Mortgage Market Update – More of the Same for Mortgage Rates

By Doug Katz – 9/16/2022

Per Freddie Mac:

Mortgage rates continued to rise alongside hotter-than-expected inflation numbers this week, exceeding six percent for the first time since late 2008. Although the increase in rates will continue to dampen demand and put downward pressure on home prices, inventory remains inadequate. This indicates that while home price declines will likely continue, they should not be large.

Highlights and Takeaways

  • It is important to differentiate between a trend and a blip.  the drop that we saw recently was the latter and anyone misinterpreting it as a trend may get burnt when they go to secure a rate.
  • The disappointing inflation numbers are pointing toward an inevitable Fed Funds Rate increase and general sentiment is that it will be sizable.
  • The housing situation, i.e. a lack of homes to buy, means buyers are still disadvantaged, but I recommend against completely pulling out of the market.  Some great opportunities, especially for buyers unafraid of minor aesthetic projects, will likely hit the market as the decreased buyer demand makes them less attractive to the pack.
  • Lenders will continue to aggressively pursue the shrinking market with tighter pricing and new programs.  This is good for borrowers as it insulates a bit against the rate increases.  I would, however, caution against price over all other consideration type approach can cause other issues.  Many large players have excessive overhead that they need to cover.  One way is through less experienced originators.  As deals become harder and harder to do, experience and track record, especially for purchase loans, should be as high on the list considerations as cost.  In short, you do not want to get a great rate only to have a deal fall through.
  • Recent data out on foreclosure and delinquencies is NOT indicating a upcoming tsunami.  They have increased but more to a normal numbers.  We still do not know if the continued inflationary pressure and increasing layoffs will impact, but many people who were still in peril after COVID forbearance ended and buyers who purchased recently at the high end of there allowable debt service ratio could end up adding to the numbers.
  • Finally, I know this is broken record kind of stuff, but I highly encourage all pre-approved buyers to revisit their assumptions.  Rates should, of course, be considered, but also other assumptions like the value of a retirement or investment account, especially if it is the source of a down payment.  I also highly advise revisiting housing with respect to the personal budget.  With almost everything costing more, it is not only the increased housing payment that may preclude a decision to buy.

I want end with a quick PSA.  Make sure that you check out the section of the page covering our commitment to those who served with discounted services.

My lending partner offers a discount as well, so if your buying or refinancing check it out.