Rocket Fuel Newsletter – 10/21/2024
And the award for “America’s Best Restroom” goes to … the Maverik service station near Salt Lake City International Airport. The soothing murals of snow-covered mountains with blue skies and modern shiny fixtures helped it reach the coveted top spot for 2024.
This week’s edition explores the “why” behind middle-class housing unaffordability, a conversion on distressed office space and our latest Rocket Release video.
Fuel up! 🚀
Middle-class homeowners are increasingly squeezed by housing costs
Home buyers across the United States are increasingly taking on higher mortgage payments in comparison to their income. The “cost-burdened” benchmark of those spending over 30% of their income on housing has doubled for the middle class over the past 10 years.
Here is the full article.
Distress in U.S. offices could lead to a surge in fresh housing
The U.S. office space vacancy rate reached 19.4% in August. In response, banks have begun offloading distressed office properties from their balance sheets, while larger banks have gradually tightened lending standards for non-residential real estate. Additionally, plans to convert office spaces into apartments have surged by 300% since 2021. These trends all point to a steady shift toward repurposing vacant office spaces into housing.
Click here for the full article from Benzinga.
Rocket Release with Mike Fawaz
Boost your business this holiday season with Rocket’s Home Equity Loans. In our latest video, Fawaz shares how you can help clients get the cash they need to prepare their homes or pay off debt, all while benefiting from fast approvals and competitive rates. Watch now to learn how you can offer this valuable solution and make the holidays stress-free for your clients.
How the Fed’s rate cuts (sort of) impact mortgage rates
After much anticipation, the Fed finally cut interest rates by half a basis point last month – its first cut since March 2020. While this move made headlines, the relationship between Fed rate cuts and mortgage rates is more nuanced than many realize. In fact, mortgage rates are actually influenced more by the 10-year Treasury yield than by the Federal Reserve's interest rate.
Here’s how it works: Treasury yields and mortgage rates tend to move together because they compete for the same low-risk investors. During the COVID-19 pandemic, when the Fed lowered the federal funds rate to virtually zero, yields on the 10-year Treasury plummeted to a historic low of 0.52%. As a result, mortgage rates also reached unprecedented lows. However, by 2022, as the Fed hiked rates to combat inflation, 10-year Treasury yields rose to nearly 3.5%, pushing mortgage rates over 5%.
Why is this relationship so important? Treasury securities, particularly the 10-year note, are seen as safe investments backed by the U.S. government. When investors seek security, they buy these notes, driving prices up and yields down. This impacts the rates for 15- and 30-year fixed-rate mortgages because these home loans compete with Treasury bonds for the same investors. If Treasury yields rise, so do mortgage rates, as investors demand higher returns for taking on the additional risk associated with mortgage-backed securities.
With expectations that the Fed will continue cutting rates through the end of the year, the bond market has likely already priced in the possibility of additional cuts. This means we may not see significant mortgage rate drops in response to further Fed rate cuts. As is often the case, mortgage rates moved in anticipation of the Fed’s decision in September, reflecting market rumors and expectations, rather than the actual rate change itself.
For those in the market for a mortgage, it’s helpful to understand how these dynamics play out. Fixed-rate mortgages tend to mirror the movements of Treasury yields, while adjustable-rate mortgages (ARMs) are more closely tied to the Fed funds rate. As such, while recent Fed cuts may signal relief for ARMs, fixed mortgage rates have already responded to broader market movements. As always, it’s the expectation of future Fed actions – rather than the actions themselves – that drive the biggest shifts.
Need a solution for clients worried about high rates? Consider Welcome Home RateBreak—a Rocket-funded 2-1 temporary buydown that lowers the interest rate for the first two years on HomeReady® and Home Possible® loans. This can save your clients thousands and ease their concerns about rising rates. Plus, we've got ready-to-use marketing materials to help you promote this opportunity to your clients.
Holiday marketing made simple
Keep an eye on the Marketing Hub. We’re adding flyers, social media tiles and postcards, designed to help you promote Rocket's Home Equity Loan offering to your clients. Use these customizable assets to spread the word, connect with clients and drive new business this holiday season.
Marketing Hub Materials: Home Equity Loan
Another tough puzzle last week! Just one solver completed the puzzle in less than a minute – our winner came in at 53 seconds, and just a handful more finished in under 2 minutes. Shoutout to everyone who has powered through the last 2 weeks of difficult puzzles – enjoy a lighter one this week.
This week’s puzzle gets 2 Rockets out of 5.
