Simone Del Rosario: Let me pose this to you. We’ve seen mortgage rates go down to levels lower than they’ve been in more than a year. This is done in anticipation that the Fed is going to be cutting rates. So when the Fed does cut its rate, how are people going to be affected? Are rates going to come down even more? Has the air already been taken out of the tires because they’re expecting the cut? What’s happening there?
Kathleen Hays: Well, of course, we had the big bond market rally, so that’s pushed deals down a lot. And that was one of the things, of course, that intensified after we got the Fed decision, and then the unemployment rate going up, etc, making people that much more worried about it. And, of course, that’s the direct link between mortgage rates and the bond market, right? The 10 year note yield, when it goes down, you’re going to see mortgage rates come down too. On a human level, doesn’t anybody know somebody who’s trying to find a house, and they can’t, because people still don’t want to move out of their low mortgage rate mortgages. They don’t want to sell their house yet. Doesn’t anybody want to sell their own house, and they figure, well, I don’t know, the mortgage rates are so high, maybe I’ll wait. Part of the issue with the how much home prices will come down is the fact that inventories are low, and when the Fed cut rates so much during the pandemic, there was a huge bout of home buying, and that’s another reason why, even with lower, somewhat lower rates now, mortgage rates, that is, the home sales are not up that much yet. But I think it’s a very important factor right now, right? Now, if someone could get a five and a half percent mortgage, they would snatch it up, right? And when it’s got so low, oh God, if I had to pay 3.75 you know? So it’s a very powerful thing that could happen. And as the Fed starts cutting rates, presumably, yes, bond market will rally, you’ll get yields coming down more, and that’s going to fade through and be a very important factor. So that’s kind of in abeyance right now, but it’s a little bit complicated, and home prices are much higher than they were. Home affordability is so much worse than it was, partly because of what happened back during the pandemic, but it’s something to look forward to. And in terms of the housing industry, lot of calls for ‘we need more homes now.’ That’s the thing. We need more construction. Well, if I’m a contractor, if I’m a developer, if I’m a builder, if I can see mortgage rates coming down, presumably that would encourage me that that’s going to heat up the market, and it’s going to make more sense for me to do that.
Simone Del Rosario: Yeah, and I just want to point people that are listening. We just did a story this week on housing affordability at SAN.com where we go over all of this. And to your point, Kathleen, I do take a chart and zoom out to show people that you know, pre 2000 even the rates we’re at today would have been an absolute steal. So it’s all about perspective when it comes to that. And I agree with you now, I think when mortgage rates were climbing up, people were thinking, 5% there’s no way. Now, if you could score anything in the fives, you’d snatch something up right now.
