# The Fed Just Reversed Mortgage Rates Source: https://www.youtube.com/watch?v=TwIKIaUMsTw Recap page: https://rapidrecap.app/video/TwIKIaUMsTw Generated: 2025-11-11T12:37:40.111+00:00 --- ## Quick Overview The Fed's recent 0.25% rate cut on October 29th, 2024, does not immediately translate to lower mortgage rates, which are primarily influenced by the 10-year US Treasury yield driven by bond investors' fears of recession and inflation, leading to a current market environment that favors investors who can strategically underwrite deals assuming rates will not drop significantly, focusing on strong cash flow and asset value appreciation potential rather than relying on future rate decreases for profitability. **Key Points:** - The Federal Reserve implemented a 0.25% Federal Funds Rate cut on Wednesday, October 29th, 2024. - Mortgage rates are not directly moving down in lockstep with the Fed Funds Rate cut; they are influenced by the 10-year US Treasury yield, which is driven by bond investor concerns over recession and inflation. - The correlation between Fed rates and mortgage rates has weakened over the last few years, meaning rate cuts do not guarantee lower mortgage rates. - Investors should focus on underwriting deals conservatively, assuming rates will remain high or potentially rise over the next 2-5 years, to protect against downside risk. - The current environment favors assets that offer good cash flow and owner-occupancy potential, as speculative buying based on expected rate drops is discouraged. - Investors must look for properties in affordable pockets where they can actively add value (e.g., zoning, adding a second unit) to create returns, rather than just waiting for market conditions to improve. - The speaker predicts that for the rest of 2024, mortgage rates will likely remain relatively flat or slightly higher than current levels, or at least not drop significantly. ![Screenshot at 00:02: Visual representation showing a rising house icon next to a large percentage sign, illustrating the direct impact of Fed rate cuts on mortgage rates and housing market dynamics.](https://ss.rapidrecap.app/screens/TwIKIaUMsTw/00-00-02.png) **Context:** The video features Dave Meyer, Head of Real Estate Investing at BiggerPockets and author, discussing the recent decision by the Federal Reserve to cut the Federal Funds Rate by 0.25%. He contrasts this move with the actual behavior of mortgage rates and provides strategic advice for real estate investors on how to underwrite and invest successfully in the current high-rate, uncertain economic environment characterized by conflicting fears of inflation and recession. ## Detailed Analysis Dave Meyer explains that while the Fed cut the Federal Funds Rate by 0.25% (0.25 percentage points) on October 29th, this did not cause mortgage rates to immediately drop, contrary to popular belief. Mortgage rates are more closely tied to the 10-year US Treasury yield, which is dictated by bond investors worried about recession and inflation—forces that pull rates in opposite directions, leading to market stagnation. Meyer argues that relying on the Fed to cut rates to make deals work is not a viable strategy; investors must underwrite conservatively, assuming rates will remain high or even rise over the next 2-5 years. He emphasizes that investors should focus on finding properties where they can actively force appreciation through strategies like rezoning or adding a second unit, rather than hoping for market conditions (like low rates or high rent growth) to improve on their own. He also notes that in the current climate, owner-occupied properties may perform better in the short term than strictly cash-flowing rentals, and that investors should be surgically precise in negotiations, avoiding deals where the primary upside relies solely on future rate refinancing. ### Fed Rate Cut Update - Fed cut the Federal Funds Rate by 0.25% on 10/29/24 - Mortgage rates moved up following previous cuts, showing weak correlation with Fed action - Rates are influenced by 10-year Treasury yield driven by recession/inflation fears. ### Things Are Getting... Better? - Relative affordability has slightly improved (down 2% from 2022 peak) due to slightly lower rates and higher wages, but this improvement is slow. ### 1. Take Advantage of THIS Market - Investors must be patient and leverage the current market conditions, which favor buyers over sellers, especially since rates are not expected to drop significantly soon. ### 2. Buy in Affordable Pockets - Focus on areas where real estate is affordable relative to the average person's income and be proactive in adding value through zoning changes or unit additions, rather than speculating on rate drops. ### 3. Run Numbers with HIGH Rates - Underwrite all deals assuming current high rates and no appreciation for the next 2-5 years to mitigate downside risk; avoid relying on future rate cuts or rent growth for deal feasibility. ### 4. Analyze More Conservatively - Do not count on rate cuts or refinancing to save a deal; assume fixed-rate debt for the long term and be conservative in projections. ### 5. Target "Upside" Properties - Seek properties where value can be added through physical improvements (like ADUs) or strategic repositioning, ensuring the deal works even without favorable macro-market shifts. ### 6. Assume Rates Will Rise - Do not assume rates will drop; instead, assume they will stay flat or rise, which encourages locking in fixed-rate debt now and focusing on strong immediate cash flow. ![Screenshot at 00:01: Close-up shot of the Federal Reserve seal on currency, setting the context for a discussion about Fed policy and interest rates.](https://ss.rapidrecap.app/screens/TwIKIaUMsTw/00-00-01.png) ![Screenshot at 00:02: Graphic showing a blue house icon rising next to a large red percentage sign, visually representing the impact of interest rates on housing.](https://ss.rapidrecap.app/screens/TwIKIaUMsTw/00-00-02.png) ![Screenshot at 00:04: Host Dave Meyer speaking directly to the camera, introducing the topic of Fed rate cuts and mortgage rates.](https://ss.rapidrecap.app/screens/TwIKIaUMsTw/00-00-04.png) ![Screenshot at 00:51: On-screen list detailing the episode's main topics, including "Mortgage Rates REVERSE" and specific action steps for investors.](https://ss.rapidrecap.app/screens/TwIKIaUMsTw/00-00-51.png) ![Screenshot at 01:36: Host using hand gestures to illustrate the paradoxical effect where Fed rate cuts led to mortgage rates going up previously.](https://ss.rapidrecap.app/screens/TwIKIaUMsTw/00-01-36.png) ![Screenshot at 03:36: Host using hand gestures to emphasize the importance of understanding how Fed decisions affect bond markets and, consequently, mortgage rates.](https://ss.rapidrecap.app/screens/TwIKIaUMsTw/00-03-36.png) ![Screenshot at 05:04: Host using hand gestures to show how investor fear of recession and inflation locks up money in bonds, pushing bond yields and mortgage rates up.](https://ss.rapidrecap.app/screens/TwIKIaUMsTw/00-05-04.png) ![Screenshot at 06:36: Host pointing upwards with his finger while discussing the expectation of future rate cuts, contrasting it with current reality.](https://ss.rapidrecap.app/screens/TwIKIaUMsTw/00-06-36.png) ![Screenshot at 08:38: Host opening his arms wide to illustrate the simultaneous fear of inflation and recession, leading to market stagnation.](https://ss.rapidrecap.app/screens/TwIKIaUMsTw/00-08-38.png) ![Screenshot at 10:00: Host making an 'OK' hand gesture while discussing the 0.25% Fed rate cut and its minimal immediate impact on mortgage rates, which dropped by 0.4% \(40 basis points\). \(Correction: He mentioned the rate was 7.1% and dropped to 6.25%, which is a 0.85% drop, not 0.4%.\) The visual shows him confirming a small, positive change in the context of a larger problem.](https://ss.rapidrecap.app/screens/TwIKIaUMsTw/00-10-00.png)