10 Year Treasury Explodes Higher – Time For Investors to Renegotiate Deals and Get Better Pricing

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good morning good afternoon good evening

folks Michael Zuber one rental at a time

back with the one and only Jonathan from

convey Home Loans how you doing buddy

Convoy Convoy sorry they’re always just

if Dustin’s not here we got a different

thing going on yeah

Convoy home loads anyways I know I feel

it that’s uh what I want to talk about

today Jonathan it’s really fun because

yesterday I got to talk to Matt the

mortgage guy before the FED release uh

obviously you and I are talking about

the day after and uh we’re seeing a lot

of churn in the uh 10-year treasury

market I don’t know that I’ve ever seen

it move this much

uh in the morning right it’s moved I

think it moved 20 basis points or

something yeah pretty crazy

it’s crazy it’s bad I mean you know

yesterday was leading up to the meeting

was bad too we thought you know it was

going to be the kind of hopefully do

what it did in June Peak up and then

kind of tip back down it looked like it

was going to do that but at the end of

the day it didn’t end up

doing that it started getting worse so

yeah this morning right now uh last time

I checked the tenure was at 3.71

okay we’re at 3.68 right now okay all

right so there you go so but still we’ve

we’ve clearly busted the psychological

three and a half level

uh which was very sticky for a long time

but what I wanted to talk to you about

today because again like Matt you’re in

the mortgage industry you see lots of

deals you see lots of clients

um I think Jerome Powell is clearly

coming after the housing market right uh

we are in a leveraged business uh we are

in a business that’s built on debt loans

are debt

fixed or you know variable whatever it

is it’s debt uh what I took from

yesterday and I wanted to get your

opinion is uh the Federal Reserve and

Jerome Powell is going to take the

federal funds rate higher than the

market expect he is going to take it

faster than the market expect and he’s

going to leave it there longer than the

market expect so that’s what I heard

yesterday did you hear anything


no I think I heard almost the exact same

things I mean his main comment I think

that kind of Spun everything in a

whirlwind too is he said housing should

have a correction yeah right so it’s

never really you know positive great

Good Feeling sign when you know the guy

that we look to to kind of do all these

funds probably he probably had a bad

morning probably woke up on the wrong

side of the bed because that’s usually

what it is and um so I think that that

and also I mean we I was reading

obviously every everyone’s speculating

now where will the 10-year treasury go

you know obviously because that’s a lot

of what mortgage rates are really well

it’s gonna go it has to go to four

percent right if the FED funds rate gets

over four which is the front end the

10-year has to I mean can you imagine a

I don’t know that this ever happened I

mean we haven’t inverted yield curve

today twos and tens uh it is very likely

that we may have a yield in version of

90 day and ten year which is a sure sign

of a recession I don’t know if I’ve ever

seen fed funds rate and tenure inverted

I that can’t happen I can’t imagine

that’s ever happened

um I I read somewhere or someone told me

some Bloomberg or something was like you

know they expect the the 10-year

treasury to be at five at the end of the

year yeah someone said it and I was like

that’s scary that’s like apps that’s

scary that’s really scary yeah because

play it out right let’s again we’re not

making any calls yeah but if fed funds

rate or I’m sorry so they’re the 10-year

treasury five percent so that’s up a

point roughly a point and a half from

today yep a point 1.3


so you just add that on the the 30-year

mortgage rate today

uh what do you get you get like seven

and a half or something I mean crazy I

mean on a primary on a primary yeah yeah

if you’re talking about Investments it’s

definitely I mean it could be God you’re

you’re in the nines you’re getting into

the nines so it’s yeah it’s bad it’s bad

yeah so the one thing that I do hold out

hope for again because I’ve studied this

for so long is historically speaking and

to say we’re in normal times is grossly

overvalued so take this with that ever

grain of salt you want but historically

speaking the Delta between the 10-year

and the 30-year mortgage fixed mortgage

rate owner Rock best qualified is 1.5


today it’s 300. now a lot of that extra

Gap is because Banks

are leading the race right right they

expect the FED to do what the FED said

they’re going to do that’s why the FED

raised 75 bases yesterday and rates got

three bips better now they’re not better

today but they did yesterday got three

bips better yesterday

uh because again it’s not a one-to-one

relationship yeah um so I do hold out

hope that you know the FED does what it

does it gets the FED funds rate to four

four and a quarter this year I don’t

know that we see a huge run up in

mortgages but maybe it certainly I mean

who knows at this point but we do have a

larger than normal spread between

10-year and 30 year that’s like one

piece of hope I have yeah and I mean I

was talking to a lot of my like you know

Private Client banking friends and their

you know rates are up too and this is

just this is for people with a lot of

money right so

um I think it’s across the board people

are kind of raising rates preemptively

and we kind of saw this back in I guess

June June July August when conventional

rates kind of took a little bit of a dip

um and non-qm rates continue to stay

where they were or go higher yeah they

had a larger Gap yeah but but now

looking back at it that was probably a

good move because imagine if

non-cuminates also went down the same

way that conventional rates down then

we’d have the same same issue we had in

like February March April where it was

all of a sudden it was a bunch of

non-cam loans being retraded that would

have been the same thing that happened

this time so obviously they’ve learned

from their mistakes but I think rates

they I think they have room to run up I

do too yeah I’ve actually said uh and I

see no reason to change my opinion that

I think the 30-year mortgage owner Rock

might see a seven on it this year

you think’s this year this year like you

know the next three months basically wow

and we started the year at like three

eight three seven so that would almost

be a double that’s a fast run yeah uh so

you haven’t said you mentioned the word

retrade I wasn’t going to go here before

but we should right there’s a lot of

people in deals today this is mainly for

investors I guess it applies to owner it

does it actually applies to both people

if you’re in a deal today and you’ve run

the numbers and you have your yield

calculation and you get to closing and

your Mortgage Debt is higher than you


um there’s a lot of people that will go

back and retrade that right get a lower

price or or some kind of more maybe

mortgage buy down that’s definitely

something you should do if your owner

occupant get points to have to have the

seller pay points I just talked to a big

syndicator right we’re talking 100 units

and above and he’s like he’s like deals

are getting retraded left right and


uh because of what’s going on so uh

realize what’s happening to the big boys

it can happen to us right you’re in

contract for a four Plex get a better

price you’re in contract for a a duplex

uh get the seller to pay points right

the if you’re a buyer today

you have more power

than any year I’ve ever seen except


use it you please use it to your

advantage for most of you you’re gonna

buy one property

for a long time right a year or two

years make it the best deal you can what

do you think of that I love it I love it

and and on top of that just a real life

example A lot of my clients right now

that have had deals that were like you

know the there’s always going to be

pressure right the agents always want to

close of course like right they get paid

at the end exactly so they they’ve been

really like pushing pushing because

we’re gonna cancel We’re Gonna Cancel

you know as these things keep coming up

they’re like we’re gonna cancel we’re

gonna cancel and then

every single time that I’ve seen they

haven’t it’s all been Bluffs they

haven’t actually canceled so what does

that tell us it’s like what you said you

know the buyers have the power right now

if they walk away the property has to be

re-listed and they know the chances of

it selling with a re-list at the same

price so the appraisal coming back

there’s just so many variables that they

have every incentive to close the deal

as is or even if you get a little bit of

a discount or a little bit of a credit

it’s going to allow you to purchase the

property at a better deal and also give

you more time you’re going to have more

time right now yeah yeah this is this is

uh it’s very interesting time again

um we are going through a very

interesting moment in real estate real

estate investing debt debt doubling in a

year the cost of capital doubling in a

year is unusual I’ve never seen it in my

22 years uh I would use it and I am

using it to get better pricing because

again to me I don’t care if the cost of

capital is nine or ten as an investor uh

because again I just put that in my

spreadsheet and I need I need to get a

great yield for for me today that’s

north of nine percent if my cost of

capital goes to nine believe me I will

raise my yield calculation higher

because I want a positive spread I don’t

want negative gearing but yeah it is

it’s it’s um I’m excited for what’s

coming because again as as rates go up

more and more buyers will back away get

scared which just makes it easier for me

to find those motivated sellers so I’m

excited at the micro level right the

Mike Zuber level at the macro level it’s

it’s uh it can be kind of scary I guess

yeah and um obviously there’s a

repetition of what we’ve always said but

this isn’t the time to be afraid this is

the time to like you know like you keep

preaching but it’s it’s the time to be

like dancing for joy because yeah you’re

you have the power again right only do

great deals folks only great deals

exactly if they wanted to reach out to

Convoy and see what the cost of capital

is with you 40-year loans IO we’re going

to talk about one in the next section uh

how would they do that uh reach out to

Private Client at convoyhomeloans.com

um and please let us know that you came

for more at so Dustin or myself can

reach out to you yeah the key here is

you telling me came from oret you get

the two principles to work with you

which I greatly appreciate thanks buddy

yeah thank you

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