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Hanna Horvath (0:32)

It's officially a buyer's market, but there's just one small problem. Buyers still can't afford anything.

Dylan Lewis (0:37)

What's happening in Las Vegas?

Hanna Horvath (0:38)

For Thursday, September 24th, it's Brew Markets Daily. I'm Hanna Horvath.

Dylan Lewis (0:42)

I'm Dylan Lewis. Let's get moving and grooving.

Hanna Horvath (0:52)

Okay, Dylan, let's kick off with everybody's favorite topic, which is the bond market. We've seen another pretty big sell off this week, which is starting to show up in the real economy. The 10-year treasure yield is hovering around 5.17% today, its highest level since 2007

And this comes just a week after the Fed raised rates for the first time in three years.

Dylan Lewis (1:13)

Yeah, and I mean, really, the market expects the Fed will hold or raise rates again in 2026

And so with new debt coming out at higher rates, investors want to pay less for old debt, that is at lower rates. So the prices on those bonds are going down, which forces yields up to make it closer to market rates. This is the classic inverse relationship between bond prices and yields.

But the rates, especially the 10 year, are kind of the baseline rates for a lot of things in the economy, and they really set the tone for the cost of borrowing. So the increases that we're seeing matter, and they kind of reflect this pressure on borrowers, but also this pressure on the economy as a whole.

Hanna Horvath (1:47)

Yeah, and speaking on borrowers, I want to focus on the housing market today, because that I think is one of the clearest places where this pressure is really showing up. Freddie Mac reported today that the 30-year fixed mortgage rate is over 7%, which is the highest since January 2025

And considering where these treasury yields are at, there is not a lot of relief in sight here.

Dylan Lewis (2:07)

Yeah, something that jumped out to me this week was adjustable rate mortgages were 10% of mortgage applications last week. Those are people paying a lower rate now, but they are subject to a rate adjustment in 3, 5, 7, sometimes 10 years, and that will bring them to market rates. And so people are making a bet that they will take the lower rate on the arm right now for affordability and hope that rates are lower in the future. If so, they'll be able to refinance before the adjustable rate kicks up to a mortgage rate that would be a little bit higher. But because of the cloudiness in the rates and the general affordability issues in mortgages, it does not really feel like a buyer's market. All of these things are kind of coming together in a way that makes things feel more expensive, which is funny because in some measures it kind of is a buyer's market.

Hanna Horvath (2:49)

Yeah, it's so interesting because on paper, the market is checking a surprising number of boxes here that points to a buyer's market. For one, Redfin estimates that sellers outnumber buyers by 58 percent in August, which is a multi-year high. Inventory is also at its highest level in years. Plus, we have homes that are sitting on the market longer and sellers are starting to offer more concessions.

Overall, buyers have a lot more negotiating power than they did a couple of years ago. I mean, this is some of the stuff that buyers have been dreaming about for the past couple of years.

Dylan Lewis (3:18)

Totally. I mean, this is a market where you can actually ask for an inspection or add contingencies into your contract. All these things that are just kind of basic home buying things that have been completely out the window over the last five years because it has been so overwhelmingly a seller's market and the market was moving so quickly.

That said, it is a buyer's market in the supply and demand sense. It's not really a buyer's market in the affordability sense.

Hanna Horvath (3:42)

Exactly, because a buyer's market and an affordable housing market are two completely different things. And if we go back to 2020, home prices have shot up since then. There are now about 54% higher than they were at that point. And incomes have just not kept up with this.