Mortgage Market Update – Rates Retreat a Bit

By Douglas Katz

From Freddie Mac:

Mortgage rates decreased slightly this week due to ongoing economic uncertainty. However, rates remain quite high compared to just one year ago, meaning housing continues to be more expensive for potential homebuyers.

Commentary

  • This really amounts to very little impact for buyers.  When the industry talks about increases and decreases, there is no minimum change required for reporting.  This means a decrease could mean paying $500 vs $750 in points for the same rate.  Often times there is NO difference in the delivered rate.  As a result, every buyer should understand context for rate movements and not just direction.
  • As with above, this will not impact the market much but for momentum from any buyers who are spurred to action by headlines, but this will be minimal if at all measurable.
  • I would not expect significant downward movement for a while, meaning months or even possibly years.  I tell all of mu clients that their perceived achievable low rates and the expectations that they are using for decisions should be real and reasonable.  I still hear they wait until things go back down argument.  This is fine, but the how much needs to be defined.
  • Inventory is still a challenge for the housing market and that is, in my humble opinion, one of the only things helping keep values up.  Any change to that through an influx of available homes will be the only way to effectively return to a balanced market.  We may get there through buyer apathy, but it will take longer.
  • Investors are still very much on the sidelines too.  They are acquiring rental properties as those have immediate revenue potential, but fix-and-flip are still sparse as values are still to high and after rehab values too low.
  • As I have been highlighting, anyone needing to refinance an ex off their property OR who is getting bought out needs to stress test their agreement or potential agreement in the context of the market.  I am already speaking with a decent number of clients who have not yet digested that the agreement that they have may be points lower in rate and thousands or even tens of thousands less than they were anticipating for value.  This may force a sale as most agreements allow for refinance or sale of the property.  You could even see underwater situations where after closing costs they need to bring funds.

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