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Here’s what you need to know today…
Big Picture
Mortgage rates are the most expensive in decades.
Expensive mortgages didn’t slow new home buying last month.
Hollywood actors and studios are back at the negotiating table.
The Market: ⬇️ -1.4%
S&P 500: 4,186.77
1Mo: -2% | 1Yr: 9% | 5Yr: +57%
The market tumbled lower today as decent corporate financial updates couldn't distract investors from the selloff in the bond market. US Treasury rates keep climbing, pushing all other borrowing costs higher.
Mortgage rates continue to rise. The Mortgage Bankers Association reported the average 30-year fixed-rate mortgage increased last week to 7.9%, the highest level in 23 years. Mortgage applications hit their lowest number since 1995, indicating buyers are avoiding purchases, unable to afford the current rates, and inflated home prices. Existing homeowners are also less likely to refinance, adding to an already volatile market. [🤓]
Buyers are flocking to newly built homes as the housing shortage continues. The Commerce Department reported that new home sales jumped by over 12% in September, the most monthly sales since early 2022. Even though mortgage rates are nearing 8%, many builders are offering incentives to lure in potential buyers, making new homes slightly more affordable. New homes are going fast because homeowners are hanging on to their existing homes with cheaper mortgages. Sales of existing homes, which comprise most of the housing market, saw the fewest sales since 2010 last month.
🏠 If you don’t have an urgent personal need, it may be worth considering delaying a new home purchase. Putting that cash in a 5% savings account generates a safe and substantial return in just one year.
Hollywood is still shut down due to ongoing performer strikes. The longest-ever film and TV actor strike recently marked its 100th day. Talks between the performers and producers are set to resume this week, with members of the actors union demanding better pay and protections against artificial intelligence. As studios continue to lose money, we can expect higher streaming subscription costs and delayed content releases.
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Company Scoops 🗣️🌎💰
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 Meta | Posting Results The Facebook ad engine is booming again, notching surging profits from the fastest revenue growth in years and a massive cost-cutting initiative that shed a quarter of its staff. Meta's virtual reality business has lost $25B in 21 months. |
 Mattel | Barbie Boom Mattel's hit Barbie movie gave the toymaker a much-needed burst in sales last quarter, expecting a $125M total Barbie sales boost. The toymaker expects the Barbie buzz to lift its annual profit despite concerns about a slow holiday season. |
 Hilton | Flying Overseas Hilton enjoyed a lot of international travel activity last quarter, reporting strong revenue growth across its hotels. The hotel giant continues to expand with new brands targeting lower price points to capture a wider range of travelers. |
 T-Mobile | Gaining Ground T-Mobile earned a solid third-quarter profit after adding over 800K postpaid phone connections, beating out its key rivals. The carrier enhanced its footing in the broadband industry with more fixed-wireless access customers. |
 Boeing | Production Setbacks Boeing reported third-quarter losses of $1.6 billion and will deliver fewer 737 MAX planes than expected. The planemaker suffered manufacturing flaws with its best-selling aircraft and is working on a plan to ramp up production. |
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Inside Scoop 🤓
How do mortgage rates work?
A mortgage is a loan you take out to buy a home. The collateral, the thing you lose if you don’t pay back the money, is the home itself. The collateral reduces the risk for the lender. Credit cards have much higher rates because there’s no collateral.
Mortgage rates can be fixed or floating. A fixed rate means you've locked in that percentage of the loan you need to pay back in interest each month, and it won't increase. A floating rate is usually tied to the movement of a benchmark interest rate. So, as broader interest rates rise, your rate increases, and you pay more each month.
Whether fixed or floating, banks determine their mortgage rates by taking a baseline low-risk lending rate like US Treasury bonds, then marking it up based on how risky you are as a borrower. So banks say, OK, we can lend to the US Government (considered no default risk) for ten years at 4% interest. You're more likely to default than the US Government, so you must pay us higher interest to make it worth the risk, maybe 7%. As baseline rates rise, your rates will rise.
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