Facts, Rates & Inspiration!

Facts, Rates, and Inspiration!
By: Fif Ghobadian, Originpoint

[email protected]

Summary:

• Be aware of market seasonality
• Inventory of homes went up
• Homes are on the market for less than a month
• Demand is outpacing supply
• The Federal Reserve is expected to increase the Fed Fund rate by 1
• Inflation is at a 40 yr high
• Rates could go up by approx. .25% - .50%
• Any potential rate increase is expected to be temporary and fall shortly thereafter

Facts:

Some of what we are seeing in the market is a direct result of the recession, rate increases and covid.  However, we have to also be aware of the impact of market seasonality. Historically, the market is slow in the summer and then begins to normalize later in the summer and into the Fall.  We have already seen that client activity has increased after July 4^th. 

Interesting facts:

• Inventory of homes for sale went up by 10% from May +2.4% year over year
• 3 months’ supply of homescurrently – up from 2.6 months. 6 months = balanced
• Homes were on the market for 14 days – fewest days on the market since 2011
• 88% of homes were on the market for less than a month(homes that are priced right are selling)
• 1^sttime home buyers account for 30% of sales(up from 27% per last report)
• Cash buyers account for 25%of sales
• Investors account for 16%of sales
• Foreclosures and short sales account for 1%of all transactions
• Purchases are down 19%year over year
• Interest rates are 2.75% higherthan this time last year
• Refinances are now down 80% year over year
  (MBS Highway 7/20/22)

CoreLogic released their Single-Family Rent Report for May, showing that rents are up almost 14% year over year. This report includes both new and renewal rents – Renewals are going up at a pace of roughly 8% and should continue to push people to see the opportunity in housing. (MBS Highway 7/20/22)

MBS Highway surveyed over 3,000 mortgage and real estate professionals around the country for current housing market conditions. The results for the July 2022 release showed that 66% of respondents reported their market was still active to very active. 33% saw moderate to significant pricing pressures. Of those that said activity was slower, many cited that it was due to lack of inventory. Overall demand is still outpacing supply, but to a lesser extent. (MBS Highway 7/19/22)

Rates:

It is expected that the Federal Reserve may raise the Federal Funds rate by 1% at their July 26 meeting — as they try to quell inflation that now sits at a 40-year high. Barron’s recently noted that: “With inflation so hot, the Fed’s next rate hike might be the biggest in decades,” and plenty of other sources — from CNBC to CBS News — are speculating about a 1% rate hike at the meeting.  If the Fed does hike rates, what might that mean for mortgage rates?

According to some economists – the speculation is that the rates could go up by approx. .25% -.5%. The Federal Reserve increases the Federal Reserve Fund rate which affects lines of credit and credit cards. It does not have a direct impact on mortgage rates.  “It’s often said that mortgage lenders price upcoming Fed rate hikes into the mortgage rates they offer before the Fed even makes an announcement,” says Jacob Channel, LendingTree’s senior economist. This means that rates might actually stay about where they currently are, even if the Fed does announce a larger-than-expected hike, he says. That said, “because inflation is as high as it is and because economic uncertainty appears to be growing among both consumers and businesses, some lenders may feel pressured to hike rates,” says Channel.  (MarketWatch 7/19/2022)

But if rates do rise, Channel doesn’t anticipate that they’ll rise above 6%; and he adds that even if they do spike following the next Federal Reserve announcement, he says they could fall again shortly thereafter. “This is what happened after last month’s 75-basis point hike when mortgage rates spiked by 50 basis points to 5.78% before eventually cooling down to their current levels at around 5.51%,” says Channel.  (MarketWatch 7/19/2022)

Mortgage rates are heavily weighted on the future expectation of what will happen, so a Fed increase of this magnitude is already priced into the market, says Cameron Findlay, chief economist for AmeriSave Mortgage Corp. Because the market already factored this increase into mortgage rates, and it stands to reason mortgage rates may actually fall if the Fed does not increase the full 1%, Findlay says. (MarketWatch 7/19/2022)

Inspiration:

There is nothing more jarring every morning when the alarm goes off at 5 am. Its early! Yet there is nothing more healing when you get into the pool 45 minutes later. After an hour and fifteen minutes of swimming back and forth, there is no better feeling.  I am convinced that there is some magical mental and physical transformation that happens. 

I googled the healing power of swimming and this quote resonated: “Water has tremendous healing potential for the human mind, body, and spirit. Water can physiologically and psychologically benefit people because of its therapeutic nature. For thousands of years it has been known to help cure illness, refresh the body and relax the mind.” 

Enjoy swimming this summer!