Tag: mortgage rates (Page 2 of 3)

Missed Opportunities by Trying to Time the Market | Don’t Wait!

August 5, 2024 / Tom Bonetto

Those who have been waiting for mortgage rates to come down have missed a huge financial opportunity.

Home prices rose 6% in 2022, 6% in 2023 and 4% so far year-to-date in 2024.

person holding white ipad on brown wooden table

That means over the last 30 months home prices have risen on average 17% compounded.

Using a median home price of $350K 30 months ago – if you waited for rates to improve, you would have missed a $60,000 wealth creation opportunity.

But don’t let those statistics discourage you. Now’s a very good time to purchase, as appreciation gains look likely for the near future!

What the Experts Are Saying

Case-Shiller’s lead analyst, Brian Luke said “while annual gains have decelerated recently, this may have more to do with 2023 than 2024, as recent performance remains encouraging. Our home price index has appreciated 4.1% year-to-date, the fasted start in 2 years”

He goes on to talk about the cost of waiting, saying “the waiting game for the possibility of favorable changes in lending rates continues to be costly for potential buyers as home prices march forward.”

Mortgage Rates

Mortgage rates are near 12-month lows – as inflation seems to be coming down and the unemployment rate has moved higher.

Both of these are potential recession indicators, meaning that the Federal Reserve may cut the Federal Funds rate shortly. You can find out more here…

Pricing Pressure Ahead?

As rates move lower, more buyers will become eligible to purchase. In fact, the National Association of Realtors states that for every 1% decline in mortgage rates, 5 million more people can be eligible to buy.

Even if a small fraction of these eligible buyers decides to move forward, it will likely pressure prices higher and shrink the number of available home choices even further. More on that here…

The Bottom Line

Home price appreciation remains strong, despite higher mortgage rates and slightly increasing inventory.

Home values continue to set new all-time highs, and housing still proves to be one of the best investments out there. If you’ve been thinking about purchasing, now is a good time to do it!

Do reach out to me and we can strategize about your next purchase or refinance!

The blog postings on this site represent the positions, strategies or opinions of the author and do not necessarily represent the positions, strategies or opinions of Guild Mortgage Company or its affiliates. Each loan is subject to underwriter final approval. All information, loan programs, interest rates, terms and conditions are subject to change without notice. Always consult an accountant or tax advisor for full eligibility requirements on tax deductions.

Federal Reserve “Getting Closer” to Rate Cuts

July 29, 2024 / Tom Bonetto

scrabble letters spelling fed on a green mat

After years of higher rates by the Federal Reserve, it looks like thing might be changing.

Thanks to friendly inflation readings throughout the second quarter, more Fed members are signaling they are “getting closer” to cutting interest rates.

Remember, the Federal Reserve does not control mortgage rates (you can find out more about that here), but their actions and comments do impact the mortgage market.

It looks like the first cut might happen at their meeting on September 18. Inflation and labor market data between now and then will play a pivotal role in this decision.

Nick Timaros, the Wall Street Journal’s go-to writer for all things Federal Reserve, recently penned an article title “A Fed Rate Cut Is Finally Within View” (subscription required).

Three Reasons

Timaros thinks that a September cut is likely given these three factors:

Inflation over the last quarter has shown progress and has given the Fed the confidence they need that inflation is going to get to their 2% target
The labor market is starting to cool, with the unemployment rate rising each of the last three months and now at a level of 4.1%
Fed Chairman Jerome Powell is concerned about waiting too long to cut rates and cause unnecessary economic weakness and a potential recession

What This Might Mean

A rate reduction this fall would be the first since the pandemic and could be a potential boost to the economy. Fed rate cuts, over time, typically lower borrowing costs for such things as mortgages, auto loans and credit cards.

It really depends on how the economy performs in the next few months. That factor will likely determine how quickly the Federal Reserve will act.

If economic growth remains solid and employers keep hiring, the Fed would most likely take its time and cut rates slowly as inflation continues to decline.

Mortgage Rates

For mortgage rate shoppers, one of the key messages for which to listen is the one the Fed talks about on inflation. Inflation is the enemy of mortgage bonds and, in general, when inflation pressures are growing, mortgage rates are rising.

Fortunately, this trend seems to be abating, but at a slow rate. We’ve also seen the 10-year Treasury Bond yield move lower, and that is actually a better measure of mortgage rates.

The 30-year fixed mortgage rate and 10-year treasury yield move together because investors who want a steady and safe return compare interest rates of all fixed-income products.

In Conclusion

We will be hearing more comments from the Federal Reserve and Chairman Powell over the next few weeks. Nothing is set in stone, but it does appear that rates might be coming down this fall.

Don’t Wait For Lower Rates to Buy

July 16, 2024 / Tom Bonetto

Don’t wait for mortgage rates to drop before making that home purchase.

So, should you wait for rates to decline before making your home purchase? The answer might surprise you.

There’s a good chance rates may be dropping in the not-too-distant future based on a slowing economy, moderating inflation and a weakening job picture.

Even if a small fraction of these eligible buyers decides to move forward, it will likely pressure prices higher and shrink the number of available home choices even further.

It’s also likely the Fed will be forced to start cutting rates in the near future.

The advantage of buying ahead of a drop in rates is that you can capture the substantial benefit of appreciation, then refinance to a lower rate once they come down. However, this does come with a cost.

The added temporary interest expense along with the cost to refinance must be considered. When you weigh it against the much greater benefit of appreciation, the choice may become clear to marry the home today, while dating the rate in the interim. More on that here…

I have the tools to allow you to evaluate what the forecasted appreciation is on the home you’re looking to purchase and weigh it against the temporary interest expense to see if it makes sense for you.

Don’t hesitate to reach out…as it would be my pleasure to help!

Why Mortgage Rates Are Staying Stubbornly High…and What Does The Future Hold?

April 22, 2024 / Tom Bonetto

Mortgage interest rates are staying higher than initially anticipated, due to the staying power of inflation today.

Inflation is a terrible thing for prosperous, economic growth…and it significantly impacts mortgage rates for the worst.

Today, we are seeing the impact of stubbornly sticky inflation in the mortgage marketplace – and relief doesn’t appear to be coming in the near term.

The most recent inflation data showed prices rising by 3.5% year-over-year in March, which exceeds the Federal Reserve’s 2% target.

Why Does This Happen?

Rising inflation shrinks buying power as prices of goods and services increase. Higher prices can then influence the Federal Reserve’s interest rate policy, affecting the cost of borrowing for lending products like mortgages.

inflation erodes the purchasing power of money over time. As the cost of living rises, the value of each dollar decreases, leading to a decline in the real value of mortgage payments. Hence, mortgage lenders must charge more in interest to make the same profit.

Then, as inflation cools, mortgage interest rates can be expected to ease as well.

The Federal Reserve and the 10-Year Treasury Note

When inflation rises, the Federal Reserve banks has respond by tightening monetary policy to control inflationary pressures. This involves raising the federal funds rates to reduce borrowing and spending, thereby slowing down economic growth and inflation.

At this point, this strategy hasn’t worked nearly as well as expected.

More importantly, the Federal Reserve does not set mortgage rates. Instead, the central bank sets the federal funds rate target, the interest rate that banks lend money to one another overnight. A Fed increase in this short-term interest rate often pushes up long-term interest rates for U.S. Treasuries.

Fixed-rate mortgages are tied to the yield on 10-year U.S. Treasury notes, which are government-issued bonds that mature in a decade. When the 10-year Treasury yield increases, the 30-year mortgage rate tends to do the same.

Short Term Outlook

The average mortgage rate for a 30-year fixed is 7.12%, nearly double its 3.22% level in early 2022.

“There is some optimism for rate cuts, however, we were forecasting three to four rate cuts in 2024 at the beginning of the year, and it now is unlikely. People are now adjusting those expectations down to two,” says Ali Nassirian, vice president of consumer & home lending at Travis Credit Union.

“Looking at the current data, there’s roughly a 50% chance we’ll see a rate cut in June,” Nassirian adds.

As little as two weeks ago, there was generally a greater optimism that the Fed would start rate cuts in June. However, that now seems to many like a hopeful start date.

There’s also a good chance that mortgage rates will remain relatively unchanged for the remainder of 2024.

“I don’t see a rate cut at the next Fed meeting. I think June would be the soonest cut we see. Even if they cut rates two or three times this year, I don’t think we will see many moves in the mortgage market from those,” says Brian Durham, vice president of risk management and managing broker at Realty Group LLC.

“The things that will have a bigger impact on the mortgage markets will be things like the Fed’s quantitative tightening policy, job numbers, and other inflationary or deflationary variables like the cost of oil,” Durham adds.

You can find out more here from Jake Safane at MoneyWatch…

In Conclusion

Mortgage rate forecasts vary depending on the expert you ask, but the overall consensus seems to be that there won’t be significant decreases in the near future. With that said, conditions can change, as recent expectations of rate cuts so far in 2024 have not come to to pass.

It’s actually possible that we’ll even see mortgage interest rates rise if inflation persists.

So, some buyers might prefer to act now, rather than waiting for however long it might take for mortgage rates to become more favorable, if at all.

Please do reach out to me to discuss how to make the best mortgage and purchasing decisions in today’s environment.

Market Uncertainty in the Banking Sector – Does This Impact Real Estate and Mortgage Rates?

March 14, 2023 / Tom Bonetto

I’ve been asked by many real estate agents and clients about how this week’s banking uncertainty might impact the real estate and mortgage markets.

Two banks have collapsed since last Friday and the federal government jumped in to guarantee depositors at those institutions. However, there’s still a lot of uncertainty about what this means to the markets.

Fortunately, depositors at Silicon Valley Bank — which failed Friday after a bank run — and New York-based Signature Bank — which collapsed Sunday — will see their money guaranteed by the federal government.

The U.S. Treasury, Federal Reserve, and Federal Deposit Insurance Corp. (FDIC) announced measures to guarantee that depositors would be able to receive all of their money back from those failed institutions.

For a great read on the details, I’d invite you to read this piece from Statechery…

Housing/Mortgage Impact

This situation looks nothing like 2008 when subprime lending and easy credit spurred a foreclosure crisis.

As a matter of fact, many experts see mortgage interest rates coming down because of this incident.

“I don’t think the bank failures will have a material impact on the housing market in the western U.S. The failures are idiosyncratic, and given the government’s decision to pay all depositors, I don’t expect there to be a problem in the broader financial system,” Mark Zandi, chief economist at Moody’s Analytics, told MarketWatch.

He added, and “if anything mortgage rates may decline given the flight to quality into the bond market and prospects that the [U.S. Federal Reserve] may delay its rate increases.”

Mortgage lenders — which includes many banks — may not necessarily see problems with liquidity, said Sam Hall, property economist at Capital Economics.

“The direct impact on the housing market is likely to be small. Moreover, SVB’s holdings of residential mortgage-backed securities (MBS) account for a very small share of the overall market, so the forced selling of those assets is unlikely to put any downward pressure on MBS prices,” he added.

Al Otero, portfolio manager at Armada ETF Advisors, also said that the two banking failures may have forced the Federal Reserve to not raise rates, which could help the housing market.

There’s a rally in rates across the yield curve, Otero said, “and an expectation that the Fed will now ‘pause’ raising the funds rate at its March 21-22 policy session.”

“We could see a material reduction in mortgage rates going into the spring sales season,” he added, “which would be a substantial positive for the housing market.”

You can find more here…

The Federal Reserve

The bank failures may actually soften the Fed’s stance on interest rates.

“The hawkish tenor of Fed Chair Jerome Powell, in his Senate testimony last week and with the February rate hike, indicated a 50-basis-point increase was likely for the March rate decision” say’s NerdWallet’s Anna Helhoski.

You can read Anna’s full article here…

But the Silicon Valley Bank and Signature failures have clouded that outlook.

In a widely reported analysis of the failures, Goldman Sachs said it no longer expects the Fed to deliver any rate hike at the March 22 meeting, adding they had “considerable uncertainty about the path beyond March.”

Michael Feroli, chief U.S. economist at JPMorgan Chase & Co., was widely reported saying he expects a 25-basis-point hike at next week’s meeting.

In Conclusion

The heightened economic risk brought on by the failed banks and the government’s response is likely to bring a short-term boost to the housing market by way of lower mortgage rates.

Secondly, the Federal Reserve might now re-think forceful rate increases that appeared imminent just weeks ago. That should trigger lower mortgage rates, as well.

For buyers shopping now, a drop in interest rates would be a welcome boost to affordability – so reach out to me for more details, as it would be my pleasure to help would be borrowers navigate this environment.

Tag: mortgage rates (Page 2 of 3)

Missed Opportunities by Trying to Time the Market | Don’t Wait!

What the Experts Are Saying

Mortgage Rates

Pricing Pressure Ahead?

The Bottom Line

Federal Reserve “Getting Closer” to Rate Cuts

Three Reasons

What This Might Mean

Mortgage Rates

In Conclusion

Don’t Wait For Lower Rates to Buy

Why Mortgage Rates Are Staying Stubbornly High…and What Does The Future Hold?

Why Does This Happen?

The Federal Reserve and the 10-Year Treasury Note

Short Term Outlook

In Conclusion

Market Uncertainty in the Banking Sector – Does This Impact Real Estate and Mortgage Rates?

Housing/Mortgage Impact

The Federal Reserve

In Conclusion

Apply Now – Online Application

Schedule Appointment With Tom

Guild Mortgage

Contact Tom

About The Coach

Categories

BLOG ARCHIVES