Before you forward this to your “other lender” – I did lock all my loans this week with 6 handles. (Literally never thought I’d be saying that as a flex.) However, the current average 30 year fixed interest rate, without points is 7.4%. This is when I usually start speculating on when this will turn around and rates will be back in the 5s.
As you also may know, I’m taking break from making predictions.
Here is the truth. I can still help families buy and sell real estate when interest rates are above 7s. Before I get into how we are still going to accomplish your goals in this market, I’ll bring you up to speed on what brought us back to the 7s.
1. The US Credit Rating was downgraded. We discussed this last week. It created some red numbers in the mortgage bond market. Scorsese Red. Not red like lust. Red like violence or danger. Red like blood.
Then last Friday, the jobs report came out showing $187,000 jobs added. Thank you all who prayed Thursday night, rates came back down into the sixes and I had a great weekend filled with something I hadn’t felt all week – the will to live. Monday was good too. My team was pricing and repricing and locking loans like it was our only job. We got a little obsessive.
2. Which was good because the road got a little bumpy on Tuesday and Wednesday when the market started to have concerns that the CPI numbers on Thursday might show an uptick on inflation due to the cost of fuel. The Cleveland Fed came out predicting that inflation would increase for July and August readings.
3. It did not. But bonds are still grumpy. Core CPI decreased from 4.8% to 4.7% due to shelter readings catching up with real time data (not caught up but inching closer), used and new car costs dropping and energy prices not skyrocketing as Cleveland had predicted. At the time of this writing I do not know why mortgage bonds are down 56 basis points on this news. I’m at a loss.
Let’s pivot back here, to how we are going to deal.
Breathe. Recognize this is hard for everyone. Mortgage Apps and existing home sales are testing 30 year lows. Consumer debt is very high. Sorry, that’s not an accurate depiction of the current reality. Consumer debt is ALARMINGLY HIGH in Scorsese RED. And, credit card delinquencies are up, so are auto loan delinquencies. Shit, even corporate delinquencies are up 25%. Mortgage delinquencies though, those are a very different story. The Mortgage Bankers Association reported today that the delinquency rate is actually dropping as we speak. It’s down 19 basis points from the beginning of the year and 27 basis points from a year ago. The seasonally adjusted mortgage delinquency rate is currently at its lowest reading EVER since the MBA began doing this survey in 1979.
People are going down on every bill EXCEPT their mortgage. Do you know why?
Homeownership is not just about the shiny object. Yes, it is a roof over your family’s heads. It is also your protection plan against inflation. It will be your nest egg in crisis. Your future home is security and current homeowners know it, which is why they are making their mortgage payments. (It helps that I made sure they could afford those mortgage payments in the first place.) The people I have enabled to achieve homeownership are better off because of it.
Why now? Why are you interested in buying now?
I met with a family this week who was barely qualifying at current interest rates. I could literally feel myself biting my tongue to say let’s wait until interest rates come down just a little and you can qualify $25k higher because it will make a difference in their price range. Even though I know they will be up against more competition then, it was still on the tip of my tongue. Then I asked them why they decided to start pursuing this now and get preapproved and they shared with me the most horrifying story of a home invasion that they were in the house during. They want out of that damn house, off that damn street and the rents where they are looking are similar to a mortgage payment. Forget everything I’ve said the last two weeks about waiting - Let’s find them a house, ok?!
You know why?
Homeownership is more than interest rates and prices. As referenced in Step 1, it’s security that we are helping people achieve. Security means a lot of different things. Helping people live in a place where they can sleep at night? I’m down to do that if the interest rate is 2% or 10%.
Seek more and more information.
We know that confusion repells people, while clarity attracts. I also know from experience in my business over that past 11 years as a lender that folks can become overwhelmed by urgency. I have been rushing you to buy before interest rates come down and prices jump. I have been pushing sellers to remove their golden handcuffs (their 3% mortgage) and buy the home that will give them the quality of life they want. I think I can do something better which is why I publish this newsletter. I can better support you by showing you what we are learning in real time. By giving you all of the information and empowering you to trust their own intuition, get in the driver’s seat and make decisions – for yourself and your family.
We don’t need to hide from the market data or the current reality, we need to completely and fully understand it so that you can decide what your next and best step is. This includes strategies such as seller concessions to use for temporary and permanent rate buy downs. Remember, the one silver lining of a higher interest rate climate is less competition and more ability to negotiate.