Mortgage Rates

Apache is functioning normally

The latest monthly national housing survey from Fannie Mae revealed an interesting contradiction.

Last month, a new survey-high 39% of respondents said they expect mortgage rates to go down over the next 12 months.

At the same time, fewer expect home prices to go up over the same period. And more believe home prices will fall.

So despite a home purchase becoming more affordable thanks to a lower interest rate, consumers don’t think prices will increase.

What does this say about home buyer demand as mortgage rates go down?

But We Were Told Bidding Wars Would Return When Mortgage Rates Fell

Fannie’s monthly Home Purchase Sentiment Index (HPSI) did increase very slightly (0.6 points) to 72.1 in August from a month earlier.

But it remains very low, with most of the 1,000 respondents saying it’s a poor time to buy and also an increasingly bad time to sell.

Just 17% said it was a “good time” to buy a home in August, which has remained relatively flat for several months and remains just above all-time survey lows.

Meanwhile, 83% said it was a “bad time” to buy a home, the highest share since the survey’s inception.

At the same time, only 65% say it’s a good time to sell, while 34% say it’s a bad time. Since August 2021, the “net good time” to sell has fallen from 54% to just 31%.

So it appears no one is happy with the current state of the housing market, which continues to be characterized by a mismatch between buyers and sellers.

Sellers are being told they aren’t realistic in terms of what they’re asking, and buyers are saying it’s too expensive. But nobody is budging.

There’s also a lack of inventory in most markets, so there’s little to choose from and often not what a prospective buyer is looking for.

Taken together, we’ve seen a big drop in home sales, especially once you factor in the ongoing mortgage rate lock-in effect.

It’s also odd to see this sentiment given the narrative we’ve heard for some time that the housing market would turn into a frenzy when mortgage rates fell.

Well, they’ve fallen from around 8% a year ago to just above 6% at last glance. You’d think that would be enough to get the ball rolling.

It’s the Economy (and Maybe High Home Prices Too!)

As I wrote last week, it’s no longer a mortgage rate story. Most consumers are on board the “rates are going lower” bandwagon.

Yet they’re also saying it’s not an ideal time to buy. So then you need to look elsewhere for your answer.

Are home prices just too high, even with mortgage rates nearly 2% below their peak a year ago?

Or is the economy becoming more of a concern, with the Fed dancing with a recession and lots of rate cuts now expected over the next year and change?

Most of the consumers surveyed by Fannie Mae said they weren’t concerned about a job loss (78%), which has drifted down from 82% in 2021 but remains high.

But respondents have been more pessimistic about their household income compared to a year ago, with more saying it’s “significantly lower” than “significantly higher.”

This could also reflect the purchasing power of their dollars, which have eroded thanks to the inflation of just about everything.

So you start to wonder if consumer outlook is worsening as the economy shows signs of slowing, all while unemployment is rising.

This is what matters more than rates. And really explains why mortgage rates and home prices don’t have an inverse relationship.

If mortgage rates are expected to fall due to slowing economic conditions, couldn’t you argue that home price growth might also?

I’ve argued that home prices and rates can fall in tandem for this reason, despite nominal declines being rare.

But it at least bucks the idea of a home buyer frenzy when rates fall. Of course, rates have fallen during the slower time of the year. And they’re still markedly higher than they were as recently as early 2022.

So perhaps we just need rates to continue falling and for the 2025 spring home buying season to come about.

Then we’ll have a better idea of where this housing market goes next.

Before creating this site, I worked as an account executive for a wholesale mortgage lender in Los Angeles. My hands-on experience in the early 2000s inspired me to begin writing about mortgages 18 years ago to help prospective (and existing) home buyers better navigate the home loan process. Follow me on Twitter for hot takes.
Latest posts by Colin Robertson (see all)

Source: thetruthaboutmortgage.com

Apache is functioning normally

The other day I noticed that mortgage rates were being advertised at some really low levels.

Many quotes in the mortgage rate table on my own site were in the mid-5s.

That got me curious how low rates could be with a really favorable loan scenario, such as a 760+ FICO, 20% down home purchase, owner-occupied, single-family residence.

So I headed over to Zillow’s Mortgage Marketplace to see what I could come up with.

Knowing that VA loan rates are typically the lowest, I threw that in too and lo and behold, saw 30-year fixed rates that began with a “4.”

I threw the screenshot up on Twitter and simply said, “Guys, it’s not a mortgage rate story anymore.”

What Did I Mean?

The tweet got a good amount of traction, likely because of those very low 4.875% 30-year fixed rate quotes in the screenshot.

And some felt it was deceiving to post rates like that, which might not be reflective of the entire borrower universe at the moment.

After all, not everyone has a 760 FICO score or the ability to put down 20%, nor might they be eligible for a VA loan.

I also threw in two discount points, since most of the low rates advertised today require the borrower to pay some money at closing in order to obtain a “below-market” rate.

In reality, you can put nothing down on a VA loan and get the same pricing since there aren’t mortgage pricing adjustments on such loans. The same goes for having a lower FICO score.

So the loan scenario wasn’t as crazy hard to qualify for as it first appeared. And when I re-ran the scenario today you could actually get a rate of 4.75% with just one discount point.

But that wasn’t even the point I was trying to make. It wasn’t about a 4.875% rate vs. 4.75% rate, or a 5.25% rate. Or any specific rate at all.

It was that the high mortgage rate story we’ve been fixated on for the past two hours is over.

The housing market today is no longer being driven by the high rate story. We exhausted it, first being caught off guard by how quickly rates increased in early 2022.

Then wondering how high they might go, if they’d hit a new 21st century high (they didn’t!).

That was followed by pondering when they’d begin to fall again (they peaked last October and have dropped quite a bit since then).

And so it’s not about rates anymore.

If It’s Not Rates, What Is It Now?

That brings me to my point. The housing market is now at a crossroads where high mortgage rates are no longer the focus.

Most prospective home buyers today will see that mortgage rates have come down significantly.

The 30-year fixed was basically averaging 8% just before last Halloween, and today is closer to 6.25%.

As I illustrated with some mortgage rate shopping, it’s also possible to bring down that rate to the high 4% range, or the very low 5s, even for conforming loans backed by Fannie and Freddie.

This means anyone who has been pondering a home purchase during the past couple years is no longer obsessed with rates.

Instead, they’re likely considering other factors, such as home prices, the cost of insurance, their job stability, the wider economy, and even the election.

If they were looking at homes when rates were closer to 8%, they’re surely still looking with rates approaching 5% (they could be there soon without all the perfect FICO scores and discount points).

But if they’re no longer looking to buy, or they’re having doubts, it’s not because of high mortgage rates anymore. Those are no longer to blame.

Perhaps now they’re worried that asking prices are too high and could fall. Maybe they’re concerned that the economy is on shaky ground and a recession is coming.

After all, there’s an expectation that the Fed is going to cut its own fed funds rate 200 basis points over the next year.

That doesn’t exactly exude consumer confidence.

We Finally Get to Find Out!

What I’m most excited about now that high mortgage rates are old news is that we finally get to “find out.”

By that, I mean we get to see how this housing market performs in a period of slowing economic growth, with Fed rate cuts and a possible recession on the table.

Remember, the Fed wouldn’t be cutting rates if they weren’t worried about rising unemployment and a softening economy.

In other words, we’re going to see what this housing market is really made of. As I’ve said many times before, there’s no inverse relationship between mortgage rates and home prices.

One does not go up if the other goes down. And vice versa. We already saw home prices continue to rise as mortgage rates jumped from 3% to 8%.

So is it possible that both mortgage rates and home prices could fall in tandem? Sure. Granted nominal home price declines aren’t common to begin with.

But we’re finally going to put it to the test. And I’m looking forward to it.

(photo: Brittany Stevens)

Before creating this site, I worked as an account executive for a wholesale mortgage lender in Los Angeles. My hands-on experience in the early 2000s inspired me to begin writing about mortgages 18 years ago to help prospective (and existing) home buyers better navigate the home loan process. Follow me on Twitter for hot takes.
Latest posts by Colin Robertson (see all)

Source: thetruthaboutmortgage.com

Apache is functioning normally

Mortgage rates have fallen four months in a row, and they’ll probably go down in September and extend the streak to five months. There are two related reasons: Inflation is subsiding, and the Federal Reserve is about to reduce short-term interest rates.

Before getting into what’s expected in September, let’s pull out the megaphone to cheer for the progress mortgage rates have made in less than a year:

  • In late October 2023, the 30-year mortgage rate peaked near 8%.

  • In April, it bounced around but averaged roughly 7%.

  • It has declined every month since then, and at the end of August it settled at around 6.25%.

Inflation and jobs data point to lower rates

The inflation rate tumbled over a similar period. The consumer price index fell from 3.2% in October to 2.9% in July (the most recent data available). Inflation usually cools when unemployment rises, and that’s what has happened. The unemployment rate rose from 3.8% in October to 4.3% in July.

“Inflation has declined significantly. The labor market is no longer overheated,” Federal Reserve Chair Jerome Powell said in an Aug. 23 speech.

The combo of falling inflation and rising unemployment has pushed mortgage rates lower and convinced the Fed that it should cut short-term interest rates sooner rather than later to prevent too many job losses. “The time has come for policy to adjust,” Powell proclaimed in the Aug. 23 speech. That seems like a mild statement, but in the soft-spoken world of central bankers, Powell’s declaration of victory over inflation was comparable to a running back spiking the ball in the end zone.

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Expectations for the Fed

According to financial market indicators, investors believe the Fed is certain to cut the overnight federal funds rate at its meeting scheduled to end Sept. 18. That’s one of the reasons mortgage rates fell in August: Mortgage rates usually move up or down in anticipation of expected Fed rate moves.

Even better news is farther downfield: More rate cuts are deemed likely at the meetings that end Nov. 7 and Dec. 18. The prospect of those rate cuts is likely to drive mortgage rates lower in September and the months after.

Home buyers are staying away for now

You might expect lower mortgage rates to stimulate home sales, but potential home buyers “remain reluctant to make the jump,” said Mark Palim, deputy chief economist and vice president for Fannie Mae, in a statement. “Even with moderately lower mortgage rates, affordability remains close to historic lows due to the high level of home prices relative to incomes.”

High home prices are definitely tackling buyers. But it’s instructive to note how affordability has been boosted by the decline in rates since last fall. Take a home buyer who can afford to pay $2,200 a month in principal and interest. When the 30-year mortgage was 7.75% in October, that buyer could borrow about $307,000. With a 6.25% mortgage rate, they could borrow $357,000. That’s a $50,000 increase in buying power.

What other forecasters predict

The affordability picture will improve at least through the middle of 2025, according to forecasts from the Mortgage Bankers Association and Fannie Mae. Both organizations expect the 30-year mortgage rate to drop by around half a percentage point, maybe a bit less, through the second quarter of 2025. So far, the average rate for the third quarter is 6.65%, roughly in line with the forecasts.

What happened in August

The 30-year mortgage rate fell substantially in August. In Freddie Mac’s weekly survey (which the above forecasts are based on), it averaged 6.5%, down from 6.85% in July.

That matches my August prediction: “Mortgage rates are likely to keep falling in August because inflation is slowing down.”

Source: nerdwallet.com

Apache is functioning normally

Mortgage rates fell this week after the chair of the Federal Reserve uttered long-awaited, market-moving words.

“The time has come for policy to adjust,” Fed Chair Jerome Powell said Aug. 23 in a speech. Translated from Fedspeak to English, this means, “We’re going to cut interest rates soon.”

Investors already were betting that the Federal Reserve would reduce the federal funds rate at the central bank’s next meeting, Sept. 17-18. But when Powell said it out loud, he provided confirmation that markets sought. The average rate for the 30-year fixed-rate mortgage reacted by dropping 11 basis points to 6.27% in the week ending Aug. 29. A basis point is one one-hundredth of a percentage point.

Powell explained that the inflation rate seems like it’s headed toward the Fed’s goal of 2%. Meanwhile, job growth has slowed and the unemployment rate has gone up. These developments are a result of restrictively high interest rates set by the Fed.

“We do not seek or welcome further cooling in labor market conditions,” Powell said. And cutting interest rates is a way to prevent labor markets from cooling more.

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Rates have been trending downward

Orphe Divounguy, senior economist for Zillow Home Loans, called Powell’s pronouncement “a gift to investors and home shoppers alike.” It’s a gift that’s been sitting under the tree for weeks: Mortgage rates have fallen more than a percentage point since early May.

The 30-year mortgage rate averaged 7.32% in the week ending May 2 and has tumbled since then, remaining under 6.5% for the last four weeks. The decline in rates has made homes more affordable than they were just four months ago.

“Lower rates also make it easier for existing homeowners to sell,” points out Lisa Sturtevant, chief economist for Bright MLS, a multiple listing service in the mid-Atlantic region.

In a news release, Sturtevant said the typical homeowner has a mortgage rate that’s three percentage points lower than current mortgage rates. “This rate gap has kept some homeowners from listing their home for sale. As rates fall, the rate gap is going to be less of an obstacle to sellers.”

Lower rates offer a refinancing opportunity

Today’s lower rates are a boon to people who bought last fall, when mortgage rates topped 7.5%. Some of these homeowners could reduce their monthly payments substantially by refinancing.

Take the example of a borrower who got a $350,000 mortgage last October at 7.5%. By refinancing the same amount at a 6.25% rate, they could cut their monthly payment by $292. They could wait for rates to drop even lower, but each month of waiting marks $292 of savings foregone.

Source: nerdwallet.com

Apache is functioning normally

Mortgage rates held mostly steady during the week ending Aug. 22, as mortgage lenders rolled with the punches. The biggest hit came from revised employment numbers hinting at a weaker economy, but that was far from a knockout.

The 30-year fixed-rate mortgage rose 10 basis points, averaging 6.38%. A basis point is one one-hundredth of a percentage point. But daily movements have been mostly downward, and for the past two days, the average rate on a 30-year fixed has been more than one percentage point lower than a year prior.

Looking at the bigger picture, we’re finally starting to see the lower mortgage rates that home buyers — and plenty of refi-curious homeowners — have long been waiting for. Will one percentage point (or more) be enough to get the housing market moving?

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The difference 1% makes

Let’s see how much a slightly lower interest rate could help a hypothetical home buyer. Last year at this time, the average 30-year fixed rate was 7.33%, just under a percentage point higher than our current average of 6.38%.

A buyer who borrowed $300,000 for a 30-year fixed loan a year ago, with an interest rate of 7.33%, would be making monthly principal and interest payments of $2,063. A buyer borrowing the same amount at this week’s average of 6.38% would have monthly payments of $1,873, a savings of almost $200 per month.

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Lower rates vs. higher prices

While rates may be going down, home prices in most markets have continued to rise. In July, the median price of an existing home was $422,600, according to data released this morning by the National Association of Realtors. That’s a 4.2% increase compared to one year ago, when the median price was $405,600 — a sum that’s also nothing to sneeze at.

Do lower mortgage rates help to cancel out that cost difference? Let’s take a look. We’ll assume an 8% down payment, which was the typical first-time home buyer down payment in 2023, per NAR data. A home buyer who borrowed $373,152 — last year’s median price minus 8% — at a 7.33% interest rate would be making monthly principal and interest payments of $2,566. This year’s buyer, with an interest rate of 6.38% and a borrowed sum of $388,792 would face monthly principal and interest payments of $2,427.

This week’s lower average rate just manages to give today’s hypothetical buyer an edge, with a savings of $139 per month despite higher home prices. Lower mortgage interest rates don’t help buyers as much as lower home prices would, but every bit helps.

Source: nerdwallet.com

Apache is functioning normally

Mortgage rates mostly leveled off in the week ending Aug. 15, following last week’s comparatively precipitous drop.

30-year fixed-rate mortgages fell one basis point to 6.28%. A basis point is one one-hundredth of a percentage point.

While rates may be cooling slightly, home prices continue to heat up around the country.

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Median home prices hit mega millions in some metro areas

The sale prices of single-family existing homes rose in the second quarter of 2024 in 89% of tracked metro areas, according to the National Association of Realtors (NAR).

Within these areas, three metros saw price gains of nearly 20%: Racine, WI (19.8%), Glen Falls, NY (19.8%) and El Paso, TX (19.2%). The national median single-family existing-home price grew 4.9% from this time last year, reaching $422,100.

Seven of the top 10 most expensive metros at the end of Q2 are in California. The most expensive metro measured was San Jose-Sunnyvale-Santa Clara, where the median home price grew 11.6% to an eye-watering $2,008,000.

NAR Chief Economist Lawrence Yun acknowledged that this is a boon for homeowners who continue to see their equity bloat, while would-be buyers face an even steeper climb up the economic ladder. “It’s difficult for those wanting to buy a home as the required income to qualify has roughly doubled from just a few years ago,” he said.

In fact, the national median home sale price is $100,000 more than in Q2 2019, in which the St. Louis Federal Reserve pegs at $322,500. That’s an increase of nearly 31% in just five years. To add additional perspective, the average 30-year mortgage rate never went above 4.65% in all of 2019, compared to 2024’s peak (so far) of 7.448% in May.

While price growth may seem discouraging, it is decelerating

Those in the market to buy a home may find these numbers disheartening, but price growth is ever-so-slightly slowing down. The national median home price increased 4.9% in Q2, compared to 5% in Q1. And though sale prices rose in 89% of tracked metro areas in Q2, this is down from 93% in Q1.

10% of tracked metro markets actually saw price declines, up from 7% in Q1.

If you’re planning to purchase a home, there are steps you can take now to maximize affordability — namely, shopping around for the best rate.

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Source: nerdwallet.com

Apache is functioning normally

Mortgage rates plunged in the week ending Aug. 8 to their lowest since February 2023. The rapid decrease is likely to set off a wave of refinancing.

The 30-year fixed-rate mortgage plummeted 31 basis points, averaging 6.29%. That’s the lowest since the week ending Feb. 2, 2023.

Crucially, the 30-year mortgage has fallen more than a percentage point since a stretch that lasted from late August to the middle of November last year. It topped out at 7.95% the week before Halloween.

If your current mortgage rate is significantly higher than today’s rates, you could decrease your monthly payment by refinancing. But would it be wise to refinance now, or should you wait in the hope that interest rates will fall even more? Here’s how to approach the decision.

Compare rate you have with rate you could get

First, review your loan account to see your current interest rate, and compare it to current mortgage rates. If you got a mortgage last year from late August through November, there’s a good chance that current rates are about a percentage point lower.

Reducing the mortgage rate by a percentage point can save lots of money. Take the example of a $300,000 loan. With a 7.5% interest rate, a 30-year loan costs $2,098 a month in principal and interest. With a 6.5% rate, monthly principal and interest costs $1,896 a month, or about $201 less.

Is a difference of one percentage point enough to justify refinancing? It depends on who you ask. Some financial advisors say you should consider refinancing if you can shave half a percentage point off your current rate. Others recommend holding out until you can reduce your rate by two percentage points. Others recommend numbers between those two ends of the spectrum.

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It’s not only about the interest rate

Finding a lower rate is the first of several steps. “Refinancing a mortgage involves several factors beyond just the interest rate,” said Steven Calio, a certified financial planner with CSG Financial in Dover, Delaware.

Those factors include closing costs, break-even time and how long you expect to keep the home.

Closing costs and breaking even

If you bought a house just a few months ago, you may remember the closing costs. They’re fees for services that are necessary to close the mortgage: loan origination, taxes and other costs. They tend to run about 2% to 6% of the loan amount.

To figure out whether refinancing is worthwhile, you can calculate the break-even period, which is how long it takes for the monthly savings to exceed the closing costs. You calculate this by dividing the closing costs by the monthly savings.

For example, let’s say you’ll pay $7,000 in closing costs to save $200 a month. When you divide 7,000 by 200, the quotient is 35. That means it will take 35 months for the accumulated monthly savings to equal the closing costs. In mortgage lingo, that’s a 35-month break-even period.

If you believe you’ll keep the home past the break-even period, you’re likely to save money in the long run by refinancing. NerdWallet’s refinance calculator can help.

Ways to minimize out-of-pocket costs

If you have sufficient equity, the lender might allow you to add some or all of your closing costs to the loan amount. That minimizes the amount you’ll have to pay at closing, but it increases the size of the loan and thus the monthly payments.

Alternatively, the lender could absorb most of the refinancing closing costs in return for charging you a higher interest rate — one that’s lower than on your current mortgage, but higher than the rock-bottom rate you could get by paying closing costs out of pocket.

This strategy makes it less onerous to refinance again in the future if rates fall again, said Noah Damsky, a chartered financial analyst for Marina Wealth Advisors in Los Angeles. “If you were paying $10,000 in upfront costs each time, it could mean refinancing is a one-time thing,” he explained.

Should you wait for rates to fall further?

A few weeks ago, economic forecasters for Fannie Mae, Mortgage Bankers Association and National Association of Realtors predicted that the 30-year mortgage would gradually fall, finally dipping below 6.5% in the middle of 2025.

However, this decrease wasn’t gradual, and it happened about nine months ahead of the predictions.

The suddenness of this drop raises a couple of questions: Will rates bounce back and take away some of this week’s progress? Will they fall even more?

And these two questions bring up a bigger one: Should you pass up this opportunity to refinance and, instead, wait for mortgage rates to fall even more? After all, no one wants to pay the closing costs to refinance now, and then pay the closing costs to refinance again.

“One of the biggest roadblocks to making a decision is the upfront cost to refinance,” Damsky said. “You would hate to refinance now, only for interest rates to drop another 1% later this year, then want to refinance again.”

The decision is a judgment call that only you can make. We’ll leave the last word to Gene Thompson, a certified financial planner and director of financial planning for Iconoclastic Capital in Rochester, New York: “Homeowners should base their decisions on what they’re paying now and how much they’ll save by refinancing. Don’t get caught up in guesswork about the future.”

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Source: nerdwallet.com

Apache is functioning normally

Over the years, there’s been a popular argument that it’s better to buy a home when mortgage rates are high.

The logic is that home prices should be lower if rates are high, and thus you get a property for less.

And the cherry on top is that if/when mortgage rates fall, you can get a lower interest rate too!

When all is said and done, you basically get the best of both worlds. A lower purchase price and low mortgage rate.

But is this scenario actually reality? And do home prices and mortgage rates even have such a relationship?

Buying a Home When Interest Rates Are High

On the surface, buying a home when interest rates are high seems like a pretty bad deal.

After all, your monthly mortgage payment is going to be more expensive if the interest rate is higher.

For example, imagine a $500,000 home purchase with 20% down. That’s a $400,000 loan amount.

  • 7% mortgage rate: $2,661.21
  • 4% mortgage rate: $1,909.66

The difference in PITI payment each month is a whopping $750! That’s not a small amount by any measure.

*You can quickly compare other monthly payments on my mortgage rate charts page.

Anyway, this large difference in payment could make many would-be home buyers ineligible for a mortgage.

Remember, you have to qualify for a home loan, so if your income doesn’t cover that big jump in payment, you could be shut out completely.

For some, the argument to buy when rates are high stops right here. But shouldn’t home prices be cheaper if mortgage rates are higher?

Again, you would think so since expensive items might reduce demand and lead to increased supply.

But if you look at history, there isn’t a strong correlation between home prices and mortgage rates.

In other words, when one rises, the other doesn’t necessarily fall. Or vice versa. So if you’re looking for a bargain, don’t expect one simply because mortgage rates are “high.”

You’ll Get More Payment Relief with a Lower Mortgage Rate

Another issue is that a reduced purchase price doesn’t translate to much of a lower payment.

For example, let’s compare a $500,000 home purchase and $450,000 home purchase at 6% mortgage rates with 20% down.

  • $400,000 @6%: $2,398.20
  • $360,000 @6%: $2,158.38

In this scenario, the monthly payment is just $240 less per month. And that assumes you can get a home for 10% off.

Remember, there’s no inverse relationship historically between mortgage rates and home prices.

So you might not even see such a discount just because mortgage rates are high.

Instead, you could face both a higher mortgage rate and higher home price, as we’ve seen over the past few years.

This also debunks the idea that home prices will go up when interest rates fall. Again, no clear relationship on that front.

They could fall together if the economy tanks and lower rates become less helpful to prospective buyers now facing bigger issues, like unemployment or reduced wages.

Your Home Buying Decision Shouldn’t Be Dictated by Mortgage Rates

Simply put, a home buying decision goes well beyond available mortgage rates.

It doesn’t matter if the 30-year fixed is 3% or 8%, it matters if you can afford the home, if you can make payments consistently for the next decade, and if you love/want/need the home.

If you’re making the purchase based on the mortgage rate, you’re either trying to time the market or you’re potentially just squeaking by.

And you could face affordability issues if property taxes rise, or insurance premiums increase.

You certainly don’t want to bank on the marry the house, date the rate strategy, which hasn’t worked out great the past few years.

Some seem to think they can buy now and perform a rate and term refinance later to lower their payment.

But there’s no guarantee mortgage rates will fall by a large amount, or that you’ll qualify when that time comes.

So instead of focusing on the rate, look at the big picture. Is it the right home for you? Is the price affordable? Do you picture yourself living there for the next 5-10 years or longer?

Does it make sense financially based on your income, assets, and employment? If yes, great, proceed. If not, maybe take a harder look at the situation.

And remember not to make the false assumption that there’s a strong relationship between rates and prices.

Should You Sell Your Home When Rates Are High or Low?

Again, mortgage rates are just one piece of the pie. There are many different factors to consider when buying or selling a property.

One needs to study supply/demand, home price outlooks, and the wider economy. As noted, there isn’t a strong relationship between prices/rates historically.

So if rates are low, you can’t just assume prices are going to skyrocket and that it’ll be a great time to sell your home.

Sure, it could be a good time to sell if demand increases. But what if rates fall because the economy is in the dumps? Fewer prospective buyers, lower prices, right?

It’s not so simple. If you’re selling and buying a replacement property, that’s another consideration.

Will it be easy to find a replacement? At the moment, selling a home is somewhat scary because inventory is so low in most places.

You could find yourself renting until a suitable property comes along. And who knows where rates will be then?

I know several people who sold at the supposed “height of the market” a few years ago to lock in profits.

But since then haven’t been able to find a new home to purchase. In the process, they’ve missed out on years of ownership and they face significantly higher interest rates today.

Long story short, don’t try to time a home purchase or home sale based on mortgage rates.

Before creating this site, I worked as an account executive for a wholesale mortgage lender in Los Angeles. My hands-on experience in the early 2000s inspired me to begin writing about mortgages 18 years ago to help prospective (and existing) home buyers better navigate the home loan process. Follow me on Twitter for hot takes.
Latest posts by Colin Robertson (see all)

Source: thetruthaboutmortgage.com

Apache is functioning normally

The downward movement in mortgage rates over the past few months accelerated last week as a cooler-than-expected jobs report and indications of a Federal Reserve rate cut led to a steep drop in loan pricing.

At HousingWire‘s Mortgage Rates Center on Tuesday, the 30-year conventional loan rate averaged 6.8% — a new low point for 2024 that was just below the 6.83% figure to start the year. Rates have been above 7% for much of the past six months, contributing to a tepid spring and summer of home sales, but they have steadily decreased since peaking above 7.5% in early May.

Depending on the loan scenario, originators across the country are offering even lower prices to borrowers. HousingWire interviewed several mortgage professionals on Monday who said that rates for government loans were in the high 5% to low 6% range, while those for conventional mortgages were in the low-to-mid-6s. Several reported that mortgage rates rose again on Tuesday due to weaker mortgage-backed securities prices. Quotes vary based on borrower credit scores, lender points and other factors.

On Monday, turmoil for international stock markets were received as good news for the U.S. housing and mortgage markets, even as stock prices for some major real estate and mortgage companies took a hit. Bank of America projected more than 100 basis points (bps) of rate cuts before the end of the year as the risk of a recession appears to be rising.

The recent decline in rates — and expectations for more — are fueling optimism for a potential renaissance in home purchase and refinance lending. At United Wholesale Mortgage, for example, CEO Mat Ishbia said Tuesday that the company is selling some of its mortgage servicing rights with higher coupon rates as it looks to deleverage its balance sheet and invest in origination opportunities.

The CME Group‘s FedWatch tool currently shows a 100% chance of a rate cut following next month’s Fed meeting. Sixty-three percent of analysts believe there will be a cut of 50 bps, with 37% expecting a cut of 25 bps. The federal funds rate has not moved from its current range of 5.25% to 5.5% since July 2023.

Other market observers cautioned that even though a Fed rate cut in September seems all but certain, mortgage rates don’t always move in tandem with changes in the federal funds rate.

“Mortgage rates aren’t going to change based on a Fed cut,“ Melissa Cohn, a regional vice president at William Raveis Mortgage, said in a statement. “Your home equity rate will drop. Your student loans, car loans, all those rates will drop every time the Fed cuts rates, but mortgage rates are tied to the bond market, and the bond market is more affiliated with the rate of inflation and bad economic data than it is to the Fed funds rate.”

In commentary published Monday, Moody’s analyst Nick Villa wrote that a September rate cut will not be enough to “relieve the housing affordability crisis.“

“Presumably, even with the first interest rate cut of this hiking cycle in September, the federal funds rate would still be in restrictive territory with additional cuts needed to help restore the housing market to a more balanced equilibrium,“ Villa said. 

Source: housingwire.com

Apache is functioning normally

Fears of a recession in the U.S. sent shockwaves through financial markets around the world on Monday. The Dow-Jones dropped 1,000 points by 10:30 a.m. Eastern time, the NASDAQ lost up to 6% of its value and Japanese stocks suffered their biggest crash since 1987, with the Nikkei 225 stock index dropping 12.4%.

The turbulence should benefit the U.S. mortgage market, which has already seen big interest rate declines in the past week following a Fed meeting that teased forthcoming cuts to benchmark interest rates, along with a much weaker-than-expected jobs report.

“Bond yields have made a huge move lower and have made a big move up; it’s market madness on Monday, the 10-year yield is only down a few basis points as of this second,” HousingWire Lead Analyst Logan Mohtashami said at 10:32 a.m. EST. “Mortgage pricing should be lower today, but the close of today with the 10-year yield is key because short term bonds are very overbought.”

Several loan officers and mortgage executives told Housingwire that they’ve been quoting even lower prices on Monday though they’re also having to fight for loans that were locked in their pipeline at higher prices.

As of 11:08 a.m. EST, the 10-year Treasury yield hit 3.76%, the lowest reading since June 2023, while the two-year Treasury yield moved to 3.88%, which is generally a sign of recession.

Analysts at Keefe Bruyette and Woods (KBW) on Monday said that weak employment data drove market concerns about credit and fueled an interest rate rally. Mortgage spreads tightened at the same time, taking the Fannie Mae current coupon to 5.05%. 

“If long-rates remains stable, this suggests that the 30-yr Freddie Mac fixed rate mortgage should fall from 6.73% last Thursday to ~6.3% next week. The market also sharply increased expectations for Fed rates, pricing in ~4.6 25 bp cuts by year-end, including a strong likelihood of a 50 bp cut in September,” the analysts said.

“Fed funds futures now imply the Fed Funds rate could be 200 bp lower by July 2025. This backdrop should favor the mortgage universe broadly as (likely) improvement in purchase activity should benefit originators/title insurers. … We also reiterate our OP on the mortgage insurers (ESNT is highlighted here) as we expect credit to stay strong unless home prices fall sharply, which we do not anticipate.”

Analysts at Bank of America said the markets view U.S. recession risk as rising and are projecting more than 100 bps of rate cuts before year’s end.

“Incoming data have raised concerns that the US economy has hit an air pocket,” they said. “Financial markets are now pricing in more than 100bp in rate cuts by year-end and significant probability of a 50bp cut in September. Markets even began discussing whether the Fed needs to deliver intermeeting cuts. A rate cut in September is now a virtual lock, but we do not think the economy needs aggressive, recession-sized cuts.”

Loan originators and mortgage executives told HousingWire on Friday that they were locking borrowers in the high 5% range on government loans and in the mid-6% range on conventional mortgages.

Last week‘s sharp mortgage rate decline, which saw most LOs improve pricing between 20 and 60 basis points, resulted in a surge in rate locks, originators said.

“For example, I locked one loan today that would have cost the borrower 1.213 points on Monday versus 0.375 today. This loan amount happens to be $610,000, and the cost of the rate went from costing $7,400 to costing $3,200 today,” said California-based Shannon Hoff of American Pacific Mortgage. “The average mortgage loan amount in the U.S. is $405,000, and saving an extra 80 basis points could equate to $150 to $250 a month, depending on the overall scenario. This is huge for borrowers.”

According to Hoff, borrowers best positioned to take advantage of these rates are those who have purchased or taken a cash-out refinance over the past 12 to 18 months. In addition, some borrowers are looking to buy now or have been prequalified this past year.

“They can take advantage of a lower payment or even qualifying for a higher purchase price if the DTI was a key factor in the preapproval,” she said.

Flàvia Furlan Nunes contributed to this report.

Source: housingwire.com