Hey everybody. It’s Adam Kernen, your favorite mortgage lender. Hope you are doing well. Writing this blog in mid-June 2022. I wanted to take just a couple of minutes and share what my team and I are seeing. Obviously, there are headlines all over the place. There is a lot of economic noise and mortgage rates are rising and all this kind of stuff going on.
I wanted to give you a real take on what we’re actually seeing and thinking and what to expect in this current market. Obviously, inflation is the number one topic in our economy and in our mortgage markets these days, obviously the price of everything is going up. Given the massive amount of stimulus in the past couple of years and interest rates being too low for too long, it’s kind of expected, right?
Inflation is the number one arch enemy of low interest rates. Obviously, if you’re an investor, prices are rising, you want a higher yield on your investment.
Right now, for a conventional 30 year fixed we’re in the low sixes for interest rates. Government loans may be high fives with a point or two, something like that. Those are gross generalizations. We’ll tailor those to you given the situation, but it gives you a rough idea that things have come up, but it’s certainly not the end of the world.
The sky is not falling. Things are still working very, very well. There are tons of click bait headlines out there. You’re seeing, oh, showings off 40%. Number of home offers collapsing, and all this crap click bait headlines. The analogy is this, imagine you’ve been driving 125 miles an hour on the interstate for the last however long, and you slow down to 90 or 85 miles an hour.
It’s going to seem really slow, and you have slowed by a substantial percent. You’re still going really fast. The truth is our real estate market is still very, very good. It’s not as crazy white hot as it was, but it’s still really, really good. Most homes are selling with multiple offers. Buyers are being successful, but it’s not as super crazy as it was.
This is actually a good thing. We’re moving back toward a normal, balanced, healthy market. The 25% appreciation we’ve seen over the last year or so. That’s just not healthy or sustainable. We are going see a much more realistic, balanced market going forward, but at the core of it is supply and demand. That is still way out of whack and not getting solved anytime soon.
There’s still way more demand than there is supply in the housing markets. Obviously, you’ve heard the headlines, the federal reserve did raise short term prime rates by 0.75 this week. That’s actually a good thing. That’ll help fight inflation, but that’s not something that happens overnight. There has been some volatility in response to that as well as other interest rate changes around the world.
It is going to help fight inflation, but it’s going take some time to do that. We do expect things to settle down. We are going to see a recession. We’re probably already in it. The numbers just haven’t shown it yet. So yeah, interest rates may settle back down.
Cost of Recession
Maybe this winter, maybe next year we do expect improvement, but it’s going to be at the cost of a recession. There are some negatives to that expecting some job loss and some economic pain. putting that aside, it’s not the end of the world. What you’re not hearing from me is panic doom and gloom.
It is going to be a good market going forward. We’re still having plenty of home purchases, home sales, things are going really well. My message is just one of reassurance. Don’t panic. I will say though, prices have risen. This is not a time to get cheap or cut on quality.
You may start hearing about arm loans and I fully believe a fixed rate is still the best choice for most people, even though an arm may be slightly cheaper, you may only plan to stay in your house for three or five years.
The problem is what happens five years from now and interest rates are 10 or 12. If you have an arm you’re stuck with much higher costs, whether you stay or whether you go, if you take a fixed rate, you’ve got it fixed forever, and nobody can ever take that away from you. Whether you stay, keep this property as a rental and buy a new one, I’m still a big fan of fixed rate.
That’s some general information I can give right now, everything from there is going to be more specific for you. So please set up a free, helpful, no obligation consultation with my team, or I we’ll meet you where you are at find out what you’re really thinking, what the best opportunities or any obstacles might be and help carve a path for you in your future.
I hope you find this very helpful. We look forward to speaking with you or anybody else that we can help in the very near future. Have an awesome day.