Fannie & Freddie Just Dropped a Housing Prediction

[00:00:03] After two years of pain for homebuyers, Fannie Mae is now predicting rates could go to 5.8% by 2026. Yeah, I think this is good news. What we have happening now is if you go back just a few months ago, it wasn't good, right? And so they're basically saying that's going to be under 6% by the end of next year. So that's a year and a half for a lot of you. That seems like a lot. But this is actually quite normal.

[00:00:31] And I don't know, what do you think? Feds going to be meeting next week, 17th, 18th? Well, there's reasons this is important. So one, you know, a drop in rates is going to pull more buyers off the sidelines. We keep telling everyone this is a great time to buy. It's a buyer's market because you can negotiate right now. And, you know, about a month and a half ago, we had a random weekend where rates, for whatever reason, dipped to 6.25 and there's a lot of home purchases. You know, people came out and drove.

[00:00:58] So as rates start to lower, it's a mental thing, right? So people know when rates go down, historically prices go up because everyone's solving to their monthly payment. Well, if things start to go down, then buyers are going to come out because they're not going to want to miss out before prices start to rise. Yeah. And I think if you go look at their forecast, they just came out with a forecast. They've got what's called the National Housing Survey. Just go on their website. Just came out this morning, actually.

[00:01:27] It's the Home Purchase Sentiment Index, and it's ticking up. This is good because just in 2023, it was not good. It was in the 50s. It was like 58. Now it's up at like 73.5. So this is very, very good news, obviously, as they look at it. And for those of you who may not know who Fannie Mae is, they've been around since 1938. It's a government sponsored and they're the largest.

[00:01:54] Well, there's two. There's Freddie and Fannie, buyer of second mortgages. And so they have a how they work, by the way, is if you guys go through, let's say, a lender, it doesn't matter who. Fannie or Freddie buys those from them and pulls them in what's called a mortgage backed securities market to free up the liquidity for the lender, essentially.

[00:02:16] So it's a secondary market, but they are big and they have a very, very, very good pulse on what's going on with single family. And I think it's also important to note is that all these people that are in really high mortgages right now, you know, six and a half, seven percent mortgages, will then all be able to refinance into these lower rates. And all everyone out there saying there's going to be this huge real estate crash and people are going to have to sell.

[00:02:42] We've already told you that most mortgages right now are under five percent because of the big refinancing that went on in 2020. The people that did buy in 2022 on are experiencing much higher rates and much larger payments. So if anyone would make sense to walk away, it would be those people. But if you give them the chance to refinance into a lower payment, you know, then it starts to tip in the favor of why would they walk away from that?

[00:03:08] Right. So it's going to these lower rates are going to diminish the potential for a housing market crash. Yeah. And so if you take a look at Fannie, what they have is they projected that the total sales for the year is going to be right around five million. And I think that's that's positive. Right. It's actually four point nine four with four point two four being existing.

[00:03:35] So that's pretty healthy, I think. So let's talk about the bond market, because that's going to dictate kind of what these yields do. So mortgage rates typically track the 10 year treasury yield cycle. And Fannie Mae is predicting this is going to fall around four point two percent. So the 10 year, guys, as you know, is a very, very important indicator for lots of things.

[00:04:02] What it what it really does is it it it it's a big indicator for commercial. Right. And the 10 year not long ago was down in like three point six. Right now it's like four four, I think four four five. And they're projecting it to go down four point two. This is really also good news for mortgage rates. Right. Right. Yeah. And the reason it's doing that. So a lot of you know that the bond market is going to obviously dictate rates even more so than the Fed.

[00:04:32] But what you don't know is there's been some stealth quantitative easing going on, which has lowered the bond market. This is important, by the way. This is not making headlines. This is QE. We talked about this a couple of weeks ago, but it still is continuing. Yeah. The Fed just recently purchased forty three point six billion in U.S. Treasury bonds.

[00:04:55] And the Fed's actions amount to a form of quantitative easing that is going to boost economic activity and also give a basis for late rates to lower. Yeah. And they also they also purchased another eight point eight billion in 30 year treasuries. So so what's happening is they're not waiting for Powell essentially. I guess this is really, really been very, very interesting.

[00:05:20] Right. They're not waiting for the next week. Right. For they're basically try to try to control this today by by doing this bond purchasing. And I think that this has been happening before. And, you know, this this is actually what I think we sold these off and it kind of got to where we are. Now they're just purchasing again. So my guess is this is another tool in the toolbox that we might see a little bit more of.

[00:05:50] Yeah, absolutely. And I think that they know that there is a pullback coming in the economy. And basically one thing is going to break off first. And if the sell off is first, then they're going to have to come in with quantitative easing. And if quantitative easing starts first, there's obviously going to be a run on prices again because it's going to be cheap and easy money. Yeah. On the on the flip side of that, guys, as we talked about before, there's a lot of trapped equity, first of all.

[00:06:19] And so there's a lot of people in that three, four percent range right now. And so that is still going to be who knows. Like if you if you guys personally or say I was talking to somebody the other day that had like a less than a three percent. A lot of people have less than three percent mortgages. Like why would you want to trade that out for, you know, five point eight next year? Yeah, it's not even that great for you. I don't think it really benefits those that want to sell.

[00:06:47] I really think it benefits those that are in high rates right now that need to refinance and that have been waiting to get out of these super high payments. Because if it does go to five point eight, that's not really a very that's a pretty decent mortgage payment. And that's next year. They're projecting that for like a year from now. So well, and I think it's important to note, too, is that they just changed this because three months ago, you know, they were had it. Yep. It was bad. You know. Yeah. So it was higher. So, you know, now it's starting to lower. So we could see that continue to lower.

[00:07:18] But I think what's important is that, you know, Fannie Mae is a big lender. And I think that they are seeing the writing on the wall and they know that mortgage rates are going to start to lower. And that should signal you as somebody that's looking to potentially buy that this might be your window before more buyers flood the market. Because the one thing is, is as soon as investments start to make sense again, you'll have the whole investor class that you're competing with.

[00:07:43] Right now with these rates, you know, no investment or hardly any investment really makes sense in the single family market unless you have a very large down payment. So investors are traditionally sitting on the sidelines and they're the ones that come in with cash offers and all the different things we saw in 2020. So if rates start, you know, now it's kind of a window where there's not a lot of buyers and you have a lot of negotiating power. Yeah. The one thing that is creeping up is the number of listings. So we are seeing days on market, the number of listings longer.

[00:08:12] You know, if you want to flip over to the commercial side of the equation, the multifamily side, as you know, I did a I did a presentation at Robo Capitalist. There was a property that I got from a broker. It was 250 units outside of Dallas, 35 percent occupied. There was a 25 percent mortgage on it. And the the lender was willing to to sell it for 14 million.

[00:08:41] So the lender would have taken a 14 million dollar hit. Now, that's the lender. Plus, the equity is gone. Now, I passed on this deal because it was a mess. Like there was all these other issues. But, you know, so the the we're also starting to see on the multifamily side of the equation and of course, on the office buildings, et cetera, is as these loans start to mature and they are.

[00:09:07] And as these syndicators run out of money, you know, you're going to start to see some of these bigger projects. Also, non single family start hitting the markets. We're already starting to see them. I got a call, another call from a broker out of San Antonio last week. They got nine deals where the the lenders, what he said, have the keys. And I'm looking at one of those nine. So, you know, so we are starting to see a little bit of an unraveling here on the commercial side.

[00:09:36] Absolutely. And I also think you need to look at Fannie Mae reported growth and cooling inflation. So Fannie Mae has lowered its GDP growth forecast to 0.7 percent in 2025 and 2 percent in 2026, reflecting softer economic momentum. And they're also expecting core inflation to go down to 3.8 percent in 2025 and 2.6 in 2026.

[00:10:04] And this economic backdrop will support lower interest rates. I don't know about that, though. I mean, I don't know this this inflation number. It just seems like it's not getting any any better. You know, one of the things that we've been talking about are the rising HOA costs. So if you guys are sitting in any kind of an HOA. I talked to a friend yesterday where their HOA went up 150 a month. And and so you're starting to see.

[00:10:34] So we do expect with the lower rate for the mortgage to come down, what, two, three hundred bucks, I guess, based on a four hundred thousand dollar mortgage. But you also got to take a look at these HOAs and the operating costs of what it costs to operate a real estate deal. So whether it's an whether it's a master plan with an HOA or it's just a single family that you own. The we are seeing property costs go up, utility costs go up. We're seeing insurance costs go up.

[00:11:04] We're seeing labor maintenance costs go up. So all of that is also going to play into this next 18 months. All right. So I think that unfortunately that could we could get to a basically a net net if if we see, you know, I know everybody's got a rosy picture on inflation, but I don't see inflation coming back and pulling back. You know, like like some of the numbers that Fannie said, especially with these tariffs and everything else is sitting on the table.

[00:11:32] Well, something else is interesting about inflation is the Fed is discussing lowering their inflation tar hiring their inflation target. Yeah, that's very interesting. You know, so basically essentially admitting that they might not be able to hit two. And I think they had discussed raising it to two point three or two point four.

[00:11:51] Basically, what that means, guys, is it means that the government or I should say the Fed is actually targeting that whatever if you're sitting in cash, you're in trouble because they're basically going to inflate it away. That's essentially what it means. That means that their target is to it's going to it's actually going to increase. And so that's not good news.

[00:12:13] If if the if the target for inflation is higher, that means if you're you're sitting in anything that doesn't move with inflation, that you're you're actually moving backwards. You know, so so that's why this is really important. I actually had a conversation yesterday with Lawrence Lepard, Lepard, L-E-P-A-R-D. He wrote the book The Big Print. We got him coming to Limitless, by the way.

[00:12:40] He's not on the website yet, but I just chatted with him yesterday. Great book, by the way. I'm on my second time of reading it. And I was mentioning this to him. I said, hey, did you see the Fed increase their target? And he's like, yeah. Well, they haven't increased it. They're discussing it. They're discussing it. Yeah. And so what that really means is it's just disruptive. The sound money is disruptive. He calls it sound money.

[00:13:04] And it basically means that if you're saving and you're essentially you're losing at least two to three or four percent a year on purchasing power on that money that you're saving. That's specifically why you go back and take a look at whatever it is. I use that insurance policy in my mom's house. I use that as an example. That's a great example. My dad passed away.

[00:13:34] And but before that, in the early 60s, he bought a $10,000 insurance policy and he bought a $10,800 house. And but they still live in. My mom still lives in. Today, that house is worth over 700 and the insurance policy is still 10,000. That's the point. And the difference is really inflation. And so so, you know, so just be careful as we head into this next piece.

[00:14:02] I think that's the wild card that could really, really mess with all this stuff. Right. Yeah, absolutely. But then in times of high inflation, you also have asset prices that rise. Yeah. That's why you want to be in a hard asset. Right. Yeah. And many would say that's why we're starting to see a run on silver and gold and all that. I mean, you know, we haven't even talked about the dollar. That's another issue. Yeah. And you have to look.

[00:14:29] So historically, you know, lower rates are stimulating home sales. And you have to remember, Fannie Mae doesn't really have a dog in the fight. You know, they back these loans, but there's really not a lot of incentive for them to make up data. And they've revised home sale forecasts higher. So now 4.9 million, partly because of these expected rate cuts.

[00:14:50] They really think as rates go down, more and more buyers are going to come to the market and, you know, get us out of this frozen, stagnated market that we've been seeing in the last few months. It doesn't seem like much. But this recent forecast change is another 60,000 homes. So I think that's significant, obviously. You know, and the fact that I would keep watching this home purchase sentiment.

[00:15:19] The Freddie Mac and Fannie Mae really, really have a pulse on this secondary market. And I think that if you want to, you really want to track this, you're going to want to make sure that it's trending up and it seems to be trending up. Yeah, absolutely. You know, as they start to cut rates, it will. And so, you know, can't reiterate enough that now is probably a good time to start looking and to kind of get into that buyer pool.

[00:15:48] The only thing that could really, I think, trigger, like skew this data is one, if we had major inflation, which I think could happen too. And if we did have major inflation, then, you know, what do you think that how do you think that that would change this data? I think it's going to change it a lot. I still think that we're going to see inflation. I think that's going to be the biggest nemesis. I think we're going to see two things. We're going to see higher inflation as a result of everything we just discussed.

[00:16:16] And I think we're going to see higher unemployment. And I don't know about you guys, but this chat GPT, AI stuff is really affecting jobs. You know, we're already seeing accounting, you know, things like marketing. You know, I have friends that are in the PR and marketing business and, you know, content writing, legal.

[00:16:46] I have a friend that sold his company recently. I said, why did you do that? He said, because in five years, I'm going to be out of business. I actually ran a 12-page term sheet through chat GPT recently, and I couldn't believe it. I couldn't believe what it gave me back pretty quickly. So why is that important? It's important because employers, employees are using these tools effectively.

[00:17:14] And some of these, you know, core things are going to be affected moving forward. It's not going to affect the trades, right? But it's definitely going to affect, I think it's going to hit that, call it that middle management or, you know, more of the white collar. And I really think that we're going to see rising unemployment this year and certainly next year. And, you know, we're at the beginning of this, right?

[00:17:43] And I'm telling you, so those two things, I think we're going to have inflation and unemployment. I think the Fed's back is going to be up against the wall. Don't forget also, Chair Powell is out of there in a year. Well, it'll be interesting, too, because mass unemployment can trigger things in the housing market. And somebody just commented that they work in AI treasure, and they said that they think we're going to lose 60% of jobs within the next five years.

[00:18:09] And scarily enough, I don't think that number is super inaccurate, you know? I don't know about 60 because people are slow to catch on to technology. But, I mean, you could definitely have very high unemployment because of technology. But when there's a crisis like that, the government tends to step in. You know, that is the one thing that we saw in COVID. When there's a crisis, the government is going to step in with payments. And, you know, they're not just going to let people go unemployed and not be able to pay any of their bills. Right.

[00:18:38] At the Rebel Capitalist Live, George Gammon and a couple of other panelists, by the way, we've got Jeff Snyder, Brent Johnson, George Gammon all coming to Limitless. But they're projecting a 10% unemployment. And so that's going to be the discussion. Why? Why do you see that? And a lot of this is AI, chat, GPT driven. A lot of it's profitability and inflation as well. And outsourcing as well. Yeah, and outsourcing as well.

[00:19:04] And what's interesting, whether you love Trump or hate him, this tax bill, this no tax under $250,000. Is it $200,000 or $250,000? I can't remember which. Is he really doing that or did he do a second? I don't know, but here's the point. That would really help people. Think about that. Think about how much that would help people. Do you think it would help them that much, though? Because the middle class doesn't really pay that much tax anyway. They're the highest paid. They usually get kind of...

[00:19:34] I know I lower percentage if you're talking about percentages. But I'm telling you, as it relates to the people, I think that any kind of relief... Obviously, we're talking about tips. We're talking about overtime. We're talking about all this other stuff. And I think that if we can give some relief... And by the way, doesn't it just replace UBI or University of Basic Income? What, getting rid of the tip or getting rid of the tax? Sure. Or the tax under that. Yes. Yeah.

[00:20:03] Instead of giving them a check, why not just give them the savings? It does if they have a job. But as we were saying, there could be mass unemployment. Of course. And then if there is, then they're not going to have a job. Yeah. But I honestly don't think it would help that much because typically, I think that most people get money back around tax time than pay it. Well, if they don't have a job, they won't get money back. Oh, no. Not if they don't have a job. If they're not working, they won't have tax. Yeah. So, to your point. But I do think that you're going to see, with AI, probably some kind of universal basic

[00:20:32] income, whether or not they call it that. I think it's going to... Kid credits and tax credits and all that. Whatever. However it's set up. It's basically going to be stimulus through this AI because people have to work. I'm telling you, this is where it's headed. The hardworking person under that $200,000 threshold, that's who needs the help the most. They're paycheck to paycheck.

[00:20:59] And if you can help them on the tax side, who cares? I mean, obviously they have to figure out how to roll that into the other piece. Because you can't do a tax cut on one side without rolling it on the other side to somebody else. But I think that will be huge. And I think that's a better way than just sending people money. I think giving them incentives or reducing their tax.

[00:21:28] By the way, there's other countries that do this. Finland does this. So we wouldn't be the first one. I don't mind the idea. I just think that with AI, these jobs just aren't going to be available. So if somebody's not working, because I think that's going to be the bigger issue with AI, is just how much work are people going to have to even take a job? Because a lot of your middle management is going to be gone. I guess if you take the position that they'll never work again. I don't know. I just think it's going to be hard to find a job.

[00:21:57] I mean, if you're like a marketing person and a marketing director, a lot of your marketing can just be done by AI. We're already starting to see that in our company. And so these kind of positions, if you post on social media, that job is going to be something you could do on AI. Yeah, which is exactly why I think unemployment is going to go up. Right. But I do think that people are resilient. I do think that they're going to start to figure out other ways to make money, like we all do. Right.

[00:22:27] And so that's going to continue. And I do think that people are going to have to make money somehow. Yeah. How everything shakes out, I don't know. Well, it could just be more government employment, you know, because they don't do much. Could be. But the reality is, again, however they make money, they're going to have a tax bill. And if we can give them relief, then I think that's going to be good for them. Yeah, absolutely. But keep watching this. You know, Fannie Mae keeps up to date on this stuff. It's important.

[00:22:57] It's important to know what rates are projected to do. And we'll see if it changes. It's great news, guys, for the single family home market, for sure. See you next week.