Mortgage Market Update – Average Mortgage Rates Above 7% With An End Of Week Improvement

By Douglas Katz – 11/10/2022

From Freddie Mac:

As the housing market adjusts to rapidly tightening monetary policy, mortgage rates again surpassed seven percent. The housing market is the most interest-rate sensitive segment of the economy, and the impact rates have on homebuyers continues to evolve. Home sales have declined significantly and, as we approach year-end, they are not expected to improve.

Commentary:

  • At the time of writing my commentary, the inflation numbers had been announced and they showed a favorable trend.  This does not mean the end of inflationary concerns and there has actually been a lot reported on the efforts of the Fed to tame inflation and how even improving numbers should not and likely will not completely end their measures.
  • Rates actually dropped a bit at the end of the week from optimism on the inflation numbers and, I personally speculate, the fact that we avoided any election day upheaval.  Like inflation, the threat has not disappeared, but, in the short-term, I think that many are feeling we are out of danger.
  • Anecdotally, I am seeing a lot more activity out of my buyers.  This is a data point and not a trend, but it is encouraging.  We may be seeing a bit of inflection point between decreasing values and increasing interest rates.
  • This increased activity does not mean we are back at a return to crazed buyer behavior and we may not see that for a long time, if ever.  Buyers are very discerning at this point and they are walking or not even going under contract when there are issues.
  • The lending industry is continuing to adapt to the changing market.  For example, there was an announcement last week benefitting first-time home buyers.  This announcement effectively ended much of the pricing add-ons for programs focused on first-time homebuyers and low-to-moderate income borrowers while also expanding the program to borrowers with incomes that previously exceeded income limitations.  This is just one example of the rapidly changing landscape and this is a big reason to value veteran originators who know how to find and apply new programs as they hit the market.
  • Divorcing and separating couples need to act deliberately.  I keep saying but I am still seeing it.  Lower values and higher rates can and often do out the refinancing spouse in a difficult position where they need to make up the different between what they agreed to and the available proceeds out of another bucket or sell.  This dilemma is often coming with a much higher payment due to a larger loan amount and higher rates.  I am not advising to act out of panic, but making informed decisions is essential.
  • Investors are not insulated from the rate fluctuation.  While it does lag the residential market, the hard money and private lending market is also seeing rates increase.  Many of the lenders with whom I work in my Redleg Funding business have been repricing for the worst this week, so if you are investor check and adjust any assumptions based on old term sheets.

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