The 10-year fell from 5.28% to 4.94% in October. Does it survive jobs Friday?

Question

The 10-year Treasury started October at 5.28% and closed Friday at 4.94%. That happened in a month when two Fed members voted for another hike, so the short end and the long end are pulling in different directions right now. Mortgage News Daily's 30-year index finished the week at 7.27%, its lowest in more than a month, and Freddie Mac's survey has dropped two weeks running to 7.24%.

Most of why the long end fell sits outside the Fed. Core PCE came in at 3.1%, right on forecast, so there was no inflation scare. Money moved out of tech stocks and into bonds. And there's been talk that heavy AI-related corporate borrowing, one of the things pushing rates up this year, might slow down.

Here's how I'm reading it for the files I underwrite. On a $264,000 loan (20% down on a $330,000 house), a quarter-point move either way changes an exit buyer's budget by about $6,500. That's roughly what one strong or weak jobs report can do to mortgage rates in a week, and the October report lands Friday with a 55,000 consensus after September's 29,000.

So I'm not pricing flips off the last two weeks of relief. If the number runs hot and rates give back a quarter point, a resale priced to the dip has lost $6,500 of buyer budget before it even lists. On rentals, a $250,000 takeout runs about $1,709 a month at 7.27%, $1,751 at 7.52% and $1,667 at 7.02%. If a file only covers at the low end of that $42 band, it doesn't really cover.

Election Day is Tuesday too, which usually means some overnight bond volatility before the jobs number even shows up.

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Question for the group: are you underwriting exits at today's rate, or building some of October's drop into your numbers? And has anyone holding rentals actually locked a refinance in the last two weeks to grab it?

Noah Wright · Answer

I don't build any of October's drop in. I'd underwrite the exit at today's rate or a cushion above it, since the exit rate isn't set until that loan locks. Your $42 band is the right way to frame it. The rate that counts is the one when the takeout locks, and on a BRRRR that's often six months out because of the seasoning most DSCR lenders want before a cash-out on appraised value. Most of them size the loan so rent covers the full payment at 1.0 or better, so on your $250k takeout a file that just clears 1.0 at 7.27% doesn't clear at 7.52%. The usual fix is a smaller loan, which comes straight out of the cash the investor planned to pull. How far out do you set the exit date when you pick the rate?

Steve Waller · Answer

Ametria, that matches what I see. Sentiment moves on the headline and payments catch up later.

On the lending side, the exit buyer's payment is what really sizes a flip, so I underwrite at today's rate and then test it half a point higher. A hot jobs number that pushes the 10-year back toward 5% takes buyer budget away faster than a cool one gives it back.

In Memphis, are sellers bridging the gap with rate buydowns or with price cuts?

Ametria Chaney · Answer

Steve, appreciate the breakdown. From the buyer side here in Memphis, what I notice is that rate headlines move sentiment faster than they move actual payments. A drop in the 10-year gets buyers off the fence even before mortgage rates fully follow — and a jobs report that surprises either way can undo that in a day. I tell buyers to focus on whether the payment works for them today with a path to refinance later, rather than trying to time the perfect rate. That said, if the 10-year keeps sliding toward 4.5%, I'd expect a noticeable pickup in showing activity. We'll see what Friday brings.

The 10-year fell from 5.28% to 4.94% in October. Does it survive jobs Friday?

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