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[00:00:00] Welcome back to the What's Your 1 More podcast. I'm your host, Quinton Harris. You're dialed in for episode 232. [00:00:05] Kind of an exciting week over here on this front. You know, we had Fed meeting. We got a recap of what was going on and said there, more [00:00:10] importantly, what does it mean to you as a homeowner, a potential homeowner?
[00:00:13] And for those of us that live here in [00:00:15] Jacksonville, Florida, all that, and more in this episode at What's Your 1 More
[00:00:17] [00:00:20] Oh all right. So here it is Friday [00:00:25] afternoon. Yeah, we're pushing four o'clock. Uh, I'd like to do these podcasts at the end of the week, especially all this data that's [00:00:30] dropping out there and just thinking about how to apply, you know, a couple of weeks ago I was in Austin and I was like, man, I want to take a look at this [00:00:35] residential market, see what's going down over here.
[00:00:37] Interviewed quite a few people while I was out there talking to people, [00:00:40] interviews kind of a loose term, but just kind of chatting it up with people as we went to different locations, we were there for a business trip. And man, [00:00:45] you know, Austin's one of those markets that, you know, uh, yeah. that you think is hit so hard because on paper they [00:00:50] talk about like, you know, the depreciation or whatever's happened over the last year.
[00:00:53] But the reality is, man, don't tell [00:00:55] people in Austin that, uh, there's a lot of deals to be had and a lot of really happy real estate [00:01:00] owners that are there. Um, I didn't, I didn't see half the stuff with them that I read online [00:01:05] and that just kind of creates a perspective that I think, you know, I like to value because I talk about all the time, [00:01:10] like the stuff you see and the stuff you read and these, these.
[00:01:14] These doom porn [00:01:15] things that are online and I talk about the people that are always pumping this crash is gonna happen Some of [00:01:20] them changed their tune already, by the way, and you know who they are Some of them have backed up and punted and decide they're [00:01:25] not gonna preach a crash anymore The real estate is actually going to make money now And I think there's reasons for [00:01:30] that, but where I'm going with this is that I think also is a great example that hey Listen, don't believe everything you [00:01:35] read like get down in the weeds and go check it out for yourself And I thought that was really cool there and it seemed to be [00:01:40] a really very positive real estate market there.
[00:01:43] So, uh, it was definitely [00:01:45] cool. And, uh, they're going to be going to Tennessee the next couple of weeks. Check that out as well. Um, I think there's some [00:01:50] things to be had there to kind of talk about. You know, this week was a big week. We had [00:01:55] Jerome Powell, the podium, we had the Federal Reserve, and then we had inflation.
[00:01:58] The Fed's former favorite form of [00:02:00] inflation came out Friday after they talked. So like, what does that mean? Like, why do we even care about that stuff? And I [00:02:05] think it's interesting because now we actually have like a live stream from the Federal Reserve where you can actually watch them at the podium, which couldn't [00:02:10] be more boring that you could possibly imagine, but it felt the need to live stream.
[00:02:13] It's because the markets move [00:02:15] and hang on every word the Federal Reserve says right now, not just the mortgage market, but the bond market, [00:02:20] stock market. In this particular podium setting, you know, we used to do a segment called the Jerome Powell show, [00:02:25] because it really used to be about Jerome Powell. But if you recall back into my 2025 [00:02:30] forecast, one of the things I talked about was when this new administration comes in, [00:02:35] how does the federal reserve act and how do they embrace some of [00:02:40] the things that Donald Trump has specifically said he wanted to see.
[00:02:43] And so what we [00:02:45] saw was the first podium, if you may, from Jerome Powell under the new administration and my, oh [00:02:50] my, was that a different take than what we've seen over the last four years? Yes, [00:02:55] it was still Jerome Powell. Yes, it was still a very dry sense of humor, if you may, and [00:03:00] a very, uh, you know, Direct to the point of about certain things and beat around the [00:03:05] bush on others But some of the answers though were much different than what we previously were getting [00:03:10] Right out the gate you anticipated him to get peppered with questions about trump and this administration He cut off said i'm not going to [00:03:15] answer any of those questions involving that.
[00:03:17] Um And so what he did say was the [00:03:20] following though, um, there was some commentary that came out from the Federal Reserve and they had talked about inflation. And as [00:03:25] we know, they have two mandates, get inflation to 2 percent and then they wanted to see the unemployment market, [00:03:30] uh, at, at maximum unemployment or maximum employee, excuse me.
[00:03:33] So One of the things they said [00:03:35] was they removed a statement out of the previous statement and where it said inflation Essentially it said [00:03:40] inflation just remains somewhat elevated But previously they had said inflation has made progress towards the [00:03:45] committee's two percent But remains somewhat elevated by taking out that one little section has made progress toward [00:03:50] the committee's two percent It freaks the markets out um to the same point that you start to see like this negative reaction because [00:03:55] What happened was investors and people on wall street like oh my god, they're they're going to raise rates now They're they're [00:04:00] that remains elevated.
[00:04:00] They're scared. They're concerned And so, thank goodness, one of the reporters in the room asked the [00:04:05] question, like, hey, why did you remove that? And Powell just said, yeah, we just thought the sentence was too long [00:04:10] and we just wanted to shorten it. By no means do we think it's, you know, it's good rear its ugly head.
[00:04:13] And I thought that was pretty, [00:04:15] uh, wise of him to calm the markets down. We started seeing immediate reversal trends, uh, in the market. As [00:04:20] soon as he did that, but we're the real, the real juice in the actual interview. And what I want to talk [00:04:25] about on the show today that really kind of set the tone. Now, remember I've called for four rate [00:04:30] cuts, maybe six.
[00:04:31] And I said, the federal reserve has given us a head fake when they said they're only going to do [00:04:35] two based on that dot plot map. Here's where I think we start to see the four unfold. He was [00:04:40] asked specifically about the mandates and the executive orders from the new administration and Donald Trump. [00:04:45] Well, his reply was the actual foreshadowing of what you're going to see.
[00:04:49] [00:04:50] His reply is what sets the stage for why I think the rate cuts are four to possibly six. [00:04:55] He said the Federal Reserve will comply with the executive orders that have been [00:05:00] mandated. So he was saying, our job is to comply with the executive orders. That's exactly how he answered the question. Well, we know Trump [00:05:05] signed the executive order for more affordability in housing and he wants to do that.
[00:05:09] By lowering [00:05:10] rates and making homes more affordable by lowering some of the prices for new construction We know that those are [00:05:15] things that he's trying to do accomplish and jerome Powell just told you what they're going to do They're going to comply with that [00:05:20] and I think that's just the start and if you're a homeowner This should be excuse me If you're a future homeowner, this should be [00:05:25] encouraging if you've been on the sidelines waiting for these rates You're already starting to see it You know, I'm [00:05:30] going to pull up a graph here.
[00:05:30] And if you're not on our YouTube channel, go check us out at what's your one more with the number one. [00:05:35] Uh, that's at what's your one more subscribe. You'll get a look at these graphs as we put them on there. And I'm going to pull it up here on my [00:05:40] laptop while I'm talking. So my producer can put it in the show here as we go through this.
[00:05:43] But one of the things [00:05:45] that we look at on here is we talk about the spreads getting better. We talk about, you know, the [00:05:50] difference between the 30 year fixed rate mortgage and the, um, 10 year treasury. My [00:05:55] computer is not cooperating here, but we'll figure this out. So anyhow, what we're seeing is that there's always, as [00:06:00] we talk about making the mortgage, there's the spread, and we talked about that significantly.
[00:06:02] That's the investor's risk and tolerance in a mortgage. And [00:06:05] then the actual 10 year treasury, put those together and that's your interest rate. Well, if you take the 30 [00:06:10] year treasury, or excuse me, a 10 year treasury right now, 4. 52. And you say, when was the last time [00:06:15] that closed at 4. 52? Well, that was back in May of 2024.
[00:06:19] The interest rate [00:06:20] that time was 7. 22. Today that exact same that exact same [00:06:25] treasury is 6. 95. So you're seeing a 30 basis point differential That's that spread [00:06:30] evaporating. That's the risk from the investor starting to become less and less Um [00:06:35] riskier in the threat of a refinance or a prepayment or paying it off So you're starting to see investor confidence [00:06:40] growing there and it's getting better and one of the things I harped on over and over again During [00:06:45] uh many of podcasts, but especially the 2025 forecasts.
[00:06:48] It doesn't take the federal [00:06:50] reserve lowering The fed funds rate for mortgage rates to come down because there was so much [00:06:55] spread that needed to go away and we're starting to See that happen I think over the course of the next weeks to come now [00:07:00] Remember the next fed meeting if you look it up, that's not till march So we got plenty of time the next fed meeting [00:07:05] is actually in let's see.
[00:07:06] It's march 19th So we've got we've got roughly six weeks before we get to that [00:07:10] What happens over the next six weeks? Do we see some windfall here? Do we see more favorable [00:07:15] economic data come out? Well, we got one on Friday. I think that's a win. And it was the PCE. [00:07:20] That's the Fed's favorite form of inflation.
[00:07:21] And you heard Powell talk about that at the podium. But the reason I think that's a [00:07:25] win is because the Federal Reserve says, you know, we think. Inflation needs to be at 2 percent and [00:07:30] they harped on it and they talked about it, but one of the trends that we saw on there was one of the [00:07:35] reporters said, Hey pal, if you don't get to 2%, are you going to, are you going to wait to lower rates until you [00:07:40] get to 2%?
[00:07:40] He said, absolutely not. Like we don't need it to get to 2 percent for us to reduce rates or [00:07:45] to, um, lower the fed funds rate. I thought that was interesting. Again, another sign, another sign [00:07:50] of this is what we think is going to happen, uh, and more rate cuts to come, not just one or two.
[00:07:54] [00:07:55] [00:08:00] [00:08:05] [00:08:10] [00:08:15] [00:08:20] [00:08:25] [00:08:30] [00:08:35] [00:08:40] [00:08:45] [00:08:50] [00:08:55]
[00:08:55] So we'll pull up a couple of things in here because they are saying, listen.
[00:08:59] We want a core [00:09:00] 2%. Now, with core, obviously, you're taking out food and energy. Right now, the core is at 2. 8. [00:09:05] However, we also know that the shelter is a lagging component. Um, meaning that today's [00:09:10] shelter cost is not being included in the PCE reading currently. It's a lagging, [00:09:15] because it's a 12 month lag. So, if you were just to use today's, just today's, uh, [00:09:20] shelter cost reading.
[00:09:21] That would actually be closer to 2. 2. And I think the federal reserve is smart enough to figure [00:09:25] that out. They know that. And they are very close to the two. I think that you're going to see more signs [00:09:30] between now and the six weeks of this lowering of the fed funds rate. And as the [00:09:35] investors start to feel that as they start to seek that, or since that they're going to react to that.
[00:09:39] And I think that's why [00:09:40] you're going to see the bond market come down. And I think that's why you're going to see the spread start to evaporate. And where I'm going [00:09:45] with this is we're already in the sixes, the upper sixes, right? And the federal reserve didn't do anything. What [00:09:50] happens when they do. Do something by lowering the rate and we start to see these spreads evaporate and next thing, [00:09:55] you know, as I said by the end of March, I think we're below six and a half [00:10:00] and as we go into that second quarter, I think that's when we finally reach and get to that 5875 and we're right [00:10:05] on track for that to happen and that's really important because if you're a homeowner, maybe you're timing yourself around that, you know, if [00:10:10] you're a real estate agent and you have clients that are like, oh man, I don't want to buy now, but I'm definitely comfortable with six and a half or below.
[00:10:14] Okay. [00:10:15] Go ahead and get ready, like go ahead and queue it up because I think you'll be there by the end of March, the six and a half. And then as we [00:10:20] get into Q2, you're going to start seeing that 5, 8, 7, 5 slash, uh, you know, 6 percent range in [00:10:25] there. And if you're putting discount points, like almost everybody is on loans right now, that's very reasonable and attainable.[00:10:30]
[00:10:30] Something else to think about on here was that, um, Powell was asked about the stock market. Is it [00:10:35] inflated? Is it an asset bubble? I thought this was interesting. Um, he didn't say it was an asset bubble, [00:10:40] but he definitely said that he blew out some of the, excuse me, he believed that it was inflated. I thought that was [00:10:45] interesting, um, to come from him.
[00:10:47] And then the crypto question came, which was really interesting because he was [00:10:50] asked about. Crypto and the reason I bring that up is because it's an asset that's hard to ignore right now. It's [00:10:55] getting incredible results and it's at all time highs and it keeps hitting them and then coming down and [00:11:00] hitting new ones.
[00:11:00] So it's, it's a very interesting dynamic plus, you know, a lot of banks are involved in it [00:11:05] now and they're using it in their, you know, in their ETFs. So Cool. He was asked about and he said, well, I understand [00:11:10] now why banks are having it in their portfolios and consumers are having the option now to invest in it in multiple [00:11:15] different ways.
[00:11:15] And he really didn't answer the question. Um, and so the guy came back and said, do [00:11:20] you think, uh, do you think it's a risky asset? And he said, well, I think. Congress at one point was [00:11:25] looking at regulating, um, the actual Bitcoin environment in the United States. And I think [00:11:30] that's something they should probably heavily consider and look at doing further and continuing down that pipeline and probably do [00:11:35] so, so that no consumer is harmed when they go to buy one of those.
[00:11:38] I thought that was interesting because, um, [00:11:40] for a minute there, the crypto crowd was roaring and it was like within two seconds, he was like, yeah, but I think it should be [00:11:45] regulated depending on what side of the coin you're on there. No pun intended that. The regulations widely accepted from some on [00:11:50] that side of the table in the form of why they think that'd be a good thing to further justify that, that asset [00:11:55] space.
[00:11:55] And it would probably increase prices for some and desirability for others. I thought that was super interesting. [00:12:00] So why is all of this interesting, more importantly, important in what we talk [00:12:05] about? Well, the Fed can move the market. Very easily and the [00:12:10] news does a really poor job of explaining what they're doing and how they're going about it But as a homeowner, here's [00:12:15] what I would look at i'm looking at labor over inflation We continue to talk about that and when [00:12:20] the labor market when the labor market doesn't feel right and doesn't look right [00:12:25] That's when you see signs of softening the economy We're gonna be getting job reports over the [00:12:30] course of the next couple weeks.
[00:12:30] As job weeks come in, we're gonna start seeing some signs of, ah, what I consider to be a weakening [00:12:35] job market. Uh, I think a DP, the private equity sector came out and already showed some, [00:12:40] not misreadings, but some backing up of the previous reports they had. And some of those are indicating that [00:12:45] even the private sector, they over reported how many jobs they had.
[00:12:47] And where I'm going with this is I don't [00:12:50] think we have as strong of a job market as the Federal Reserve is indicating. I don't think the 4.1. [00:12:55] That Powell, he basically touted at that podium is a 4. 1. I think it's more like 4. 5 and [00:13:00] I think we're going to find that come about pretty quickly here and as that job market softens, they're going to react.
[00:13:04] [00:13:05] That's the reason for another cut on here. Plus the other thing I just described, the rate cut from the federal reserve is going to [00:13:10] compound some of this evaporation that we're talking about in the 10 year treasury as well as on [00:13:15] the spread for the 30 year fixed rate. It's going to be a win. It's going to be an exciting season for us and as the forecast said, [00:13:20] the second quarter is where it's going to be at for us and that's going to time out with seasonality in the market.
[00:13:23] Hey, it's just January. [00:13:25] We're. 31st haven't turned into February yet and things are already trending the right way and I'm very pumped [00:13:30] about that. So guys, if you like what you're hearing, please leave us some comments, uh, check us out on YouTube at [00:13:35] what's your one more. I love all the feedback you guys are putting on there.
[00:13:37] All of our graphs, all of our charts are on there. Um, check [00:13:40] out that forecast we did. If you didn't listen to that, then check out this episode as well. Refer to a family [00:13:45] friend, check us out on Apple and Spotify, uh, as well as any other platform you listen to your [00:13:50] podcast on until the next episode, we'll see you at what's your one more.
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