Will Mortgage Rates Hit 7%?

Rates with a 7 Handle?  Say it isn’t so…

Mortgage rates spiked on Thursday and Friday as the 10-year treasury moved from 3.55% right before Powell’s speech to top 3.75% on Friday.  So what did Powell say to cause the spikes?

At the July 27^th Fed meeting, Powell stated the housing market needed a “reset”.  At that time the housing market was still intense but slowing down.  Mortgage rates reached 5.5% and lower pending sales were starting to show signs the housing market peaked early this year.  First time homebuyers got reengaged given their ability to buy a home closer to list and with little less competition; but with fewer new listings we were reminded that home prices would be supported.

During the last two months between Fed meetings, we’ve also seen strong employment followed by increasing wages and salaries, continued but slowing consumer spending and a 27^th consecutive month of manufacturing growth supported by lower commodity prices.

The economy is hanging on, unemployment is low, yet inflation is still high.  Why? Well… shelter inflation makes up a third of the CPI; so let’s get back to that housing “reset”.  He addressed his intention for housing by stating “I think shelter inflation is going to remain high for some time. We’re looking for it to come down, but it’s not exactly clear when that will happen. It may take some time. Hope for the best, plan for the worst.” Powell went on to say “we’ve had a red-hot housing market; with a big imbalance between supply and demand.  Supply and demand needs to become more aligned so prices go up at a reasonable pace. We’ve already seen a deceleration of home prices, which needs to get more in line with rents and other housing market fundamentals.  There are also longer term concerns, including lack of supply for building lots, getting zoning, and finding workers.  Bottom line, we have to go through a difficult correction to get back to balance.”

Regretfully, it’s not as easy as pushing rates up to reduce demand.  With two years of insanely low rates, many took advantage of purchasing or refinancing to safely secure housing that they don’t need to give up.  Powell confirmed this when he said “our expectation has been we would begin to see inflation come down, largely because of supply side healing,” he said. “We haven’t. We have seen some supply side healing but inflation has not really come down.”  Workers won’t give up their raises, companies will take the reduced commodity prices as additional profit, and homeowners will hold onto their low-rate homes.

It’s not working.

…and that was the primary driver behind the stock market drop and increasing bond yields/mortgage rates.  While the Fed raised the Fed Rate another .75% and told the market its plan to increase another 1.25% this year; that is not why our rates went up.  If what the Fed was doing was expected to control inflation; our longer-term mortgage rates would have celebrated; instead they cried… all the way to an average 6.75% per Mortgage News Daily.  Expect some rebounding next week; but also be on the lookout for more recessionary metrics.  We need the economy to show significant signs of slowing for the Fed to take its foot off the gas and rates to settle back in.

7 Ways to Build Business in a Recession

Agents are reaching out to me looking for creative ideas on how to keep their messaging up during this housing correction and market recession.  First advice… do not go dark!  Many salespeople will pull back and stop spending during times like this; but clients are looking for information that gives them stability.

Be their resource, continue marketing, and stay consistent.  Here are a few ideas to do just that.

• Look for a new niche or market opportunity. Typically when markets shift, not all aspects of the market moves in the same direction.  Right now in Denver, we are seeing over $1 million dollar homes moving faster.  Are you reaching out to that segment of your database?  Or what about niching to nurses, investors, or buyers coming from higher priced markets? People are still buying and segments of the market are doing well.
• If you didn’t have a CRM before, this is the time. Focus your marketing efforts on people who will need your services three, six, or even 12 months from now.  You will also want to look for ways to segment your database to those having life events, wanting to downsize or getting married so that they will hear from you just in time.
• Video, video, video.. staying relevant and relatable is critical when markets turn. People need to hold onto someone they know, like and trust. A little face time goes a long way!
• Evaluate your Marketing ROI. Many agents have lead gen systems, postcards, newsletters or other campaigns.  Spend some time to figure out which is bringing in business and which ones seem to be a dud?  Now is the time to know your numbers, cutting out the non-producing efforts and doubling down on the ones bringing in results.
• Become a Market Leader. Maybe you know market numbers or economics or rental statistics.  Maybe you know everything there is to know about condo buildings and HOAs or how to structure a land deal.  Now is time to let everyone know who you are and what you know. Brand yourself.  Building and staying consistent in down markets, pays dividends when the market turns.. and it always does!
• Get crafty with your service. Don’t resort to becoming a discount broker to bring in deals; elevate your services to a higher-level.  How can you become a concierge agent?  Maybe adding cleaning services to your listings or moving services for your buyers.  There is so much stress in today’s market, how can you alleviate some of it for your clients.
• Create your A Team! Whether it’s joining a team or creating one.  Know who your go-tos are in order to create a more seamless experience for your clients as well as offering additional products that they need today.  The more resourceful you can be; the more your clients will know you’ve got the answers they need.

Want more ideas for building your business? Let’s sit down and design your best strategy for crushing a challenging market! Email, IM or Call me today!

NEW Bridge Loans .. Current Examples

These are not your parent’s bridge loans anymore!  The Rueth Team has the solution you’ve been waiting for!  Have buyers who have to sell first?  Can’t qualify yet? Or need short-term financing?  Check out these actual scenarios and think about who in your database we can help get into a home today!

Example 1:  Buy before you sell – Borrower is an older gentleman, lives in Houston, TX and a partner in a law firm.  They currently own a 2^nd home in Angel Fire, NM that is listed for sale (valued at 700k, with a balance of 90k),and they’re purchasing a new 2^nd home for 680k in Albuquerque, NM.  When the home in Angel Fire sells, the proceeds will pay down the bridge balance, if not completely off.   DTI is 79% but short-term loan so no ATR.

Example 2:  Buy Now…FHA later – Borrower was relocating to Colorado.  She couldn’t go FHA at the time because she had a job gap and had not been back to work 6 months. She couldn’t go conventional due to a short-sale from over 3 years ago, but less than 4.  DTI over limit.  Closed loan using 12-month bridge and will refinance beginning of next year into FHA 30 year fixed.

Example 3: Buy Now..Wait for Returns – Borrower is self-employed and doesn’t have 2 years tax returns.  Based on 1 year tax return and YTD P&L, once tax returns are filed for this year, borrower will easily qualify for conventional loan.  Closed on 12-month bridge and will refi into 30 year fixed after 2022 taxes filed.

NEW Real-Time Updates and Text Messages

Real estate agents who want to stay in the know are texting UPDATE to 855-930-0377. Know what rates are and what’s moving the market going into the weekend.  Don’t miss out!