Four events this week that could undo October's mortgage rate relief
Quick read on the week for anyone underwriting a flip or a rental right now.
October was a decent month for rates. The 10-year Treasury closed the 30th at 4.94%, down from 5.28% on the 2nd, and Freddie Mac's 30-year average is at 7.24% after two straight weekly drops. This week gives that four chances to reverse.
Today the Treasury updates how much it plans to borrow this quarter ($628 billion was the early number), and Wednesday it announces how many notes and bonds it'll sell. Supply worries were part of what pushed the 10-year over 5% in September.
Tuesday is the midterms. I'd watch what the result means for deficits, not who won, and I wouldn't read anything into a one-day move.
Thursday the Bank of England is expected to hike to 4.0%. Global bond yields tend to move together, so a surprise there can show up here.
Friday is October payrolls, with 55,000 expected after 29,000. Money markets already put about 76% odds on a Fed hike December 9.
Here's why I care. On a $264,000 loan at 7.24%, the payment's about $1,799. Hold that payment and your exit buyer can carry about $270,700 at 6.99% or $257,600 at 7.49%. That's a $13,100 swing in what your buyer can pay, from one week of headlines. So I'm pricing resales at today's rate and treating any rally as cushion. If a flip only works with a 7% buyer rate, it doesn't work.
Same logic on rentals. A $250,000 takeout is about $1,704 a month in principal and interest at 7.24%, $1,662 at 6.99% and $1,746 at 7.49%. If your coverage only clears at the low end, get the term sheet before you commit.
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Are you repricing exits this week, or underwriting at today's rate and letting any rally be upside?