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Mortgage Rates Forecasted Below 4%
Here is a link about an economist aggressively forecasting mortgage rates will drop under 4% in 2024. Could 2024 be a bull market for loan officers? Out of 150,000 loan officers, close to 100,000 either left the mortgage industry completely, retired early, or let their NMLS licenses expire and are in a different industry or thinking about going into a different industry. Hundreds if not thousands of mortgage companies, whether they are mortgage bankers, correspondent lenders, or mortgage brokers went out of business in 2023
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8 Replies
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The secondary bond market is still very volatile. I think rates will start going downhill in about two to three months.
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Predicting mortgage rates to plunge under a theoretical Trump economy in 2025 largely depends on a few macroeconomic factors. While it is not entirely a conspiracy theory, it is quite the prediction. Let us break down some of the criteria which might influence such an outcome and evaluate it:
Factors Supporting a Possible Decline Below 4% Federal Reserve Policy
- If the Federal Reserve maintained a more drastic, aggressive stance in cutting rates during 2025 due to low economic growth or high inflation, mortgage rates could relentlessly rise in such an economy.
- Traditionally, mortgage rates have danced to the 10-year Treasury yield, which would likely be significantly low if the Fed cuts the rates.
Economic Growth and Inflation
The focus on policy could restrain confidence and encourage a deflationary pattern by ensuring that tax cuts and deregulations became the norm during his term.
This kind of control over inflation would ensure that standing positions of sub-4 % mortgage rates were attainable during periods after the norm was set.
Supply-Side Economic Stimulus
Policies that boost the housing supply, reduce construction costs, or encourage homeownership as a form of social investment could indirectly influence market forces.
Factors Affecting the Target Below4% Obligation RatesFederal Debt and Deficit
- The federal government’s rising debt load and fiscal responsibilities may constrain its ability to develop such low rates.
- Such borrowing will fuel losses on US Treasury bonds and deviate yields from expectations of sub-4 % rates.
Global Economic Conditions
Another determinant of the mortgage rates is the global financial markets. Increased interest in US Treasuries or political risks may cap rates but will unlikely produce large reductions.
Market Conditions in 2025
The current housing market conditions, characterized by a structural shortage of housing supply, high housing prices, and an increasing population, suggest that rates lower than these may still remain unattainable for many people.
Speculative Nature of the Forecast
Historical Precedents
- These rates only decorated the mortgage market once a long while ago and for an extended period, thanks to the Federal Reserve pounding dollars with its quantitative easing programs during the post-2008 recession.
- Such a return would only be possible in a recession or extreme economic turmoil.
Potential Political Influence
Forecasts made under the influence of one administration may appear rather too sanguine or gloomy due to that administration’s extra influence due to its economic policies. Such policies do have a lot of power, but so do global and other market dynamics.
Complexity of Mortgage Rate Determination
Mortgage rates depend on various risk factors, including lender risk premiums, housing market conditions, and other macroeconomic aspects. The list of factors has multiple variables, making it hard to make accurate predictions.
The projection of sub-4 % mortgage rates in a Trump-directed economy as of 2025 is a theory that doesn’t sound quite achievable. While it is not entirely correct, it is a conspiracy theory. For such rates to be achieved, there would be a need for an array of measures, including but not limited to a radical dip into a policy easing exercise, moderate inflation, and a favorable international economic environment. Such Rates might be possible, but other issues like federal deficits, international money market environments, and housing markets might block the way, so it is balanced thinking to expect a radical drop in rates.
Home buyers should be careful not to rely too much on such minor spikes while deciding on their home, its features, and its cost, as rates will always depend on the economy in that given time frame.
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The prediction of the mortgage rate dipping below 4% amid a ‘Trump economy’ scenario in 2025 raises eyebrows. Consider the following points whether this prediction has any value or whether it borders on conspiracy:
Context of Predictions
Economic Influence:
- Mostly, mortgage rate predictions are based on economic parameters like inflation and unemployment.
- Actions taken by the Federal Reserve.
- Even though political changes could be linked to future possibilities, rates usually respond more to economic conditions than individual politicians.
Historical Context
Past Rates:
- Along with all the other fluctuations, there were periods when the mortgage rates dipped below 4% during the Trump presidency.
- That said, these instances predominantly took place as a reaction to the pandemic triggered by COVID-19.
Economic Fundamentals
Inflation and Fed Policy:
- While it cannot be ruled out that the combination of falling inflation.
- A more dovish Fed can lower mortgage rates.
- Achieving the below 4% threshold will require several favorable conditions to be marshaled together.
Diverse perspectives:
- According to some experts on YouTube, rates below four percent are possible.
- In contrast, others caution against similar prediction experts due to their credibility and track record.
Political Implications:
- It is dangerous to presume that a nation’s economic performance is the sole responsibility of its political leaders.
- While there are lasting political implications, other issues, such as international markets, are equally important and beyond the reach of political leaders.
Potential for Misinformation:
- Whether rates collapse at the behest of a particular politician without sufficient evidence support, it borders on conspiracy whereby other evidence or environmental context is disregarded.
- While the economy could be conducive to mortgage head pressures in the mid-40s, economists’ lay predictions are likely overly optimistic.
- Economists assure us that various other economic factors, history, and Federal Reserve policies influence mortgage rates significantly.
It should be discouraged to follow variables highly based on political climate rather, as advised, following economists’ trend analysis of the changing economic indicators in the economy.
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Can you elaborate on how Trump’s proposed policies might affect inflation?
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This reply was modified 2 weeks, 6 days ago by Gustan Cho.
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The economic policies laid out by Trump would halt inflation in the United States. Let’s highlight some principles of inflationary policies as it pertains to Reagonomics:
Bitterness Tactics
Trump has aimed to use bitterness to deal with Chinese companies, particularly by imposing taxes of up to 60% on China and a minimum of 10% on all imports. Such tariffs are believed to have the same effect as New York City rent increases, whereby businesses pass on expenses businesses always pass on expenses to their customers. The estimated 5.1% price hike by the Budget Lab at Yale would empower Trump as this is significantly higher than the estimated average for developing countries. The old would primarily benefit as their society cuts across the entire five-dimensional spectrum: tax incentives would increase the purchasing power of older people, greatly benefiting from aid combined with higher tax payouts from partial state enterprises.
Changes in The Labor Market
Trump’s efforts to heavily deport undocumented immigrants could make it worse for industries such as food production and agriculture, where there are already very few workers. This effect would then overflow and raise consumer prices. At the same time, a loss in certain sectors would displace supply chains considerably, adding to inflation.
Increase In Consumer Spending and Tax Cuts By Mr. Trump
Previously, Trump promised to cut taxes further, increasing personal income and consumer expenditure. This might facilitate growth, but too much money chasing a few goods in a tightly held labor market can induce inflation. Therefore, combining tax cuts and increased spending could result in other inflationary markers.
Federal Reserve’s Influence With Trump And His Promises For Policy Change
Mr. Trump would like to influence higher policy rates than he already does, particularly with respect to interest rates. If he persists and pressures the Fed to reduce the rates and promote growth, the country’s inflation can worsen. The same consequence will occur if the Fed decides to slow the economy by increasing the rates in a fight against inflation.
Market Reactions To Mr. Trump’s Economic Policies And Their Effect On Economic Growth
The unpredictable economic policies Mr. Trump implemented can lead to fluctuations in the financial markets. Suppose a direct relationship is observed between Mr. Trump’s new tariffs and his spending plans. In that case, all this can hamper long-term interest rates and the cost of borrowing, eventually reaching consumers’ prices.
Overall, Trump’s suggested enhancements, especially concerning tariffs, payroll alterations, tax holidays, and possible Federal Reserve maneuvers, are expected to exert inflationary pressures on the economy. The magnitude of these effects is largely contingent on the modalities of implementation of these policies and their relations with the current economic environment.
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This reply was modified 2 weeks, 6 days ago by
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What are some potential mitigating factors to counter these inflationary pressures?
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This reply was modified 2 weeks, 6 days ago by Gustan Cho.
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Many inflationary factors may emerge as a result of some policies that would be passed during Trump’s administration. However, there are possible ideas that could help alleviate the situation:
Essential Reforms
Reforms would include deregulating particular industries. Easing regulatory constraints could reduce firms’ costs, which may allow customers’ prices to remain lower. Some economists suggest that deregulating will help dampen even greater inflationary price increases that would otherwise occur. However, the extent of relief may differ depending on the regulations being considered.
Domestic Output
Tariffs can cause inflationary threats that could be reduced by initiating domestic production. By developing local industries and decreasing its dependency on imports, the U.S. could help control the prices of goods. This would, in turn, lead to new places for society and increase the economy’s ability to withstand disruptions in global supply chains.
Balancing Immigration Reforms
There is a fear that Trump’s mass deportations may lead to a labor shortage. On the other hand, allowing the immigration of more skilled workers may reduce inflationary trends. More employees translate into lower stress on labor markets, meaning stabilized wages and increased prices in the long run.
Joint Efforts Towards a Proper Monetary Policy
Mrs Sanders and her team noted that sharing their goals with the Federal Reserve could tame inflation. If the Fed does not aggressively raise rates, it can help keep inflation at bay and not choke the pace of economic growth. Addressing the market-type uneven allocation of resources for a while now could help address inflation expectations.
Supply Chain Improvements
Shoring up the other supply side of the economy through investment in supply chain improvement and infrastructure could promote efficiency and lower operational expenditure. Bottlenecks could be unclogged and logistics enhanced, lowering business unit costs and making it easier to keep consumer prices down in the face of tariff regime impacts.
Consumer Behavior Adaptation
Consumer behavior can relieve some of this inflationary pressure in an economy. To smoothen demand and prices, consumers can respond to price increases by changing their buying patterns, buying locally, or reducing non-essential expenditures.
Trump’s policies are inflationary as they propose increases in costs. Still, simultaneously, there is deregulation, growing domestic capacity, adjusted immigration policy, coordinated expansionary monetary policies, improvements in the supply chains, and changing consumer behavior, which should mitigate these implications.
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This reply was modified 2 weeks, 6 days ago by
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I highly doubt mortgage rates will drop below 6% in 2025. Joe Biden and Kamala Harris Administration did way too much damage 💔 😢 that even President-Elect Donald Trump will not be able to fix this catastrophic economy let alone skyrocketing interest rates.