Two major developments this week have caused mortgage rates to plunge, potentially below 4% for some borrowers.

First, the Federal Reserve Open Market Committee meeting minutes released this week gave us a good idea of the stronger language regarding the committee's position on interest rates. Patience is still the members' firm commitment. Citing a lack of inflationary pressure, members said they believe rates will remain unchanged for "some time."

The FOMC members also changed their position on where they believe the economy is going. Worries about recession have taken a backseat and the members are instead positive about growth this year, agreeing that growth is "solid." Keep in mind, however, that this Fed meeting took place well before the recent trade issues with China.

The Fed minutes created a positive vibe on Wall Street which was quickly overshadowed by the shake up in negotiations with China. China's Commerce Ministry said that trade talks cannot continue until the United States addresses its "wrong actions." No specific actions were cited and no further talks are scheduled at this time.

That caused equities to take a dive. At its lowest point the Dow was trading down 400 points and finished 286 points down on Thursday. The S&P 500 tumbled by 1.2% while the Nasdaq Composite lost 1.6%. The S&P is now down just over 4% from the record highs. Crude oil also saw a big dropoff as the risk crept into other parts of the market.

This volatility in equities, combined with belief from investors that this trade war will last for much longer than anticipated, had another very important consequence for the housing market.

This Thursday, the benchmark 10-year Treasury yield hit its lowest level since 2017. It dropped 9 basis points to 2.308% (see chart below). Again, this is in response to the intensified trade war discussions between the U.S. and China. The yield on the 30-year Treasury bond dropped 8 basis points to 2.742%. Those are the lowest levels for those yields since November 2017 and December 2017, respectively.

The silver lining is that as bond yields dive lower, so do long-term mortgage rates. According to Freddie Mac, the average 30-year fixed mortgage rate was 4.06% this week.

This political drama continues the whirlwind of a month where President Trump accused China of reneging on a deal and then announcing he would raise tariffs. That was countered by China announcing higher tariffs on U.S. goods. Helping ease some of the tension was a move by the United States to allow Google to continue working with Chinese telecom giant Huawei.

Another move keeping investors wary is a tension with Iran that has bubbled up in the last week. President Trump tweeted over the weekend that "If Iran wants to fight, that will be the official end of Iran."

The Pentagon has dispatched additional ships and bombers to the Middle East while acting Defense Secretary Patrick Shanahan said that "This is about deterrence, not war." It will be a situation closely watched by investors and analysts as it continues.

Adding to the geopolitical mess was U.K Prime Minister Theresa May resigning her position in the wake of the Brexit fiasco. She will officially leave her position on June 7 as the U.K. continues to struggle to figure out a deal to leave the European Union.

NEW YORK FED SPEAKS ON FUTURE OF HOMEOWNERSHIP

This week the New York Fed held a press briefing discussing homeownership in the United States. That coincided with the release of the group's 2019 Survey of Consumer Expectations Housing Survey.

What the group found is that the future of homeownership in America depends on quite a few factors, first and foremost, how many people continue to enter into homeownership. If the economy stays stable, there's a good chance the number of people owning homes will increase as the aging population is more likely to own a home. The study also found people would like to own instead of rent, but are held back by factors like student debt and tight credit.

Along those lines, new home sales data out this week shows that home sales declined by 6.9% in April with previous months being revised up. The most notable revision was adding 31,000 units to March's report.

Existing home sales also declined in April, dropping by 0.4% month-over-month against expectations for an increase. It's interesting to note that while single-family unit sales decreased, we did see increases in sales of condos and co-ops.

FANNIE, FREDDIE DISCUSSION CONTINUES

Federal Housing Finance Authority Director Mark Calabria sent a ripple through the housing world this week during the MBA Secondary Conference in Manhattan. He is itching for change and says the time for reforming the government conservatorship of Fannie and Freddie is now.

The process to get there isn't very simple, however, and Calabria has suggested the groups explore initial public offerings (IPOs) as a way to raise the capital necessary to exit government control. "The centerpiece of this plan has to be a strategy to end conservatorship of Fannie and Freddie," said Calabria. "I want to move to a new reform structure. One that's more competitive and works for taxpayers and supports financial stability."

The other part of his plan is to create more competition in the marketplace while helping Fannie and Freddie regain financial stability. In summary, he believes that companies should succeed because they are the best. Not because the rules are best suited for them.