The REconomy Podcast
Tackling the Most Frequently Asked Questions Regarding Economic Trends Currently Impacting Real Estate (Part 1) - EP 78
Dec 14, 2023
Economists discuss the impact of federal funds rate on mortgage rates and analyze the correlation between 10-year yields and mortgage rates. They explore shelter inflation, predict future mortgage rates and multifamily rents, and compare current economic trends to the 80s.
22:22
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Quick takeaways
- An increase in federal funds rate results in higher mortgage expenses, influenced by spread between U.S. Treasury and mortgage rates.
- Inverted yield curve predicts economic downturn amidst strong GDP growth, tight labor market, and high core inflation levels.
Deep dives
Federal Funds Rate and Mortgage Rates Relationship
The podcast discusses how the federal funds rate impacts mortgage rates. An increase in the federal funds rate leads to higher short-term borrowing costs, translating to higher expenses for longer-term borrowing like mortgages. Currently, the spread between U.S. Treasury and mortgage rates is larger than expected. The outlook suggests the spread may remain above the long-run average due to the duration risk lenders face.
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