Did Scott Bessent Just Waste $6 Billion? Mortgage Rate Reality Check

SPEAKER_1 (0:00)

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Michael Zuber (0:31)

All righty, folks. Scott Bessent has made his move this morning during the Daily Financial News. We talked about could it be four? Could it be five? No, folks. It was actually $6 billion.

So the Treasury has gone from $2 billion and talk of doubling to actually tripling, buying the long end of the curve. This, of course, was meant to drive yields lower and lower and lower. So let's talk to Matt, the mortgage guy, about what actually happened, because the market is basically telling Scott to hold my beer because it's not working. What say you, Matt?

Matt (1:06)

Right. Yeah. I mean, to keep it simple for folks, this should have a positive downward effect on mortgage interest rates. If you're like, the Treasury is going to buy back up to $6 billion of the older 10 to 20 year, the long end of the bond curve, like you said.

But after a bunch of talk, expectation was more like 8 to 10 billion. And so when they came out and said 6, the 10 year Treasury, which we know is tied to 30 year fixed rate mortgages, didn't go down. It didn't stay flat either. It went up to 4.85 or something in that range.

Michael Zuber (1:47)

It didn't only go up, it exploded up. Because it had been trading at a range where 4.8 was the ceiling. Now it's busted through. So in chart talk, that now becomes a floor. So what I've been reading since Bessent came out with 6 billion in the market reacted is people are like, dude, the 10 year is going to 5

Right.

Matt (2:11)

And for anybody who's like, oh my gosh, 6 billion, how did this not move the needle? When you look at that and the Treasury market's 32 trillion, 0.02 percent, 1.50th of 1 percent. So this wasn't a big, heavy-handed move that we should really expect to have any dramatic effect.

But what people want to know amidst all this fancy talk is like, what's happening to interest rates with that 10-year Treasury at 4.85, 30-year fixed rate average. And when I say average, like Mortgage News Daily says 6.89 is what somebody with great credit, who's paying 0.7 or 0.8 points for is getting. So rest assured, you've got a 690 credit score or you've got any type of loan that's not like the perfect loan. You're most likely seeing a 7 handle unless you're spending a bunch of money buying it down. And so it continues to be hard for buyers. And this undoubtedly will continue to keep the dampening of demand on the housing market, which is the most wonderful thing in the world if you're a real estate investor. Really, if you show up to an auction and you're the only one there. Yeah. To buy something that you like and everybody goes home, that is really good news for you. Right. Bidding against 100 people for something that you want is not an ideal situation. So to spending on perspective, oh my gosh, rates are up.

There's no end in sight. Affordability is an issue that's never going to be solved, never going to be fixed. That's one way to look at it.

Investors that are part of One Rental At A Time and part of our circles are probably licking their lips.

Michael Zuber (4:16)

No, they should be. I mean, if they hear me at all, this is the best buyers market in 12 years. I mean, it's really simple. You want less competition, check. You want more supply, check. And you want more motivated sellers, check, check, check. Also, oh, by the way, we just happened to be entering the winter period, which is the slowest of the slow time. So it is time to get uber aggressive, get, you know, very creative with seller financing, seller seconds, get 90 percent CLT. I mean, this is the time to go ham because we're the only people buy.

Right? When you look at a pool of buyers, it used to be 100 And now it's 12

And the pool of sellers that used to be 100 is now 120

Those 12 buyers, they're the king of kings. So my community should be licking their chops. But that still means that the overall real estate industry is in a depression. We get existing home sales, I think, later this week or next week. It'll come in sub 4 million. It's going to be, I've told people for the last month, the last six months of 26 are going to be the hardest. So congratulations, we're a month and a half into the hardest period. It doesn't get better from here. But eventually the sun will come out, and we'll be on the other side of this. But the next four and a half months for home flippers suck. Wholesalers suck. Home sailors suck. But hey, investors, my world, time to go ham.