#930 Mortgage Rates Are Highest In 12 Years, But Home Purchasers Aren’t Slowing Down

Today's episode I discuss the explosion in mortgage rates, the decline of refinancing, and why despite the jump on rates the buyers market continues to be as strong as ever. ======================= Today’s episode is brought to you by Coinbase Wallet, your key to the world of crypto. Crypto wasn’t made to just buy, sell, and hodl. With Coinbase Wallet, you can do so much more: Collect more NFTs, earn more with DeFi, and trade more than 4,000 tokens. Whether you’re looking to play, stake, spend, or just explore a trending new protocol — Coinbase Wallet is your key to more. Long-time HODLers already know that wallets are a must-have if you want complete control of your crypto. That’s why Coinbase Wallet makes self-custody simple, while providing the safety and security of the most trusted name in crypto. Visit http://coinbase.com/wallet to learn more. ======================= If you’re a regular listener of the podcast, I would bet that two things are true: First: You’re passionate about Web3 and protecting your personal data And two: that you’re a human. If I’m right, then congratulations! You’re entitled to all the benefits of the decentralized web. But there’s a catch: As Web3-enabled tech — like NFTs, smart contracts, and DAOs — drive more elements of our “real world” lives online, proving that you’re a person – without surrendering personal data – becomes exponentially more valuable. And exponentially more difficult. This is why Unstoppable Domains launched Humanity Check. Humanity Check proves that you’re, well, you – without revealing personal data. No matter where you go on the web, you’ll have total control over which apps you want to share data with…and which ones you don’t. Prefer to be completely clouded in mystique? No worries - Humanity Check is 100% opt in. If you want to feel alive, or at least prove you are, head to http://UnstoppableDomains.com and get your NFT domain with Humanity Check. ======================= The Pod Pro Cover by Eight Sleep is the most advanced solution on the market for thermoregulation. It pairs dynamic cooling and heating with biometric tracking. Go to https://www.eightsleep.com/Pomp to check out the Pod Pro Cover and save $150 at checkout. Eight Sleep currently ships within the USA, Canada, and the UK.

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:02Anthony Pompliano?

  What's up everyone, this is Anthony Pompliano. Most of you know me as Pomp. You're listening to the Pomp Podcast, simply the best podcast out there. Now let's kick this thing off. Today's episode takes a look at mortgage rates, how they're the highest in 12 years, and why home purchasers aren't necessarily slowing down. I really enjoy recording these solo podcast episodes, and I hope you enjoy them as well. Before we get into this episode, though, I first want to talk about our sponsors. Today's episode is brought to you by Coinbase Wallet, your key to the world of crypto. Crypto wasn't made to just buy, sell, and hold. With Coinbase Wallet, you can do so much more. Collect more NFTs, earn more with DeFi, and trade more than 4,000 tokens. Whether you're looking to play, stake, spend, or just explore a trending new protocol, Coinbase

• 0:46Anthony Pompliano?

  Wallet is your key to more. Longtime holders already know that wallets are a must-have if you want complete control of your crypto. That's why Coinbase Wallet makes self-custody simple while providing the safety and security of the most trusted name in crypto. Visit Coinbase.com/wallet to learn more. Again, that's Coinbase.com/wallet and learn more today. Today's episode is brought to you by Unstoppable Domains. If you're a regular listener of this podcast, I'd bet that the two things are true. First, you're passionate about Web 3 and protecting your personal data, and two, you're a human being. If I'm right, then congratulations, you're entitled to all the benefits of the decentralized web. But here's the catch. As Web 3-enabled technology like NFTs, smart contracts, and DAOs dive more

• 1:30Anthony Pompliano?

  elements of our real-world lives online, proving that you're a person without surrendering your personal data becomes exponentially more valuable and exponentially more difficult at the same time. This is why Unstoppable Domains launched Humanity Check. Humanity Check proves that you're, well, you, without revealing any of your personal data. No matter where you go on the web, you'll have total control over which apps you want to share your data with and which ones you don't. Prefer to be completely clouded and mystique? No worries, Humanity Check is 100% opt-in. If you want to feel alive, or at least prove you are, head to unstoppabledomains.com today and get your NFT domain with Humanity Check. Again,

• 2:10Anthony Pompliano?

  On over to unstoppable domains.com and get your NFT domain with humanity check today. This episode is brought to you by eight sleep. Eight sleep is the single best product that I have purchased over the last three years. It completely changed my life. I'm not joking. Pay attention. The pod pro cover which goes over your mattress by eight sleep is the most advanced solution on the market for thermal regulation. It pairs dynamic cooling and heating with biometric tracking. You can go to eight sleep.com slash pump to check out the pod pro cover and you save $150 at checkout. They currently ship within the United States, Canada, and the UK. And I told you it changed my life. It helps me sleep deeper, helps me sleep longer. I feel much more refreshed and I have better energy. You want to know how I have relentless energy every single day? Because

• 2:55Anthony Pompliano?

  I sleep on an eight sleep. Seriously. Go check it out. Eight sleep.com slash pump today. All right. Let's get in this episode. I hope you guys enjoy this one.

• 3:03Speaker 01

  Anthony Pompliano runs pump investments. All views of him and the guests on his podcast are solely their opinions and do not reflect the opinions of pump investments. You should not treat any opinion expressed by pump or his guests as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of his personal opinion. This podcast is for informational purposes only.

• 3:26Anthony Pompliano?

  Good morning, everyone. Bang, bang. Economic incentives drive the world. There is no better example than the mortgage market within the United States right now. In response to the pandemic, the Federal Reserve conducted multiple emergency interest rate cuts in 2020, which brought us into a 0% rate environment. These actions were intended to incentivize market participants to borrow significant amounts of capital, and that is exactly what happened. Investors ran to banks, borrowed as much money as they could, and the economy was flooded with cheap capital. You can see this reflected in the explosion of mortgage applications, both new purchase and refinances starting early 2020.

• 4:04Anthony Pompliano?

  If we break out the refinancing borrowing and compare it to the 30-year fixed mortgage rate, the inverse relationship is very obvious. As rates have cratered, refinancing applications exploded. The economic incentives were playing out perfectly. It doesn't take a genius to identify that refinancing applications are now falling quickly, especially as the 30-year fixed mortgage rate is going parabolic. This shows that the increasing cost of capital, particularly due to the Federal Reserve's need to increase interest rates to address inflation, is having a material impact on borrowing demand. To put some numbers behind this trend, refinancing demand is down nearly 15% over the last week and down almost 60%

• 4:46Anthony Pompliano?

  in the last 12 months. But here's a really interesting data point. Refinancing and new purchase mortgage demand are actually decoupling in an unexpected way. We saw this happen back in 2011 to 2014, but it wasn't nearly as severe as a decoupling as we are seeing now. The demand for new purchase mortgages has continued to stay fairly stable, while refinancing demand has fallen off a cliff. The simplistic analysis would arrive at the conclusion that this is entirely the result of monetary policy decisions by the central bank. That is unlikely to be the complete story, though. Refinancing demand is almost exclusively the product of monetary policy. Homeowners ask themselves, is the current cost of capital cheaper than

• 5:30Anthony Pompliano?

  the cost of capital I currently have? If the answer is yes, they refinance. If the answer is no, they don't refinance. Given that current mortgage rates are at the highest level since 2010, homeowners are choosing not to refinance. But new home purchases aren't exclusively driven by the cost of capital. There is the imbalance of supply and demand in the United States, which keeps home prices propped up since we can't build new housing fast enough. There are evolutions in work trends related to remote work, a pursuit of better work-life balance, etc. Millennials are also starting to have children, which leads to the classic pursuit of a new home to fulfill the suburban lifestyle. Many market participants will focus on the drop in refinancing demand due to the increase in interest rates.

• 6:12Anthony Pompliano?

  But the more interesting story, in my opinion, is the persistent demand for new home purchase financing demand in light of the increased interest rates. Even the highest mortgage rates in more than a decade can't slow down the demand for housing. This leads to a much longer conversation about how important it will be in the coming five to 10 years for the United States to become more efficient at building housing across the country. Demand is not going to slow down, and we aren't producing enough product. The average cost of a new home in the U.S. has now crossed over $500,000, which is absurd. Sure, undisciplined monetary and fiscal policy has some impact on that number, but the imbalance in supply and demand is likely just as important. Hope each of you has a great start to your day, and I'll talk to everyone tomorrow.

• 6:56Anthony Pompliano?

  Thanks so much for listening to today's episode. I really hope you guys enjoyed this one. Make sure you subscribe on Apple, Spotify, or your favorite podcast player. And if you're looking to try to transition to get a new job in the Bitcoin or crypto industry, we've got you covered. Head over to pompscryptocourse.com. We've developed a curriculum with the top teams across the industry. It's a three-week intensive training program with over 50 events packed into that three-week time period. Go to pompscryptocourse.com to learn more, and I'll meet you guys for the next episode.