We at Orion pride ourselves on our products, service, and pricing. The general trend in interest rates is out of our hands, of course, but we feel it is very important to educate our brokers about them, as well as housing news that may impact general values.

After St. Louis Federal Reserve President James Bullard said the central bank's appropriate target for the federal funds rate could end up as high as 7%, well above the current 3.75% - 4% range,interest rates took note. Bullard said that even with his "generous" assumptions that tend to favor amore dovish policy, "the policy rate is not yet in a zone that may be considered sufficiently restrictive." The Boston Fed's Susan Collins followed up on Friday that she was not ruling out a 75-basis point rate hike in December.

"To attain a sufficiently restrictive level, the policy rate will need to be increased further," he said at an event hosted by Greater Louisville Inc. The central bank has increased its key interest rate by 375 basis points this year and has been shrinking its balance sheet in its fight to lower inflation. He said in remarks after the speech that he sees 5% - 5.25% as a minimum level for rates.

Meanwhile, Orion’s brokers have noticed that the yield curve inversion between the 2-year and 10-year Treasury notes deepened to its widest level in four decades. The spread between the 2-year and 10-year extended to a mark of -66 basis points, marking the deepest inversion since 1982. An inverted yield curve is usually a sign of recession. But not always!

Orion’s management would like to remind brokers that, despite moves in interest rates, for your clients the American Dream is not to live in an apartment, but to own a plot of land with their own house on it. And continuing a trend that has been with us far too long, American home builders are not putting up single-family homes at nearly the pace necessary to reduce the desperate shortage of housing we have suffered from since the QE era kicked off in 2008.

Sure enough, the National Association of Home Builders Market Index dropped again to extend its record streak of downward moves, and it now lay at its lowest in a decade if one excludes the lockdown period. This negative sentiment for those in the home building business has been reflected in the move lower in single-family starts, which have dropped to under a 1 million per annum run rate for three readings in a row, something not seen since early 2020. The pace of single-family home building has dropped back below the average pace of 967,000 (annualized) seen this millennium. This isn’t good news for Orion or our brokers, but we will continue to help our clients regardless!

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