It's Finally Christmas!

Happy Market Update! 

Okay…NOW it’s Christmas. Today is 5 days from Christmas…and it seems like it. Traffic is light. Airports are packed. Volume is all over the place this week in the markets. Is today the 5th day of Christmas…for the golden rings? If you are like me, you can only afford the onion rings that are golden. Great, now I’m hungry. How is that possible with all the cookies all over the place these days? I have to work out twice as hard…I didn’t say I did…I said I have to. So I guess that’s ahead of me. 

That’s my kind of workout. Anyway, today will be a short version of this email and the last one for the year. I will plan to see you on the other side!

Speaking of other side…we are still in a world where we don’t have an open government ahead of us. As has become the norm from the elite in DC, we are borderline shutdown of the government. Who would have thought that the Repubs would not want what the Libs want, and the Libs would not want what the Repubs want? I’m as shocked as you…like we are every time we hear about these shutdowns. I did like that the 1500 page document didn’t get passed with all the pork. This pic is stupid…but that’s your first bill that got toasted. It usually passes because everyone gets a little of what they want…like a 36% increase in politician pay. I know I want that with all those trades they get to make that Martha Stewart would have gone to jail for. DC continues to anger me…so I shall pray for them this Christmas season.

If you are hoping for relief form housing, too bad. Starts are down…and you can see that trend moving down the past 2 years. That means inventory shall remain low. Who can afford a new home anyway?

The Fed lowered their Fed Funds Rate this week…another ¼ point. So that’s 100 basis points for those of you playing bingo at home. But the market didn’t like that they are shrinking their view on how much lower they will go in 2025 (that’s called being Hawkish). From NPR: 

So how have all those lower Fed Funds Rate moves helped the 10yr we watch so closely? It has not. Bear with me on this one…we spoke about it a few months ago…the cup and handle. You see my red lines that draw a cup and handle shape? That is a technical bull term…meaning, the chart should continue moving to the up side. And sure enough, we are above that rim (a horizontal orange line). Back around that Fed Pivot location (that is your Fed moving their rate lower by 50 basis points), a lot of loan officers on social media started posting that rates were coming down. I did not. You could already see the increase happening at a bottom. I told our team, rates would move up again. How high? I wasn’t sure then. But I knew down was not an option. Shame on those loan officers who clearly tell people what’s happening to a chart without knowing how to read a chart. Anyway, I digress. See that vertical orange line moving up above 5.289%? That is the same height from the rim as it is the depth of the cup (the other orange vertical line). This is what can be expected if the cup and handle holds. Yikes. That would be higher rates than October of 2022 when we hit the highest rates since before the Great Financial Crisis. Buying a home? Do it soon! We are here to take your calls!

All right, now that I’ve scared the crap out of you…just kidding. That’s probably enough for the year. We will circle back on what the 10yr and MBSs are doing in 2025. It’s going to be a very interesting year to say the least.

Happy Hanukkah and Merry Christmas to most of you. Happy New Year to you all. May your 2025 be more fruitful and successful than this past year. Plan to be a better person than you were this year…it can’t hurt to try.

What does not kill you (including those drones) only makes you stronger.

Tim