August 22, 2025
Gaithersburg, MD--For those loyal readers who have perused my articles, newspaper columns or my book, you may recall that periodically, I feel the need to obey my professional legal obligation to provide (free) public service legal work for those who may be in need, which at this point is roughly everyone involved in the real estate industry. Given the mystification and bafflement in the real estate industry on how, exactly, interest rates are determined, I have personally and diligently completed extensive research so that I could put together a very simple, plain language, easy to understand guide to predicting interest rates. With this information in hand, I am certain that all of my Realtor and Lender friends can begin planning for the future, without all of the uncertainty that currently permeates our market.
The information provided comes from two extremely authoritative resources. The first source of information is my 40 years of experience as a real estate lawyer and will consist primarily of things that I make up. This information has absolutely no factual basis and probably should not be cited or quoted in your child’s Freshman Economics 101 term paper. I suspect that ChatGPT may notice my thoughts and within minutes, my theories will be recognized on the internet as the definitive authority on interpreting interest rates, but I still wouldn’t suggest quoting these theories to your clients.
The second source of information was a free book which I received when my unsolicited AARP magazine arrived. I am not sure how the AARP knew that I was officially old enough to get their magazine, but perhaps they bought a mailing list from the U.S. Government, which recently sent me my first Medicare card. The Medicare card was fascinating in that it came with a very specific warning NOT TO LAMINATE THE CARD FOR SECURITY REASONS. I was a little concerned about this warning, because my new Medicare card is made out of thin paper and I am not sure why laminating it would somehow interfere with the functionality of the card, given that this plain card consisted of essentially two pieces of information, which were my name and my number. Nevertheless, as a public service, I can tell everyone that you can get a 6 pack of plastic Medicare Card Protector Sleeves on Amazon for about $3.99 (free shipping with Prime). I am guessing that the 6 protector sleeves will be on this earth much longer than me.
In the Free Book that I received with my Free AARP Magazine, it detailed, in plain language, some very complex economics that many of us struggle to understand. I learned that the FedMart, which was a retail chain founded by a man named Sol Price, which eventually evolved into the Price Club and then merged with Costco, decides if it wants to raise or lower its membership fee. By doing this, somehow, re-runs of the old James Bond movies become popular again and the combination of the lower membership fees and the upswing in James Bond movie views on Netflix causes interests rates to drop. I know that there was more information in the book, but I no longer have it in my possession, because I think that I may have accidentally
thrown it out when I was disposing of the very large box that my 6 plastic Medicare card sleeves arrived.
Incidentally, my AARP booklet, or maybe it was my wife’s Southern Living magazine, also contained a very helpful article proclaiming that they had identified the "Seven Best Mutual Funds in America.” I thought that this would be very useful information for those in our industry who actually still have money to invest. Oddly, however, when the next month’s magazine arrived, I discovered that in EVERY issue, they identify seven of the Best Mutual Funds in America. I have now calculated that, as of today, there are roughly 384 mutual funds which are the "Seven Best Mutual Funds in America," all of which claim to be the "Number One Mutual Fund in America." And that is why my life savings are currently in a small plastic sleeve that I carry around in my wallet with my Medicare card.
In order for a mutual fund to be ranked Number One in America, the fund manager must place an advertisement in People Magazine or the back of Reader’s Digest, proclaiming, in these exact words, "We are the Number One Mutual Fund in America," whereupon the wary investor will scan the Current Top Seven Best Mutual Funds and, if the fund is one of the 384 funds in the Top Seven, the investor will pour his or hers entire life savings into the fund. This leads us to the real topic of discussion for today, which is predicting interest rates.
Interest rates are tied to the 10-Year Treasury Yield and also the secondary market for Mortgage-Backed Securities. Lenders then add a spread to these rates, such as peanut butter or hummus, and then after adding the hummus, the Lender can figure out what the costs of the money will be and then the interest rates are announced in New Yorker magazine.
Thus, if the FedMart (now known as Costco) lowers their membership fee, thereby causing interest rates to drop, borrowing money becomes less expensive and people can buy things that they will never actually use, such as exercise equipment and 12 packs of soap. This inevitably leads to inflation, which increases the price of bread and hummus, and that ultimately causes the Consumer Price Index to rise, and that is not good because we are all Consumers and we don’t want prices to rise, unless our money is in one of the top 384 Mutual Funds.
Now that I have carefully outlined the method for determining interest rates, hopefully everyone understands the importance of keeping their Medicare Card in a plastic sleeve, because you never know when some Artificial Intelligence created fraudster might trick your Grandmother into giving away all of her life savings, which, unfortunately, were not in a mutual fund. But how Artificial Intelligence is going to change the real industry is the subject of another article, so for now, we wait for our beloved real estate industry to perk up, and until then, enjoy your hummus sandwich.
David Parker is an attorney and the Managing Director of Village Settlements-an Atlantic Closing and Escrow Company. His columns have appeared regularly in local newspapers, magazines, and newsletters. He is the co-author of the book, “Real Estate Practice in DC, Maryland and Virginia.” If you have a topic that you would like him to write about, he can be reached at dparker@villagesettlements.com
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