What Can We Expect from Mortgage Rates in 2025?

Hey folks, Dan Farrell here with your market update for December 30th, 2024. So sorry I was off for a few days, went back to visit my family and now I'm back. So what I'm gonna talk about today is kind of giving you a precursor of what's coming up in 2025. And I got several videos coming out this week. We'll be closed tomorrow at noon and then obviously on Wednesday. And I'm gonna have several videos coming out, going over my forecast for home prices. Yeah, I'm gonna do it this year, home prices in 2025, where mortgage rates are expected to go next year. And then just the overall market. And then we're gonna have a little bit of a different format next year. We're gonna have live events every Tuesdays or Thursdays. We're gonna change those up and have realtors on here with us. So if you're a realtor out there and you need some exposure on YouTube, I need you to have a channel though. So we're hoping to boost your channel up by collaborating with us. So if you're out there and you wanna collaborate, reach out to us, we'd love to do that with you. But in today's event, here's what we're gonna talk about. There's really no economic news out there right now. Today is the Chicago PMI, tomorrow is New Year's Eve. And then on Thursday, we have initial jobless claims come in and that's about it. So let's dive into what the Federal Reserve is looking at. And the reason why we're doing this is we're trying to get an idea of what they're gonna do in 2025. So here's the backdrop of what the Federal Reserve has to look at. So here's our economy at a glance, basically. Or the first thing you're seeing over there is where the federal funds rate is. That's basically the rate that the Federal Reserve controls and that's interbank lending. So you have to understand what the Federal Reserve controls. They only control what's called the federal funds rate. Basically, when a bank closes in the evening, they have to have X amount of reserves. And if they don't, what they do is they go out to another bank, get enough money to meet those reserve requirements, and they pay a rate that's equivalent to the federal funds rate. That's what it is. Okay, so when the Federal Reserve controls that rate, usually then the banks say, okay, well, the Federal Reserve raised our lending rate, so we're gonna then lower or increase whatever the Federal Reserve did short-term rates, meaning like car loans, credit card rates, and things like that, not mortgages. Mortgages are controlled by a mortgage bond, and I'm gonna go over that in a second. But then the next thing you have right through here is the inflation. Inflation, they want this number to be 2%. Well, it was almost there recently if you go through here. So if you click here, it'll give you actually a more in-depth view of this. So if you go through here, here's where the inflation rate was back in 2022. It was about 7%, the PCE, not the CPI. So if you're getting a little confused, just stay along with me. This came all the way down to about 2.1 right through here. You can see that there, and they're like, okay, we might have cured inflation, and then it clicked up to 2.2, then 2.3, then 2.4. So that's what's happening there. So the markets are like, okay, is the Federal Reserve, did they really control the inflation numbers? Okay, the other piece of the puzzle right here that the Federal Reserve has, they were created for two reasons. One, for price stability, aka inflation, and the other was to keep the economy at full employment. Let's see how that's going. Let's go over to here. They thought that what was going to happen to the unemployment rate, it was going to spike. That thus would help the inflation numbers. Well, it did spike back in 2020 right through here where you had the unemployment rate at 14%, but then it came all the way back down pretty darn quick, and then it's staying steady right through there. You can see there, we're about 4% over history. It's usually about in the high threes or right at 4%. So this isn't anything to be really scared about there. Okay, so now let's get over to mortgage rates. You bet you didn't, you didn't even realize this. You didn't realize mortgage rates are basically the same over the last two years, and I kind of did, but I really don't pay attention to the backloading of this. So let's go down through here. Back in 2023, October that year, we hit 8% right through here. That's where rates are. But if you see the norm through here, we're about, let's say 6 1⁄2 to 7 1⁄2% is the rate. That's basically the lion's share of the data right through there that we have. Then you go to 2024, look at the same thing. We have 6 1⁄2, let's go back through here, about 6 1⁄2 to 7 1⁄2. You see basically almost all the data is in there. There's an anomaly above there and below there. You go down to 2024, and again, you take out this anomaly right through here, and you're between 6 1⁄2 and 7 1⁄2%. So we're basically right through there. I missed it, I missed it, folks. I thought we would be about 6 to 6 1⁄2 by this time, and we're not. And one of the biggest things is the deficit. And one other piece of this puzzle I'm going to show you here in a second. Let me cheat a little bit, I'll go over to here. Here's why a lot of investors aren't buying bonds. Okay, so here's the returns people are getting or got through October of this year. That's all the further the chat GPT would go. But look at the returns people are getting in the equity markets. So you have the S&P 500, it's up 25% in 2023. The Dow Jones was up 15% in 2023. NASDAQ up 30, Bitcoin up 70. So if we now go to see where it is today, let's go and see where, let's just do a Google. How much is the S, and hold on a second, P up in 2024, so I'm doing this live on the fly, let's see what it says. Down through here, stack chart. Let's try to get to the end of the year or close to it. Let's see if this will give it to us. Let's see, 25% return. Total return so far in 2024, 26.9%. And basically the other investments follow suit along with that. So most investors are like, even myself, I hate to say it, I'm buying equities and I'm still buying equities into this market because of the returns that we're getting in there. Okay, so let's go back, we're back to the CME. Let's go to the CME. What is the Federal Reserve expected to do next year? Because that's the biggest thing that we're trying to figure out. What's the Federal Reserve going to do? Well, right now there's an 88% chance they're not going to do anything. Okay, how do I know that? It's right through here. They're saying the federal funds rate at the January meeting is going to be 88% chance, it's going to be 4.25 to four and a half. Okay, well, let's get over and see where it is right now. It is, let's go back to this, and this is that handy dandy economy at a glance for us. It's four and a quarter and four and a half. So there's no expectations of any changes at the next meeting. And then you're reaching out all the way to about May until there's kind of a likelihood that the Federal Reserve will be cutting rates. So people continue to load up on the equity markets. Here's where we kind of throw a little bit of a curveball in here. Remember I said at the end of the year, there's going to be a lot of limited trading, not a lot of bond traders and so forth. There's really no reason for this right now. The bond market is taking off. It's up 30 ticks today. So mortgage rates are going to probably drop about 0.1, maybe 0.125. We might be in the high six range by the end of the day. And again, I just showed you the data. There's really no economic news out today, but the markets are taking off. And you go over to the broadband, let's go to CNBC and let's see what it has. I know the NASDAQ and the Dow and everything else is crashing today, over 1% correction in each one of these. So are they going to be moving that money into bonds? Maybe that's what they're doing today because they're pushing bond prices way up and the yields down. So that's what we're seeing right through here. Good news is right through here, oil is, well, that's not good news. Oil was up over $70 a barrel. I don't like that because it's inflationary. Once we get above that, US treasuries are coming down. Let's see what cryptos are doing. Cryptocurrencies right now are down 600 bucks. This Bitcoin was 108,000 just about two, three weeks ago. And I will be back, coming back with the stock talk. It might not be on Tuesdays. Actually, two young men that are going to join me a lot of these events to explain to you guys out there how the equity markets work. They have a little equity fund that they work on. And it was intriguing because these young men I've met down in Florida, amazing two guys. And I'm going to be having those guys join us to teach you guys about the equity markets. Okay, so let's keep going over Bitcoin. We went through the equity returns there. So basically there's no reason for today's kind of market moves. That's why me and my team, we've been sitting back just waiting for the dust to settle. But this might be a day where we jump in and lock some rates because we've been sitting on the sidelines because of the market volatility. But we're going to let the market volatility today work in our favor because right now we have the MBS market up 29 ticks, means mortgage rates are going to go down. Again, equities are down across the board right now. You go to chat GPT and we went over where the equity positions were, what they did in 2023, as well as 2024. So if you put money in the S&P, you made 25% in 2023, 25% in 2024, at what point is that going to start to peter out and people moving into the bond market? That's what we're focusing in on right now. So that's what the context of is for today. I will be back at the closing bell to let you guys know how kind of all this settles for today. Right through here, what I did is I want you guys to understand in 2025, if you're looking to buy your house, you're basically saying, okay, the housing market isn't going to crash and I'm going to show you more of those details in today's or this week's housing forecast. And mortgage rates aren't expected to plummet either. So if you've been on the fence for the last two years or so, now you're saying, okay, 2025 is probably going to be my year. I want you to do two things. Okay, one, I need to make sure your credit's in check. So this is one of the areas where people, you know, the first thing they come out and say, oh, I got an 800 credit score. Then I pull it and it's a 650. And they're like, ooh, I didn't know that. So check out creditscoresandmore.com. I created this website years ago. And what I'd ask you to do is scroll down through it. Use a bunch of these tools. What I ask you to do, like free credit, sign up with it, it's fantastic. But don't click or add any of the bells and whistles. It's not worth it. The free services are good enough. If you really want to spend some money, you got to go out and get your FICO score, your FICO score. That's what all lenders use. You can do that right here on the site if you want. Just hit click here. There's also some other tools down here. We use a system called Smart Credit. I use it personally. It's right through here. I use this to control, alert me on when I should be paying bills, how much I should be paying bills. It gives me all this data to emphasize or boost my credit scores the maximum they can be boosted. So check out that system as well. You can click this video and watch it or just click this tab right through here. But if you're interested in housing 2025, maybe you're looking to buy that first house, maybe that first investment property. Maybe it might be time to refinance. If rates get 6.9%, there's a lot of people out there that 7.75, 8% might be a little bit of a payment reprieve for you, check it out. But go to the rateupdate.com. We put a lot of work in our websites. We're cleaning it up quite a bit, but there's three pieces of this puzzle I want you to see. Okay, one, if you're ready to put in your application, it's simple to do. Just click the Apply Now button. Here's what we want you to do. You're watching this video. Why? You're trying to understand the housing market, real estate and everything else. So why don't you talk with us? You could do this and you could talk with me, Alan or David. All of us have over 30 years of experience in the business. The cool thing is we're licensed in all 50 states as well as Puerto Rico. So there's no reason not to use us. Okay, are our rates competitive? Well, I work at the number one or the number 10 largest mortgage servicer in the entire country. That's not it. We're also a big mortgage broker. I'm set up with over 40 different lenders. So basically think of this, one application, one credit pool, and we're going to shop your loan over 40 different lenders. Where else can you get that? And we're licensed in all 50 states. So you can click that consultation, schedule consultation, or you can even call us. Scroll all the way down to the bottom of the website. And that's where we would love you to do. Go down here and then it's going to give you our phone number as well as my email address. So give us a call at 844-775-5626. Or you can email me personally if you want to set up a consultation with me or give me a call. Just email me right through here. Give me your information. If you want me to call you, just give me your phone number. I'll get you on the horn. We'll discuss all the options that you might have. So that's our report for this morning. Don't go away because we'll be back later this afternoon to see how all this mess ends for the day. Thanks for watching, folks. God bless. Have a fantastic afternoon.