There was a lot at stake for interest rates last week and finally we got some good news!
Interest rates improved about .5% last week.
That may not sound like much but that is a huge movement in a short window of time.
That’s $132 payment per month / $1,592 per year on a $400,000 loan amount.
Not too Shabby.
Below are average interest rates across the country according to Mortgage News Daily.
Below is the Green Home Loans rate sheet today.
There are a lot of characteristics that go into a mortgage rate – credit score, investor, loan to value, loan amount, costs, etc.
Please call me to go over your specific scenario so we can price your loan out accurately.
So why did rates improve so much?
#1 – The FED did not increase the Federal Funds Rate.
They did state that the FED’s current fiscal policy will likely weigh on increased economic activity.
In reading the tea leaves, it seems unlikely that the FED will raise again barring some major event or higher than expected inflation.
Now the question is, when will they cut?
#2 – The BLS Jobs Report came in below estimates.
According to the report, there were 150,000 jobs created in October 2023, well below the estimates of 180,000 jobs.
There were also 2 downward revisions of prior months of 101,000 jobs.
Unemployment rose to 3.9% and average hours worked hit the lowest levels since April 2020.
Unemployment has risen .5% from it’s low of 3.4%. Historically when unemployment rises .5%, we are likely headed into a recession.
See below for CNBC article on all the signs that a recession is coming.
The likely outcome of a recession? Lower mortgage rates and modest home appreciation.
HOME SELLERS DROP PRICES
According to Redfin, almost 7% of homes on the market dropped prices during the month of October.
This is the highest number on record and shows that high interest rates affect home values.
Rates hit some of their highest levels in 20 years during October, which made the buyer pool shrink and affordability tighter.
See full article here.
I believe we will see home prices drop in the short term during Quarter 4 in 2023 and possibly part of Quarter 1 of 2024.
High interest rates will lower demand during a Season that is already low on demand.
This will cause houses to sit longer which will increase housing inventory.
I expect the home price drop will be short-lived as more buyer demand will increase during the spring and summer buying season.
I also predict mortgage rates to come down sometime next year which will bring a lot of pent up demand off the sidelines.
This will increase demand, lower inventory and home prices will move higher again.
Now is an amazing time to get a great deal on a home.
Many of our clients are getting sellers to pay for a 2/1 Buydown which is:
A 2% lower rate in the first year.
1% lower rate in the second year.
Regular rate third year and on.
This dramatically lowers a client’s payment for the first 2 years and hopefully they will be able to refinance to a permanently lower rate during those 2 years.
In order to refinance to a permanently lower rate, the client would still need to qualify from an income, credit, and equity perspective.