CPI ran hot and the 10-year auction tailed. Are you repricing exits at 7.30%?

Question

On Monday I asked whether 7.17% was a floor for mortgage rates. Tuesday answered it.

October CPI rose 0.4% against a forecast near 0.24%. Core rose 0.3% for the third month running, and services prices, the part the Fed watches hardest, didn't cool. BLS didn't publish a yearly all-items number at all, because October 2025 prices were never collected.

Then the Treasury sold $42 billion of 10-year notes at 5.02%. That's a one basis point tail, a 2.46 bid-to-cover against a 2.60 average, and indirect bidders at about 61% when they usually take around 77%. The 10-year went from 4.88% Monday to about 4.98%. Mortgage News Daily's 30-year index closed at 7.30%, up from 7.18%.

What it does to a flip: on a $264,000 loan (20% down on a $330,000 house), the payment goes from about $1,788 to $1,810. Hold the payment at $1,788 and your exit buyer can carry about $260,900, roughly $3,100 less than Monday. Between 7.05% and 7.45%, that same buyer's loan swings by about $10,500, on a resale that might not close for four to six months.

Rentals feel it less, but they feel it. A $250,000 takeout goes from about $1,694 to $1,714 in principal and interest. Twenty bucks a month sounds like nothing until a file is covering right at 1.0x.

I'm pricing resales at 7.30% or higher now, and any lower ARV assumption comes off the purchase price, not out of the margin. The full write-up is on my website, which you can find through my profile.

Bonds are closed today. The 30-year auction Thursday and PPI Friday are the next tests.

For those of you underwriting flips right now: are you repricing the exit off Tuesday's 7.30%, or waiting to see whether Thursday and Friday give some of it back?

Noah Wright · Answer

The piece I'd add is the backup exit. If buyers thin out and the house sits, a lot of flippers end up holding it as a rental, and most DSCR lenders qualify that refinance on the property's rent. So a flip that only works as a sale is carrying more risk this week than it was on Monday. I'd run the rent on every flip in the pipeline now and see whether it still covers around 1.0x at a higher rate, and budget a few extra months of carry on the short-term loan in case the sale takes longer. Steve already did the hard homework on the auction numbers, which makes that check quick. A deal with two exits can wait out a bad week. A deal with one has to sell into it.

Ametria Chaney · Answer

Steve, thank you for the clear breakdown — this is the kind of Tuesday that separates an underwriting habit from a hope. From the Realtor side, I land on your side of the question: I'd rather reprice the exit now than wait for Thursday's auction or Friday's PPI to tell me what the market already said. A buyer who can only afford the home at a lower rate is a buyer who may not be there at closing, and an ARV that only works at yesterday's rate is a guess, not a plan. For flips, that means the purchase price has to absorb the rate, not the margin — exactly as you put it. For rentals, the payment change looks small on one property, but it compounds across a portfolio, so I'd rather know the deal works at today's numbers and be pleasantly surprised later. Rates will move again; discipline is what keeps a deal standing either way.

CPI ran hot and the 10-year auction tailed. Are you repricing exits at 7.30%?

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