By Douglas Katz – 10/14/2022
From Freddie Mac
Rates resumed their record-setting climb this week, with the 30-year fixed-rate mortgage reaching its highest level since April of 2002. We continue to see a tale of two economies in the data: strong job and wage growth are keeping consumers’ balance sheets positive, while lingering inflation, recession fears and housing affordability are driving housing demand down precipitously. The next several months will undoubtedly be important for the economy and the housing market.
- While rates are trending upward, there are micr0-drops on favorable days. If you are in a deal and have not locked, you may find opportunity, but you should NOT expect it. Typically, rates go up more rapidly than they go down and more indicators are for higher rates than lower.
- It is an interesting time for lending as the end of any cycle brings innovation to keep deal flow and fundings at a level that sustains their profitability. These are usually not driven by price, but rather designed to decrease the payment or approval guidelines to make a bigger serviceable market. This does create a lot of opportunity, but, as you stray from vanilla programs, it is imperative that you know and more importantly UNDERSTAND the terms of the loan. Some come with some important terms that offset more risk and you do not want a gotcha later.
- Out of the traditional program, more buyers are looking at Adjustable Rate Mortgages (ARMs), which is not like the aforementioned programs. It is a great way to maintain a certain payment, but it will adjust eventually. You need to fully understand the how and when of this change. I am still surprised at how many homeowners in ARMs do not know what they may be in store for, both positively or negatively, when they emerge from thee fixed period.
- The investment part of the market continues to be robust with a continued need for rental units and the boom of short-term rentals. This is another area of innovation in the last cycle ended and there are very strong programs that allow buyers to purchase investment properties WITHOUT personal income verification or in the name of business entity. This market is generally unregulated so caveat emptor should be your mantra, but when you find a good lender, you can do some great things to grow your portfolio.
- As always, my final advice is stay frosty on the market if you are thinking of buying or refinancing, especially in situations with required transactions such as divorce. More and more people are finding out that the deal that they expected is not what the market will bear and sometimes the deal falls through under new market conditions.
I always end with a reminder that we have discounts available for veterans, first responders and law enforcement. Make sure that you check out the section of the page covering our commitment to those who served with discounted mediation services. My lending partner also offers a discount as well, so if your buying or refinancing check it out