We have a job opportunity to share from a member of the GEM, Unwritten Capital, an investment firm that plays at the intersection of real estate and technology
Real Estate Partner (job description):
About the firm
Unwritten Capital is an investment firm that plays at the intersection of real estate and technology.
Their team has decades of experience investing in and operating real estate, tech companies, and investment firms.
On the venture side, their portfolio includes 300+ real estate technology companies across geographies and property types. They’ve invested alongside the best in the business including Sequoia, Union Square Ventures, Accel, etc.
They are now investing capital into real estate investments supported by technology.
They are frequently the first institutional real estate capital into a business and invest across the capital stack.
Unwritten Capital has a purpose built team with unparalleled access to an underserved capital market
About the role
Unwritten Capital is looking for a partner to lead their real estate activities. You will have a seat at the table as we build our firm from the ground up. Their offices are in NYC and we spend several days a week there.
About you
10-15+ years of real estate asset level investing experience.
Led deals from cradle to grave and have invested across property types and geographies. Ideally you will have experience in niche strategies.
Expertise with complex joint-venture, co-GP and other nuanced investment structures.
Have the entrepreneurial “bug.” Our firm is a startup–same goes for the companies we partner with.
Play well with others. We are collaborative internally and externally.
Want to have fun. Yes, we want to make money and build a generational firm. We are going to have fun doing it.
About the opportunity
The largest asset class in the world is still horse-and-buggy-ing around operating the same as it has for the past 50 years.
The real estate industry is in the earliest stages of digital adoption.
Technological innovation initially came from startups that sell products and services to existing real estate companies.
It is now time to build new kinds of real estate companies with tech in their DNA.
In the process, these companies unlock new and novel real estate investment opportunities for everything from vacation rentals to construction financing.
WASHINGTON — The Federal Deposit Insurance Corp. announced Tuesday it would begin marketing $33 billion of commercial real estate loans that once belonged to Signature Bank in New York, which failed during the banking crisis this spring.
The agency said it is setting up joint ventures to market about $15 billion of credits in the portfolio that are secured by rent-stabilized or rent-controlled units to fulfill its obligation to protect low-income housing availability.
“The FDIC will place the rent-stabilized or rent-controlled loans in one or more joint ventures (JV), with the FDIC retaining a majority equity interest in the JV,” the agency said in a news release. “The JV operating agreement will provide certain requirements that facilitate the financial and physical preservation of these loans and underlying collateral.”
Under the Federal Deposit Insurance Act, the FDIC has a statutory obligation to safeguard the affordability and availability of residential real estate for low- and moderate-income individuals. The agency said the $33 billion of loans — which the FDIC retained in receivership following the failure of the New York-based bank in March — are made up primarily of apartments in the New York metropolitan area. The FDIC previously announced it was considering various means of marketing the portfolio in a way that safeguarded the roughly $15 billion of low-income housing secured loans represented in the portfolio.
FDIC said while it will take on a majority equity interest in the joint ventures, ultimately the winning bidders on the loans will be responsible for maintaining the loan portfolio on their terms.
“The winning bidders, or partners, will act as the managing member of the joint venture and will be responsible for the management, servicing and ultimate disposition of the loans,” the FDIC said in a statement. “The JV partner will be required to manage the portfolio in accordance with the JV operating agreement and be subject to stringent monitoring.”
The FDIC tapped Newmark & Company Real Estate to assist in advising on the sale.
The FDIC will be accepting bids for Signature Bank’s former commercial real estate loans over the next three months. The agency indicated that it expects the sales to be finalized by the end of the year. The FDIC said its marketing strategy took into account input from relevant New York municipal and state agencies as well as community groups.
Signature Bank was shuttered by New York State regulators amid mounting withdrawal requests that decimated the bank’s available funds. Signature’s failure, along with that of Silicon Valley Bank, spurred banking regulators to invoke the systemic risk exception that would allow the FDIC to cover uninsured deposits.
Following Signature’s failure, New York Community Bancorp’s Flagstar Bank acquired most of Signature’s deposits and some of its loans from the FDIC. The deal left out $4 billion of deposits related to Signature’s digital banking business, and a $60 billion loan portfolio.
Commercial real estate loans have been viewed with increasing anxiety by banks and regulators amid growing concerns about the disastrous effects delinquencies on such loans could have on the economy.
Candlesticks are price chart units that show the high, low, opening, and closing prices of a stock or security within a specified time period. Overtime, the candles create patterns that traders can use to predict price movements, trends, and reversals.
Most candlesticks consist of a body and upper and lower wicks, which are also known as shadows or tails.
Candlestick charts are commonly used, along with line charts, bar charts, and point-and-figure charts.
What Is a Candlestick Stock Chart?
Candlesticks originated in Japan, perhaps in the 19th century, as a means of tracking the prices of certain assets and commodities. When candlestick charts were introduced in the West, they originally were called Japanese candlestick charts.
The candlestick itself consists of an open area called the “real body,” which shows the range between the open and close prices, with the price movements in the specified time period shown as vertical lines or wicks (also called shadows) on either end of the body. The wicks indicate the high and the low for that period.
When the real body is filled in with black or red it means the close was lower than the open. When it’s white (blank) or green, the close was higher than the open. On most platforms, traders can alter the colors to whatever is easiest for them to read. Some candlestick charts are black and white.
Traders can set the desired time period they want to analyze; often a candlestick represents the price movements during a trading day. Candlestick patterns are formed by a series of candles within a designated interval (e.g. days or weeks). 💡 Quick Tip: Before opening any investment account, consider what level of risk you are comfortable with. If you’re not sure, start with more conservative investments, and then adjust your portfolio as you learn more.
Candlestick Charts vs Bar Charts
Like candlestick charts, bar charts show security price changes over time. Many traders think candlestick charts are easier to read; the thicker candle bodies make it easy to see the distinction between the opening and closing price and the high and low.
Bar charts are also often not color coded, making it more difficult to see price trends. However, some traders prefer the cleaner aesthetic of a bar chart.
What Do Candlestick Charts Tell Investors?
Candlestick charts are composed of candles lined up next to one another, each of which shows price movement between the specified time period. Because candles show price changes in certain time periods, traders can use charts to see trends and try to predict price changes.
Candlestick patterns can show that a negative or positive price continuation is likely, or that a price trend may reverse. Even a single candlestick can help traders decide whether to buy or sell.
Some investors use fundamental analysis of an investment to make trading decisions. But that in-depth analysis is typically not of interest to a day trader.
Day traders often use what is called technical analysis in an attempt to detect patterns in a security’s performance. Although this method is common in the financial industry, many debate the validity of these patterns and whether they can be predictive, or help investors anticipate a security’s future performance in any way.
Recommended: Understanding the Risks of Day-Trading
How to Read Candlestick Charts
Owing to the four main components of a single candlestick — the opening price, closing price, the high and the low — candlestick charts convey a lot of information. Essentially you have five data points in each candlestick:
• The opening price (indicated by the top of the real body)
• The closing price (the bottom of the real body)
• The high (the upper wick)
• The low (the lower wick)
Whether the day’s closing price was higher or lower than the previous close.
Parts of the Candlestick Chart
As described above, the part of the candle between the top and bottom borders is called the candle body, or real body. This represents the opening and closing prices of the time period that the candle depicts.
The candle body is more important than the wicks or shadows, because the wicks show high and low trades, which may be significantly different from the majority of the day’s trades. A longer candle body shows a stronger price trend in either direction.
Upper Wick
The vertical line above the candle body is the upper wick or shadow. The top of the shadow the highest price the security was traded at during the set time period. A long upper shadow indicates a bearish price direction: It means traders are unsuccessfully attempting to increase prices.
Lower Wick
The line below the candle body is the lower wick. The bottom of the wick marks the lowest price of the security during the set time period. If a wick is short, it means the opening or closing price was near the high and low trades.
Range
The range is the difference between the top and bottom of the real body. If the close was lower than the open, the real body is filled in (usually black or red. If the close was higher than the open, the real body is hollow or green (or another color of the trader’s choice).
While these are the components of a traditional or standard candlestick chart, some candlestick charts have candles without a top or bottom or wicks. 💡 Quick Tip: It’s smart to invest in a range of assets so that you’re not overly reliant on any one company or market to do well. For example, by investing in different sectors you can add diversification to your portfolio, which may help mitigate some risk factors over time.
Candlestick Chart Time Frames
Traders can select the time frame that each candle represents. One commonly used time frame shows the opening price, closing price, and high and low for a single day. Each candle in the chart would show the price movement in one day.
A trader could see that a stock price declined significantly over the course of the day, which could result in a continuing decline in the coming days.
The most commonly used time frames are:
• 1-minute (M1)
• 5-minute (M5)
• 15-minute (M15)
• 30-minute (M30)
• 1-hour (H1)
• 4-hour (H4)
• Daily (D1)
• Weekly (W1)
• Monthly (M1)
Shorter time frames essentially allow traders to zoom in on the price action of the chart. For example, an H1 chart would have four times the candles of an H4 chart, so traders can look more closely at price changes.
Basic Types of Candlestick Charts
Candlesticks are created by price movements throughout the specified time period. Taken as a cluster, candlesticks form patterns traders use for analysis and trend prediction.
Bearish and Bullish Patterns
There are two main patterns: bearish (the security’s price is likely to decline) and bullish (the security’s price is likely to rise). These reflect the common terms for bullish and bearish market conditions.
No pattern is a guarantee of a price change or of a security’s performance. Candlestick charts are therefore used more as indicators of potential price trends.
Doji Candles
If the price closes exactly where it opened, there is no candle body. This is called a doji and is marked with a cross. A doji candlestick is rare, but when it shows up it can be a predictor of a price reversal.
Marubozu
The marubozu is essentially the opposite of the doji. It has a long candle body and no wicks or shadows. This type of candle indicates that the price didn’t trade beyond the range of the open and closing prices.
Common Types of Candlestick Patterns
Certain candlestick patterns can help traders make short-term predictions about price movements. Although a single candle indicates whether buying or selling action is strong, it doesn’t necessarily mean that the long-term price will continue in that direction. This is why traders look at different time periods to get a sense for longer-term trends, and to understand support and resistance levels.
There are many ways to read candlestick charts, depending on trading strategy and time frame.
At first glance, candlestick charts can appear pretty random. But there are many bullish and bearish patterns traders can identify in order to try to predict price movements. It’s important to remember that patterns are not guarantees of future price movement.
Bearish Engulfing Pattern
If there are more sellers than buyers when a chart has been trending upward, traders will see a long red candlestick after a small green one. This can indicate that prices may decline.
Bullish Engulfing Pattern
The opposite pattern will occur if the price is trending downward but then a long green candlestick appears in the chart. This may indicate that prices will continue to increase.
Bearish Evening Star
The evening star pattern is uncommon, but considered a strong indicator of future price declines when it does show up. It’s generally a three-day candlestick pattern.
• The first day is a large white or green candle, indicating a clear rise in price.
• The second day shows a smaller candle, indicating a more modest price increase.
• The third day is a long red candle that opens at a lower price than the previous day, and closes near the middle of the first candle’s range.
Morning Star
The reverse of the evening star is the morning star, a bullish indicator. The first candlestick in this pattern is long and red, the second is short and lower than the first, and the third is a long green candlestick that closes above the center of the first, indicating an upward price trend.
Bearish Harami
This is a two-candle pattern. If traders see a small red or black candle body that fits completely within the previous day’s candle body, it could indicate a price reversal. Price action continuing downward after the small candle could indicate a longer-term downward trend.
Bullish Harami
A bullish harami is a three-day pattern that may indicate a reversal of a bearish trend. If there are two black or red candles, indicating the downward trend, followed by a small white or green candle that fits completely within the body of the previous candle, that may signal a bullish turn.
Harami Cross
The harami cross can be bearish or bullish. With a bearish harami cross, there is a long candle that’s part of a downtrend and it’s followed by a doji.
With a bullish harami cross, there is a long candle that’s part of an upward trend, also followed by a doji. In either case, the doji could signal a reversal of the trend.
Falling Three Methods
This is a bearish pattern that includes five candlesticks. Typically there is one day with a strong downward trend, followed by three small green candle bodies that stay within the boundaries of the first candle, followed by another long red candle. The falling three methods may signal an interruption of the trend, but not a full-on reversal.
Hammer
If the price significantly decreases but then makes a comeback and ultimately closes near the high, this is called a hammer. The hammer pattern has a small body and a long lower wick. It’s a bullish signal because it shows that the price was declining but then traders pushed it back up.
Hanging Man
The hanging man pattern is the opposite of the hammer. It is also referred to as an inverted hammer. This pattern looks like a square lollipop. If traders are attempting to spot the top or bottom of a market, they often use hammer and hanging man patterns as indicators.
Shooting Star
A shooting star takes shape when a security opens, the price rises significantly over the trading period, but then closes near the opening price, signaling a reversal.
To really be considered a shooting star pattern, this particular candlestick — with the short real body, long top wick, and hardly any bottom wick — must occur within an upward price trend.
Gaps
A gap is a window of time in which there are no trade transactions. Gaps in a chart can indicate support and resistance levels, which can be followed by a further bullish or bearish trend.
The Takeaway
Candlestick charts are a way of condensing price information about a security into a fairly simple diagram that looks like a candle with two wicks. The candle’s “real body” shows the range between the open and close prices. The wicks are the vertical lines at the top and bottom of the real body, indicating the high and the low for that period.
Candlesticks can be grouped together into patterns that traders can interpret as signals of price trends that are either bearish or bullish. Often it’s best to use tools like this with other types of technical indicators.
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Intercontinental Exchange (ICE) completed its acquisition of Black Knight Tuesday, making the combined company the biggest player in the mortgage tech space. I sat down with Tim Bowler, president of ICE Mortgage Technology, a business unit of ICE, to talk about the company’s mortgage automation strategy — and what keeps him up at night.
Sarah Wheeler: ICE’s acquisition of Black Knight just closed today. What is top of mind for you moving forward?
Tim Bowler: We’re incredibly excited about what we will be able to bring to our customers, to borrowers, as well as to other stakeholders across the mortgage ecosystem. We’ll accelerate our focus on delivering value and efficiencies with the combined ICE and Black Knight entities so we can continue the journey of helping more people into homeownership.
SW:ICE Mortgage Technology is known for its focus on automation. What parts of the mortgage loan process have been the most resistant to digitization up to this point?
TB: It’s hard to say because there are so many different kinds of transactions between borrowers and lenders. What we’re trying to do at ICE is break down the various transactions where a borrower and a lender might interface and figure out how we can deliver a set of technology tools and solutions so that the borrower can get their loan — for purchase or refinance — as fast as possible with the least amount of cost.
That mindset of knowing that mortgage transactions vary depending on the borrower’s circumstances is an important lens for us because it helps us actually get to the solutions that make the most sense for each one of those discrete transactions.
SW:How does ICE determine the right balance between automation and the human element?
TB: The reality is that the mortgage process, particularly in today’s purchase market, is still a deeply human process. We realize that we are providing the appropriate set of tools and solutions to those humans who are helping those borrowers through the most important financial transaction of their life, so that the processcan be as efficient, seamless and pleasant as possible. The right technology can help you achieve faster approvals and faster closing, while also giving greater comfort and certainty to that borrower.
It’s also helping those borrowers find the right products. Those will inevitably flow through a lender, so we make sure that the lenders have as much information as possible around what might be the best, most appropriate alternatives to present to borrowers.
SW:The FHFA recently held a tech sprint for the mortgage industry and part of the goal was to find out why adoption was low on some of the tech solutions that have been available for years that could really benefit lenders, servicers and borrowers if they were adopted. What do you see as the key obstacles to tech adoption now as, as opposed to in the past?
TB: It seems like each mortgage process should be relatively standardized because we’re manufacturing loans — the vast majority of which will be purchased by the two GSEs or insured by FHA, VA or USDA.
But in the midst of that process is an individual or family and it ends up being a very human-to-human experience. Maybe in the past, the industry looked and asked how we could just industrialize everything associated with the mortgage underwriting approval and funding process too myopically. We think taking a step back to look at that origination process through a human lens will be helpful to increase the uptake of some of the tools that are out there to make the process work.
SW:The cost of origination has been front and center for mortgage banking executives. How are the most successful mortgage executives prioritizing their resources right now?
TB: In this purchase market, it’s the ones who are identifying borrowers they can work with on purchasing that first home. Or, if they are selling and then buying another home, the lenders getting them approved as fast as possible. It’s so important in this market that when a buyer puts an offer on a home, it’s 100% clear that financing is available and ready to support the purchase. And then closing as fast as possible because we’re still in a tight housing market with tight inventory.
SW:We know that homeowners who locked in low mortgage rates might stay in their current home for years. And that’s just building on a trend that’s just been going on even before we got to these really low mortgage rates. What’s the role of tech as lenders play the long game in this market?
TB: Many families and households locked in extremely favorable rates. But I think there’s a dynamism in the U.S. economy and in the housing markets that means people will still move, they’ll still buy a bigger home when the time is right.
In today’s environment, I think there are going to be more households looking to use their equity to invest in their home within the context of retaining the existing primary mortgage that they have at attractive rates. So, for us as a technology provider, it is finding solutions that make it efficient for borrowers to make important investments in their house through mortgage products that meets their needs from a pricing perspective, while also delivering a smooth experience throughout the process.
SW:Affordable housing initiatives are on the radar of more lenders this year, but your typical loan officer may not have a lot of experience there. How are lenders helping borrowers take advantage of loan product innovation and affordable housing initiatives?
TB: There’s no doubt that debt-to-income levels are going to be stressed for that first-time borrower because home prices have remained high despite higher interest rates. And I think it’s incumbent on all of us in the industry to provide tools so lending officers have the knowledge they need to help borrowers access affordable programs, so they know what’s available and how pricing works for those programs.
SW:AI has really stepped into the spotlight this year. Is this going to be a time we will look back on as being a turning point?
TB: The way I think about a lot of these new tools that are being created, whether they be generative AI or more efficient search or more efficient document recognition, is that they should be used to help buyers have a better experience. Correctly harnessed and used, AI could ultimately lead to a more efficient process where decision-making for the borrower is faster.
Our team is focused on thinking about technology in this way: How do we help our customers and partners help borrowers have a better experience through the advanced technologies and tools that are being developed?
SW:Looking out 10 years, what part of the mortgage ecosystem will have changed most in that time frame? What challenges do you think we’ll still be talking about solving with technology?
TB: There are four key aspects to the mortgage process that could be evolved. First is determining whether the homebuyer has the capacity to cover that housing cost on a regular basis. And my hunch tells me that over the course of the next decade, we’re going to develop better tools than those that exist today to be able to highlight the fact that borrowers have the ability to repay on their loan. And a lot of that will come from better mechanisms to evaluate past rental history and the borrowers’ ability to manage housing payments consistently.
As a technology provider, we want to find a better way to show the ability to repay so that the ultimate investor in that mortgage or the insurer feels comfortable with it without having to retain massive amounts of personal information on a multi-decade basis, which is inefficient for the system and puts that information at risk.
Secondly, I think the tools around how we assess the value of the property and the risk associated with that property will evolve to drive a more efficient process, particularly for that first-time borrower or that lower wealth transaction.
The third area is trying to find a way to have a better outcome with refinancing for lower loan balance borrowers than what we saw in the last period of refinancing where the frequency of higher loan balances refinances was just so much greater relative to moderate-balance borrowers, who could benefit the most.
Lastly, this is just a deeply personal point for me because I’m always shocked at how inefficient it is: We’ve got to be able to use technology so when a borrower makes that last payment on the mortgage and owns that house free and clear, the release of liens or security interests is improved.
SW:You are the head of a very large mortgage tech company. What keeps you up at night?
TB: The lack of housing supply in the country and the lack of affordable housing supply, specifically. That lack is driving the cost of housing to artificially high levels that is really squeezing so many lower- and middle-income households.
And I’m hoping and praying that policymakers can be more creative and collaborative in that regard because we have to solve it for this generation of kids and the next generation of kids to come. So that they’ve got adequate housing at fair prices that does not chew up half of their paycheck — that is absolutely critical if you want to keep this economy going.
SW:Lastly, what makes you hopeful or optimistic about our industry right now?
TB: I’m deeply optimistic about our industry. Despite the fact that we face a myriad of challenges, I wouldn’t trade our mortgage market for any other mortgage market on the planet. We’re innovative, we’re dynamic, we have the ability to fund mortgages through thick or thin. We have all the tools at our disposition to retain the best mortgage market on the planet.
It is just incumbent on everybody in the ecosystem to work hard every day and in every way to make a difference to have a better, fairer, more dynamic market.
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Moving home is such an exciting time. I am a bit of a moving addict actually, it comes with the territory of being a serial renter. I would get so excited about starting over with my interior design style, choosing new sheets, picking out new prints, and deciding what style of rug would suit my new place best.
And after years of moving, I have worked out what pieces are the most important. I have noticed what pieces come with from home to home, and what’s made it out of the rentals and finally into my own space with me.
interior trends, so it can be tricky investing in pieces for a new home that will stand the test of time. But as both a pro home mover and the Head of Design at Homes & Gardens, I feel equipped enough to share with you the new house decor buys I have never regretted buying. And yes, they are purely aesthetical decor, and of course, you want to be making practical investments like the best mattress, and good quality kitchen appliances too, but I think investing in decor is equally important when shopping for a new home.
What to buy for a new home
Moving into a new home can be a stressful time, so I do think it’s important to allow yourself to get a bit excited about investing in new timeless pieces and treating yourself to decor that’s going to instantly elevate your home and make the new space feel more like you.
Some of these buys are ones I think have longevity and will stay with you move after move, but I’ve also pieces I think are key to making a house feel like a home and for me are the first things I pull out of the boxes when I get to a new space.
West Elm Jute Boucle Rug
Anthropologie Gleaming Primrose Mirror
Wall decor ideas are always something I focus on in a new home. Bare walls can be quite intense when you are faced with how to fill all that blank space. But I think mirrors are far easier to shop for and get right, than prints. Print trends come and go and it can take time to find pieces you really love and stay with you, but mirrors have more longevity, mirror trends don’t switch up all that often, and I’ve found the mirrors I have invested in have stood the test of time.
Case in point, the Anthropologie Gleaming Primrose Mirror. It lived leaning up against a wall in one of my apartments and it still worked.
Pom Pom At Home Chatham Cotton Matelasse Coverlet
best bed sheets are always worth in investing in for a new home. I recommend stocking up on a few sets in seasonal sales, so you can always have a nice set on rotation. Again, like with the rugs I like to have mostly plain, simple bedding that can adapt to my ever-changing tastes and interior design trends. You can always switch up the look with cushions and throws too.
I like that this set as it has a subtle texture to it, it adds interest without the need for color or a bold pattern. It would love wonderful layering up with both soft neutrals and brighter colors depending on the look you want to achieve.
Amber Lewis for Anthropologie Marana Table Lamp
home feel more cozy. In fact, lamps are the first thing I unpack. I dot them around my new space and they even make a sea of boxes look more inviting. I have found the lighting that I have bought and never regretted are table and floor lamps. I’ve left ceiling lamps and light shades behind before, but never my accent lighting.
CB2 White Picture Frame
Anthropologie Glenna Platter
kitchen countertops and add them to kitchen shelving with my cookbooks.
A Table Full of Love by Sky McApline
Crate and Barrel Edge Drink Glasses
Diptyque Feu de Bois Candle
best candles I never regret buying are ones that double up as decor and can be on show all the time.
Diptyque candles instantly elevate a space, and when moving I always unpack them pretty quickly and dot them around surfaces to make the chaos feel slightly calmer and more sophisticated. Diptyque’s ‘Feu de Bois’ is ideal for this time of year, smokey and woodsy and delicious.
So there is my list of new home buys I think are essential. A mix of both investment pieces that every new home should have, and small items that you should treat yourself to to instantly make your space feel more like home. I will say when moving into a new home, do spend a bit of time in the space before buying anything new, the pieces I don’t regret buying are ones I have mulled over, or have had a vision that I know I will love for years to come, not just panic bought because something is on trend or because I am desperate to fill a blank space.
A key indicator of excess liquidity in the financial system has been falling since May, a development that holds promise for banks but raises questions for financial stability.
The Federal Reserve’s overnight reverse repurchase agreement, or ON RRP, facility has seen usage decline from nearly $2.3 trillion this spring to less than $1.7 trillion through the end of August, its lowest level since the central bank began raising interest rates in March 2022.
For banks, this was a desired outcome of the Fed’s effort to shrink its balance sheet. As the central bank allows assets — namely Treasuries and mortgage-backed securities — to roll off its books, its liabilities must decline commensurately. The more of that liability reduction that comes from ON RRP borrowing, the less has to come out of reserves, which banks use to settle transactions and meet regulatory obligations.
“What we’ve seen is the decline in the Fed holding has mostly come through on the liability side in terms of a decline in reverse repos, rather than reserves,” Derek Tang, co-founder of Monetary Policy Analytics, said. “This is, of course, welcome news to the Fed, because the Fed wants to make sure that there are enough reserve balances in the banking system to operate smoothly. So that’s good news.”
Yet, as participation in the ON RRP — through which nonbank financial firms buy assets from the Fed with an agreement to sell them back to the central bank at a higher price the next day — shrinks, some in and around the financial sector worry that funds are being redirected to riskier activities.
Darin Tuttle, a California-based investment manager and former Goldman Sachs analyst, said the decline in ON RRP usage has coincided with an uptick in stock market activity. His concern is that as firms seek higher returns, they are inflating asset prices through leveraged investments.
“I tracked the drawdown of the reverse repo from April when it started until about the beginning of August. The same time that $600 billion was pumped back into the markets is when markets really took off and exploded,” Tuttle said. “There’s some similarities there in drawing down the reverse repo and liquidity increasing in the markets to take on excessive risk.”
The Fed established the ON RRP facility in September 2014 ahead of its push to normalize monetary policy after the financial crisis of 2007 and 2008. The Fed intended the program to be a temporary tool for conveying monetary policy changes to the nonbank sector by allowing approved counterparties to get a return on unused funds by keeping them at the central bank overnight. The facility sets a floor for interest rates, with the rate it pays representing the first part of the Fed’s target range for its funds rate, which now sits at 5.25% to 5.5%.
For the first few years of its existence, the facility’s use typically ranged from $100 billion to $200 billion on a given night, according to data maintained by the Federal Reserve Bank of New York, which handle’s the Fed’s open market operations. From 2018 to early 2021, the usage was negligible, often totaling a few billion dollars or less.
In March 2021, ON RRP use began to climb steadily. It eclipsed $2 trillion in June 2022 and remained above that level for the next 12 months. Uptake peaked at $2.55 trillion on December 30 of last year, though that was partially the result of firms seeking to balance their year-end books.
While it is difficult to pinpoint why exactly ON RRP use has skyrocketed, most observers attribute it to a combination of factors arising from the government’s response to the COVID-19 pandemic, including the Fed’s asset purchases as well as government stimulus, which depleted another liability item on the Fed’s balance sheet: the Treasury General Account, or TGA.
Regardless of how it grew so large, few expected the ON RRP to ever reach such heights when it was first rolled out. Michael Redmond, an economist with Medley Advisors who previously worked at Federal Reserve Bank of Kansas City and the Treasury Department, said the situation raises questions about whether the Fed’s engagement with the nonbank sector through the facility ultimately does more harm than good.
“The ON RRP, when it was initially envisioned as a facility, was not expected to be this actively used. The Fed definitely has increased its footprint in the financial system, outside of the usual set of counterparties with it,” Redmond said. “The debate is whether that increases financial instability, because obviously it is nice to have the stabilizing force of the Fed’s balance sheet there, but it also potentially leads to counterproductive pressures on private entities that need to essentially compete with the Fed for reserves.”
Fed officials have maintained that the soaring use of the facility should not be a cause for concern. In a June 2021 press conference, as ON RRP borrowing was nearing $1 trillion, Fed Chair Jerome Powell said the facility was “doing what it’s supposed to do, which is to provide a floor under money market rates and keep the federal funds rate well within its — well, within its range.”
Fed Gov. Christopher Waller, in public remarks, has described the swollen ON RRP as a representation of excess liquidity in the financial system, arguing that counterparties place funds in it because they cannot put them to a higher and better use.
“Everyday firms are handing us over $2 trillion in liquidity they don’t need. They give us reserves, we give them securities. They don’t need the cash,” Waller said during an event hosted by the Council on Foreign Relations in January. “It sounds like you should be able to take $2 trillion out and nobody will miss it, because they’re already trying to give it back and get rid of it.”
But not all were quite so confident that the ON RRP would absorb the Fed’s balance sheet reductions. Tang said there have been concerns about bank reserves becoming scarce ever since the Fed began shrinking its balance sheet last fall, but those fears peaked this past spring, after the debt ceiling was lifted and Treasury was able to replenish its depleted general account.
“If the Treasury is increasing its cash holdings, then other parts of the Fed’s balance sheet, other liabilities have to decline and there was a big worry that reserves could start declining very quickly,” Tang said. “The Treasury was going from $100 billion to $700 billion, so if that $600 billion came out of reserves, we could have been in trouble.”
Instead, the bulk of the liabilities have come out of the ON RRP, a result Tang attributes to money market funds moving their resources away from the facility to instead purchase newly issued Treasury bills.
The question now is whether that trend will continue and for how long. While Fed officials say the ON RRP facility can fall all the way to zero without adverse impacts on the financial sector, it is unclear whether it will actually reach that level without intervention from the Fed, such as a lowering of the program’s offering rate or lowering the counterparty cap below $160 billion.
A New York Fed survey of primary dealers in July found that most expected use of the ON RRP to continue falling over the next year. The median estimate was that the facility would close the year at less than $1.6 trillion and continue falling to $1.1 trillion by the end of next year.
Those same respondents also expect reserves to continue dwindling as well, with the median expectation being less than $2.9 trillion by year end and roughly $2.6 trillion by the end of this year. As of Aug. 31, there were just shy of $3.2 trillion reserves at the Fed.
“The Fed’s view is that there are two types of entities with reserves, the banks that have more than enough and they don’t know what to do with, and the ones that are having some problems and need to pay up to attract deposits, which ultimately are reserves,” Redmond said. “When there are fluctuations in reserves, it’s hard to tell how much of that is shedding of excess reserves by banks that are flush with them, and how much is a sign that this is going to be a tougher funding environment for banks.”
Tuttle said a balance-sheet reduction strategy that relies on a shrinking ON RRP is not inherently risky, but he would like to hear more from the Fed about how it sees this playing out in the months ahead.
“We have gotten zero guidance on the drawdown of reverse repo,” he said. “Everything is just happening in the shadows.”
July saw inflation rise once again, and interest rates are still rising. In fact, the average rate on credit cards is now nearly 21%, up from just 15% a little over a year ago. With these economic headwinds, you might find yourself in need of extra funds — to repair your home, to cover unexpected costs, or maybe just as a financial safety net.
Either way, if you’re a homeowner, you may think about tapping your home equity. Home equity loans and HELOCs both allow you to turn your equity into cash, which you can then use however you wish.
Is now a good time to do that, though? And what should you consider before tapping your home equity in today’s market? We asked experts for their opinion to help you decide.
Start by exploring your home equity loan options here to learn more.
Is home equity worth using now? Here’s what experts think
Thinking of using your home equity today? Here’s how the experts we spoke to recommend homeowners proceed.
Know what you’ll use it for
Tapping your home equity means putting your home at risk, so having a clear idea of what you need the money for is key before making a decision.
“Why do you need the money? Is it really necessary? Are you investing in your future or in something that strays away from your financial goals?” asks Jim Black, executive director of lender strategy at mortgage lender Calque. “Some things, like vacations, might not be the best reason.”
In short: Make sure the risk is worth it. Fixing the roof on your house or putting money into your business likely fall within that category. But pulling out equity to pay for new clothes or buy a new couch may not.
Using your home equity might also be smart if you’re eyeing a new home but currently have an ultra-low mortgage rate. In this scenario, selling your house and buying a new one would mean trading up for today’s 7%-plus rates. You might consider leveraging your equity and improving your existing house instead.
“Homeowners have the unique opportunity right now to tap into an incredible amount of home equity that’s built up over the past few years,” says Bill Banfield, executive vice president of capital markets at Rocket Mortgage. “They can use this cash to do home renovations and make their space better fit their life — without having to pick up and move to a new house.”
Get started with a home equity loan here now.
Weigh it against other options
You’ll also want to weigh all your options before turning to home equity. Depending on what you’re looking to pay for, you may be able to use a credit card, personal loan, student loan or one of many other financial products.
Typically, home equity loans and HELOCs are going to have lower rates than credit cards and personal loans, but they’re higher than rates you’d see on first mortgages and refinances. Because of this, it’s important to get quotes for several different products (and from different lenders) to ensure a home equity product is the most affordable path forward.
“Do you have other options?” Black asks. “Look at different ways to get the financing you want and compare them.”
If you do opt to tap your home equity, you should also compare your options within that realm. Home equity loans and HELOCs are the most commonly used products, but depending on your age, you may also consider a reverse mortgage (these are only for seniors). Home equity investments — which give you an upfront payment in exchange for part of your home’s future value — are an option, too.
“These provide funds upfront with no monthly payments or debt accrual, but in exchange for the some future value of your home — or its appreciation over time — or both,” says Sarah Dekin, president of Hometap, a home equity investment platform. “The potential disadvantage here, of course, is that you may miss out on some part of the future value of your home down the line when you settle.”
Think long term
Finally, think about your long-term financial picture before you tap your equity. Calculate the total cost of tapping your equity — the interest, closing costs, or lost appreciation you could see — and make sure those costs are worth it.
As Black puts it, “Banks are in the business of making interest, and this means you need to see the worst-case amount of equity you will be losing by borrowing. You also need to evaluate the cost of attaining the additional debt.”
Consider your employment and income prospects, too. Is your job stable? Do you expect your income to be the same or higher 10 years down the road? You want to be sure you can afford your payments not just now, but throughout your entire loan term (and some home equity loans are as long as 30 years).
Keep in mind that if you use a HELOC or another product with a variable rate, your payments could rise over time, too, so make sure you’ll have the capability to make those higher payments should they come about. If not, you could lose your home to foreclosure.
“The most important consideration is affordability,” says Adam Boyd, executive vice president of home equity, credit cards, and unsecured lending at Citizens Bank. “Since the borrower is using the home as collateral, it is critical they ensure they can afford the loan. If there’s any concern that rising rates will impact your ability to afford the loan in the future, it may not be the best option.”
Learn more about your home equity options here now.
Other home equity benefits to know
Home equity products can be smart tools when used in the right scenarios. They may be able to save you on interest compared to other loans and financing options, and they allow you to spread your costs out over many years. You may even get a tax deduction, depending on how you use the funds.
Just remember: Using your equity means putting your home on the line as collateral. If you’re not sure this is the right move for your finances — or you want help evaluating your full range of options — consider talking to a financial professional first. They can point you in the right direction.
Fun fact: your mortgage lender—the bank or company that granted you your loan—probably isn’t cashing your mortgage payment check each month. That’s because almost immediately after you closed on your loan, they turned around and sold it.
With the housing bubble that caused the recession still on everyone’s mind, it’s more important now than ever for home buyers to know how the system works—and how it went so wrong.
What many homeowners and buyers don’t realize is that there’s an entire secondary mortgage market where the lender becomes a seller. Here are the basics to help you understand how that market influences the primary mortgage industry and the rest of the economy.
What is the Secondary Market for Mortgages?
Once you close your loan, your bank takes it to a marketplace, where a variety of investors can purchase it. Sometimes, the final purchaser is lined up before you even close and the paperwork at your signing includes a statement as to who they will be.
The largest investors by far are Fannie Mae and Freddie Mac, two corporations that are owned by the United States government. They were designed to provide backing on the secondary market for low-income and very-low-income home purchases, and they have expanded under the Obama administration to take on more and more purchases.
There are other investors on the secondary mortgage market, and often those investors will purchase the loan and bundle it together with other loans into a fund called a mortgage-backed security, or MBS for short.
Understanding How Mortgage-Backed Securities Work
If your mortgage is bundled into an MBS fund, the investor or investment entity that created it then sells out shares of the fund to other investors in the same way they might sell shares of a mutual fund or a company’s stock.
Investors then buy the shares of the fund knowing that as the loans are paid, a portion of the returns (a.k.a. your interest payment) comes back to them. How large a portion depends on several factors, including how many shares of the security they bought, how many mortgages are bundled into the security, and how many of those loans are performing as expected.
The reason why such a large number of mortgages are bundled together? Reduced risk.
After all, if more mortgages are part of the fund, then when a few have repayment difficulties, that relatively small number is outweighed by the larger number of still-performing mortgages and the fund as a whole remains profitable.
For this reason, MBSs were, historically, one of the most secure investments available.
MBS Funds and the Financial Meltdown
Many homeowners are rightly wary about mortgage-backed securities on the secondary mortgage market in light of what happened with the financial meltdown of 2007-2008.
Here’s how it worked: private equity investors grouped higher- and lower-risk mortgages in separate categories, called tranches. They then sold these without disclosing the risks of investing in a particular tranche to the investors.
In fact, during this period, investors were rarely told about the tranches, leading to situations where investors were misled about the risks. When these funds began to fail, it affected many of the investors involved, and for many, it was the first time they fully realized which risk category their investment had fallen into.
The results are history.
MBS Funds in Today’s Secondary Mortgage Market
After the financial meltdown, the Obama Administration unveiled a comprehensive plan for reforming the mortgage market, one that put Freddie Mac and Fannie Mae front and center. The plan sought to achieve a few key changes to the market:
To use the government-backed corporations to underwrite mortgages and provide stability, so ordinary people could purchase with confidence again.
To expand the programs to cover most American home purchases in the short term.
To use FHA measurements to ensure that housing was being provided to low-income and extremely-low-income families who qualify.
To stabilize the market so banks could continue to offer mortgage loans with confidence.
To eventually scale back these programs as the private equity market regains strength, BUT
To fund all of the programs’ commitments for the duration of the loans they underwrite.
As a result of these clear policy goals, today’s secondary mortgage market is dominated by Freddie Mac and Fannie Mae, who acquire around 90 percent of all new mortgages between them.
MBS funds do still play a role in the marketplace, especially when it comes to jumbo loans, commercial real estate loans, and mortgages that do not meet Fannie Mae and Freddie Mac requirements.
As time goes on, they are also growing in popularity again, and the new regulations on their structure and constitution have restored some consumer confidence in their use.
Whoa, have you seen what just happened to interest rates!?
Suddenly, after at least fourteen years of our financial world being mostly the same, somebody flipped over the table and now things are quite different.
Interest rates, which have been gliding along at close to zero since before the Dawn of Mustachianism in 2011, have suddenly shot back up to 20-year highs.
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Which brings up a few questions about whether we need to worry, or do anything about this new development.
Is the stock market (index funds, of course) still the right place for my money?
What if I want to buy a house?
What about my current house – should I hang onto it forever because of the solid-gold 3% mortgage I have locked in for the next 30 years?
Will interest rates keep going up?
And will they ever go back down?
These questions are on everybody’s mind these days, and I’ve been ruminating on them myself. But while I’ve seen a lot of play-by-play stories about each little interest rate increase in the financial newspapers, none of them seem to get into the important part, which is,
“Yeah, interest rates are way up, butwhat should I do about it?”
So let’s talk about strategy.
Why Is This Happening, and What Got Us Here?
Interest rates are like a giant gas pedal that revs the engine of our economy, with the polished black dress shoe of Federal Reserve Chairman Jerome Powell pressed upon it.
For most of the past two decades, Jerome’s team and their predecessors have kept the pedal to the metal, firing a highly combustible stream of easy money into the system in the form of near-zero rates. This made mortgages more affordable, so everyone stretched to buy houses, which drove demand for new construction.
It also had a similar effect on business investment: borrowed money and venture capital was cheap, so lots of entrepreneurs borrowed lots of money and started new companies. These companies then rented offices and built factories and hired employees – who circled back to buy more houses, cars, fridges, iPhones, and all the other luxurious amenities of modern life.
This was a great party and it led to lots of good things, because we had two decades of prosperity, growth, raising our children, inventing new things and all the other good things that happen in a successful rich country economy.
Until it went too far and we ended up with too much money chasing too few goods – especially houses. That led to a trend of unacceptably fast Inflation, which we already covered in a recent article.
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So eventually, Jay-P noticed this and eased his foot back off of the Easy Money Gas Pedal. And of course when interest rates get jacked up, almost everything else in the economy slows down.
And that’s what is happening right now: mortgages are suddenly way more expensive, so people are putting off their plans to buy houses. Companies find that borrowing money is costly, so they are scaling back their plans to build new factories, and cutting back on their hiring. Facebook laid off 10,000 people and Amazon shed 27,000.
We even had a miniature banking crisis where some significant mid-sized banks folded and gave the financial world fears that a much bigger set of dominoes would fall.
All of these things sound kinda bad, and if you make the mistake of checking the news, you’ll see there is a big dumb battle raging as usual on every media outlet. Leftists, Right-wingers, and anarchists all have a different take on it:
It’s the President’s fault for printing all that money and running up the debt! We should have Fiscal Discipline!
No, it’s the opposite! The Fed is ruining the economy with all these rate rises, we need to drop them back down because our poor middle class is suffering!
What are you two sheeple talking about? The whole system is a bunch of corrupt cronies and we shouldn’t even have a central bank. All hail the true world currency of Bitcoin!!!
The one thing all sides seem to agree on is that we are “experiencing hard economic times” and that “the country is headed in the wrong way”.
Which, ironically, is completely wrong as well – our unemployment rate has dropped to 50-year lows and the economy is at the absolute best it has ever been, a surprise to even the most grounded economists.
The reality? We’re just putting the lid back onto the ice cream carton until the economy can digest all the sugar it just wolfed down. This is normal, it happens every decade or two and it’s no big deal.
Okay, but should I take my money out of the stock market because it’s going to crash?
This answer never changes, so you’ll see it every time we talk about stock investing: Holy Shit NO!!!
The stock market always goes up in the long run, although with plenty of unpredictable bumps along the way. Since you can’t predict those bumps until after they happen, there is no point in trying to dance in and out of it.
But since we do have the benefit of hindsight, there are a few things that have changed slightly: From its peak at the beginning of 2022 until right now (August 2023 as I write this), the overall US market is down about 10%. Or to view it another way, it is roughly flat since June 2021, so we’ve seen two years with no gains aside from total dividends of about 3%.
Since the future is always the same, unknowable thing, this means I am about 10% more excited about buying my monthly slice of index funds today than it was at the peak.
Should I start putting money into savings accounts instead because they are paying 4.5%?
This is a slightly trickier question, because in theory we should invest in a logical, unbiased way into the thing with the highest expected return over time.
When interest rates were under 1%, this was an easy decision: stocks will always return far more than 1% over time – consider the fact that the annual dividend payments alone are 1.5%!
But there has to be some interest rate at which you’d be willing to stop buying stocks and prefer to just stash it into the stable, rewarding environment of a money market fund or long-term bonds or something else similar. Right now, if a reputable bank offered me, say, 12% I would probably just start loading up.
But remember that the stock market is also currently running a 10% off sale. When the market eventually reawakens and starts setting new highs (which it will someday), any shares I buy right now will be worth 10% more. And then will continue going up from there. Which quickly becomes an even bigger number than 12%.
In other words, the cheaper the stocks get, the more excited we should be about buying them rather than chasing high interest rates.
As you can see, there is no easy answer here, but I have taken a middle ground:
I’m holding onto all the stocks I already own, of course
BUT since I currently have an outstanding margin loan balance for a house I helped to buy with several friends (yes this is #3 in the last few years!), I am paying over 6% on that balance. So I am directing all new income towards paying down that balance for now, just for peace of mind and because 6% is a reasonable guaranteed return.
Technically, I know I would probably make a bit more if I let the balance just stay outstanding, kept putting more money into index funds, and paid the interest forever, but this feels like a nice compromise to me
What if I want to Buy a House?
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For most of us, the biggest thing that interest rates affect is our decisions around buying and selling houses. Financing a home with a mortgage is suddenly way more expensive, any potential rental house investments are suddenly far less profitable, and keeping our old house with a locked-in 3% mortgage is suddenly far more tempting.
Consider these shocking changes just over the past two years as typical rates have gone from about 3% to 7.5%.
Assuming a buyer comes up with the average 10% down payment:
The monthly mortgage payment on a $400k house has gone from about $1500 at the beginning of 2022 last year to roughly $2500 today. Even scarier, the interest portion of that monthly bill has more than doubled, from $900 to $2250!
For a home buyer with a monthly mortgage budget of $2000, their old maximum house price was about $500,000. With today’s interest rates however, that figure has dropped to about $325,000
Similarly, as a landlord in 2022 you might have been willing to pay $500k for a duplex which brought in $4000 per month of gross rent. Today, you’d need to get that same property for $325,000 to have a similar net cash flow (or try to rent each unit for a $500 more per month) because the interest cost is so much higher.
And finally, if you’re already living in a $400k house with a 3% mortgage locked in, you are effectively being subsidized to the tune of $1000 per month by that good fortune. In other words, you now have a $12,000 per year disincentive to ever sell that house if you’ll need to borrow money to buy a new one. And you have a potential goldmine rental property, because your carrying costs remain low while rents keep going up.
This all sounds kind of bleak, but unfortunately it’s the way things are supposed to work – the tough medicine of higher interest rates is supposed to make the following things happen:
House buyers will end up placing lower bids which fit within their budgets.
Landlords will have to be more discerning about which properties to buy up as rentals, lowering their own bids as well.
Meanwhile, the current still-sky-high prices of housing should continue to entice more builders to create new homes and redevelop and upgrade old buildings and underused land, because high prices mean good profits. Then they’ll have to compete for a thinner supply of home buyers.
The net effect of all this is that prices should stop going up, and ideally fall back down in many areas.
When Will House Prices Go Back Down?
This is a tricky one because the real “value” of a house depends entirely on supply and demand. The right price is whatever you can sell it for. However, there are a few fundamentals which influence this price over the long run because they determine the supply of housing.
The actual cost of building a house (materials plus labor), which tends to just stay pretty flat – it might not even keep up with inflation.
The value of the underlying land, which should also follow inflation on average, although with hot and cold spots depending on which cities are popular at the time.
The amount of bullshit which residents and their city councils impose upon house builders, preventing them from producing the new housing that people want to buy.
The first item (construction cost) is pretty interesting because it is subject to the magic of technological progress. Just as TVs and computers get cheaper over time, house components get cheaper too as things like computerized manufacturing and global trade make us more efficient. I remember paying $600 for a fancy-at-the-time undermount sink and $400 for a faucet for my first kitchen remodel in the year 2001. Today, you can get a nicer sink on Amazon for about $250 and the faucet is a flat hundred. Similarly, nailguns and cordless tools and easy-to-install PEX plumbing make the process of building faster and easier than ever.
On the other hand, the last item (bullshit restrictions) has been very inflationary in recent times. I’ve noticed that every year another layer of red tape and complicated codes and onerous zoning and approval processes gets layered into the local book of rules, and as a result I just gave up on building new houses because it wasn’t worth the hassle. Other builders with more patience will continue to plow through the murk, but they will have less competition, fewer permits will be granted, and thus the shortage of housing will continue to grow, which raises prices on average.
Thankfully, every city is different and some have chosen to make it easier to build new houses rather than more difficult. Even better, places like Tempe Arizona are allowing good housing to be built around people rather than cars, which is even more affordable to construct.
But overall, since overall US house prices adjusted for inflation are just about at an all-time high, I think there’s a chance that they might ease back down another 25% (to 2020 levels). But who knows: my guess could prove totally wrong, or the “fall” could just come in the form of flat prices for a decade that don’t keep up with inflation, meaning that they just feel 25% cheaper relative to our higher future salaries.
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When Will Interest Rates Go Back Down?
The funny part about our current “high” interest rates is that they are not actually high at all. They’re right around average.So they might not go down at all for a long time.
Remember that graph at the beginning of this article? I deliberately cropped it to show only the years since 2009 – the long recent period of low interest rates. But if you zoom out to cover the last seventy years instead, you can see that we’re still in a very normal range.
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But a better answer is this one: Interest rates will go down whenever Jerome Powell or one of his successors determines that our economy is slowing down too much and needs another hit from the gas pedal. In other words, whenever we start to slip into a genuine recession.
In order to do that however, we need to see low inflation, growing unemployment, and other signs of an economy that’s not too hot. And right now, those things keep not showing up in the weekly economic data.
You can get one reasonable prediction of the future of interest rates by looking at something called the US Treasury Yield Curve. It typically looks like this:
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What the graph is telling you is that as a lender you get a bigger reward in exchange for locking up your money for a longer time period. And way back in 2018, the people who make these loans expected that interest rates would average about 3.0 percent over the next 30 years.
Today, we have a very strange opposite yield curve:
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If you want to lend money for a year or less, you’ll be rewarded with a juicy 5.4 percent interest rate. But for two years, the rate drops to 4.92%. And then ten-year bond pays only 4.05 percent.
This situation is weird, and it’s called an inverted yield curve. And what it means is that the buyers of bonds currently believe that interest rates will almost certainly drop in the future – starting a little over a year from now.
And if you recall our earlier discussion about why interest rates drop, this means that investors are forecasting an economic slowdown in the fairly near future. And their intuition in this department has been pretty good: an inverted yield curve like this has only happened 11 times in the past 75 years, and in ten of those cases it accurately predicted a recession.
So the short answer is: nobody really knows, but we’ll probably see interest rates start to drop within 18-24 months, and the event may be accompanied by some sort of recession as well.
The Ultimate Interest Rate Strategy Hack
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I like to read and write about all this stuff because I’m still a finance nerd at heart. But when it comes down to it, interest rates don’t really affect long-retired people like many of us MMM readers, because we are mostly done with borrowing. I like the simplicity of owning just one house and one car, mortgage-free.
With the current overheated housing market here in Colorado, I’m not tempted to even look at other properties, but someday that may change. And the great thing about having actual savings rather than just a high income that lets you qualify for a loan, is that you can be ready to pounce on a good deal on short notice.
Maybe the entire housing market will go on sale as we saw in the early 2010s, or perhaps just one perfect property in the mountains will come up at the right time. The point is that when you have enough cash to buy the thing you want, the interest rates that other people are charging don’t matter. It’s a nice position of strength instead of stress. And you can still decide to take out a mortgage if you do find the rates are worthwhile for your own goals.
So to tie a bow on this whole lesson: keep your lifestyle lean and happy and don’t lose too much sweat over today’s interest rates or house prices. They will probably both come down over time, but those things aren’t in your control. Much more important are your own choices about earning, saving, healthy living and where you choose to live.
With these big sails of your life properly in place and pulling you ahead, the smaller issues of interest rates and whatever else they write about in the financial news will gradually shrink down to become just ripples on the surface of the lake.
In the comments:what have you been thinking about interest rates recently? Have they changed your decisions, increased, or perhaps even decreased your stress levels around money and housing?
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* Photo credit: Mr. Money Mustache, and Rustoleum Ultra Cover semi gloss black spraypaint. I originally polled some local friends to see if anyone owned dress shoes and a suit so I could get this picture, with no luck. So I painted up my old semi-dressy shoes and found some clean-ish black socks and pants and vacuumed out my car a bit before taking this picture. I’m kinda proud of the results and it saved me from hiring Jerome Powell himself for the shoot.
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The top three cities in the ranking have an average payback period of just over 21 months on a 20% down payment. The average home value in these cities is $133,148.57.
Scroll through to see which cities are in the top 10 and how they fared.