Interest Rates | The HousingCoach

What Happens to Housing when There’s a Recession?

by The HousingCoach℠ - Matt McGrath | Oct 25, 2022

Since the 2008 housing bubble burst, the word recession strikes a stronger emotional chord than it ever did before. And while there’s some debate around whether we’re officially in a recession right now, the good news is experts say a recession today would likely be mild and the economy would rebound quickly. As the 2022 CEO Outlook from KPMG says:

“Global CEOs see a ‘mild and short’ recession, yet optimistic about global economy over 3-year horizon . . .

More than 8 out of 10 anticipate a recession over the next 12 months, with more than half expecting it to be mild and short.”

To add to that sentiment, housing is typically one of the first sectors to rebound during a slowdown. As Ali Wolf, Chief Economist at Zonda, explains:

“Housing is traditionally one of the first sectors to slow as the economy shifts but is also one of the first to rebound.”

Part of that rebound is tied to what has historically happened to mortgage rates during recessions. Here’s a look back at rates during previous economic slowdowns to help put your mind at ease.

Mortgage Rates Typically Fall During Recessions

Historical data helps paint the picture of how a recession could impact the cost of financing a home. Looking at recessions in this country going all the way back to 1980, the graph below shows each time the economy slowed down mortgage rates decreased.

Fortune explains mortgage rates typically fall during an economic slowdown:

“Over the past five recessions, mortgage rates have fallen an average of 1.8 percentage points from the peak seen during the recession to the trough. And in many cases, they continued to fall after the fact as it takes some time to turn things around even when the recession is technically over.”

While history doesn’t always repeat itself, we can learn from and find comfort in the trends of what’s happened in the past. If you’re thinking about buying or selling a home, you can make the best decision by working with a trusted real estate professional. That way you have expert advice on what a recession could mean for the housing market.

Bottom Line

History shows you don’t need to fear the word recession when it comes to the housing market. If you have questions about what’s happening today, let’s connect so you have expert advice and insights you can trust.

Four Things That Help Determine Your Mortgage Rate

by The HousingCoach℠ - Matt McGrath | Oct 12, 2022

If you’re looking to buy a home, you probably want to secure the lowest interest rate possible for your home loan. Over the last couple of years, that was easier to do as the housing market saw record-low mortgage rates, but this year rates have risen dramatically.

If you’re looking for ways to combat today’s higher rates and lock in the lowest one you can, here are a few factors to focus on. Since approval opportunities can vary, connect with a trusted lender for customized advice.

Your Credit Score

Credit scores can play a big role in your mortgage rate. Freddie Mac explains:

“When you build and maintain strong credit, mortgage lenders have greater confidence when qualifying you for a mortgage because they see that you’ve paid back your loans as agreed and used your credit wisely. Strong credit also means your lender is more apt to approve you for a mortgage that has more favorable terms and a lower interest rate.”

That’s why it’s important to maintain a good credit score. If you want to focus on improving your score, your trusted advisor can give you expert advice to help.

Your Loan Type

There are many types of loans, each offering different terms for qualified buyers. The Consumer Financial Protection Bureau (CFPB) says:

“There are several broad categories of mortgage loans, such as conventional, FHA, USDA, and VA loans. Lenders decide which products to offer, and loan types have different eligibility requirements. Rates can be significantly different depending on what loan type you choose.”

When working with your real estate advisor, make sure you find out what’s available in your area and which types of loans you may qualify for.

Your Loan Term

Another factor to consider is the term of your loan. Just like with location and loan types, you have options. Freddie Mac says:

“When choosing the right home loan for you, it’s important to consider the loan term, which is the length of time it will take you to repay your loan before you fully own your home. Your loan term will affect your interest rate, monthly payment, and the total amount of interest you will pay over the life of the loan.”

Depending on your situation, the length of your loan can also change your mortgage rate.

Your Down Payment

If you’re a current homeowner looking to sell and make a move, you can use the home equity you’ve built over time toward the down payment on your next home. The CFPB explains:

“In general, a larger down payment means a lower interest rate, because lenders see a lower level of risk when you have more stake in the property. So if you can comfortably put 20 percent or more down, do it—you’ll usually get a lower interest rate.”

To learn more, connect with a lender to find out the difference a higher down payment can make for your new mortgage.

Bottom Line

These are just few factors that can help determine your mortgage rate if you’re buying a home. The best thing you can do is have a team of professionals on your side. Connect with a local real estate professional and a trusted lender so you have the expert advice you need in each step of the process.

What Are Experts Saying About the Fall Housing Market?

by The HousingCoach℠ - Matt McGrath | Oct 11, 2022

The housing market is rapidly changing from the peak frenzy it saw over the past two years. That means you probably have questions about what your best move is if you’re thinking of buying or selling this fall.

To help you make a confident decision, lean on the professionals for insights. Here are a few things experts are saying about the fall housing market.

Expert Quotes for Fall Homebuyers

A recent article from realtor.com:

“This fall, a more moderate pace of home selling, more listings to choose from, and softening price growth will provide some breathing room for buyers searching for a home during what is typically the best time to buy a home.”

Michael Lane, VP and General Manager, ShowingTime:

“Buyers will continue to see less competition for homes and have more time to tour homes they like and consider their options.”

Expert Quotes for Fall Sellers

Selma Hepp, Interim Lead of the Office of the Chief Economist, CoreLogic:

“. . . record equity continues to provide fuel for housing demand, particularly if households are relocating to more affordable areas.”

Danielle Hale, Chief Economist, realtor.com:

“For homeowners deciding whether to make a move this year, remember that listing prices – while lower than a few months ago – remain higher than in prior years, so you’re still likely to find opportunities to cash-in on record-high levels of equity, particularly if you’ve owned your home for a longer period of time.”

Bottom Line

Mortgage rates, home prices, and the supply of homes for sale are top of mind for buyers and sellers today. And if you want the latest information for our area, let’s connect today.

Two Questions Every Homebuyer Should Ask Themselves Right Now

by The HousingCoach℠ - Matt McGrath | Oct 6, 2022

Rising interest rates have begun to slow an overheated housing market as monthly mortgage payments have risen dramatically since the beginning of the year. This is leaving some people who want to purchase a home priced out of the market and others wondering if now is the time to buy one. But this rise in borrowing cost shows no signs of letting up soon.

Economic uncertainty and the volatility of the financial markets are causing mortgage rates to rise. George Ratiu, Senior Economist and Manager of Economic Research at realtor.com, says this:

“While even two months ago rates above 7% may have seemed unthinkable, at the current pace, we can expect rates to surpass that level in the next three months.”

So, is now the right time to buy a home? Anyone thinking about buying a home today should ask themselves two questions:

1. Where Do I Think Home Prices Are Heading?

There are two places to turn to answer this question. First is the consensus of what experts are saying. If you look at what experts are projecting for home prices in 2023, they’re forecasting home price appreciation around 2%. While it’s true some are calling for depreciation, most are calling for appreciation in home values over the next year.

The second spot to turn to for information is the Home Price Expectation Survey from Pulsenomics – a survey of a national panel of over one hundred economists, real estate experts, and investment and market strategists. According to the latest release, the experts surveyed are also calling for home price appreciation for the next several years (see graph below):

2. Where Do I Think Interest Rates Are Heading?

Like mentioned above, Ratiu sees mortgage rates rising over the next several months. Another expert agrees. Mark Fleming, Chief Economist at First American, says:

“While mortgage rates are expected to continue to drift higher over the coming months, much of the rapid increase in rates is likely behind us.”

The instability in the world and higher inflation are driving this volatile market, resulting in higher borrowing rates for those looking to buy homes.

Bottom Line

If you’re thinking about buying a home, asking yourself about home prices and mortgage rates will help you make a powerful and confident decision. Experts see both prices and rates rising in the future. The alternative is to rent, but rents are also increasing. That may mean buying a home makes more sense than renting.

The Cost of Waiting for Mortgage Rates To Go Down

by The HousingCoach℠ - Matt McGrath | Oct 4, 2022

Mortgage rates have increased significantly in recent weeks. And that may mean you have questions about what this means for you if you’re planning to buy a home. Here’s some information that can help you make an informed decision when you set your homebuying plans.

The Impact of Rising Mortgage Rates

As mortgage rates rise, they impact your purchasing power by raising the cost of buying a home and limiting how much you can comfortably afford. Here’s how it works.

Let’s assume you want to buy a $400,000 home (the median-priced home according to the National Association of Realtors is $389,500). If you’re trying to shop at that price point and keep your monthly payment about $2,500-2,600 or below, here’s how your purchasing power can change as mortgage rates climb (see chart below). The red shows payments above that threshold and the green indicates a payment within your target range.

As the chart shows, as rates go up, the amount you can afford to borrow decreases and that may mean you have to look at homes at a different price point. That’s why it’s important to work with a real estate advisor to understand how mortgage rates impact your monthly mortgage payment at various home loan amounts.

Are Mortgage Rates Going To Go Down?

The rise in mortgage rates and the resulting decrease in purchasing power may leave you wondering if you should wait for rates to go down before making your purchase. Realtor.com says this about where rates could go from here:

“Many homebuyers likely winced . . . upon hearing that the Federal Reserve yet again boosted its short-term interest rates by three-quarters of a percentage point—a move that’s pushing mortgage rates through the roof. And the already high rates are just going to get higher.”

So, if you’re waiting for mortgage rates to drop, you may be waiting for a while as the Federal Reserve works to get inflation under control.

And if you’re considering renting as your alternative while you wait it out, remember that’s going to get more expensive with time too. As Nadia Evangelou, Senior Economist and Director of Forecasting at the National Association of Realtors (NAR), says:

“There is no doubt that these higher rates hurt housing affordability. Nevertheless, apart from borrowing costs, rents additionally rose at their highest pace in nearly four decades.”

Basically, it is true that it costs more to buy a home today than it did last year, but the same is true for renting. This means, either way, you’re going to be paying more. The difference is, with homeownership, you’re also gaining equity over time which will help grow your net worth. The question now becomes: what makes more sense for you?

Bottom Line

Each person’s situation is unique. To make the best decision for you, let’s connect to explore your options.

How an Expert Can Help You Understand Inflation & Mortgage Rates

by The HousingCoach℠ - Matt McGrath | Sep 27, 2022

If you’re following today’s housing market, you know two of the top issues consumers face are inflation and mortgage rates. Let’s take a look at each one.

Inflation and the Housing Market

This year, inflation reached a high not seen in forty years. For the average consumer, you probably felt the pinch at the gas pump and in the grocery store. It may have even impacted your ability to save money to buy a home.

While the Federal Reserve is working hard to lower inflation, the August data shows the inflation rate was still higher than expected. This news impacted the stock market and fueled conversations about a recession. It also played a role in the Federal Reserve’s decision to raise the Federal Funds Rate last week. As Bankrate says:

“. . . the Fed has raised rates again, announcing yet another three-quarter-point hike on September 21 . . . The hikes are designed to cool an economy that has been on fire. . .”

While their actions don’t directly dictate what happens with mortgage rates, their decisions have contributed to the intentional cooldown in the housing market. A recent article from Fortune explains:

“As the Federal Reserve moved into inflation-fighting mode, financial markets quickly put upward pressure on mortgage rates. Those elevated mortgage rates . . . coupled with sky-high home prices, threw cold water onto the housing boom.”

The Impact on Rising Mortgage Rates

Over the past few months, mortgage rates have fluctuated in light of growing economic pressures. Most recently, the average 30-year fixed mortgage rate according to Freddie Mac ticked above 6% for the first time in well over a decade (see graph below):

The mortgage rate increases this year are the big reason buyer demand has pulled back in recent months. Basically, as rates (and home prices) rose, so did the cost of buying a home. That pushed on affordability and priced some buyers out of the market, so home sales slowed and the inventory of homes for sale grew as a result.

Where Experts Say Rates and Inflation Will Go from Here

Moving forward, both of these factors will continue to impact the housing market. A recent article from CNET puts the relationship between inflation and mortgage rates in simple terms:

“As a general rule, when inflation is low, mortgage rates tend to be lower. When inflation is high, rates tend to be higher.”

Sam Khater, Chief Economist at Freddie Mac, has this to say about where rates may go from here:

“Mortgage rates remained volatile due to the tug of war between inflationary pressures and a clear slowdown in economic growth. The high uncertainty surrounding inflation and other factors will likely cause rates to remain variable, . . .”

While there’s no way to say with certainty where mortgage rates will go from here, there is something you can do to stay informed, and that’s connect with a trusted real estate advisor. They keep their pulse on what’s happening today and help you understand what the experts are projecting. They can provide you with the best advice possible.

Bottom Line

Rising inflation and higher mortgage rates have had a clear impact on housing. For expert insights on the latest trends in the housing market and what they mean for you, let’s connect.