KGCI: Real Estate on Air - Navigating Mortgage Rates and Political Impacts on the Market

Episode Date: February 8, 2026

Summary:This episode provides a crucial look into the factors influencing the real estate market, with a specific focus on mortgage rates and government policy. The discussion, featuring an economist and a real estate professional, explains the concept of property cycles and how external influences like interest rate hikes and political events can shape them. The conversation offers agents and investors a better understanding of these complex dynamics, equipping them with the knowledge to make more strategic, long-term decisions and guide their clients through uncertainty.

And welcome to another edition of the Nary Agent podcast. I did a long intro today because I'm not Luke. This is Josh. Luke is selling house after house after house right now. So he's actually at closing. But AJ and I are here today to chat through, you know, just some of the realities that have occurred in the last month or so since we were last on the mic. The last time we spoke to y'all, we talked about our expectations for where we thought things might go with all of the changes that were coming in.

to play in 2025. And now that we have actually seen some, some small things kind of put into place and seem some actions of new administration, et cetera, and some of the results within the markets, we wanted to kind of talk about how that's impacting what we've seen, what we're seeing and, frankly, where we think it might be going. So, but before we do, how's it going, age? It's going great. And you mentioned Luke, what's fun about Luke right now.

And actually, John Hansen, big shout out on our team as well, both. on pace for over 60 sales right now for 2025. Our team is on pace for roughly, I think, 650 at this point. But we'll see what happens.

We've turned in, it's going to end up being 53 after these last two get turned in for the month of January. And we had 37 as our record, which was last January. So we're about up 50% from last year in January. Pretty neat to see.

Team's been growing. super fun stuff and new office space is almost ready new office space is almost ready we've uh yeah we've moved into space five times the size of our current one and um yeah we're expanding our group but a lot of the stuff we talk about on the podcast we talk about as a team too so um you know it's always helpful to go back and forth on some of these items and have deeper conversations about them and hopefully if you're on our team you're getting the right information like we talk about on the podcast but if you're not hopefully uh the stuff that we're delivering to you is helpful for your real estate business.

You know, the biggest thing is that you get one or two sentences out of this podcast that if someone asks you, how's the market, that you're able to have a meaningful conversation with them about what's going on in the world. And to Josh's point, you know, I think this is our first podcast since we've, since Donald Trump's become the president again. And so that's a pretty important topic and something that we, obviously you want to discuss what he's been doing, what the, you know, the other chambers of the

government have been doing. And then what is happening in the economy and has it, what has been impacted. So I don't know if you want what you want to kick us off with, Josh. Yeah. Well, I mean, it is also fun to point out that this, either this one or maybe next week will be our probably final podcast in this studio. We'll have a new setup for the next one. I don't know if we will yet. You're going to wait. We need, we need a quiet space in there that we don't quite have yet, I don't think. Working on it. Working on it.

Yeah, I mean, it was the new office space. I was telling people was, the timing on it couldn't be more perfect. We had our team meeting this Tuesday. And there were, I think, we counted 36 people in our 700 square foot office space. So we're actually going to have to meet at the library next week before we open the new office. But, yeah, they're coming in droves right now. It's been really fun to see all that play out. So I want to start with the conversation surrounding inflation.

That's going to be one of the biggest things. and interest rates in general. Can you give me a couple thoughts on what you've seen and heard in the last two weeks since kind of the new administration has taken shape? You know, some of the things that have been said by the new president, some of the things that have been done outside of that. And really, if that met your expectations or if that changed some of your thoughts for where things might be going this year?

Yeah, I think the biggest thing that has impacted bond yields, treasure yields and mortgage interest rates actually had nothing to do with the United States government, really, other than it was maybe potentially a shot at them. But the Chinese government, it seems like, were the people behind this. But they released a new AI tool that's sort of a competitor with chat GPT called DeepSeek. And that release actually sent markets into a little bit of a turmoil NASDAQ futures. I think that day were off like four or five percent. It didn't end up being too bad. It was down 16 at one point.

Nvidia got smoked because they make a lot of the chips that go into these kinds of products and servers and data storage and all that. And now everything's right back to where it was. I think S&P is going to hit an all-time high today. Again, 61.75, I think, was the future market on it. Either way, that sent those 10-year yields spiraling downward. I think we had as much as like 12 or 13 on the interday trading points off, which did. did reduce the mortgage rates. But again, a fun thing to talk about, you know, I said this in the car the other day,

and it wasn't, you know, massively value add other than I did tell them what the kind of going rate for interest rates was. But I have a client that's looking to build. And I said, well, you can thank the Chinese government. They released this AI thing. And you're going to get about 15 basis points better on your mortgage rate now. And they kind of chuckled. But most people just don't understand that stuff, right? So just being able to say that and say, this is why this happened.

especially when it's a lighthearted beneficial thing for a consumer, I think is pretty helpful. Especially when it happened so quickly and abruptly. And we didn't, I mean, there were expectations or thoughts around like what we were actually responding to. But there was more responding on the thoughts on what the reality was versus even really knowing if this was a big deal or not. Exactly. Exactly. And I think, yeah, it was definitely an interesting, interesting day. But like we said, I mean, the market went down.

The market came back up and now it's right back to where it was or even higher. But the yields did not. The yields subsided down to around 4.5 percent. We're sitting right about there. Now we talk about those mortgage rate 10-year yield spreads too, which is kind of running at 250 basis points again, which is not. bad. I mean, if we can get that tenure down back to where it was before, you know, a few months back when it was down in the mid-threes, now you're looking at mortgage rates around the low sixes,

which would be, I don't know, a nice reprieve for buyers now. But we are seeing the market pick up here locally. I think that's been just driven by seasonality. It's been three years, four years of this like early January pickup. I mentioned our team at like way higher than we've been. ever had for total contracts turned in in January. So, yeah, it's been a, it's been a good year for that sort of thing. But Trump, I mean, we can get onto what he's been talking about. It's kind of wild. It's, uh, yeah. And I think the point about, well, a couple points, right? And the one about the way the market responded very quickly to what happened with the deep seek thing is, it's a good point to also bring into everyday life, which is people tend to overreact to things.

Right. We've talked about that a few different times. But like when something happens, the perception of how big it is or the fear of how. big it is, tends to drive much more exaggerated behaviors in today's environment. Something to think about as you're advising your clients, as you're talking, it's going to continue, right? And their expectations of things are going to become exaggerated by whether it is fear or excitement about how the market is or about what's going on. It's really real. So the more that we can always stay grounded, we're going to drive more value for them. But in terms of, yeah, expectations on where the market's been going. It's been funny. Like we've talked about this, but

this is, I think since COVID, right? Every single year, 2021 and beyond, the pattern has been this New Year's resolution buyer, I call them. And I think I had five conversations with referrals in the last week about this exact topic where all of a sudden it's like, hey, I'm looking by a house this year. And almost all of the ones I talked to were first time home buyers. And it just feels like that marketplace in general, you know, the year turns over and they go, well, I think I probably need to get a new house this year because either it's cycle thing, or it's just that they felt like they wanted to relax during the holidays, and then whatever pent-up demand is there all comes out at the same time. But it is almost getting

to be comedic at this point how fast the market turns on January 2nd. And so if you are in agent and buyer, we've talked about this before, but think about those market cycles. And if four years in a row, the same thing happens, expect it to happen for a fifth year and maybe give advice to your clients that, hey, this is going to happen. So if there's opportunities to not be involved in this market, but be involved in a different market, that'll be beneficial for you. Totally. Politically, though, that whole side of things. Yeah, I mean, there were consumer reports or consumer spending reports released today that

came in about as we expected. Literally all of them were exactly the same, except I think the PCE month over month was 0.1% higher than expected. So PCE is the personal consumption expenditures report. this telling, you know, the economy, how much money people are spending, buying things, essentially. So it's a demand side report rather than the CPI, which would be a supply side report, really. Yep, everything. I mean, like even unemployment's roughly about where they expected just under that 4.2%. It's at 4.1 now. So it's, you know, we're still 2.9 higher. Fed's target's been 2%.

from the start. New administration, though, obviously has said some things in terms of what they want for interest rates. Now, I think that there's probably been some people that have been out there saying, well, he's going to demand lower interest rates, so lower interest rates will happen, and therefore I'm going to get lower mortgage rates in 2025. I think I said in the last podcast that my expectation is that anything, any expectations communicated that suggest rates are going to be any different than they are today would be irresponsible on our part. But I'd like to get your perspective, I guess, age on

what we've heard so far and if you think that's actually going to move the needle into 2025. Yeah, I mean, I'm not, like you, I'm not really expecting anything substantial. It's funny, you've seen all the canned meme realtor posts kind of disappear. I don't think I've seen any Facebook or Instagram post saying,

by now, the rates will be five and a half next year like they're making all these wild predictions that don't have any basis in reality. I don't think we're going to see a huge change. I mean, I had a conversation yesterday with somebody. Do I think we probably do settle back into the 5% range in the next 24 months? I think it's a fair guess to make, probably. But until these numbers continue to be under control, the Fed's not going to start cutting.

And usually the cutting doesn't happen. The cutting cycle happens when bad stuff goes on usually in, you know, like a recessionary type environment where people don't have enough money so they're not spending so inflation goes down so they cut rates to spur the economy. Our economy really doesn't need to be spurred right now just given that it's already doing very, very well by all reports, right? Is there something going on in the background that maybe is suggesting something different? Like the credit card debt being at an all-time high, probably, but still the Fed, all the Fed chairs have said, we need some time to see if where we're at right now is actually working.

We're not just going to cut rates seven times this year or whatever. I think a lot of people are predicting like two cuts in 2025. So, yep. What was it like? It was going to be 12 originally. Six, I think. But started 2024. It's like, we're going to cut 12 times the next 24 months.

I think they've cut the rate down by 1% from the top. Is that right? 425 to 4.5 right now. That's correct. Yep. So that's, it was three cuts. One of them was bigger. But there was an expectation that there was going to be significantly more of that.

But I think the fed's being careful and knowing, yeah, if we cut the rate all the way down to, you know, a 3% benchmark or something, inflation shoots up to 6%. Now we've really messed up. Well, you're undoing all of the work you've done over the last, you know, multiple years to get this in line. You're not where you want to be. So you're going to continue to try to do what you want. I mean, so the quote from the president was, I demand that they drop interest rates immediately. and I know interest rates much better than they do. Which is a wild thing to say.

Yeah, but I would tell people, I think that since that happened, the only thing I've seen on Facebook that I felt like was irresponsible was people saying, well, he's saying this so it's going to happen. And I think it's important for us to acknowledge, regardless of political sides, et cetera, that the president doesn't control the Fed, the Fed Act independently that was put in place intentionally to avoid conflicts of interest, right?

Where if the president wants to look good because the economy is spurred, demanding something that the Fed might not believe is in the best interest of the country, this independence allows them to think independently. And so, you know, Jerome Powell responded back to that, said he hasn't actually spoken to the president yet since he said this in person.

The Fed did, as I mentioned, keep interest rates flat at their last meeting, so they didn't respond to this with any sort of changes. and he did say the public should be confident that we will continue to do our work as we always have, focusing on using our tools to achieve our goals and really keeping our heads down and doing our work. Yeah, it's fascinating. And like I'm pretty sure Jerome Powell is barred from owning any securities as the Fed, the head of the Fed. This guy doesn't have any agenda except for just doing his job because he doesn't, at least by what we know, he does not benefit in any way from the decisions that he makes other than.

and he gets a pat on the back if it goes well. Well, he's been appointed by and lived through both Democratic and Republican presidencies and fourth administration. Yeah. So it's, I mean, I think it's important to know that because one thing as realtors we tend to do is take one bit of news or soundbite and then blast it all over social media saying, X, Y, and Z is going to happen. You should do this thing. But I think the more you can dig into the details and be informed about how it works, the more important is going to be, which is what we've kind of always communicated.

So it's a long way this podcast of saying, you know, we don't believe anything has meaningfully changed at this point in time. Obviously, when it comes to economic environments, political environments, you know, things move pretty quickly these days. So that's not to say that there's not going to be a change the next time we talk next week or next month. But it is important to continue to keep an eye on these numbers and to, as AJ mentioned earlier,

have the ability to have conversations with your clients about what you're seeing in the marketplace when they say, how's the market right now? Exactly. And what's going to be interesting too is we can wake up tomorrow. We have this handy little tool called Info Sparks for all the Minnesota agents out there. And it will say the number of pending sales that we had in the month of January. And it'll give us a year over a year number on that as well, which will be really interesting to look at because our last podcast we shot in 20.

24 was some of our predictions. And I think I threw out that I thought we'd probably see somewhere around 10% more sales in 2025 across the market than we had last year. Mostly just based on same rate, but further into the future. So there's more people that are either going to make the decision to move because they've sat around long enough waiting for the rates to go down and they haven't gone down. Or they bought a home in the increasing rate environment. And now we're like three years down the road, those folks may decide, hey, I already have a high rate and I need a bigger house. So I'm just going to sell my old crappy rate for a, you know, quote unquote crappy rate for a new quote unquote crappy rate. Nobody's seeing, you know, 4%. So if, if those folks are sitting

on those houses, they may decide they want to sell them, which would pick the market up. So it'll be interesting tomorrow to look to see how many sales do we have, you know, pending sales, not closed, but pending sales, January of 2024 versus January of 2025 because we're shooting this podcast. on the 31st of January. So that would be a good one for us to kind of recap and just kind of see how we're tracking, at least here locally. Absolutely. Thanks for your time today, as always.

And that's all we got today in the Nerdy Agent podcast. And always remember, be better.