Category: Mortgage

7% Rates Mean Trouble Ahead For Market

For the first time in 20 years, 30-year fixed rates hit 7%

The last time 30-yr fixed mortgages were at 7%, the world was very different place:

  • Gas was $1.36/gallon
  • “Friends” was still on TV
  • The iPod was Apple’s latest gizmo
  • Tom Brady won his 1st Super Bowl

But what’s also drastically different compared to 2002 is our real estate market. 20 years ago, the median price for a Sacramento home was $187,000. That was relatively affordable even with rates at 7%. Today with rates at 7%; not so much. Let’s compare the then & now numbers.

Today, home values are almost 200% higher than they were 20 years ago while income is only marginally up 62% higher. All that translates to is instead of 34% of a household income going to a mortgage payment, it is now standing at an unsustainable 57%. Something has to give.

Let’s compare this percentage of income to what the market was at the last peak of the real estate cycle in 2005.

Home values were less & annual income was less but as a percentage, today’s household’s monthly income going towards a mortgage payment is higher than the levels in in 2005. That is a very troubling statistic. Something is going to break. Something has to change from these 2022 numbers. They are not sustainable. 1 of 2 things is going to happen: home prices have to come down or interest rates have to come down. Let me show you by how much.

How about a middle-of-the-road number of 45% as an acceptable mortgage payment-to-income ratio. To get to that number, home values need come down to $420K in Sacramento County. That’s a 21% drop from where they are right now. Keep in mind from 2005 to 2011, home values in Sacramento County decreased by more than 50%. To have a 21% correction, its not quite as deep of a crash as what we saw, but its very certainly possible to see them come down quite a bit if interest rates stay at these elevated levels at 7%.

Now, if interest rates come down then affordability is obviously aided by paying less in interest & you can pay more for a house. For home prices to remain at their current levels, 30-yr rates will need to fall down to 4% to get that percentage of income to acceptable 44-45% range.

Which is going to happen? I don’t know. We’re going to have to see as we go into Q4 here and see what happens with inflation. See what happens with buyer demand. There’s so many factors that go into impacting the health of the real estate market. But in the present moment right now with prices where they are at, with interest rates where they are at, we are at an unhealthy level.

If I had to guess, its going to be a combination of both prices and interest rates falling in the next 3-6 months for us to find a little bit more of a healthy footing for our real estate market. I know I just showed you Sacramento numbers, but this is an issue statewide and, arguably, nationwide.

What do you think, though? I’d love to see some comments down below. Tell me what your forecast is & we’ll all be on the edge of our seats here as we go into Q4 of 2022. As always, I appreciate you taking the time to watch my videos & read my posts.

Look out for more. I’ll keep you updated with market analysis here at MattsMemos.com.

Thanks again!

How Do I Help Thee? Let Me Count The Ways!

We built our business so we can serve you with nearly all things real estate

Earlier this year, I wrote about how there are now more real estate agents in America than ever before.  But The Blue Waters Group is truly one-of-a-kind; not every firm is licensed as both mortgage brokers and real estate agents who can help you with all of this:

1 – Buy a New Home
From finding to writing the offer to facilitating inspections, we help buyers purchase their ideal home

2 – Finance a Home Purchase
Our pro-active philosophy & decades of experience make the underwriting process easy, painless and predictable

3 – Sell your Home
From marketing to pricing research to contract negotiation, we are a full-service Listing Broker

4 – Buy a Vacation Home
We can search all of California to help you secure your favorite getaway property

5 – Buy an Investment Property
From traditional rentals to AirBnB properties, we help you analyze the purchase as a business & scrutinize the income and expense projections of purchasing an investment

6 – Refinance Your Current Property
Our rates are some of the lowest in the industry and our broker model means we have the most options available to meet your finance needs.  The best rates & options are not at the big banks; they are with us!

7 – Obtain a Reverse Mortgage
We have lenders who specialize in reverse mortgages, and can help homeowners 62 & up navigate this often mis-understood yet incredibly valuable loan program

8 – Obtain a Home Equity Line of Credit
We have direct relationships with banks who offer HELOCs, but will also honestly refer you to a bank outside of our network if our terms are not the best available

9 – Write Contracts for Off-Market Home Sales
Sometimes you don’t need a full-service agent; we can help with transaction paperwork for a discounted flat fee

Our clients find us most valuable when we help them in multiple ways on a single transaction.  For example, if you want to sell your current home and buy & finance a new one, allow us to help you with all of it!  Doing so will simplify & streamline the experience for you, and lower your costs through our discounted commission rates.

Beyond helping you through transaction, we are always striving to earn your trust in all things mortgage & real estate.  Bottom line, if you or someone you care about has a real estate question, call me.  We have the experience, skills, and compassion to help in every way we can.

I’m Talking About You, BOOMER!

From relocations to reverse mortgages, we’ve been helping more baby boomers than ever

As the second-largest generation in history, Baby Boomers have spent their entire lives shaping and shifting the marketplace. We have experienced a boomer boom in our business lately, as more folks in this age range (58-76) reach out to us for advice while facing major life changes.

Several recent blog posts such as “Yo Mama Is So Important” & “19 Is Your New Favorite Number” have touched on topics pertaining to this growing trend, and more clients than ever are inquiring about our reverse mortgage services! Specifically, we have helped recent boomer clients:

Move to a new area to be closer to their adult children

Pull cash out to finance a major purchase rather than sell taxable assets

Obtain a reverse mortgage to help with retirement planning

Many of our clients know we are a one-stop-shop to help you buy, sell & finance homes.  But some overlook the fact that we also offer REVERSE MORTGAGES.  Already this year, our team has completed more reverse mortgages than in all of the previous three years combined!

These loans are growing in popularity amongst baby boomers, and for good reason.  A reverse mortgage allows a client 62 & up to retain ownership of their home, provide access to pent-up equity, and have monthly mortgage-payment relief.  We are experts in these programs, and can discuss the pros & cons with you or a loved one.  I will be posting again soon with more details about how we can help clients looking for a reverse mortgage.

The Blue Waters Group is designed to help homeowners of all ages, but we are perfectly suited to serve the diverse needs of Baby Boomers.  As retirement approaches, it is common to reconsider how you spend your time & money. 

Some may decide they want a smaller house or move closer to the grandkids.  Others want to free up their hard-earned equity through a reverse mortgage.  And even those who choose to not change things up still may look to help their kids or grandkids achieve home ownership by steering them to a trusted real estate professional (that’s us! 😊).  No matter the need, our firm is suited to serve you, your friends, your family, and your colleagues with ALL home buying, selling & financing needs.

What Are Mortgage Rates Doing? Just Look At Gas Prices!

Pump prices & mortgage rates have been in lockstep together, and both are headed down!

A client recently asked me where he could go to see current mortgage rates.  While there are more sophisticated research tools, I told him the easiest place to gauge rates at the moment is at the gas station! 

We see gas prices every day driving around town, wincing as we fill up, and giving real-life math questions to our kids in the car (or am I the only person that does that last one??!!).  You may not remember how much you paid for your last gallon of milk or your last loaf of bread you purchased, but I bet you recall the price of your last tank of gas ($105 for me; OUCH!).

Conveniently, mortgage rates have been in lockstep with California gas prices.  This makes following mortgage rate trends as easy as peeking at the gas prices as you drive by. Check out the graph & numbers below to see for yourself.

Rates & Gas are in Lockstep!
 



CA Gas Price per Gallon30-yr Fixed Mortgage Rate
Increase since Jan 2021$2.672.95%
Peak (amount)$6.446.28%
Peak (date)6/14/2206/14/22
Current (7/13/22)$5.65* 5.72%

*Price paid for regular unleaded at Arco on Folsom Blvd

Oddly, the price for gas (in $) has been & is nearly the same as a 30-yr mortgage rate (in %)! While its impossible to predict what these prices and rates will do in the future, the recent correlation between gas prices and 30-yr mortgage rates is unmistakable.  Even if you drive an electric vehicle or own your home debt-free, its important to keep tabs on gas prices and mortgage rates. They are the bellwether for so many other pieces of our economy.

So the next time you’re casually curious if mortgage rates are rising or falling, just look at the pump!  Both are currently in the largest decreasing trend since the early days of the pandemic. Lets hope they both continue to drop!

Our Rates Are Some Of The Best In The Biz!

Let me show you how we stack up to the rest of the industry

Mortgage rates fell .75% in the second-half of June, which was a welcome change to the steady increases we’ve seen for much of 2022.  During that same time period, our lenders dropped their rates by nearly 1%, making ours some of the lowest around!

As a mortgage broker, we have the ability to secure the best rates offered by our wide array of wholesale lenders.  This means the rate we find for you is generally lower than anything else you may find at a traditional retail bank. 

*Rates illustrated are based on a loan amount less than $648,250 with 740+ credit score & 25% home equity

Here is a chart showing how our 30-yr fixed rates* recently compared to the industry at large.  The blue line is the Mortgage News Daily Index, a broad sample of rates offered by various mortgage companies.  You can see it dropped considerably in late-June (more on that in another post).  But our rates dropped even more, making our rates nearly ½% lower than others in the industry heading into this past holiday weekend!

We love doing business as a mortgage broker because we can find the best rates around.  We never work with just one bank, because banks are always changing their rates.  Sometimes one is overwhelmed so they raise rates to intentionally push business away.  Other times they have a “sale” and discount their rates more than others.  During the month of June, we had 5 different “lead changes” amongst our lenders, meaning our top lenders are constantly outdoing one another to try and offer the lowest rates.  Our job is to find those opportunities to get you the best interest rate possible.

And what’s even better is you do not pay us for our services; the lender does!  When you combine our experience & service with great interest rates, you get the best of all worlds!  .If you or someone you know has been waiting for a rate decrease to refinance or purchase a home, give me a call. 

Summer Breeze, Makes Me Feel….

I’m forecasting falling home values, and this summer breeze on the cooling market should make buyers feel fine!

My oh my, a lot can change in a few months.  At the beginning of the year, home prices were rising at an unsustainable 4% per month and selling faster than ever before.  And then a war broke out!  Needless to say, Russia’s war sent shockwaves around the world & we’ve all been impacted by the war’s economic ripple effects (gas prices, food costs, interest rates, etc).

The typical red-hot summer real estate market has changed too.  Sellers have watched buyers become more hesitant due to the fastest rise in mortgage rates since the early 80s.  

As a result, 30% fewer home sales have occurred this month compared to the same time frame in 2021.  This significant decrease in volume will force motivated sellers to drop their prices to attract a buyer, and eventually this momentum should lead to declining home values by summer’s end.

Homes on the market are up; homes actually selling are down. But both are approaching normal, pre-pandemic levels

Some may read those figures and suggest this post’s musical title be changed to “Cruel Summer” or “Summertime Sadness.” But they would be wrong.  Rather, this cooling “Summer Breeze” is simply returning the market metrics to pre-pandemic levels.  We are approaching 7,000 homes for sale in the Sacramento market, a similar amount we saw in the spring of 2020.  This equates to 2 months of housing inventory on the market, again a comparable figure seen before the pandemic.

For some, this market slowdown is wonderful news!  A more balanced, normal market will lead to more opportunities for first-time buyers.  With younger Millennials now hitting their late 20s/early 30s, there are literally millions of them looking to purchase their first home.  This will help soften the fall for home prices, particularly for lower priced homes.

If you have been considering a home purchase, now is the time to get prepared for buying opportunities!  You have more options, sellers are more eager, and prices are no longer increasing.  Give me a call to discuss ways to best capitalize in today’s market as a home buyer.

Babies & Businesses – Oh, How They Grow!

My son turns 10 this year.  Its incredible to think of how much he’s grown and learned in such a short time.  While he still needs lots of attention, love and discipline, he’s a far cry from the helpless newborn of 2012.

THEN…

& NOW!

The same can be said for Blue Waters Mortgage & Real Estate Group, which also turned 10 just this month.  We were a bit insane to birth both a baby and a business in the same year!  But that’s for another blog post.  

Since that exciting “I’ve Started My Own Business!” announcement, The Blue Waters Group has grown from a start-up with 1 part-time employee to a company of 10 experienced, caring professionals.  But just like Oliver, we still need help from the folks that care about us…that’s YOU!

THEN…

& NOW!

My son’s teachers often speak to how 10 is an age of transition.  You’re old enough to begin grasping the complex world around you, but you still need the help of loved ones to find your way in it.  The Blue Waters Group is in a similar phase of transition; we are here to stay, grow & serve our community, but we still need the referrals and repeat business from our cherished clients to do it. 

Today’s real estate market is a tough one to navigate, and folks need the help from a trusted, seasoned professional.  Please pass along my name to anyone you know who may benefit from our real estate and mortgage services when buying, selling or refinancing.  You doing so is vital to our continued growth & success.

Here’s to turning 10!  May the next decade be just as fulfilling and exciting as the last!

10 YEARS AND COUNTING!!!

The Fed Raised Rates. Now What??!!

You probably noticed recent news articles that went something like this…

“For the first time in 3 years, The Fed raises interest rates!!!”

This headline gets overly-simplified and makes the reader believe that ALL interest rates, including mortgage rates, increased overnight because of the government.  That is simply not true.  In fact, mortgage rates LOWERED slightly immediately after The Fed’s recent rate rise announcement.  Let me paint a more accurate picture.

The Federal Reserve Board (aka- The Fed) has direct control over a single rate, The Federal Funds Rate.  Some types of loans are indeed coupled to this rate, so The Fed’s decisions have a direct impact on these loans.  But fixed rate mortgages ARE NOT one of these types of loans.  Mortgage rates move not based on government decisions, but rather by open-market supply & demand.

Below is a graph that shows both the Federal Funds rate (the blue line) and 30-yr fixed rate (the gray line) over the last 5 years. You can see there is no direct correlation.  Surely, in 2019 they both were generally declining, but not at the same time nor pace. 

As in most things, open market dynamics force changes more quickly than bureaucratic decisions.  The chart shows the gray line’s peaks and valleys all pre-date the blue’s, with the exception of The Fed’s decision to plummet the Federal Funds Rate to nearly 0% at the onset of the Covid-19 pandemic. With the Fed’s rate finally rising, it doesn’t necessarily mean mortgage rates will continue to rise along with it. Perhaps mortgage rates have already hit their peak??

Here’s the takeaway…last week’s headlines of rising rates are old news for mortgages, and don’t ever assume that mortgage rates will change due to a Fed rate change.  Actually, mortgage rates have slightly improved since The Fed’s recent rate increase!

30-yr rates are now over 4%, so where do they go from here?  Much of that answer depends on the war in Ukraine, the cost of gas at the pump, and evolving expectations of this year’s mid-term elections.  Good luck correctly predicting the outcome of those story lines!!!

But, I will leave you with one more graph to consider as potentially a glimpse into the future.  Below is an illustration that shows the difference in interest rates from long-term to short-term US government bonds.  When the short-term bond has a higher rate than a long-term bond (a very unlikely event), the line’s chart goes into the pink negative territory.  Economists call that an “inverted yield curve,” and this financial anomaly has taken place before every US economic recession over the last 60 years. 

Presently, the difference from long to short term bond rates precariously sits at only +.2%, and has been falling in recent weeks.  If this figure indeed becomes negative and an inverted yield curve is realized, it could foreshadow an economy headed for a recession.  Mortgage rates nearly always fall during recessions, so its conceivable we will see lower mortgage rates in the near future.  Stay tuned, and thanks as always for reading!

Becoming One IN A Million (or 1,559,537 to be exact)

In today’s hot real estate market, scant sellers are being courted by ravenous buyers.  Homes are selling fast, appreciating even faster, and becoming the largest source of net worth for the average home owner. 

Every seller is feeling like a one-IN-a-million these days, but real estate agents are simply feeling like one-OF-a-million as more new folks have entered the industry. At the end of 2021, there were 1,559,537 members of the National Association of Realtors (NAR), a new record.  Google recently shared that “real estate agent” was the most popular “how to become” search in all of 2021!

As a 20-yr practitioner in this competitive industry, I have seen the ebbs and flows of new agents coincide with the direction of the market.  As such, there are more options than ever when choosing a real estate professional in today’s booming market.  I’ve previously written about how honoring it is when clients choose to do business with us over the countless other alternatives.

It can be tough to stand out in a crowd, but I have differentiated my practice to be one-of-a-kind.  Keep these facets of my business in mind when considering returning to or referring us in the future.  I confidently believe we are not simply one OF a million, but rather one IN a million and offer you the highest level of value possible.

One-Stop-Shop – Nearly no other brokerage in the area offers both real estate sales and mortgage broker services from the same small group of professionals.  Knowing both sides of the industry allow us to give a unique and holistic perspective to your needs.

Ownership –Operating & owning a small business is no cake-walk, but it does allow me to be nimble when it comes to helping you.  When I see an opportunity to change our firm to better serve you, I can swiftly put those changes in place.  Its good to be the boss!

Local & Approachable – Running a business in the city I grew up in means I have a reputation to uphold.  I treat clients like family (did you read my recent Yo Mama post?) & aim to keep earning your trust like my life depends on it…because it does!

Teamwork – As they say, to truly master a skill, you have to teach it.  Leading a team requires I understand the ever-evolving market, showcase an inspiring work ethic, and employ the newest industry tools; all things that translate to also being a better professional for you.  And working with our amazing team means you get the talents of all of us!

Earn Accolades and Reviews – This month I was recognized as a Five-Star Professional for the 11th year in a row.  Many others also earned this distinction, but I am the only one in the Sacramento region to earn that distinction both as a Mortgage Broker and a Real Estate Agent.  More importantly, I’ve been able to earn over 100 raving reviews in recent years that show my commitment to my craft and to my clients.

There is presently a swarm of agents in our field, but we’ve worked very hard to make sure you can still pick us out in the crowd.  We will remain diligently prepared to work with you and those you care about, regardless of the market conditions or the trendy fads our industry creates.

Its time to get your Refi ON!!!

Last year I posted a ton about mortgage rates and refinance opportunities. This year to date I’ve been rather silent, largely because rates have trended higher and unfair government-imposed fees on refinance loans made them less attractive.  But that’s yesterday’s news!  Today its time to jump for joy and proclaim that mortgage rates are as low today as they have EVER been!!!

For starters, market conditions in recent weeks have been more favorable for mortgage rates.  Initial fears of widespread inflation have subsided, which has allowed mortgage rates to drop.  Furthermore, today the Federal Housing Finance Authority (FHFA) rescinded a fee applied last autumn that added a .5% charge to nearly all refinance transactions.  This is pleasant, unexpected, and well-needed news. 

Here’s a brief history lesson on the matter: the prior FHFA regime (under director Mark Calabria, appointee of former President Trump) suddenly and unilaterally imposed this fee in August 2020 under the guise of increased risk and costs associated with buying mortgages during the pandemic.  In reality, it was a good ‘ol fashion money-grab by the US government.  As soon as the law allowed (literally, a supreme court case was decided on the same day granting authority for removal from office), President Biden appointed current director Sandra L Thompson to replace Mr Calabria.  Within 30 days of taking her position, the Agency has removed this unnecessary fee for American homeowners. 

This means mortgage rates are at record lows!!!  Like crazy low.  Like 30-yr rates well under 3% & 15-yr rates near 2% low!!!  If you haven’t refinanced in the last 12 months, we should chat ASAP. Or, if you’re looking to take cash-out for home improvements or debt consolidation, its never been cheaper to borrow money from your home.  Tell your friends. Tell your family.  Lets collectively shout this news from the figurative roof-tops to help all homeowners save money!

I know the world is starting to get back to normal (for the moment) and that there are more fun things to do in the middle of summer than apply for a refinance. But, I would recommend you take a few minutes to call me soon to crunch some numbers and see how these developments can help you save money every month.