On our 4th episode of The Whissel Way Podcast, Kyle Whissel and Jason Hall discuss the plans of the Federal Reserve; they told us last year they planned to raise the rates about 5 times over the next year and a half, but they just came out saying they may only raise the rates 2 times. Watch the full video below.
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- Welcome, welcome, you are listening to The Whistle Way Podcast. Our goal is to discover what's happening in the Real Estate Industry today and help understand what that means to you as a Real Estate Agent, as a mortgage professional or just as a general business owner out there. And the thing I really want to talk about on today's show, the news literally just dropped within the last few hours. And that is that the Federal Reserve had their annual meeting. And we're going to talk about what they did. And something's happened, that I don't recall happening, ever. Now, it may have happened and I just don't remember it. But, the government is not typically an organization who says their going to do something and in a negative manner, and then come back and say well, I know that we said we were going to to do that, but we're actually not going to do that. The government usually doesn't do that. It's usually the opposite, they say we're going to do a little of this and then they do a lot of it. But, they said they're going to do a lot of something and they actually decided that we're going to do a little bit of it. It's very different from what we typically see from the government. Rarely, do they go back on their word of what they said they're going to do in our favor. Very frequently, I was on a call with a client today and I mean, it was just screw our government, screw California. I'm out of here. I'm going to Mexico. Right, because that is the sentiment a lot of times is that our government is not looking out for us, they're not doing things in our favor, they're doing things in their own. This is one of those rare occasions where the government's actually come out and said, I know we said that we're doing this, but we're not. So, the Fed earlier this year came out and said we're looking to raise the rates, probably five times over the next year and a half.
- They kind of project that out, right Kyle? They want to project it so the market can kind of take that in and absorb that. That has been the projections based on what they thought. But today's news, they're saying, guess what? We don't think we're going to need to raise, you know, we're only going to raise maybe two times your sayin, right?
- Yeah so, a lot of people, they get very confused about how rates work, because we hear the rates are going up, rates are going up. Now, to be clear, we're talking about when the Fed raises rates, they're not raising mortgage rates. They are raising the Federal Funds Rate. Now, the Federal Funds rate, while not directly tied to mortgage rates, definitely has an impact on mortgage rates. Now, there are times when the Federal Funds Rate goes up and mortgage rates come down, and vice versa. But, for the most part, as the Federal Funds Rate tends to increase, so do mortgage rates. Jason, help, if somebody's listening to the Podcast right now, and they're unfamiliar with how this works and how the mortgage interest rates have these projections baked into them, help somebody understand exactly how that works.
- Alright, I'm going to try my best. So, I kind of think we just decided to drop this information, so I'm just going by memory. So if somebody's out there dot an I and cross every T. Here's how the Fed Funds rate works, and how mortgage rates works. So, the Fed Funds rate really is the banking rate, what the Fed offers to the banks. That interest rate, that has been rising up. And we have seen mortgage rates go up, but mortgage rates are long term, future traders. People are betting on what the economy will be doing in five, ten, twenty, thirty years from now. And based on what current activity is happening, they predict how that's going to impact our future. So, it truly is a future trade, and so, as Kyle mentioned, sometimes we've seen them raise rates and mortgage rates go down because the future already predicted that they would go up, and now they are not going up as much. So, we're actually starting to see mortgage rates slide, the last few weeks. Based on everything going on, I think we will continue to see that. Part of the issue, I believe why we're going to see rates stay within a certain range is... You know, I remember when nine percent was a good mortgage rate. But, most people here in the studio, if I called you and said hey, I got this great deal, nine percent! You'd be like, no freaking way, right? No way! Because, the governments, including Canada, have all got involved in bought down rates. They've been part of lowering interest rates the best they can. And so, we've kind of seen this three to five percent. You know, and now that rates are in five, nobody is even happy at five, right? And we're seeing buyers start to say hey, I'm not sure if I ought to buy now because that rates are five, you know, now my payment's a couple hundred bucks more than it would have been a year ago if I bought 'cause prices were up. And so I really think we're going to see a long term rate between three and five percent. The reason I say that, is Japan did exactly what we did, but ten years earlier, and they got to negative rates! And they won't even see rates three to five. And, even when I talk to an eighty-five year old lady, and I told her rates are five percent, she's about yelling at me! She goes, but you gave my friends three and a quarter. I go that's 'cause it was three and a quarter a year ago, hon, you know, it's changed. Right, and so if an eighty-five year old lady who used to pay double digit rates is upset about a five percent rate, of course, all of my millennials are going to be upset. And, I think that governments bought in, right? And I really think we're going to be stuck at that spot. And that's what the future is starting to see. We're starting to see what's called an inverted interest rate curve, where the 10 year yield and the 30 year yield is almost the same as a one year and a two year yield. Every time that's happened in history, there's a recession that's followed. So, the future traders are able to literally predict when it's going to happen. And it looks like, people have been saying 2020 for a while, that we're going to see a recession. It might be a little bit earlier. You know, you never know. So, that's kind of what I got with rates and how mortgage rates work.
- That was some serious knowledge dude.
- That's just going from memory, too. A few weeks.
- A few weeks, yeah.
- It's all the internet guys. Yeah, doing this nearly thirty years, as you can tell, I am a geek when it comes to mortgages and the Fed and just buying homes, I love doing that. There's nothing better than helping a client buy their first home. They get their keys and they call you up crying. There's nothing better than helping somebody like Kyle Whissel at nineteen years old, didn't have a house, he now owns over thirty units. He's one of the top agents, not only in San Diego, but across the United States. And, you know, it's not because of me, but I've been there to help support him, you know? And to see people, to help people like that, right? That's what beautiful about the industry I'm in, is it's great. Now, on the other side, we may start seeing some short sales. And sometimes, that could be a positive, hey, let's just get rid of this property now, take a little loss, Let's do it while you can and move on so you can just clear that versus getting stuck 'cause so many people hold on to things that they should let go, right? And so, there could be some positive stuff happening with that as well. So, I love what I do.
- I love that. So, if you're listening right now, you're a realtor, right? We understand that the Federal Funds rate went up a quarter of a point. But, that's what was predicted. So, I think if anything, you'll see rates stay relatively level, mortgage rates. If anything, you might actually see the rates come down a little bit more because going into this meeting, the expectation was that the Fed was going to raise rates three or four times in 2019. Now, the Fed has stated that they are only going to raise them two times. So, again, the market bakes in the expectation of what the Fed is going to do. While being that the Fed now pulled back their expectation, it's very likely you could see it pull back in rates. So, even going in to today's meeting, there was already some thought that something like this was going to happen. So, rates this morning are the lowest they have been since August. And I think that you are very likely going to see a bit of a pullback over the next few weeks as well after the news comes out, right? That it happened today. That, you know, they pulled back that expectation. So, as a realtor, as a mortgage professional, it's our job to, you know, control that narrative. To get this information out to the clients, because what's going to happen right now is your clients going to listen to the news and they're going to hear, oh the Fed raised rates a quarter of a point. And now, what's going to trigger in every single one of your clients' heads is that mortgage rates just went up.
- Yeah, so if they got quoted five percent last week, they now think that it's five and a quarter.
- Yes, and so this is where it's important for us as the professional in this scenario to help people understand. Help the average home buyer and home seller understand that all though the Fed's raised rates a quarter point, there's a very high probability you could actually see mortgage rates pull back. So that's where it's important to understand that these are not directly correlated with each other. Just 'cause one goes up, doesn't mean the other goes up. What matters when an announcement like today comes out is what was the expectation going in to that announcement? And being that the expectation was that there was going to be a quarter point raise. And, not only did that happen, that's what was expected so that was already factored in the things, but the fact that they are actually pulling back on the number of raises in the future, is actually positive. The time where you see rates jump after an announcement like this is where the expectation is the rate is going to go up a quarter and it actually goes up a half. That's when you see mortgage rates spike. But, given the information that came out today my prediction is that you will see rates stay the same, if not come down even a little bit lower. You're going to start getting in to six month lows, when it comes to that mortgage rate. So, our job, your job is to go and convey this knowledge to your home buyers and to your home sellers out there. Today is actually a positive thing, where the media, the typical media, is going to latch on to this information and they're going to convince the consumer that this is a negative. That rates are going up. And now it's even more expensive to buy a home. When, in reality, that's not the most likely scenario there. So, you need to go out there. You need to control that narrative. You need to understand that the media is all about getting clicks, right? And getting eyeballs and getting ears, right? That is how the media wins. And whether we like it or not, as a typical American, or Canadian, we click on more negative stuff than we do positive stuff, right? Like, you're never going to turn on the news and have them have spend five minutes talking about the fact that nobody died today. Or, that there is no traffic today, that's not going to happen, right? The media reports, oh, there's accidents all over the place! Big Rig overturned, they're not spending any time on these other things, it's all the time is spent on negativity because that's what sells. So, whether it be an announcement like today, or an announcement regarding what's happening in the Real Estate market, in the mortgage market, you have to 100% control that narrative. You need to utilize the tools that you have available to you. We're obviously here. We have a radio show and a podcast that we're doing. We have the ability to share that narrative via this media. What media can you utilize, right? We've all got social media. So, maybe you shoot a
- What's social media? Yeah, you guys used to sell telegrams and stuff, Jason. And penpals and all this
- I used to print out picture crazy stuff, right?
- Cards gimme a hard time. So, you've got to use whatever media you have available to you to get this news out there and get it out there as fast as you can, so that when people are hearing what the typical media is reporting, you're helping them understand what's really happening. And, if you want to be a professional, if you want to be somebody who's at the top of your game, again, whether it's real estate, whether it's mortgage, or you run a restaurant, right? You need to be ahead of that news. Like, you know there was the big scare with the lettuce recently, right? You've got to get out there and control that narrative. Because, when the media latches on to that they basically make it like, don't eat a salad or you're going to die. Like, that's what the media does. So, it's our job as the professional, business owner, mortgage, real estate agent, we've got to control that narrative. We've got to help people understand what's really happening. And if you want to be at the top of your game, that's the way that you're going to do it. So, leverage whatever outlets you have. Whatever media you have access to get that message out there today, control that narrative. I want to thank you guys so much for listening to our podcast today. If you want to stay in touch with us, join our Facebook group where we share tons of tips and tricks on there. The Whissel Way on Facebook. You can go to thewhisselway.com. It's W-H-I-S-S-E-L. Thanks so much for listening to the podcast. Make sure, subscribe, rate the show, give us five stars if you appreciate the information. We'll talk to you next week.
