March 20 - Mortgage Spotlight | Questions Dominate The Economic Discussion
Updated: Apr 23
The Week of March 20, 2023
The short version of our economic situation is that we aren’t out of the woods yet. UBS will acquire Credit Suisse, and regional banks in the US are under pressure. This week, Jerome Powell and the Fed have one of the most anticipated meetings and rate announcements in recent months. This week, Agents' most significant challenge is sorting through the headlines and translating what is happening in your market.
We are anchoring into a couple of crucial points to help our buyers understand the moment we are in:
Bad news for the economy is good for mortgage rates.
Real estate is local. Just because a bank is failing doesn’t mean that homes are going on sale.
Inventory is light, and new listings are at historic lows in most markets. There is not enough housing supply to meet the current demand.
These factors point toward strong home values in 2023, and the cost of waiting could be high.
It is a great time to help your buyers make strategic financial decisions while others sit on the sidelines.
Agent Script of the Week - Continued Questions
“There is significant uncertainty in the global economy today. Real estate is local and driven by the number of homes available... and interest rates.
Rates continue to drop, increasing the number of potential buyers. If you are in a position to buy a home, we believe home values will start trending up, and now may be a good time to move before they do.”
Market Update - The Market Holds Its Breath Again
Today I will start with a review of Mortgage Rates 101. Bad for the economy = good for mortgage rates. This is an excellent way to think about every piece of economic data. The bigger the scale, the more potential rate impact.
Mortgage rates are set by individual lenders each day. There are two bonds we watch closely when creating our daily rate sheet: 10 yr Treasury Bill and the 30 yr Mortgage-Backed Security. Bonds have a PRICE (what it costs) and a YIELD (your fixed return on investment). The yield dictates the asset's long-term value and impacts mortgage rates.
When individuals and institutions are nervous about the economic future, there is a “flight to quality.” Investors leave high-risk investments (stock market) for safer territory (bonds). The safest investments in the world are those backed by the US government and the US real estate market. So, buying pushes prices UP and YIELD down (what we watch).
This is an interesting week. The Fed will announce its rate decision on Wednesday. We are not even going to hazard a guess as to what they will do. The more economic turmoil we experience, the more likely we will see falling rates. The recent economic issues have also increased the likelihood of a hard landing for the economy, resulting in higher unemployment (which could impact our buyers).
Stay connected to your buyers, their why, and their personal economic situation. Make sure you update your pre-approvals. Now is a great time for savvy buyers to win.
A Message For Your Buyers - Economic Changes and The Real Estate Market
Global economic concerns around the banking sector entirely dominate headlines. If you are shopping for a home, it is understandable that the uncertainty could make you think twice. The good news is that the underlying real estate market is in excellent shape and continues to improve.
Here are a few reasons that now is still a great time to be a buyer or seller of real estate.
Bad Economic News = Lower Interest Rates
The mechanics of lower interest rates during tough economic times involve bond yields and investors' flight to quality. The worse the news, the more likely we will continue to see interest rates improve. We are unlikely to see rates like 2020. However, the drop is significant, potentially saving you thousands on your next purchase.
Home Values May Have Bottomed Out
Predictions of a significant home price decline may have been overstated. Remember, real estate is local. In February, 65% of major markets saw a price increase (up from 30% in September). The underlying issue is a lack of homes for sale. We expect the trend to continue due in part to the number of current homeowners with very low-interest rates and a lack of distressed properties.
Buying your first or next home is an incredibly personal decision. Global economic turbulence does not impact every consumer equally. It is an excellent time for qualified buyers to build equity and take advantage of the lower rates.
Happy House Hunting!