Well last week should have been a GREAT week for rates, but when all was said and done, it was a neutral week, which is of huge concern!
When traders typically sell off stocks, traders need to put their money somewhere safe, and that safety net, historically, has been into bonds. So when the stock market lost a trillion dollars or so last week, we really expected mortgage bonds to get a nice bounce lower, but that did not occurs. Trades kept their money in cash, which tells us traders are no confident in the bond market.
Rates now have a pretty good floor of support, so the next big jump for interest rates should be some time off, with that being said, it is truly unlikely we will see conventional mortgage rates dip below the 5’s for quite some time.
So how do you sell these higher rates, that has been the question Realtors are asking me. The short answer is, don’t sell it. Rates are where they are, and they are going to be there for some time. A person needs to buy a home when it is right for them and not when it is right for the market.
With that being said, I have some clients that were floating, $250,000 loan amount, ($312,500 purchase price with 20% down) and they wanted 4.875%, but rates jumped to 5.00% and the clients were freaking out, I mean losing sleep freaking out. Then I told them that on a $250,000 loan amount, that higher .125% equated to only $19.03 per month mortgage payment increase. And I told them to afford that, they just need to drink 2 less Dutch Bros coffee per month. Thus, the clients are able to sleep now, but it took me to break it down to that simple association for them to realize. Moral of this story, break it down for the clients, even if it is to tell them it is only $0.63 per day.
But, on the flip side, below is a pretty interesting chart, as we can see, rates have increased by 1.00 point in 1 year, so taking that same above scenario, the PI payment on a $250,000 loan on October 13, 2017 was $1183.47, but that same loan amount on October 15th, 2018 is $1332.90 or a difference of $149.43, now that hurts. And that doesn’t take into effect home prices going up during that time period.
Although we are in a holding pattern for rates, we see no reason to encourage people to float, lock them, one Tweet from Trump or one misstep by Italy and the market could go nuts again. Rates are going to continue to rise through out the year.
The end is near…
Well we have been hearing that for quite some time, that this market can’t really continue to keep growing and that the housing market is going to crash.
While no one can predict, we can look at some economic report that will help us.
I wrote a few weeks back about watching the unemployment numbers, because it will be jobs that keeps this economy booming, but the 2nd report I would recommend watching is the CoreLogic National Delinquency Rates.
This report come out each month and give data on 30-60-90-120 day lates, as well as in foreclosure. Sometimes we get some spikes, like last year when the hurricane wiped out Huston, but the report is always self-correcting.
Below are a couple of charts, 1st is the Foreclosure rate July 2017 to July 2018, which shows a .5% foreclosure rate for the US.
Now lets look at the last 10 years of foreclosures from CoreLogic. Here you can see the low foreclosures from 2001 through the early 2007, and then the JUMP!
If this numbers starts to creep up, that could be a warning sign, and a sign of a buyer’s market as well. Definately something to watch!
The end is near…seller’s market
I have been commenting about this for a few weeks now, that the market in May turned, and we are trending towards a buyer’s market. Well I say another ad, in social media, for a different builder that is offering $3000 to buyers.
This will be the 2nd builder I have seen in the last 30 days, offering incentives for buyers. We also say stats from MLS come out that homes are on the market for longer periods, and that month over month home prices have fallen.
This is a GREAT time to pull up these stats, and do some door knocking or postings on NextDoor Neighbor and tell people if they are on the Fence Post, time to quit getting splinters and get that home listed!