BUMPY RIDE — Average daily mortgage rates hit 8 percent last week for the first time in 23 years, which, on top of soaring home values, is making it harder than ever for people to buy a house.

Plenty of would-be homeowners are staying on the sidelines as they wait for rates to return to more affordable levels — mortgage applications decreased to their lowest level since 1995, according to the Mortgage Bankers Association. But while rates are likely to drift down over the next couple of years, don’t hold your breath for 3 percent mortgages to come back.

The Federal Reserve has raised borrowing costs across the economy over the past year and a half, and no sector has felt the effects more acutely than the housing market. The central bank might be done raising rates for now, but that’s not a done deal if inflation shows signs of reaccelerating.

They also don’t expect to cut much over the next year, and even once they do start lowering rates, they’re not going back to the near-zero levels that prevailed after the 2008 financial crisis and during Covid, unless something goes very wrong.

That, along with other dynamics in housing finance, means mortgage rates won’t be going back to where they were a couple years ago.

“Certainly the days of 3 percent mortgages are long behind us and unlikely to return any time soon,” said Mark Calabria, who served as head of the Federal Housing Finance Agency under President Donald Trump. “Even with a moderation in inflation, we should expect mortgage rates to remain well above 6 percent for some time.”

Of course, the uncertainty around the path of rates is also contributing to the higher cost of home loans, according to an analysis by the Brookings Institution. “If rates rise, mortgage holders can simply choose to keep their mortgages at the previously issued rate,” Wendy Edelberg and Noadia Steinmetz-Silber wrote. “If rates fall, mortgage holders can prepay and refinance their mortgages at lower rates.”

“In other words, mortgage lenders want to protect against the possibility that mortgages issued recently will be refinanced to lower rates,” they added. “As a result, lenders charge a premium.”

So, if it becomes more clear that the Fed won’t be raising rates any further, that could help lower rates by as much as half a percentage point, Brookings found this summer (Edelberg told Nightly that they updated their analysis in September, and the data looks roughly the same).

But the central bank, as we noted earlier, isn’t going to slash rates to where they were before.

For now, the Fed has pushed borrowing costs to “restrictive” levels, which means that they are actively cutting into economic growth as part of their bid to cool inflation. In contrast, during the height of the pandemic, they’d set their main policy rate near zero because they wanted to actively boost the economy.

Once price spikes are entirely tamed, policymakers will likely aim to set rates at a more neutral level for growth. That’s lower than where we are now, but still much higher than what the economy has been used to for the last 15 years.

And in the meantime, it’s going to be a bumpy ride.

“Rates are extremely volatile, which means that one week we can see spikes up and the next week we might see a sudden shift down,” Redfin chief economist Daryl Fairweather told Nightly. “My advice to agents is to tell their buyers that they should lock their rate before they go into escrow to avoid a situation where rates go up so high they have to cancel the deal.”

Welcome to POLITICO Nightly. Reach out with news, tips and ideas at [email protected]. Or contact tonight’s author at [email protected] or on X (formerly known as Twitter) at @vtg2.

— Emmer drops speakership bid: Majority Whip Tom Emmer has ended his speakership bid after he, too, failed to unite the highly fragmented House GOP, according to two people familiar with the situation. He’s now the third candidate to drop out after failing to secure the 217 votes needed to win the gavel — marking yet another humiliating setback for a party that’s now gone three weeks without a leader. Former President Donald Trump publicly opposed Emmer’s bid just hours after he won the nomination, hardening the stances of the roughly two dozen members who already opposed him.

— Another Trump lawyer who pushed to overturn 2020 election pleads guilty: Jenna Ellis, a Trump campaign attorney who worked with Rudy Giuliani to press state legislatures to overturn the 2020 election results, pleaded guilty today to a felony charge that she participated in an effort to make false statements to Georgia lawmakers about election fraud. Ellis is the third Trump-aligned attorney in recent days to plead guilty to crimes stemming from the 2020 election, joining Sidney Powell and Kenneth Chesebro, who each accepted deals to admit to aspects of the charges brought by Fulton County District Attorney Fani Willis.

— Bernie Sanders opposes Biden’s pick to lead the NIH, putting her confirmation in jeopardy: President Joe Biden’s nominee to lead the National Institutes of Health will need at least one Republican vote to advance after Sen. Bernie Sanders — angry that Biden isn’t doing more to lower drug prices — said today he’d oppose her. “Dr. Monica Bertagnolli is an intelligent and caring person, but has not convinced me that she is prepared to take on the greed and power of the drug companies and health care industry and fight for the transformative changes the NIH needs at this critical moment,” the Vermont independent said in a statement.

DITCHING DESANTIS — Florida’s only Jewish Republican state lawmaker is dropping his endorsement of Gov. Ron DeSantis for president, writing in a scathing column that the Republican governor has not done enough to counter antisemitism in their home state, reports POLITICO.

State Rep. Randy Fine, previously a DeSantis ally, has pushed top priorities of the governor — including co-sponsoring legislation banning gender-affirming care for minors. He had such a good relationship with DeSantis that the governor at one point was backing him as a candidate for the presidency of Florida Atlantic University. Fine, however, said that in the aftermath of the Hamas attacks on Israel, he is now shifting his support to former President Donald Trump. He touted Trump’s record in office, including his support for moving the United States embassy to Jerusalem and for brokering a peace deal between Israel and two Arab countries.

ON THE BANDWAGON — Rep. Dean Phillips, D-Minn., has not officially launched a 2024 presidential campaign, but he appears to already have a bus, reports The Messenger. Minnesota radio host Jason DeRusha posted a video to X of a Dean Phillips for President bus driving down a highway. The bus includes the slogan, “Make America Affordable Again,” as well as Phillips’ signature “Everyone’s invited!”

‘DECISIVE RELAUNCH’ — French President Emmanuel Macron attempted a delicate balancing act during his visit to Israel today, calling for the peace process with the Palestinians to be re-energized as he pledged solidarity with Israel in the wake of Hamas’s deadly attacks against Israel, writes Clea Caulcutt.

“The security of Israel cannot be long-lasting without a decisive relaunch of the political process with Palestinians,” Macron said at a press conference with Israeli Prime Minister Benjamin Netanyahu. The Palestinian militant group Hamas does “not carry the Palestinian cause” and should be fought, but Palestinian aspirations must be heard “with reason,” Macron said.

Macron also suggested the remit of the international coalition fighting the Islamic State terror group should be widened to fight Hamas. “We should build a regional and international coalition to battle against terrorist groups that threaten us all,” he said.

While Macron gave little detail on how the US-led coalition would combat Hamas, his office later clarified the president’s comments and said that France was ready to “work on ideas of action against Hamas, with our partners and Israel.” The anti-Islamic State coalition could be “an inspiration” in the fight against Hamas, as it focuses not just on military operations but also on training, information-sharing and the fight against terrorism financing, the Elysée added after to the president’s initial comments, which provoked some concern among diplomats and observers.

“Not sure this idea has been fully thought through, notably with our allies and partners,” François Heisbourg, a senior advisor for the International Institute for Strategic Studies, wrote online. “Beyond the political criticism in France and the incomprehension of our foreign partners, we can fear repercussions in the field,” added Héloïse Fayet, Middle East specialist at IFRI think tank, on X (formerly Twitter), noting that Western forces in Iraq face threats from militant groups close to Iran.

Meanwhile, the French president appeared to aim for a difficult balance during his visit — offering support for Israel’s offensive against Hamas while noting that the rules of war will need to be respected in Gaza. “It’s in the interest of Israel and its security…This fight should be ruthless but not without rules, because we are democracies that are fighting terrorists,” he said, adding that the laws of war and “humanitarian access” to civilians must be upheld.

WINTER IS COMING — The blazing hot summer in the United States this year was due at least in part to an El Niño pattern — a climate pattern that explains unusual warming in the Pacific Ocean that can affect global temperatures. That pattern continues to hum along, but it means something slightly different for the wintertime. With the usual caveats that no weather is ever assured, Eric Berger explains that the El Niño could lead to some much needed precipitation across the Southern U.S., as well as some potentially warmer temperatures in the Northwest and Northeast. Read the piece in Ars Technica.

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