most of you guys know that. But the federal funds rate also, the short term maturities, like the two year treasury that he's talking about, those are influenced more and more and more by what the Federal Reserve does. The long end of the curve actually doesn't really change as much as the short end of the yield curves on these things. So just want you to understand, short term is usually influenced by the Federal Reserve. The longer term bonds are usually predicated on the bond markets and other equities or other bonds like mortgage bonds and corporate bonds and things like that. So I just want you guys to understand that part of it. But if you look at the 10 year, which is basically unchanged on the week, what we garner from that is at 10 o'clock Eastern, expectations from University of Michigan, they were big drops sequentially, much less than expected. And the one year inflation rate embedded in that survey popped. And I think that that's why it's different. And it's probably giving us an early sign of what the Fed should pay closest attention to in 2025, the unemployment rate and strong wages pushing up inflation. And I think the reason the expectations was weak is because we know so little about what the administration really will do versus what they have said they may do. Tyler, Kelly, back to you. Rick, did you? Okay, so now they're gonna get a little political and they're gonna talk about some things. These aren't the views of me. They're not the views of ServBank. They're not the views of us. So this is just a caption. I want you guys to understand, the political parties do matter in this context, but I'm not gonna get political on this channel that don't wanna go there. And again, it's not the views of me or ServBank. This is just the views of the commentator up through here. So let's get back to Rick to talk about it. It's gonna get a little bit testy here. So just pay attention. There's a lot to learn here. You see the political breakdown in the sentiment survey, Republicans versus Democrats? I didn't. If I'm, now this is, you know, a grain of salt. It looks like, remember for a long, long time, the sentiment in the University of Michigan had lagged because Republican sentiment in particular was very, very weak. And then we saw a crisscross with inflation expectations where post-election, actually, they improved for Republicans and worsened for Democrats. So it goes to show your point of view as for what you're saying about the uncertainty on what's gonna happen next year seems to depend in large part on the philosophy that you hold. Yeah, you know, the issue with all of that is is that everything has gotten so political. In the discussion that you just had on immigration, I was pulling my eyelashes out. I want somebody to give me an accurate number of how many people have come across the border the last four years. And nobody could give an accurate number of that. So all the rest of that discussion without that number is really sort of meaningless. But we know it's a lot, right? So we know if it lessens that it's gonna, we can kind of estimate the impact. We know it's a lot. And how much did that a lot cost versus how much did the jobs that were actually taken by some of those do for the economy? In other words, try to weigh the good outcomes versus the expensive outcomes. But without knowing that number, you really can't weigh that. So to make a statement that if he impacts immigration and slows it down, it's gonna be bad for the economy, I think that is way over the skis on the actual information we know. And I think that goes to the point of all these politics being imprinted on things like surveys to begin with. Rick, as always, thank you. Rick Santelli. See, I told you to get a little testy there. So again, those are his views, not ours. So let's get over to it. The CME FedWatch tool is telling us right now in 11 days, you realize the Federal Reserve's meeting in 11 days, what are they gonna do? Well, this was 88% earlier this morning, now it's 85. So folks, they're gonna cut. They're gonna cut rates by 25 base points. Now here's the problem going forward. Really don't know what they're gonna do going forward. If you look at the probabilities right through here, there's gonna be a cut rate right now through here. Okay, so now let's look out here, 50, 50, 50, whatever. So we don't know what's gonna happen going forward from here. Remember just two months ago, and I said this before in a previous video, they were supposed to cut 10 times, 10 times before the September 18th cut. Well, they cut in September and then they cut at the last meeting. That was two, looks like there's one, two, three, maybe four left. So that would be six out of 10 total cuts from the Federal Reserve. So only time's gonna tell on where this takes us. So right through here, here's where the 30-year fixed rate has been over the last year. Right through here, and there's a reason why I'm bringing this up. Right through here, rates hit 8% right through there. So here's where we're at today. Six point, where are we over here? Well, let's just go back to here. This one's a little bit simpler. We're at 6.68%. So here's one way to look at this. If you go to one of the calculators on my website, I have most of these down below as well, you can put down here. So if you were looking to buy a $300,000 home a year ago when the rates were 8.03 on a 30-year fixed, your payment would be $2,208, okay? You can now afford a $345,000 home at the same price. Okay, but let's say you wanna just do the same loan amount. Here's how much less in monthly payments you would have. So let's just click right there. This is how cool these calculators are. So please use them. I have access to them down below. You can use these. So your payment would be almost $300 cheaper just today versus where we were a year ago on your housing payment. So just something to think about in that area as well. So if you wanna find out more about me and my team, please visit us at therateupdate.com. I'm a mortgage loan officer, folks. I'm licensed in all 50 states as well as Puerto Rico. So if you're watching this video, please reach out to me. If you're looking to buy that first house, maybe you're looking to refinance your house and pull out some equity, pay off some bills, maybe buy another home. I'm starting to get a lot of calls for reverse mortgages again because a lot of people with this inflation, they got stuck and they need some help with a reverse mortgage. So please reach out to me with that. We can usually beat the competition on the reverse mortgages by thousands of dollars. So check us out. We'd love to help you there. So you can reach us right through here. You can hit the Apply Now button. That's what most people will do or they schedule a consultation with us. It's gonna be me, David, or Alan. We all have 30, 20 years of experience of doing this, but if you'd rather call in, you can do that as well. And our 800 number, as well as my email address is right down at the bottom of our webpage. And that is right through here. It's 844-775-5626. Or you can reach me personally at my email at danattherateupdate.com. So thanks so much for watching, guys. God bless. Have a fantastic afternoon and evening. I'll see you back here on Monday morning, bright and early. Take care, folks. Have a great weekend. Bye-bye.