July 2024 Market Insight

Where did rates end in the month of July?

30 Year Fixed Rate Conventional Average: 6.969% (0.430% decrease month over month)

30 Year Fixed Rate FHA Average: 6.779% (0.329% decrease month over month)

30 Year Fixed Rate VA Average: 6.896% (0.486% decrease month over month)

Disclaimer: The mortgage rates provided are sourced from a database reflecting lenders’ current pricing and fees for informational purposes only, not as an offer or commitment to lend. Rates are subject to change and may not apply to all borrowers. This information does not constitute financial or legal advice. Conventional rates are based on a $400,000 loan amount with 20% down payment and 740-759 credit score. FHA & VA rates are based on a $300,000 loan amount with 5% down and 740-759 credit score.

What Happened This Month in the Mortgage and Real Estate Space?

Unemployment Rate: In July 2024, the US unemployment rate was 4.1%, a 0.5 percentage point increase from June 2023. This is the highest rate since November 2021 but still within the range of a healthy job market. However, unemployment rates vary by state, ranging from 2% to 5.8% in June.

Consumer Spending: Fannie Mae reported that personal consumption expenditures (PCE) were downgraded to 1.5% annualized for Q1 2024, which is 1% lower than initially reported. Monthly personal consumption data showed that spending didn’t increase much in the second quarter, indicating a slowdown in consumer spending.

Consumer Debt: Total household debt in the US reached an all-time high of $17.3 trillion in June 2024, up by $184 billion (1.1%) from the first quarter of 2024. Credit card debt saw the largest increase, rising by 16.6% between Q3 2022 and Q3 2023. The average American's credit card debt was $6,218 in Q1 2024, with an average interest rate of 22.63%.

Interest Rates: The Federal Reserve kept rates unchanged in their latest meeting. Fed Chairman Jerome Powell's announcement on June 1, 2024, initially caused rates to drop for nearly two weeks before they started rising again. Elevated interest rates, driven by strong economic indicators, continue to impact borrowing and spending behaviors.

Election Season: Donald Trump is the Republican candidate for president, and Kamala Harris takes over as the Democratic nominee after Joe Biden steps down.

Federal Reserve Interest Rate Decision

Key Takeaways from the Latest Fed Meeting:

• Rate Cuts Expected: The Federal Reserve hinted at potential rate cuts in the coming months to reduce borrowing costs for mortgages, car loans, and credit cards. While rates are held steady for now, Fed officials are cautious about risks to the labor market.

• Inflation Progress: Fed Chair Jerome Powell highlighted positive inflation trends. The Personal Consumption Expenditures (PCE) index showed a 2.5% year-over-year increase in June 2024, down from 2.6% in May, approaching the Fed's 2% target.

• Economic Growth: The U.S. economy grew at a robust 2.8% annualized rate in Q2 2024, doubling Q1’s growth rate and surpassing expectations. Powell noted this “historically unusual” development as a key factor supporting the Fed's potential policy shift.

Labor Market Concerns:

• Employment Trends: The job market is cooling, with slower hiring, reduced labor demand, and decelerating wage growth. The unemployment rate reached 4.1%, the highest in over two years. Powell described this as a “gradual normalization” but emphasized the importance of preventing significant labor market weakening.

• Future Outlook: Powell stated that further cooling would need to be substantial to prompt a response from the Fed, highlighting the delicate balance in managing employment and inflation.

Economic Cycle and Consumer Behavior:

• Unusual Dynamics: The combination of slower inflation and stronger growth defies conventional economic wisdom, complicating predictions. The Fed’s efforts to cool the economy through high interest rates have had mixed effects.

• Consumer Spending: Major retailers report a shift in consumer behavior, with Americans becoming more cautious and prioritizing value. Despite this, overall spending remains robust, contributing to economic resilience.

These insights from the latest Fed meeting provide a comprehensive view of the current economic landscape, highlighting the interplay between inflation, interest rates, and the labor market.

Rate Cut in September?

Speculation and Insights: There is growing speculation about a potential rate cut in September 2024. While the Federal Reserve has hinted at this possibility, it's important to approach these forecasts with caution. Economic indicators, such as consumer spending and unemployment rates, will play a crucial role in this decision.

My Take on It: Historically, mortgage rate forecasts have proven to be unpredictable. In 2020, no one anticipated rates dropping to 2.5-3% due to the pandemic. Similarly, in 2022, forecasts underestimated the rate increase, which soared to 7.08% in October, far higher than the predicted 3.875%.

The lesson here is to be prepared for fluctuations. If you're planning to buy a home, make sure you're comfortable with your initial payment in case rates don’t decrease as expected. It's essential to do your research and stay informed about market conditions.

June 2024 Market Insight

Where did rates end in the month of June?

30 Year Fixed Rate Conventional Average: 7.399% (0.172% decrease month over month)

30 Year Fixed Rate FHA Average: 7.108% (0.317% decrease month over month)

30 Year Fixed Rate VA Average: 7.382% (0.076% decrease month over month)

Disclaimer: The mortgage rates provided are sourced from a database reflecting lenders’ current pricing and fees for informational purposes only, not as an offer or commitment to lend. Rates are subject to change and may not apply to all borrowers. This information does not constitute financial or legal advice. Conventional rates are based on a $400,000 loan amount with 20% down payment and 740-759 credit score. FHA & VA rates are based on a $300,000 loan amount with 5% down and 740-759 credit score.

What Happened This Month in the Mortgage and Real Estate Space?

Economic indicators have had a significant impact on the real estate and mortgage sectors this month. Here’s a simplified overview of the key points:

Unemployment Rate: As of June 25, 2024, the US unemployment rate was 4.0%. This marks the first time in over two years that the rate has hit 4% or higher. While a higher unemployment rate can be tough for families, it does help reduce inflation since fewer people have money to spend. This rate is still lower than the long-term average of 5.69%.

Consumer Spending: The annual growth in the PCE price index slightly decreased to 2.6%, while the Fed's preferred core PCE price index also dropped to 2.6%. Despite these decreases, personal spending increased by 0.2% month-over-month, indicating that people are still spending money. For interest rates to decrease, we need to see data showing a significant reduction in consumer spending, which signals to the Federal Reserve that higher rates are effectively slowing the economy.

Consumer Debt: As of June 2024, total household debt in the United States reached an all-time high of $17.3 trillion, up by $184 billion (1.1%) from the first quarter of 2024. Credit card debt saw the largest increase, rising by 16.6% between Q3 2022 and Q3 2023. The average American's credit card debt was $6,218 in Q1 2024, up from $5,733 in Q1 2023, with an average interest rate of 22.63% on accounts with balances that assessed interest.

Interest Rates: Federal Reserve Chairman Jerome Powell announced on June 1, 2024, that there would be no more rate hikes. This initially helped the market, causing rates to drop for nearly two weeks before they started rising again later in the month. Elevated interest rates, driven by strong economic indicators, have a significant impact on borrowing and spending behaviors.

Inflation: According to the IMF, inflation is on track to reach its 2% target due to the Federal Reserve's actions. In May, the Consumer Price Index (CPI) was steady, with the headline flat and the core index rising only 0.2% month-over-month. The Producer Price Index (PPI) also fell by 0.2% over the month.

Job Creation: In May, job creation exceeded economists' expectations with 272,000 jobs added, mainly in healthcare, leisure and hospitality, and government sectors. However, the unemployment rate increased to 4%, the first time it has been this high since January 2022.

Global GDP: S&P Global forecasts that global real GDP growth in 2024 will be 2.7%, with higher growth revisions for some countries, including the US and China, due to policy stimulus.

Important Dates for Upcoming Economic Data

• Federal Reserve Chairman Jerome Powell Speaks on 07/02

• Unemployment Data comes out every week

• Consumer Price Index (CPI) will be released on 07/11

• Producer Price Index (PPI) and inflation expectations will be released 07/12

• Federal Reserve Interest Rate Decision will be on 07/31

Let's Talk About Mortgage Rate Forecasts

My Take on It: While mortgage rate forecasts are important, it’s crucial to take them with a grain of salt. In 2020, no one predicted rates would drop to 2.5-3% due to the pandemic. The Federal Reserve lowered the federal funds rate to 0% to stimulate the economy, making borrowing money cheaper than ever. Similarly, in 2022, forecasts underestimated the rate increase, which soared to 7.08% in October, far higher than the predicted 3.875%.

My point is, don't rely solely on these forecasts. It’s important to do your own research. If you’re buying a home and relying on rates to come down, make sure you’re comfortable with the initial payment in case there’s no relief in the near future.

Real Estate Professionals Leaving the Industry Behind

As anticipated, the tough market conditions have led to a significant number of realtors and loan officers leaving the industry. Between October 2022 and January 2024, 85,049 real estate agents left the industry, according to Housing Wire. This number is expected to have risen further due to the recent NAR settlement making it more difficult for agents to collect commissions.

For mortgage loan originators (MLOs), the situation is similar. In January 2024, only 93,938 MLOs originated at least one mortgage in the previous 12 months, down from 178,270 in June 2021, according to Ingenius. Many people entered the industry during the favorable market conditions of 2020 and 2021, with sub-3% mortgage rates making it an attractive career option.

My thoughts are straightforward: many people joined the industry in 2020 and 2021 for what seemed like easy money. When times got tough, they moved to other industries that seemed more appealing. Those of us who view this as a career rather than just a job are facing these challenges head-on. As a consumer, look for professionals who are committed to this industry as their livelihood. These individuals are more likely to provide the best service and support.

May 2024 Market Insight

Where did rates end in the month of May?

30 Year Fixed Rate Conventional Average: 7.571% (0.048% decrease month over month)

30 Year Fixed Rate FHA Average: 7.425% (0.112% increase month over month)

30 Year Fixed Rate VA Average: 7.458% (0.062% increase month over month)

Disclaimer: The mortgage rates provided are sourced from a database reflecting lenders’ current pricing and fees for informational purposes only, not as an offer or commitment to lend. Rates are subject to change and may not apply to all borrowers. This information does not constitute financial or legal advice. These rates are based on a $400,000 loan amount with 20% down payment and 740-759 credit score.

What Happened This Month in the Mortgage and Real Estate Space?

Economic indicators played a significant role in shaping the real estate and mortgage sectors this month. Here's a simplified overview of key points:

Unemployment Rate: As of May 17, 2024, the national unemployment rate was 3.9%, up by 0.5 percentage points from April 2023. This rate has been stable, ranging from 3.7% to 3.9% since August 2023. While a rising unemployment rate can be tough for families, it helps reduce inflation, as people spend less money when they lose jobs. The unemployment rate has been under 4% for over two years now.

Consumer Spending: The annual growth in the PCE price index remained steady at 2.7%, with the Fed's preferred core PCE price index increasing by 2.8% for the third consecutive month. Steady consumer spending growth is a good sign for the economy, reflecting ongoing confidence in the market.

Consumer Debt: The Federal Reserve Bank of New York's Center for Microeconomic Data reported that total household debt in the United States increased by $184 billion in the first quarter of 2024, reaching $17.69 trillion. This includes debt from mortgages, car loans, student loans, and credit cards. The high debt levels are concerning because it’s unclear how people will manage to pay back this debt.

Interest Rates: The Federal Reserve met on May 1, 2024, and Chairman Jerome Powell announced no more rate hikes. This decision initially helped the market, causing rates to drop for nearly two weeks before rising again later in the month. Elevated interest rates, driven by strong economic indicators, significantly impact borrowing and spending behaviors.

Gross Domestic Product (GDP): In the first quarter of 2024, GDP grew at an annual rate of 1.6%, less than half of the 3.4% growth in the last quarter of 2023. However, private final sales to domestic purchasers increased by 3.1%, indicating solid underlying growth.

Will the Housing Market Crash in 2024?

My Take on It:

No, the market is not likely to crash due to the low inventory of homes. Many people have locked in sub-3-4% interest rates, which means there won't be a wave of foreclosures or a rush to sell. However, market conditions can vary by region. For instance, Florida has more inventory and slower sales, leading to price drops, while urban areas in North Carolina have high demand and stable prices.

Expert Opinions:

• Tom Hutchens, Angel Oak Mortgage Solutions: The record low supply of houses on the market protects against a crash.

• Orphe Divounguy, Zillow Home Loans: Home prices may see slower appreciation but won't plummet. Several factors like Millennials entering prime home-buying years and wage growth will sustain demand.

• Bill Adams, Comerica Bank: National house prices are expected to rise by 2.9% in 2024.

Foreclosures in 2024:

• According to Attom, foreclosure starts showed a slight increase in the first quarter of 2024, but overall foreclosure activity is still below pre-pandemic levels. This is due to a strong economy, low unemployment, and good loan quality. Most homeowners have significant equity, reducing the risk of foreclosure.

When Is the Best Time to Buy a Home in 2024?

My Personal Take: Buy when you are ready or need to. Timing the market is challenging, and it’s best to purchase when it makes sense for your family. Whether you need a bigger yard, want to move to a better school district, or have other reasons, find a payment that’s comfortable for you and won’t cause undue stress.

Experts agree that buying a home is a personal decision and advise against trying to time the market. It’s important to be in a solid financial position and look for a home that meets your needs and budget. Building equity and net worth by getting on the housing ladder is beneficial in the long run.

April 2024 Market Insight

Where did rates end in the month of April?

30 Year Fixed Rate Conventional Average: 7.619% (0.321% increase month over month)

30 Year Fixed Rate FHA Average: 7.313% (0.238% increase month over month)

30 Year Fixed Rate VA Average: 7.396% (0.356% increase month over month)

Disclaimer: The mortgage rates provided are sourced from a database reflecting lenders’ current pricing and fees for informational purposes only, not as an offer or commitment to lend. Rates are subject to change and may not apply to all borrowers. This information does not constitute financial or legal advice. These rates are based on a $400,000 loan amount with 20% down payment and 740-759 credit score.

What happened this month in the mortgage and real estate space?

Amidst economic indicators shaping the real estate and mortgage sectors, let's simplify key data points for better understanding:

Unemployment Rate: Currently at 3.9%, unemployment remains a pivotal metric monitored by the Federal Reserve. A lower unemployment rate signifies a healthier economy, stimulating spending and potentially affecting inflation rates.

Consumer Spending: Predicted to grow by 2.3% in 2024, consumer spending plays a crucial role in driving economic activity. This growth trajectory, supported by solid momentum, reflects ongoing confidence in the market.

Consumer Debt: Rising consumer debt, as projected, poses challenges to economic growth. The increasing debt burden can constrain consumer spending and impact overall economic health.

Interest Rates: Elevated interest rates, influenced by robust economic indicators, have increased significantly this month. These rates are essential indicators of market conditions and play a crucial role in shaping borrowing and spending behaviors.

Let's Talk About the NAR Settlement

Background of the Issue: There was a big legal discussion about how much real estate agents get paid. Some people sued NAR, saying agents charge too much. This caused uncertainty in the real estate market because people weren't sure what would happen next.

Settlement Agreement Details: NAR agreed to pay $418 million over four years to settle the lawsuits. This money will be used to solve problems in the real estate industry.

Misunderstanding About Agent Fees: Some people thought NAR decided how much agents should be paid. But actually, agents and clients negotiate the fees.

Impact on Agents and Industry Rules: The settlement affects almost all NAR members and changes how they do business. For example, agents can't offer certain deals on house listings anymore, and they need to have agreements with clients before showing them houses.

Why It Matters: This agreement helps NAR avoid going bankrupt because of the lawsuits. It also tries to make sure agents are fair and honest with clients.

Help for Agents: NAR is giving agents support and training to understand the new rules and keep doing their jobs well.

What's Next: Even with these changes, NAR is still going to lead the real estate industry and help agents do their best for clients. They're working to make sure everyone involved in buying and selling houses is treated fairly.

March 2024 Market Insight

Where did rates end in the month of March?

30 Year Fixed Rate Conventional Average: 7.298%

30 Year Fixed Rate FHA Average: 7.075%

30 Year Fixed Rate VA Average: 7.04%

Disclaimer: The mortgage rates provided are sourced from a database reflecting lenders’ current pricing and fees for informational purposes only, not as an offer or commitment to lend. Rates are subject to change and may not apply to all borrowers. This information does not constitute financial or legal advice.

What happened this month in the mortgage and real estate space?

March witnessed a pivotal meeting by the Federal Open Market Committee (FOMC), a cornerstone event influencing the financial landscape. For individuals unfamiliar with the intricacies of financial policies, here’s a simplified overview of the outcomes and their implications:

1. Steady Rates: The FOMC maintained the Federal Funds Rate at a target range of 5.25% to 5.5%, marking the fifth consecutive meeting without a change. This decision reflects ongoing concerns over inflation levels, which, despite easing, remain higher than desired.

2. Future Projections: The March dot plot, an indicator of future rate expectations among Fed officials, suggests an anticipation of 75 basis points in rate reductions within the year. This projection is significant for planning and forecasting in financial markets.

3. Balance Sheet Policies: The Fed confirmed continuity in its balance sheet reduction strategy, affecting Treasury securities, agency debt, and mortgage-backed securities. Such policies play a crucial role in influencing overall market liquidity and interest rates.

Personal observations from the meeting suggest a cautiously optimistic stance from Jerome Powell and the Federal Reserve. Despite prevailing uncertainties, there’s a palpable sense of optimism regarding potential rate cuts later in the year, a sentiment that contributed to a modest dip in mortgage rates in March.

Let's Talk About Consumer Debt

In an era marked by escalating personal and credit card debt, reaching a collective $25.4 trillion with credit card debt alone surpassing $1.4 trillion, the financial strain on individuals is intensifying. The average credit card interest rate has soared to an unprecedented 24.66%, placing a heavy burden on those carrying balances, particularly in a time when the cost of living is surging across various sectors. If you don’t get scared by the amount of debt we have as a country, you should watch it live.

Amid these challenges, homeowners may find a beacon of relief through strategic financial management, specifically via cash-out refinancing or obtaining a Home Equity Line of Credit (HELOC). Though not universally applicable, many could benefit from consolidating high-interest debt under a potentially lower interest rate tied to their home equity.

Illustrative Scenario:

A homeowner with a $500,000 property and a $250,000 mortgage at 5% interest faces considerable monthly outlays when including $20,000 in personal loans and another $20,000 in credit card debt. By consolidating these debts through refinancing, not only could the monthly financial burden be reduced, but additional cash flow could be liberated for other essential or emergency needs.

Let’s do the math.

Current Situation:

• Current Mortgage Payment: $1,342

• Credit Card Minimum Payment: $500

• Personal Loan Minimum Payment: $700

• Total Current Monthly Expenses: $2,394

Cash Out Refinance Numbers:

• Updated Loan Balance: $250,000 (current loan balance) + $40,000 (consumer debt) + $5,000 (estimated loan costs to refinance) = $295,000

• Interest Rate: 7%

• Proposed Payment: $1,962

All together monthly payment savings: $2,394 (current total monthly expenses) - $1,962 (New Payment) = $432 monthly payment savings

Moreover, with the potential for future interest rate declines, homeowners could eventually secure even more favorable terms with a rate and term refinance, further alleviating the financial pressure and enhancing their capacity to manage personal finances more effectively.

February 2024 Market Insight

Where did rates end in the month of February?

30 Year Fixed Conventional Average Rate: 7.375%

30 Year Fixed FHA Average Rate: 7.458%

30 Year Fixed VA Average Rate: 7.77%

Disclaimer: The mortgage rates provided are sourced from a database reflecting lenders’ current pricing and fees for informational purposes only, not as an offer or commitment to lend. Rates are subject to change and may not apply to all borrowers. This information does not constitute financial or legal advice.

What happened this month in the mortgage and real estate space?

In our latest market analysis, we observe a complex landscape shaped by recent inflation reports and unemployment data, signaling that inflation may not be moderating as swiftly as anticipated. This development, however, presents a unique opportunity for prospective homebuyers.

Despite the economic uncertainties, the current market conditions continue to offer considerable advantages for those looking to purchase a home. Opportunities for favorable deals, including seller credits, remain prevalent. It is our considered view that real estate, at this juncture, represents an unparalleled investment opportunity, one that should not be overlooked.

As we scrutinize the housing market data, a concerning trend emerges: a dwindling number of new listings, escalating average home prices, and properties remaining unsold for extended periods. This scenario underscores a significant market challenge—while many await further decreases in interest rates, the window of affordability and the opportunity to enter the homeownership market may be narrowing.

The decision to purchase a home transcends the mere acquisition of property; it is fundamentally an investment decision. Like all investments, it entails certain risks. However, historical data strongly suggests that the long-term benefits of homeownership often outweigh these risks, offering not just a place to live but a foundation for financial growth and stability.

Given these considerations, we advise prospective buyers to carefully evaluate the current market dynamics. The essence of investment is not merely in navigating through uncertainties but in recognizing and seizing opportunities that align with long-term strategic goals. As we move forward, it is imperative to approach homeownership with a balanced perspective, acknowledging its potential to contribute significantly to one's financial and personal well-being.

January 2024 Market Insight

Amidst the housing market's whirlwind, haunted by concerns about home prices, interest rates, and economy-induced nightmares (or perhaps, your neighbor's aunt's dog's housing crisis predictions), I'm here to share a candid perspective – and no, the silver lining isn't hidden under your imaginary dog's chew toys.

Let's dive into some real (estate) talk:

We might just be experiencing the golden age of home buying. Seriously, this could be as close as it gets to a real estate fire sale. Why? The supply and demand conundrum in the real estate realm persists, and the only thing keeping home prices from reaching the stars is the anticipation of interest rates lacing up their dancing shoes and hitting the 5% range.

Hold onto your mortgage calculators, because here's the lowdown: rumors are circulating about not one, not two, but four Federal Reserve rate cuts in 2024. We're teetering on the brink of that sweet 5%-5.5% interest rate territory. My advice to you, my astute clients, is to take the rate hit now to dodge the potential home price hit in the next 6-12 months. It's like choosing between a bad haircut and a bad hair day—choose your poison wisely.

Now, let me paint a picture with a hypothetical scenario, because who doesn't love a good imaginary real estate rollercoaster ride?

Present Day:

• Purchase price: $300,000

• Interest rate: 6.75%

• Down payment: 10%

• Loan amount: $270,000

• Principal & Interest: $1,994

Fast Forward 12 Months:

• Federal Reserve dropping rates to 5%-5.5%

• Home's now worth: $330,000

• Your Loan Balance: $267,122

• Your Home Equity: $62,878

• New Payment after Refinancing: $1,517

Now, envision if you waited. The same home you hesitated on would look like this:

Delayed Purchase:

• Purchase Price: $330,000

• Interest Rate: 5.5%

• Down Payment: 10% or $33,000 ($3,000 more than a year ago)

• Loan Amount: $297,000 ($27,000 more than a year ago)

• Principal & Interest Payment: $1,686 ($169 more than the refinance payment)

• Home Equity: $33,000 ($29,878 lower than if you bought 12 months ago)

Let's break it down:

Tally Time:

• Equity Difference: $29,878

• Payment Difference (after refinance): $169 Lower ($2,028 annualized payment savings)

• Down Payment Difference: $3,000

Sure, these are all numbers from the imaginary kingdom of Hypothetical, but the trends suggest we're heading towards this reality. Waiting for rates to hit rock bottom is like waiting for a cat to walk a straight line—it's a losing game. The housing supply issue? Buckle up; it's not getting solved anytime soon.

In the grand saga of history, buying real estate has been a stellar investment. So, don't get caught up in the nitty-gritty of interest rates and market fears. Seize the moment, folks. Your future self will thank you for the wise investment and the chuckles you had along the way.