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Category: Housing Market (Page 2 of 24)

Financing Strategy, Recession, and Mortgage Rates – May 2022 Edition

white paymaster ribbon writer adding machine placed on tabletop

Many experts are warning of a potential recession later this year, which has many questioning if it’s a good time to purchase a home…and worrying about mortgage interest rates, in particular.

We know that inflation is at 40-year highs – and as a result, mortgage rates are up over 2% in the last 4 months.

This is one of the most rapid increases in mortgage rates we’ve seen in recent memory.

With all of this in play, what’s the outlook for the future of mortgage rates and housing – and what’s the best strategy to navigate these rough waters?

Let’s take a look at a what’s happening today and also consider a little history of Federal Reserve rate hikes and recession.

Believe it or not, we might be in for an upcoming perfect storm – and in a good way for borrowers.


Mortgage rates are primarily driven by inflation, which erodes the buying power of the fixed return that a mortgage holder receives.  When inflation rises, lenders demand a higher interest rate to offset the more rapid erosion of their buying power.

When the Federal Reserve increases the federal funds rate, they are trying to slow the economy and curb inflation. If successful in cooling inflation, mortgage rates will indeed decline.  History proves this during rate hike cycles for the past 50 years.

Here’s a quick look at what’s happened historically when the Federal Reserve raises the federal funds rate:

Notice how rates actually DECREASE after inflation starts to slow. 

Most experts hope that the Federal Reserve is aggressive at tackling inflation, as they are really late to the game.  Better late than never, I guess!

By the way, don’t be fooled if you see inflation numbers come in lower over the next few months.  Many in the media have talked about “peak inflation” as right around the corner.  I don’t buy it. 

Federal Reserve Chairman Jerome Powell

Peak inflation will be in September/October of this year.  Just watch.

Also, it does look like some of the supply chain issues that have plagued us (and has contributed to inflation), might be worked out by this fall.  Or at least, we can hope for that!


The first quarter US Gross Domestic Product (GDP) reading came in at -1.4%.  That means the US economy actually shrunk by nearly a percent and a half.  Not good news, to be sure.

The definition of a recession is back-to-back negative GDP quarters.  So, if the April-June numbers are negative, we will officially be in a recession.  And this seems likely. If not now, it will be soon.

The Fed has stated that they will be moving the federal funds rate higher in the coming months – possibly even 3 percentage points this year.

The thick grey bars in the chart below demonstrate recessionary periods…and they correspond very closely to the Federal Reserve interest rate hikes.

Secondly, when you take a look at the combination of high inflation and low unemployment, a recession always follows:

Finally, another great barometer of a coming recession has to do with the difference in yield between the 10-year treasury bond and the 2-year treasury bond.

Investopedia: An inverted yield curve describes the unusual drop of yields on longer-term debt below yields on short-term debt of the same credit quality. Sometimes referred to as a negative yield curve, the inverted curve has proven in the past to be a relatively reliable lead indicator of a recession.

As you can see by the chart below, we are nearing that point now where we have an inverted yield curve.

So, when you take a look at negative GDP growth, the combination of inflation/high-employment, and the inverted yield curve, it is most likely that we will see recession very soon.

Mortgage Rates

As stated earlier, mortgage rates generally FALL during recessionary periods.

This might seem counter-intuitive, but history bears this out.  Take a look at the chart below:

Notice that mortgage rates actually fall during recessionary periods.  You can see the recessions are pictured in the dark blue verticals, and mortgage rates are highlighted inside of them.

Also, one of the few areas that seem relatively immune from recession is the housing market.  Historically, one of the safest bets during recession is real estate.

The chart below shows how housing stays quite resilient during and through recessions:

Looking back at eight of the nine recessions since 1960, home prices significantly increased or at least remained stable each time during and after the recession.  One of the reasons this occurs is because interest rates significantly fall during recessionary periods.

So, things look to be lining up for lower rates ahead!

Potential for Perfect Financing Storm

Essentially, all of these factors listed above combine for LOWER rates later this year into 2023. 

lightning and gray clouds

So, what’s a buyer or home owner to do now?

Of course, things can change, but it sure is looking like a recession is on the horizon, which will undoubtedly bring lower mortgage rates.

Well, waiting to purchase a home and “timing the market” is one option…but it’s almost always a bad idea. 

Why?  Because no one knows exactly when rates will hit rock bottom – and home prices will continue to accelerate.

More importantly, buyers will miss out on the gains of owning a home. Homes increased in value over 15% last year in the west…and things aren’t getting any cheaper.  More on trying to time the market here…

Today’s housing market is extraordinarily strong, as there is record low inventory:

On the other side, there are more new households than ever – and these are competing for fewer homes:

Strong demand and tight supply should continue to be supportive of home price increases, so prices are not coming down.

Again, what’s a potential buyer to do? Fortunately, there’s a great solution here.

Purchase Strategy

I recommend making your purchase now – and NOT paying extra discount points to lower your interest rate.  As a matter of fact, you could use “negative” points to help offset any closing costs.

Instead of paying discount points to access lower mortgage rates, borrowers can receive credits from their lender and use those monies to pay for closing costs and fees associated with the home loan.

More on that strategy here…

Yes, the interest rate might be slightly higher, but you will want to refinance this mortgage when rates drop later this year or next year!  This will also limit your out-of-pocket fees for the initial transaction.

Refinance Strategy

selective focus photo of stacked coins

If you are considering refinancing, now might be a good time to do a “cash-out” refinance and take advantage of all of the equity that’s been built over the last 5 years and pay down debt.

Rebates can be good for refinances, too, as loan’s complete closing costs can be “waived”. This allows the homeowner to maximize the amount of money received from the refinance transaction.

Then, refinance in early 2023 when rates come down.  That means you can have the cash now, and a more-than-likely lower rate later.

In Conclusion

Although things look a little grim currently, the future is actually looking bright for mortgage rates later this year and into next year.

Would you like to find out more?  Contact me to discuss your current situation and how you might be able to take advantage of today’s market.  It would be my pleasure to help you!

Real Estate/Mortgage Market Webinar – Featuring Industry Expert Barry Habib

The Lending Coach and Finance of America Mortgage are proud to present a special virtual event featuring mortgage and housing expert Barry Habib on Wednesday, April 6th. He will be discussing where the housing market’s heading in 2022.

In case you are unfamiliar, Barry Habib is a real estate and mortgage industry executive, bestselling author, and founder and CEO of MBS Highway. Barry is also a well known media resource and TV commentator on the mortgage and real estate markets.

He has recently been named America’s top real estate forecaster by Zillow and Pulsenomics®.

Join us to learn all about housing rates, recession, and how to be best prepared to serve your borrowers this year!

Wednesday – April 6, 2022 at 10:00 a.m. PDT:

As a professional in the real estate industry, you know that interest rate fluctuation and real estate pricing can be a challenge to predict.

Stay ahead of your competition and find resources to help you become a trusted advisor to buyers and borrowers in your community in this rapidly changing environment.

Barry will discuss his predictions for the housing market going forward in 2022 and the benefits of utilizing this system to show clients and referral partners the power of homeownership.

Do register today!!

Key Trends in Today’s Real Estate Market

aerial photography of buildings under blue and white sky during golden hour

As we move into 2022, one thing is clear…today’s real estate market is one for the record books.

white house

The exact mix of conditions we have today creates opportunities for both buyers and sellers.

Home values are appreciating at rates we have not seen since the housing boom nearly 15 years ago.

At the same time, there is a general shortage of homes for sale across the nation. This has led to prevalent bidding wars, as homebuyers struggle to purchase a home before prices go even higher.

Let’s take a look at today’s real estate market and how it will affect you as a home buyer (and seller).

4 Main Developments

  • Home Price Appreciation
  • Shortage of Available Homes
  • Purchase Competition and Bidding Battles
  • Rise in Home Equity

Let’s take a closer look at these 4 factors…

Home Price Appreciation

Over the past year, we have seen incredible home price appreciation throughout the US. According to the most recent Home Price Index (HPI) from CoreLogic, national home prices have increased over 18% year-over-year!

brown and white wooden house

This creates a great opportunity for current homeowners to tap into that equity via a cash-out refinance to make other investments or pay off more expensive consumer debt.

It is not at all unexpected that rising home values are a big part of why real estate remains one of the top investments. For potential sellers, it also means it is a great time to list your house to maximize the return on your investment.

Shortage of Available Homes

In 2021, the number of homes available for sale fell to an all-time low. In recent months, however, inventory levels gradually began to trend up.

According to the latest Monthly Housing Market Trends Report from, newly listed homes have grown by nearly 5%.  This isn’t fantastic news for buyers, but the trend is heading in a positive direction.

However, even though we are experiencing small gains in the number of available homes for sale, inventory remains a challenge in most states.

This would still be considered a “seller’s market”, giving current homeowners a good deal of control if/when they decide to put their house up for sale.

Purchase Competition and Bidding Battles

Today’s low supply combined with high demand creates a market with buyer competition and bidding wars.

Purchasers are being forced to become aggressive to make sure their offer stands out from the crowd by offering over the asking price or waiving some contingencies.

multiethnic businesswomen checking information in documents

The number of offers on the average house for sale broke records last year.  As a matter of fact, last year’s Confidence Index from the National Association of Realtors (NAR) stated that the average home for sale received at least five offers!

For buyers, the best way to put a convincing offer together is by working with your local real estate professional. That agent can act as your trusted advisor on what terms are best for you and what is most appealing to the seller.

Rise in Home Equity

The final key trend we see in today’s real estate market is the rise in home values and equity. One key thing to consider:

The equity in a home does not just grow when a homeowner pays their mortgage — it also increases as the home’s value appreciates.

Due to this increase in appreciation, homeowners across the country are seeing record-breaking gains in home equity.

graph and line chart printed paper

This is clear when looking at CoreLogic’s recent reports that indicate homeowners with mortgages (which account for roughly 62% of all properties) have seen their equity increase by 19.6% year-over-year!

Again, this has produced a great opportunity for current homeowners to tap into their home equity.  They can do this with a cash-out refinance to make home improvements, other real estate investments, or pay off higher balance consumer debt.

In Conclusion

If you are considering purchasing a home, conditions are a bit challenging because of low inventory, but the rewards can be substantial, as the housing appreciation is expected to continue into 2022!

Contact me to discuss becoming a homeowner or pulling out some equity in your current home, as it would be my pleasure to help you!

Major Pricing Increases Coming on Second Home Mortgages: Fannie Mae and Freddie Mac

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Mortgage interest rates and fee structures are increasing for second home financing, thanks to the Federal Housing Finance Agency (FHFA).

The FHFA has announced targeted escalations to Fannie Mae and Freddie Mac’s upfront fees for second home loans.

Here’s their announcement: 

Upfront Fee Adjustments for Second Home Loans to Take Effect

For second home loans, upfront fees will increase between 1.125 percent and 3.875 percent, depending on the loan-to-value ratio.

Why The Change?

Essentially, this appears to be the FHFA’s attempt at revenue redistribution.  They will be charging more for 2nd home financing in order to facilitate increased participation in first-time and low-income borrower programs.

FHFA Acting Director Sandra Thompson

In a statement, FHFA Acting Director Sandra Thompson said the fee increases are to provide better access to mortgages for first-time and low-income borrowers, as well as strengthen Fannie Mae’s and Freddie Mac’s balance sheets.

“These targeted pricing changes will allow the Enterprises to better achieve their mission of facilitating equitable and sustainable access to homeownership, while improving their regulatory capital position over time,” said Thompson.

“Today’s action represents another step FHFA is taking to strengthen the Enterprises’ safety and soundness and to ensure access to credit for first-time home buyers and low- and moderate-income borrowers.”

In short, it looks like second homeowners will be footing the bill and helping fund first-time buyer and low-income borrower programs.

illustration of woman analyzing financial line graphic

What Does it Mean?

For mortgages on 2nd homes, they will now look nearly identical to investment properties in terms of rates and fees.

Traditionally, 2nd homes had similar rates and fees relative to primary residences.  Here are a few sample scenarios prior to the FHFA’s move…assumptions: 760 credit score, 20% down (80% loan-to-value):

Primary residence or 2nd home

  • Interest Rate – 3.5%
  • Points – $0

Investment Property – single family residence

  • Interest Rate – 4.5%
  • Points – 1.5 (1.5% of the loan amount)

After April 1st,, here’s what we can expect:

Primary residence

  • Interest Rate – 3.5%
  • Points – $0

Second Home or Investment Property – single family residence

  • Interest Rate – 4.5%
  • Points – 1.5 (1.5% of the loan amount)

These rates/fees are just examples to show the differences in between primary residences and 2nd home/investment properties. Of course, rates are subject to change daily.

wallet with coins banknotes and credit card for payment

Also, these increases are for loans purchased by Fannie Mae and Freddie Mac on/after April 1st, 2022 – and most lenders will need to have these increases in place for loans closing in March.

For example, under the new plan, the buyer of a second home with a $300,000 mortgage loan amount and loan-to-value ratio of 65% will pay an additional fee of $4,875 if their mortgage is acquired by Fannie Mae or Freddie Mac, per the National Association of Home Builders.

Prior to the policy change, the same buyer would pay no additional fee for the comparable mortgage.


“With the nation in the midst of a housing affordability crisis and many more workers electing to telework, this is exactly the wrong time for federal regulators to be raising fees on homeownership and second homes,” Chuck Fowke, chairman of the NAHB, which has spoken out against the fee increases.

The National Association of Realtors (NAR) chimed in, as well: “Fannie Mae and Freddie Mac will face greater risks as the market is waned off of the extraordinary federal support during the pandemic, and these changes may help them to support the maximum access and affordability possible for the market in a sound manner,” said NAR President Leslie Rouda Smith.

“However, we are concerned that any fee increases that exceed necessary levels in the current environment will harm affordability and access for consumers. REALTORS® believe any excess revenues gleaned from the fee increases must be used to support homeownership opportunities in underserved communities, expanding affordability and access in a safe manner.”

In Conclusion

Unfortunately, get ready to pay more for your second home.

As always, mortgage rates for second homes will depend on a borrower’s credit score and down payment. With current mortgage rates on the rise during the first part of 2022, some market watchers are even forecasting that the new fees could increase interest rates to nearly 5% for second home purchases late this spring.

If the new mortgage interest rates aren’t to your liking for 2nd homes, you always have the alternative lending market to explore. There are other options out there!

Do reach out to me to find out more, as it would be my pleasure to help you!

First-Time Buyers: Facts Young Home Buyers Should Know

joyful young couple dancing after moving in new purchased apartment

As we all know, there’s a good deal of anxiety out there for first time home buyers. Home ownership is a major investment and isn’t something to be taken lightly.  This one of the most important financial decisions one can make…and it will have a long term effects in building wealth.

black handled key on key hole

It is never too early to start planning for your financial future, including that first home purchase.

There are some serious benefits to home ownership, to be sure (and you can find out more on that here…).

However, there are a few things that young homebuyers frequently fail to consider when starting the home buying process.

Let’s take a look at these key facts…

The Home Buying Process Begins With Mortgage Pre-Approval

Before you start looking for that dream home, would-be buyers need to have a good understanding of their overall financial position. This means having financial information readily available, such bank, savings, and investment statements.

yellow concrete house

You might want to check your credit score via a free, online site.  While it won’t give you the exact score, it will give you a good idea of what to expect.  More on that here…

It’s important to konw that mortgage interest rates tend to be higher with lower credit scores, which can dramatically affect the total costs associated with a new home purchase.

In general, saving for a down payment is sometimes viewed as one of the biggest obstacles for homebuyers, but that does not have to be the case. There are a wide variety of down payment options available – from 0% to 20%+!  You can find out more on that here…

Home Ownership Becomes Less Affordable the Longer You Wait

With mortgage rates starting to rise along with home prices appreciating, putting off buying a home now could cost you much more later.

a couple taking a selfie with their new home key

Sam Khater, Chief Economist at Freddie Mac, recently noted, “As the economy progresses and inflation remains elevated, we expect that rates will continually rise in the second half of the year.”

Most experts also forecast interest rates will rise in the months ahead, and even the smallest increase can influence your buying power. So, if you have been on the fence about buying a home, there really is no time like the present to purchase one.

Do you think you might be too late and have missed out on purchasing? Not at all! You can find out more on that here.

Know What You Can Afford and Your Mortgage Options

Some young homebuyers are unsure they can actually afford a mortgage payment for a home that suits their growing needs.

Fortunately, there are a multitude of options!  For example, the Federal Housing Administration (FHA) loan for first-time buyers (and a minimum 3.5% down payment).  Or a VA loan backed by the Department of Veterans Affairs (if you qualify), along with other home loan programs available to you.

a couple walking through the door while carrying boxes

What’s more, many buyers may be able to afford more home than you think.  It’s important to work with a mortgage professional who can help analyze the different programs to find one that suits your individual needs.

Knowing how much home you can afford and understanding the current market when starting the process are musts—and could be just what you need to stop renting and start buying.

Would you like to find out more?  Contact me to discuss your current situation and how you might be able to take advantage of today’s real estate market.  It would be my pleasure to help you!

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