Mortgage rates hitting a century-high of 8% this month has left economists, homeowners, and prospective borrowers alike wondering when (or whether) the market will let up. Capital Economics doesn’t expect mortgage rates to fall significantly anytime soon—how does 6% or higher through the end of 2025 sound?
The London-based research firm, known for its housing market forecasting, released a revised mortgage rate forecast on Thursday, showing it’s unlikely that mortgage rates will fall below 6% before the end of 2025. Thomas Ryan, the new U.S. property economist for Capital Economics, tells Fortune: While the firm has “kept the same path for mortgage rates that we had in our previous forecast, we’ve shifted up our anticipated path for mortgage rates.”
That’s going to continue to have an adverse effect on housing affordability in the U.S., which is already at abysmal levels with high home prices and mortgage rates and declining inventory levels.
“Our new higher forecasts for U.S. Treasury yields mean that mortgage rates won’t fall as quickly as we previously predicted,” Ryan wrote in the new forecast. “While we still expect mortgage rates to decline, they are unlikely to fall below 6% before end-2025, muting any recovery in house purchase demand and sales volumes.”
By the end of 2023, Capital Economics predicts the mortgage rate will be 7.5% (versus 6.75% in its previous forecast), and drop to 6.25% by the end of 2024 (versus 5.25% in its previous forecast), Ryan says. It won’t be until the end of 2025 that we’ll see 6% mortgage rates, predicts Capital Economics, which had previously penciled in a 5% rate by the end of that year.
Higher mortgage rates tied to higher Treasury yields
The firm’s new forecast is tied to higher forecasts for U.S. Treasury yields, which affect mortgage rates. The 30-year fixed mortgage rate is “loosely benchmarked” to the 10-year Treasury bond, Odeta Kushi, deputy chief economist at Fortune 500 financial services company First American, wrote in a report this year, meaning that mortgage lenders tie their interest rates to bond rates. Historically, the spread between the 30-year fixed mortgage rate and the 10-year Treasury bond yield has been 1.7 percentage points (typically expressed as 170 basis points or bps).
“In simple terms, mortgage rates are priced directly from the yield on mortgage-backed securities (MBS), which is a bundle of home loans sold as an asset,” Ryan tells Fortune. “When Treasury yields rise, lenders require higher yields on their mortgage-backed securities to attract investors that want to earn a higher return than the risk-free rate, which in turn pushes mortgage rates up.”
Today, the spread is at more than 300 bps with the U.S. Treasury yields briefly touching 5% this week for the first time since 2007. This, in turn, has pushed mortgage rates to their highest point since November 2000, “and is higher than we had anticipated them to go,” Ryan wrote.
When we can really expect to see rates fall
However, Capital Economics does predict that mortgage rates will fall faster than Treasury yields, albeit slowly. In 2024, the firm predicts, the 10-year yield will drop 75 bps to 3.75%, compared with a 125 bps fall in mortgage rates, Ryan says.
The firm also predicts that the U.S. Treasury yields will “fall sharply” from here and that the Fed will abandon its “higher-for-longer rhetoric” and cut interest rates next year. Even with strong GDP growth this quarter, Capital Economics expects that growth to slow—and even decline soon.
“That weakness, together with further signs of improvement in core inflation, which has already been falling since the back end of 2022, is why we expect the Fed to cut rates more aggressively next year than current market pricing assumes,” Ryan says. “As outlined in the report, that will put downward pressure on Treasury yields and mortgage rates.”
Other real estate experts and financial institutions tend to agree that we’ll continue to see relatively high mortgage rates—at least compared with the sub-3% rates of the pandemic—throughout the next couple of years. Goldman Sachs also released its forecast this week, predicting “sustained higher mortgage rates,” not dipping below 7% until the end of next year.
Other housing market experts are doubtful we’ll ever enjoy the mortgage rates of the pandemic era again.
Mortgage rates “will never return to the 2%-to-3% range they were previously,” Rhett Wiseman, a private real estate investor who owns and has invested in more than 200 residential properties in the Northeastern and Midwestern markets, previously told Fortune. In other words, the frozen housing market, with people holding on to their sub-3% rates, could be with us for a long time to come.
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In the world of mortgage lending, there’s an all-too-common sentiment that echoes through the industry: “My loan origination system (LOS) sucks.”
Regardless of the specific LOS in use, this feeling seems pervasive among lenders, and the dissatisfaction stems from lenders’ desire to deliver more digitally driven, bespoke borrower experiences.
In reality, the LOS is not the problem; the technology is doing exactly what it was designed to do. The root of lenders’ dissatisfaction with their LOS is unrealistic expectations versus the limitations of the LOS itself.
Lenders could save themselves a fair bit of angst — and achieve their goal of crafting better digital borrower experiences — by reframing their thinking about the LOS’s role in the overall origination process and exploring more suitable technology to craft the desired borrower journey.
Adjust your expectations
At its core, an LOS is designed to serve a very specific purpose: ensuring that lenders can originate compliant and sellable loans. It’s the backbone of the lending process, responsible for handling complex calculations, managing compliance and orchestrating a multitude of moving parts to transform an application into a closed loan.
While some platforms may include consumer-facing features and functionality, the impetus is to improve the LOS’s ability to perform its back-end function and not necessarily support the lenders’ desired borrower experience. Furthermore, expecting the LOS to perform like a consumer-facing application with texting capabilities, an intuitive app interface and bespoke interactions is simply asking too much.
The LOS is a foundational piece of technology for every lender. Thus, these systems have evolved over time to provide the necessary backbone for lending operations and ensure compliance, scalability and adaptability across various lending models, from wholesale to retail. With that in mind, it is easy to see how it would be impossible for an LOS to cover a mandate as broad as supporting every type of operating model and be bespoke enough to deliver a unique borrower experience for every lender.
To paraphrase Albert Einstein, imagine judging a fish by its ability to climb a tree. It would forever feel like a failure due to its inherent limitations. Along these same lines, lenders should avoid assessing their LOS based on its capacity to deliver a borrower experience for which it was not designed. Instead, lenders should focus on identifying the right tools for the job and setting realistic expectations for each.
Expand your horizons
As the front-end technology mortgage borrowers often interact with first, the point-of-sale (POS) system is the most logical starting point for lenders to build the unique borrower experiences they desire. Unlike an LOS, a POS system is intended to be consumer-facing, offering an opportunity to design and deliver a tailored experience that aligns with the lender’s brand, values and customer journey.
In addition, a POS system isn’t shackled by the same need to cater to all aspects of lending as an LOS does. Therefore, each POS platform has its own identity and focus, making it more likely for lenders to find a platform that enables them to personalize the borrower experience.
Whether they’re targeting real estate agents, working in the consumer direct space or focusing on any other niche, lenders can capture the essence of their lending process and extend it directly to borrowers, creating an intuitive, engaging and unique journey using the right POS.
However, the POS is not the be-all-end-all technology for crafting the borrower experience. While the POS is often the first technology-driven touchpoint between the borrower and the lender, the homebuying journey starts well before the application process, and there are numerous borrower touchpoints between application and closing.
By identifying these points and applying the right technology, lenders can not only deliver a superior borrower experience but also gain a much-needed operational lift and perhaps reduce overall expenses.
Make it work
While it is not the LOS’s job to deliver the borrower experience lenders desire, the technology lenders adopt to fulfill that goal must play nice with the LOS to maintain the integrity of the origination process and ensure compliance. LOS providers have recognized the need for flexibility and innovation.
Many LOS platforms now offer APIs (application programming interfaces) that allow lenders to seamlessly integrate ancillary technologies, like POS systems. This creates a modular approach, empowering lenders to assemble a tech stack that aligns with their specific vision for borrower engagement.
However, not all APIs are created equal, and biases may exist in the integrations between certain systems. Thus, lenders should conduct considerable due diligence into how their chosen ancillary system will connect and interact with their LOS to ensure a smooth process from both the borrower’s perspective and the back end.
Rather than blaming an LOS for not meeting expectations it was never designed for, lenders should leverage their point-of-sale system and complementary technologies to sculpt the borrower experience they envision.
By making the most of the tools at their disposal and embracing the strengths of each component, lenders can elevate their offerings, stand out in a competitive housing market and ultimately deliver a borrower experience that’s truly bespoke.
Patrick O’Brien is co-founder and CEO of LenderLogix.
The Dallas housing market is a nuanced picture of competition and change, mirroring the complex economic forces at play. As the latest figures roll in, analysts are keenly observing the subtle shifts that could signal the future trajectory of property values and market dynamics in one of Texas’ top cities.
Home prices in Dallas
In recent months, the Dallas housing market has been defined by healthy competition. The median home price has risen to an impressive $420,000, a 6.3% year-over-year increase, signaling sustained growth in property values. Each Dallas home, on average, garners two offers, with a median time of 33 days from listing to contract — a slight increase from the previous year.
Competition in the Dallas housing market
The Dallas housing market’s competitiveness is more than a matter of bidding wars; it’s reflected in the numbers across the board. With a 61 on the Redfin Compete Score™, the latest trends point to a market that’s competitive but not cutthroat. Dallas homes are being sold at a slight discount, typically around 2% below the listed price, with the sale-to-list price ratio sitting at 97.9%. However, some homes defy this trend, fetching around 1% above list price and transitioning to pending sales in a brisk 15 days.
Migration patterns to and from Dallas
These transactions take place against the backdrop of a dynamic migration pattern. The Dallas housing market is influenced not only by internal factors but also by the ebb and flow of people. While a fifth of the residents are exploring housing options outside the metro area, the vast majority remain committed to the Dallas market. The city has become a prime destination for buyers from coastal cities like Los Angeles and San Francisco, as well as New York, adding an influx to the local housing demand.
Environmental effects on the Dallas housing market
Environmental considerations are also shaping the Dallas housing market. Buyers are increasingly aware of the risks posed by natural occurrences. The average properties in Dallas face moderate flood risks and wildfire threats. On the other hand, wind and heat present major concerns, with nearly all properties in Dallas at risk over the next three decades.
Getting around in Dallas
The walkability, bikeability, and transit options in Dallas score 46, 49 and 39, respectively, out of 100. These figures highlight the necessity of a car for most residents, despite some available public transportation options and the developing infrastructure for cyclists.
Settle down in Dallas
The Dallas housing market remains a competitive arena where timing, price and environmental factors play crucial roles. The city’s real estate scene is a confluence of migration trends, market competition and infrastructure capabilities, all of which contribute to a market that is as challenging as it is rewarding for those navigating its waters.
Renting in Dallas
Shifting focus to the rental market, there are plenty of attractive options in Dallas for those not looking to buy. As of the latest figures, the rental market in Dallas presents a range of pricing, reflecting the variety and scale of the city’s neighborhoods and housing options.
Average rent in Dallas
The average rent for a studio in Dallas stands at $1,477, marking a 4% increase over the past year — evidence of a steady demand for these compact living spaces. For those seeking more room, one-bedroom apartments have seen a decrease in average rent, now at $1,371, which is a 5% reduction from the previous year.
This suggests a shift in the market dynamics, possibly driven by changing preferences or a supply adjustment. The average rent for two-bedroom apartments has also decreased by 4%, positioning the current rate at $1,862.
Image source: Rent./Sagemont
Dallas rent ranges
The rental ranges in Dallas illustrate a high-end market dominance, with nearly half of the apartments falling into the $2,101 and above category. This indicates a substantial segment of the market catering to more affluent tenants or those seeking premium amenities. Meanwhile, apartments priced between $1,501 and $2,100 account for 27% of the market, providing options for those with moderate to high rental budgets.
At the more affordable end of the spectrum, 18% of the apartments are priced between $1,001 and $1,500, aligning with the national median for similar urban settings. Notably absent are options below $700, which highlights a pressing shortage of low-end rental options in the Dallas market, a challenge for budget-conscious renters.
Your Dallas apartment awaits
These figures underscore a rental market as layered and dynamic as the city itself, with a range of options catering to different lifestyles and budgets. As Dallas continues to attract new residents from around the country and across the globe, the rental market is likely to continue reflecting the broader trends of the housing sector at large, with adjustments in pricing and availability that mirror the always-changing Dallas housing market.
Ready to settle down in your dream Dallas apartment? You’re only a few clicks away.
This is a sponsored partnership with The Entrust Group. Having more options for your retirement savings is always nice. And that’s where self-directed IRAs (SDIRAs) come in. These tax-advantaged accounts allow you to invest in real estate, small businesses, private equity, gold, oil, and more. An SDIRA differs significantly from an IRA or a 401k…
This is a sponsored partnership with The Entrust Group.
Having more options for your retirement savings is always nice.
And that’s where self-directed IRAs (SDIRAs) come in. These tax-advantaged accounts allow you to invest in real estate, small businesses, private equity, gold, oil, and more. An SDIRA differs significantly from an IRA or a 401k from a brokerage, where your options are limited to traditional assets like stocks, bonds, and mutual funds.
SDIRAs do give you more choices, but there is more work needed from you as they are a tad more complicated.
Key Takeaways
Self-directed IRAs can diversify your portfolio with different kinds of alternative assets.
SDIRAs can be set up as traditional or Roth IRAs.
There are cons to having an SDIRA, such as possible scams and the need for increased due diligence on the part of the account holder.
What is a Self-Directed IRA? – Complete Guide
So, what is a self-directed IRA?
A self-directed IRA (SDIRA) is simply an IRA in the eyes of the IRS.
But there is a big difference.
The most significant change with using an SDIRA is that you can invest in assets that are different from a standard retirement account (such as real estate, gold, bitcoin, and more – otherwise known as “alternative assets”), AND you can still use the same tax benefits as any other IRA.
Every investment and transaction is made on your request – not at the discretion of a financial institution.
Why have I never heard of a self-directed IRA?
Okay, so until recently, I had yet to hear of a self-directed IRA. You may not have either.
This is because SDIRAs are less common than the typical IRA you might already have. There are many different options for building your retirement portfolio out there, and this one requires more work on your end, so it’s less commonly used.
But, SDIRAs do have a wide range of potential. They are helpful for investors who want to diversify their retirement portfolio with assets beyond the usual stocks and bonds. In particular, they are an excellent option for investors with expertise in a specific area, like real estate or startups. They allow investors to use their existing retirement funds to invest in these types of assets to better take advantage of their own experiences.
How is a self-directed IRA different from a regular IRA?
The main difference between a self-directed IRA and one that is not self-directed is the different investment options available. SDIRAs can invest in alternative assets such as real estate, private businesses, precious metals, etc. However, standard IRAs are limited to stocks, bonds, and mutual funds.
If you’re looking to diversify your assets, then this may be a retirement account that could be great for you.
Types of self-directed IRAs
With SDIRAs, you can still receive the same tax benefits as an IRA holding publicly traded assets.
There are two main categories of self-directed accounts: traditional and Roth. Both have tax advantages, but they differ in how your contributions and withdrawals are taxed.
Traditional self-directed IRA – Your contributions are made with pre-tax dollars, which could lower your taxable income. There are also no income limits on contributions. When withdrawing the funds at retirement, you pay taxes on the distributions.
Roth self-directed IRA – Your contributions are made with after-tax dollars, so they don’t reduce your taxable income. All qualified withdrawals at retirement will be tax-free, including any gains your investments have made.
It’s essential to evaluate your financial situation and goals when choosing the type of SDIRA that’s best for you. There are also income and contribution limits to remember, mainly as these are updated annually.
How does a self-directed IRA work?
To invest with a self-directed IRA, you’ll have to open an account with a financial institution offering SDIRAs, often called a custodian, administrator, or recordkeeper.
After that, you can transfer or rollover money from an existing IRA or 401(k) into your SDIRA and look for an asset to invest in. You’ll be in charge of all asset decisions (this means that it’s your job to do as much research as you can), as well as ongoing account management.
It’s crucial to remember: per IRS rules, the custodian you choose does not help you to make investment choices. There are also other rules and regulations you must follow (you can read more about this at Self-Directed IRA Rules), such as avoiding prohibited transactions and staying within the annual contribution limits.
What Can You Invest In With A Self-Directed IRA?
A self-directed IRA lets you invest in various assets compared to regular IRAs.
Common investment choices
With a self-directed IRA, you can invest in assets such as:
Real estate – This could be rental properties, hotels, parking garages, or even empty land.
Precious metals – You can invest in physical gold, silver, platinum, and palladium.
Private equity – This includes investing in private companies not listed on public stock exchanges, including small businesses and start-ups.
Cryptocurrencies – Some self-directed IRAs allow investing in digital currencies like Bitcoin and Ethereum.
Commodities – You can invest in oil, gas, sustainable energy, and more.
Prohibited investments in self-directed IRAs
While there are many new things that you can invest in with an SDIRA that you may not normally do, there are some that are not allowed. Here are some examples of investments that are not allowed:
Collectibles – You cannot invest in antiques, artwork, and stamps.
Life insurance
S Corporations
Explore over 90 alternative assets you can invest in with a self-directed IRA (and learn more about the ones you can’t) here!
Understanding a Self-Directed IRA (SDIRA)
Here are some essential things to think about when it comes to self-directed IRAs:
Due diligence
Due diligence means doing careful research and checking everything thoroughly before making an important decision. Since you are responsible for all the investment choices, you’ll want to do your homework beforehand to make sure you know all the facts and risks involved.
Legalities and regulations
You should be aware of the legalities and regulations surrounding SDIRAs. As mentioned before, certain transactions, such as investing in life insurance or collectibles, may be prohibited. There are also separate IRS deadlines for some types of assets.
In addition to the prohibited transactions listed above, it’s also essential to remember that the IRS has strict regulations concerning who can materially benefit from or transact with the SDIRA – known as “disqualified persons.” These are people like your spouse and children. For example, if you purchase a rental property, you (and your family) cannot use it for a family vacation.
Fees and expenses
SDIRAs have fees for recordkeeping and making transactions. Knowing the costs can impact how much money you make from your investments and may change your decisions.
Contribution limits and rules
Like IRAs from a bank or brokerage, SDIRAs have annual contribution limits. Be mindful of the limitations and make sure that your contributions follow the rules set by the IRS.
Withdrawal rules and penalties
You should be aware of the self-directed IRA withdrawal rules and penalties. Early withdrawals made before the age of 59.5 years may be subject to a 10% penalty and additional taxes. Additionally, if the funds are tax-deferred, you must also pay income taxes on the distributed amount.
Pros and cons of a self-directed IRA
Advantages of self-directed IRA:
Diversification – You can invest in real estate, private equity, precious metals, and other alternative assets.
Tax benefits – SDIRAs have the same tax advantages as regular IRAs. You can enjoy tax benefits based on the type of IRA (traditional or Roth) you choose.
Potential for higher returns – With a self-directed IRA, you can go after investments that might earn you more money than the usual choices. This could mean your retirement savings grow faster in the long run.
Disadvantages of self-directed IRA:
Can be more complex – Managing an SDIRA can be a more complicated process due to having more responsibility in choosing suitable investments and having to do more research. There is also less transparency surrounding alternative assets than those traded on the public market.
Higher risk – There may be higher risks, such as illiquidity, lack of regulatory oversight, and market volatility. There are also more scams in the SDIRA world because the investments differ and don’t have as much oversight.
Fees and expenses – SDIRAs often have higher fees, such as custodial, transaction, and recordkeeping fees.
How to Open a Self-Directed IRA
Setting up a self-directed IRA requires a bit more work than opening one through a bank or brokerage.
Here are some steps:
Find an SDIRA provider. Often referred to as an administrator or custodian, this entity is a financial institution that handles alternative investments and fulfills IRS-mandated recordkeeping requirements associated with your self-directed IRA.
Ensure they can hold the asset you want to invest in. For example, not all SDIRA custodians allow single-member LLCs or cryptocurrencies.
Choose between a traditional or Roth SDIRA
Create your account and pay your account establishment fee
Fund your SDIRA via a transfer, rollover, or contribution
Note: Having an experienced financial advisor can be super helpful in handling your SDIRA, as they can give you expert advice on what you should do.
The Entrust Group Review
Want to open a self-directed IRA? A popular administrator option is The Entrust Group, which has been in the business for over 40 years, with over 45,000 investors and $4 billion in assets under custody.
Opening an account with The Entrust Group makes the process easy, and you can choose your funding type, including rolling over an old 401(k), transferring an existing IRA, or making a new contribution.
Keep in mind that there are increased fees associated with an SDIRA. But, The Entrust Group is open about their fee structure, which you can find on their website here. Some of their fees include:
Account establishment fee – This one-time fee covers the cost of opening an account.
Annual recordkeeping fee – This is the fee that covers IRS reporting, recordkeeping, and admin.
Purchase and sale of asset fees – This one-time fee covers the paperwork required to execute the purchase or sale of an asset.
Transaction fees – These fees are charged for transactions.
The Entrust Group has a quick calculator that you can play around with to see what your fees are. I spent some time with it to better understand the different fees; for example, if I have one asset valued at $45,000, my one-time setup fee would be around $50, and my recordkeeping fee would be $199. If I have two assets with a total value of $100,000, then my set up fee is $50, plus the recordkeeping fees of $374. However, any undirected cash in your account isn’t subject to recordkeeping fees; so you won’t be subject to these when you’re between investments.
In summary, The Entrust Group is a reputable and experienced provider of self-directed IRA services, giving you the power to invest in many different alternative assets. If you want to diversify your investment portfolio simply, The Entrust Group may be a choice for your self-directed IRA.
Download their free Self-Directed IRAs: The Basics Guide to learn how you can take control of your financial future with an SDIRA with The Entrust Group.
Frequently Asked Questions About Self-Directed IRAs
Below are answers to common questions about self-directed IRAs.
What are the risks of a self-directed IRA?
Some risks of self-directed IRAs include the potential for fraud, and higher fees, and it may be a little more challenging to manage your alternative investments because there are more rules. And you are entirely in control of your account – so it requires more of a time investment. Also, self-directed IRAs require a custodian, and fees for these services can be higher than with a regular IRA.
Do you pay taxes on a self-directed IRA?
Yes, you do pay taxes on a self-directed IRA, but as with a regular IRA, the matter of “when” depends on what type of account you have. With a self-directed traditional IRA, your contributions may be tax-deferred, and you will pay taxes on withdrawals during retirement. Comparatively, a self-directed Roth IRA holder contributes after-tax dollars and can make tax-free qualified withdrawals.
Is a self-directed IRA better than a 401k?
It depends on your financial goals and investment preferences. A self-directed IRA can give you more control over your investments, while a 401(k) has limited investment options but may include employer-matching contributions.
How do self-directed IRA fees work?
Self-directed IRAs typically have higher fees than traditional IRAs due to the increased administrative costs associated with alternative assets. Some of the fees you may come across with SDIRAs include set-up fees, annual maintenance fees, and transaction fees.
Can I invest in real estate with a Self-Directed Roth IRA?
Yes, you can invest in real estate with a Self-Directed Roth IRA. You can also learn more about this at Self Directed IRA for Real Estate: Benefits, Risks, & Next Steps.
Are Self-Directed IRAs a Good Idea? – Summary
I hope you enjoyed this self-directed IRA guide.
While it is great that you have more options in what you can invest in, SDIRAs do require a little more work on your end.
But, if you’re looking to invest in different kinds of assets than just stocks and bonds, then SDIRAs are worth considering.
Are you interested in opening a self-directed IRA? Visit The Entrust Group to schedule a consultation with one of their experienced IRA experts.
What was your favorite thing to talk about as a kid? Maybe it was dinosaurs, or Barbie or the Magic Treehouse book series. It probably wasn’t compound interest. Getting kids excited about investing can pay off for the rest of their lives — but how do you do it?
Here are six strategies to help get kids interested in investing for good.
1. Make it relatable
Explaining what investing is and why people should care about it can feel like an exercise in futility — the jargon, the math, all the acronyms — but at its core, investing is incredibly simple. Investing means taking the money you already have and using it to make more money without having to do any additional work. When talking with kids, stay away from “Roth IRA,” “dividends” and “return on investment,” and instead focus on the basics.
The language should be simple: If you have $100 now, and you invest it, you may have $110 later. Then, that extra $10 you earned will start earning money, too. You can play around with an investment calculator to help them visualize how their money could earn more money over time.
And while it’s good to be skeptical of financial advice on social media, there are some great sources of information that may help get kids more interested in money management.
“I got started with the help of YouTube,” says Ariana Bribiesca, a content creator based in Malibu, California, who started investing at age 16 and now runs the TikTok account Ari Invests. “I spent about 10 months doing research before I decided to open up my brokerage account.”
Bribiesca got introduced to investing through social media, particularly through her YouTube recommendation page, which showcased videos about credit cards, the college application process, starting a business, and investing.
2. Have them invest in what they’re into
One way to get a kid excited about investing, according to Riley Adams, a certified personal accountant and founder of Young and the Invested in Pleasanton, California, is to help them connect with brands they like.
“Instead of saying, ‘I shop at Nike,’ or ‘I use Snapchat,’ it actually lets you go a step further and gets you involved by not just spending your money with these companies, but making money on things you already do,” Adams says.
Investing in brands kids are excited about may help them feel a more personal connection to the experience. If they’re invested in their favorite store, shopping there may feel like they’re helping make their own stock more valuable instead of just spending money.
3. Make it a game
Investing itself may not be something kids are interested in, but turning it into a game may help your kids feel more excited about it — especially if there’s a chance they can beat you at it.
“Gamification is definitely a big thing, so find little ways to make it seem more like a game, and it’s more fun to get involved with,” Adams says.
You can have regular contests to see who can make more money on their investments, with the winner earning a prize in addition to whatever profits they make; or see who can better predict what happens to the stock market based on what’s happening in the news.
Just like players can lose when playing a game, investors can lose money. Helping a child understand the risks is an important piece of the puzzle when it comes to helping them develop a healthy relationship with investing.
4. Get them some practice
If you don’t want to risk real money, you can open a paper trading account for kids, which allows them to simulate the investing experience for free.
“I practiced with fake money before investing my own money for about two months,” Bribiesca says. “I used the app Stock Market Simulator which gave me $10,000 of simulated money to invest. I showed my parents my entire journey with it and would even force them to watch a couple YouTube videos with me so they understood what I was learning.”
If the kids in your life are ready to start investing for real, you can help them open a 529 plan to help them save for college, a Roth IRA to get a jump on retirement, or a custodial brokerage account for general investing.
5. Help them make it a habit
Making a habit stick requires repeating the behavior again and again. If you’re trying to help a child stick with investing for good, they’ll need to get in the habit of doing so early.
If you give a child an allowance or pay them for small jobs around the house, help develop their investing habit by teaching them to take a portion of their earnings and put it toward investing for the future. This can help cement the habit and make it something they do regularly as they get older.
6. Talk openly about money
While some adults may not want to discuss finances in front of the kids, it may be more beneficial for children to see healthy financial behaviors and conversations modeled for them. If they never hear adults talking about investing or budgeting, or are told that talking about money is inappropriate, they may not have the tools to deal with financial conversations when they get older.
“Overall, it is important for parents to include their kids in talks about money and slowly introduce them to different topics or resources,” Bribiesca says. “It is important to include them because kids like to imitate their parents and follow their footsteps when they notice something can be very rewarding.”
Neither the author nor editor held positions in the aforementioned investments at the time of publication.
What a difference a year makes At last year’s FUSE conference, LaCentra hinted at choppy waters ahead but noted an uptick in 30-year fixed products: “Especially with what’s going on in the residential side, we’ve seen a really large increase in interest from brokers just to be able to diversify their product offerings, which has … [Read more…]
After last Friday’s jobs report, there wasn’t anything on the event calendar that demanded obvious attention until next week’s CPI. The Treasury auction cycle was the thing that traders/analysts talked about because that’s the only thing that was remotely worth talking about. To be fair, there was obviously a pop after the 30yr auction, but it was a stunningly bad auction. Moreover, it was traded back out by the next morning (today). Bonds drifted sideways to slightly weaker on Friday for no particular reason and we’re not interested in trying to fabricate any reasons in light of the entire week’s trading range remaining inside a single day’s trading range from last Friday.
Consumer Sentiment
60.4 vs 63.7 f’cast, 63.8 prev
1yr inflation expectations
4.4 vs 4.2 prev
5yr inflation expectations
3.2 vs 3.0 prev
10:52 AM
Slightly stronger overnight but giving up some gains early. 10yr still down 3.4bps at 4.598. MBS up 2 ticks (0.06).
12:01 PM
Weaker into the PM hours. MBS down 1 tick (0.03) on the day and a quarter point from highs. 10yr down 2 bps at 4.612
01:22 PM
New lows for MBS, but distorted by illiquidity. 6.0 coupons showing more than a quarter point of losses, but probably less than an eighth after factoring out the wide bid/ask. 10yr up to unchanged levels on the day at 4.63.
04:16 PM
MBS bounced back from illiquidity, heading out with 6.0s down only 2 ticks (.06). 10yr yields have been boring by comparison: down 3.5bps currently at 4.736.
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Watching interest rates rise from 3% to over 8% in a relatively short period has been enough to give anyone whiplash. And it may have been particularly difficult if it happened just as you prepared to buy a home or new car. It’s possible to intellectually accept that the Federal Reserve raises interest rates to combat inflation, but that does not mean you have to like it.
During the pandemic, the world felt wonky. However, the influences that led to higher mortgage rates were, at their core, the same factors that have always driven rate hikes. Here’s what they were and what it will take to stall and reverse them.
1. Inflation cools
There are a couple of basic reasons interest rates increase when inflation is on the rise. The first is that higher interest rates are one important way the Federal Reserve can slow the economy and cool inflation. The other has to do with mortgage lenders needing to earn a higher rate of return to ensure they don’t lose out on purchasing power due to inflation.
As inflation heats up, businesses — including your mortgage lender — look for ways to remain competitive. If they’re going to pay more for rent, supplies, and the other costs associated with doing business, they must find the money from somewhere. By raising the mortgage rate on their loans, lenders can hedge against losses due to inflation.
Stall No. 1: As inflation cools, lenders have fewer concerns about what it’s costing them to do business and can begin to cautiously lower their rates on mortgage loans alongside the Federal Reserve cutting rates.
2. Unemployment rises
At 3.9%, the unemployment rate remains low. While that’s great for employed families, low unemployment means consumers have more money to spend on goods and services, including new homes. The more people who can afford to buy a home, the more vital it is that inventory keeps pace. When that’s not the case, anxious buyers begin paying too much just to get in a house. In what becomes a vicious circle, overpaying leads to inflation, and inflation leads the Federal Reserve to raise interest rates.
More: Check out our picks for the best mortgage lenders
Stall No. 2: As the economy weakens, companies lay off more employees. Once the unemployment rate begins to climb, the Federal Reserve makes it easier to borrow money by lowering interest rates.
Bonus: As interest rates drop, more current homeowners may be more willing to sell their properties and take out a new mortgage for another house. Once enough homes come back on the market and inventory begins to approach pre-pandemic levels, home prices should cool.
3. People begin to squirrel away more money
The U.S. is currently enjoying a strong economic period. During these times, governments, businesses, and households each have the urge to spend — often more than they bring in. This desire leads to higher interest rates as lenders know they can cash in on the desire for loans.
Stall No. 3: As economic conditions weaken, fewer people are willing to borrow money. Instead of spending, people begin to stow their money somewhere secure, like savings accounts and certificates of deposit (CDs). Slowly, lenders realize they have more funds to loan than consumers willing to borrow, and interest rates drop.
We can’t say for sure when rates will stall and then begin to fall. However, we can say that there’s nothing about today’s economy to suggest that rates will always be high. Historically, mortgage rates have gone up, and they’ve come back down. It’s a matter of deciding how patient we can be as it all plays out.
HousingWire Editor in Chief Sarah Wheeler sat down with Rick Arvielo, co-founder and CEO of New American Funding (NAF), to talk about AI, why he chose to start NAF Technology India and how to keep NAF innovative. This interview has been edited for length and clarity.
Sarah Wheeler: New American Funding is known for building rather than buying technology. Are you still in that mode?
Rick Arvielo: Yes, and as a matter of fact, we’ve really doubled down on the effort. I’ve always kind of led the charge in our tech build, and as we’ve gotten bigger, it’s just harder for me to devote the time to immerse myself in that. So within that last couple of years, we brought in some great leaders — we’ve been lucky to attract some top talent to New American Funding,
Another fairly material decision we made was about a year and a half ago, we made the decision to rely on some offshore assistance. But having some experience with that, I didn’t really want to find contract offshore providers. So we decided to open our own company in India: NAF Tech India. We have about 150 New American Funding employees over there now to help supplement our somewhat lofty tech build goal.
SW: What has that experience been like?
RA: It’s great! We’ve been using contractors here and there for some time just because it’s often a lower cost, but what we find is with contractors, oftentimes, they’ll give you their “A” players to get you into contract and then they move those people on to their next target. Then you’re left with people that don’t measure up to the initial bar. So, we just realized that the only way that we were going to control that world is to own it ourselves — and it’s quite an undertaking.
You’ve got to incorporate over there, you’ve got to get space and build it out, you’ve got to find the leadership and then start hiring staff. That took about a year, but we’ve been full force now for about a year.
The challenge with the U.S. really has a lot to do with the escalating pay scales [for tech workers] which is very hard to digest in a market like we’re in right now. It will have you second guessing your decision to build versus buy! But also, when you bring people in, it takes some time just to get them familiar with your tech stack. And if they then get attracted away by somebody wanting to pay them a little bit more, it’s just a big expense to digest.
So having that foothold in India, where they have vast expertise, and really have them part of New American Funding so we can indoctrinate them into our culture — something they care about as much as Americans — it’s been a fun exercise.
SW: Is it similar to just having another location?
I would say the only thing that’s a little different is the time zones. But we live in a virtual world anyway right now — most of our tech people don’t work in our corporate office, they’re working from wherever they are.
I think that the quality of engineer over there is really good. We’re now finding that we need to invest in bringing more product people into India so they’re intimately familiar with what we’re doing. So when they’re busy during our nighttime and they get stuck or need help, there’s somebody there that can answer those questions. We’re starting to build out that infrastructure now as well.
SW: What advantages does building this way gives you in this particular market?
RA: Cost efficiencies are probably the biggest advantage. There is a stark difference between what you have to pay a technician here in the United States and what you have to pay a technician in India. Not to take advantage of anyone. But, we’re privately funded — we’re not public, it’s just Patty and me — so we have to be very careful about the dollars we spend, especially in a real estate market that’s under pressure like ours is. So to go as hard and as fast as we want to go with our tech initiatives, we needed to bring on a lower cost resource to supplement and help us stay within our budget.
SW:Are you guys rolling out a lot of different products for them?
RA: Our goal is always to improve the experience for our loan originators and our consumers. Millennials are digital natives and Gen Z doesn’t know anything but a digital lifestyle experience. Our goal is to take that seriously and try to develop technologies for both our loan officers and our consumers, to give them a real-time experiences.
When I looked at the vendors that are out there that have done a lot of this — that comes with as many challenges as benefits, because technologies are changing quickly. And when you’re a vendor and you’ve invested over years to develop techn, and then this technology morphs and changes, a lot of times they find themselves painted into a corner because they have to support people that are already using their stuff. So our goal is to develop the foundation, and have the technical prowess to be able to pivot for our needs, and not the need of some vendors’ 100 customers.
SW: How is New American Funding leveraging AI?
RA: I think artificial intelligence can bring a lot to the table, to the extent it can be taught. That’s the beauty of AI — it’s a large language model and neural networks are so far beyond human beings, they can arrive at answers much more quickly and accurately. We do a lot of transactions, so we can take those transactions and teach a large language model more quickly than maybe a smaller competitor.
AI is so new, but we’re focused on getting the right people on the boat, to have the subject matter expertise so that they can bring these types of solutions and allow people time to become comfortable with the transition. It’s not that we want to replace their job — it has nothing to do with that, it has to do with making them more efficient. But creating this new ecosysem is a bigger effort than you would think. And it’s not just operations or marketing — it’s just about every part of the business where AI can make a difference. And you still need to be very careful massaging it into the organization so people aren’t defensive and they don’t feel threatened by it.
SW: How do you keep making sure you’re on the edge of innovation where it matters?
RA: For me, personally, I just find people better than me. I mean, don’t get me wrong, I have a lot of confidence, but I’m also 61 years old so I’m not the guy anymore to direct tech. I used to be, but today, it’s very important that I find people much better than I am: much more immersed, much more contemporary in the way they think, and bring them in to help make those decisions. And we’ve probably worked harder on that than just about anything else over the last few years.
New American Funding has always been what I call skinny at the top — it’s been me, Patty, Christy Bunce our president, and a handful of other people that we really rely on. And I needed to fill in puzzle pieces with people who really had that level of expertise and just a new perspective that was better, more relevant and younger than mine, to be honest with you.
And we’re blessed that we’ve been able to find those people and attract them to New American Funding, and they’re really making their mark. And we’re such a better business today than we were even a handful years ago, when I was in charge, because I just don’t know what they know. And I think that it was important for me to recognize that myself, and to be able to figure out a way to attract that top talent to New American Funding.
SW: What keeps you up at night?
RA: I think, to be blunt, not f*ing up. We’re 3,800 employees at New American Funding and those people rely on me to not screw it up and to make sure that I make the right fiscal decisions for our company, that we have the right vision, we invest the right money and execute in the right way, so that everyone can continue to do their work and earn their living and take care of their lives. So when I feel pressure, it really has more to do with that than anything else.
We don’t swing for the fences at New American Funding. We think things out. We’re very deliberate in our growth, because I don’t want to do something that jeopardizes the wherewithal in the business and put 3,800 souls at risk, especially in a market like this. We had an unprecedented run through the COVID years, obviously, but now is the time to really make wise decisions so you don’t have an undue impact on the organization.
The price of existing single-family homes across the United States continued to fall in January, with 16 of 20 metro areas posting record low annual declines, according to the S&P/Case-Shiller Home Price Indices released today.
All 20 of the metros posted a December to January monthly decline, with Las Vegas leading the pack with a 5.1 percent drop, followed by Phoenix with a 4.1 percent decline, and Los Angeles off 3.7 percent.
Over the last 12 months, the 10-City Composite fell 11.4 percent, a new record, and the 20-City Composite recorded a 10.7 percent decline.
“Unfortunately it does not look like early 2008 is marking any turnaround in the housing market, after the declining year recorded throughout 2007,” says David M. Blitzer, Chairman of the Index Committee at Standard & Poor’s. “Home prices continue to fall, decelerate and reach record lows across the nation.”
Las Vegas and Miami posted the greatest annual declines, each off 19.3 percent, followed by Phoenix at 18.2 percent.
Washington and Minneapolis also crept into negative double-digit territory, with losses of 10.9 percent and 10.0 percent, respectively.
“No markets seem to be completely immune from the housing crisis, with 19 of the 20 metro areas reporting annual declines in January and the remaining – Charlotte North Carolina – eking out a benign 1.8% growth rate. Looking deeper into the data, you can see that 16 of the metro areas are also reporting record low annual growth rates,” Blitzer added.
Meanwhile, the OFHEO, Fannie and Freddie’s regulator, published its own monthly House Price Index, which saw U.S. home prices fall roughly 1.1 percent on a seasonally adjusted basis between December and January.
For the 12 months ending in January, home prices fell 3.0 percent, and are off 4.1 percent since peaking in April 2007.
The report, which is calculated using purchase prices of housing backed by mortgages sold to or guaranteed by Fannie and Freddie, found that the Mountain Census Division was the only region to post a price increase, while the New England Census posted the largest price decline.