August 19th Mortgage Market Update

Mortgage Market Update – The Rate Volatility Pause That Refereshes

August 19th Mortgage Market Update

By Douglas Katz – 8/19/2011

Per Freddie Mac

Inflation appears to be beyond its peak, which has stopped the rapid increase in mortgage rates that the housing market was experiencing earlier this year. The market continues to absorb the cumulative impact of the large price and rate increases that led to a plunge in affordability. As a result, over the rest of the year purchase demand likely will continue to drag, supply will modestly increase, and home price growth will decelerate.

Highlights and Takeaways

  • Although things can change, we have reached a bit of a pause in the major moves.  This is a gift if you are in a transaction right now and you should definitely assess whether it is the right time to lock.
  • Even though inflation may be slowing, nobody is sure.  The Fed has communicated their willingness to continue moving rates to tame inflation.  Remember that the current inflation numbers are ones that we have not seen in many years and the factors causing it were unique in nature.
  • The housing market continues to see a shift that while not rapid is pronounced enough to see.  Time on market is going up and reprices are happening more often.  Anecdotally, I would guess that sellers are working from old expectations and realtors are acquiescing with the understand that the reprice will come after an agreed upon time at a higher asking price.
  • Some seasonality may be kicking in as a lot of my pre-approvals decided to rent, especially when kids were involved.  I am confident some of these will end up pulling the trigger if the market really moves, but without that, they are hunkered down for the rest of 2022.
  • Investors are still on the sidelines, but with a bit more activity.  I personally have attended a few meetings of investors that had ceased meetings for a long time and are just getting back up to some decent attendance.  They are actively discussing deals and are refining their models for the new normal.  I would expect that they will move quickly once the market hits their acceptable triggers for profitability.
  • As this is a pause there is not much to say other than breaks in volatility like this are the time to assess and plan.  I recommend doing this for anyone looking into any real estate transaction.