UPDATED – Got Debt?  You Are Not Alone

It may be time for a cash-out refinance, but time is running out to get the best terms

Total US household debt continues to climb even as borrowing costs rise with higher interest rates, particularly on credit cards. The total debt level recently hit a record amount of $16.5 trillion…with a T!!! 

While over $11 trillion is attributed to mortgage debt, that leaves $5 trillion in car, student, and credit card loans. By my account, that averages to more than $40,000 per household in consumer debt!  Many of us are facing harder times with the on-going economic slow down along with surging gas and food prices. With credit card balances & their interest rates at all-time highs, it may be time to consider a cash-out refinance to consolidate high-rate loans. 

Home values remain reasonably resilient & most homeowners have record levels of home equity. At the same time, mortgage rates are settling down, with our best-priced lenders back in the 5s on 30-yr fixed loans. 

Has the economic slowdown forced you to borrow more against credit cards, cars, and education? Borrowing from your equity at a low rate to pay off higher rate debt will lower your overall monthly payments and lower your interest costs over the long-run. I can help you determine the “blended rate” of your various debts, the effective interest rate you’re paying across all of your loans (including your mortgage). If your blended rate is over 5%, then its time to consider a cash-out refinance.

Consider the following graphs…according to CreditCards.com the national average credit card interest rate is nearly 20%, the highest mark in the last 20 years. With The Fed suggesting further increases to the Federal Funds Rate, this will lead to even higher credit card rates.

Meanwhile, mortgage rates have been falling as credit card rates have been rising. 30-yr mortgage rates dipped below 6% this week for the first time since September. Our rates, in particular, continue to be much lower than the industry average (read Our Rates Are Some Of The Best In The Biz).

Let us help alleviate the financial stress of carrying high credit card balances at astronomically high interest rates by refinancing them into a lower fixed rate mortgage. There is a small window this month before cash-out refinances cost thousands higher in fees due to industry-wide changes to these types of loans, so give us a call now & allow us to assess your cash-out refinance options.

**The chart above is for illustrative purposes and not intended to be used as a rate quote. Rates vary based on loan size, credit scores, and many other factors. Give us a call to get a customized and competitive rate quote.**

Rates Are Up…But Life Goes On

Major life events will continue to prompt real estate transactions

For the last two years, most home purchases were driven by “wants.”  Covid-related isolation made many buyers feel like they “needed” a bigger backyard, a home office, a vacation home, a Red-state zip code…but those were wants, not needs.

With current mortgage rates now over 7%, most existing homeowners may be content sticking with their sub-4% mortgage rate and never moving again.  Right?

Think again.

Contrary to recent history, the real estate market is not solely guided by mortgage rates and exuberant home buying trends fueled by reality TV.  It’s guided by life; you know, the thing you are constantly planning but inevitably takes an unexpected turn.  And its in these turns when people NEED to move to a bigger home, a smaller home, a different state, closer to new work…the list goes on and on.

You never know where life’s next turn may take you

Marriage, job relocation, illness, promotion, divorce, kids, grandkids, death…these events drive the real estate market; keystone life moments that are emotionally charged with excitement, fear, hope or tragedy.  As such, its important you and your loved ones enter your real estate transactions with experienced & caring professionals.  We know your home purchase or sale is more than a transaction; it’s a significant chapter in your life’s story.

Higher mortgage rates will certainly curtail a homeowner from moving just because they are bored with their current house.  But life goes on for the rest of us.  Something will come along that will force you to reconsider your living situation.  When that time comes, I hope that you’ll give me a call to review things with you.  Nearly no one else does what we do: holistically assess your overall real estate position including your current home’s value, your new home buying opportunities, and the mortgage programs available to you.

Life’s unexpected twists & turns may force you to change direction with your real estate affairs, but we will be able to clearly articulate the options available to help you stay on your path.

Many Are Getting Out But We Are ALL IN!!!

Our industry is shrinking; we are getting bigger!

This year has been a challenging one for mortgage and real estate companies. After years of ultra-low rates & fast-selling homes, 2022 has brought a swift change in market conditions.  Some of the biggest mortgage companies in the country are closing up shop, and for the first time in a decade the number of Realtors across the country is declining.

So…you may ask…how is The Blue Waters Group faring?  We are certainly having a difficult year as well, but we are not running for the hills.  To the contrary, we just signed a lease at a new location in Folsom that will more than triple the size of our office!  Our goal is to mentor more like-minded real estate agents and mortgage consultants to provide the utmost care to a growing family of Blue Waters clients.  We are incredibly excited to share more details in the months ahead, and host an open house party & other events once we’re all settled in.

Here’s the truth of it…the easy money is gone and so are the ones who were here chasing it.  And that’s a great thing for all of us!!!  Clients need sound guidance and clear options from experienced and caring professionals, not short-sighted smooth talkers. Only those who are in this field for the right reasons will survive the new market.  The Blue Waters Group is here to serve our clients and community regardless of the market conditions, and we are confident you will be referring us more than ever in the future!

Thank you for your support of our business these first 10 years in our “starter” office.  We look forward to the opportunities our new location will provide our team & clients!

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!

Summer Breeze, (STILL) Makes Me Feel Fine!

Thank goodness the record heat wave throughout California is behind us.  This week we have summer breezes to cool us off & blow the smoke away!  At the beginning of the summer season, I penned a post that predicted the real estate market normalizing and home values cooling over the summer months.  With mere days left in summer, lets look back and see how that prediction fared to what transpired over the last few months.

Buying Pace Slowed

As summer temps were heating up, the pace of home buying was falling dramatically.  30% fewer homes were purchased this June compared to the same time in 2021.  Oddly, early summer is normally when we see volume INCREASE as spring-fever purchases begin to close escrow.  Clearly the market was going through a change, and this shift continued through the rest of summer.  Things appear to have bottomed out, as August saw a small increase compared to July, but we are still at seasonably low levels.  You have to go back all the way to 2007 to see a slower summer for Sacramento real estate.

Listings Piled Up

From April 1 to August 31, we saw the number of homes for sale nearly TRIPLE.  This wasn’t due to a ton of people deciding to sell all at once, but rather a back-log of homes sitting on the market from a drop in buyer demand.  This sharp increase has leveled off, and the ratio between buyers and sellers has returned to a normal, pre-pandemic range.

Home Values Fell

I had predicted that fewer buyers and more sellers would result in falling home prices. Indeed, the greater Sacramento area experienced a drop of nearly 7% in the median home price from Memorial Day to Labor Day.  August’s mark of $580K is still the highest ever recorded if you exclude the prior 6 months, so most homeowners are still in very good shape.  

Nevertheless, the market is clearly changing and both buyers and sellers need to get accustomed to the new landscape in real estate.  Like this week’s summer breeze that has removed the unusually hot temperatures, our cooling real estate values mark an end to the insanity experienced during the pandemic. This shift should make both buyers and sellers feel just fine as things have normalized heading into the autumn & winter seasons.

Feel free to call on our team & me should you need any advice navigating today’s market.

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.