By Douglas Katz – 07/08/2022
Per Freddie Mac:
Over the last two weeks, the 30-year fixed-rate mortgage dropped by half a percent, as concerns about a potential recession continue to rise. While the drop provides minor relief to buyers, the housing market will continue to normalize if home price growth materially slows due to the combination of low housing affordability and an expected economic slowdown.
Some key takeaways:
- Rates did decrease, but this should not be interpreted as a full trend reversal. Lenders are adjusting to the new normal and the volatile market conditions. There will be periods of stability and even rate decrease, but those will likely be minor and borrowers should not expect to see the rock bottom rates of the last few years. When they drop, rates will do so in smaller increments and they will be slower than the increases.
- If currently floating and in a deal, i.e. under contract for buyers or application submitted for a refinance, locking is a pretty good idea right now. While rates might drop a bit more, the more likely possibility will be upward from the current rates, especially with an expected Fed Funds Rate increase in July.
- The lending industry continues to see some players close their doors. This week Sprout joined First Guaranty in going under. While these are primarily non-qualified lenders, the traditional Fannie, Freddie, government lenders are aggressively trimming their workforces to match the new normal.
- The description of the housing market seems to be generally accepting of the cooling from most of not all sources. Most try to avoid negatively associated terms instead focusing on euphemistically positive ones like correction or normalization. In my opinion, this represents capitulation and spin on the part of pundits and the media. That is not to say that I do not agree that this is actually positive, but the perspective helps sellers swallow their perceived loses from the peak. Buyers should be ecstatic because they will see the most benefit.