Mortgage Interest Rates Will Remain Higher For Longer

Mortgage Interest Rates just hit the highest level we've seen in 6 months with the FED talking about the potential of another rate hike in June? When will we see interest rates moderate? Will higher rates cause a housing crash? In this episode, we discuss the idea of mortgage rates staying higher for longer due to The FED paying too much attention to employment figures versus what's actually happening in the economy along with an interest rate forecast as we help you become The Educated HomeBuyer.

Connect with me 👇

Jeb Smith (huntington beach Realtor/orange county real estate)
DRE 01407449
Coldwell Banker Realty

Connect with me 👇
Josh Lewis (Huntington Beach Certified Mortgage Expert)
NMLS ID: 234220 | CA DRE: 01209148
United American Mortgage | NMLS ID: 1942

🙏 If you found any value today, please be sure to like, share rate and review us - Follow us on social media - Thanks for listening.

[tonynelson]

Thank you again for getting the truth about the market out to the public.

[NeoSoulCrew]

Great work and plenty of good points made by both.

[Katadori]

27:20 I have some disagreements about the conversation about rates here.

1. There is indeed a moment in the real estate cycle when both prices and rates come down. That is when the market begins to crash, and in order to save it, the Fed does emergency rate cuts. This can be quite a prolonged period, for instance in the GFC it lasted from late 2008 to 2012. I’m not saying we’re facing a GFC now, but just pointing to the part of the cycle as an example.

2. When given a choice between a higher rate and higher price, you -definitely- want to lock in a higher rate with a lower price. Why? You can re-fi out of the rate but not the price, your mortgage overpayments lower total cost of ownership by more, your tax deduction only applies to the mortgage interest and not the price, you have a larger lever arm for later rate reductions which will add equity, and you don’t have to compete against a lot of other buyers when rates are high so you can negotiate a better deal.

3. It is not “the best of both worlds” to lock in today’s rates. Actually, right now is the worst moment in the history of the US to afford a house, statistically. We’re in the part of the cycle where the Fed has raised Fed funds rates, but housing moves so slowly that it has not yet responded much to it. It takes 3 years or so for the long and variable lags of the Fed action to kick in, and we’re only 1.5 years in.

4. Lowering interest rates do not rescue the housing market, aside from a very small uptick right away when it happens. The reason is like I said before, the long and variable lags. The economy must churn through these hikes for years for them to play out fully. For example, the Fed stopped hiking in late 2006 to early 2007, but the housing prices continued to come down for another 5 years after that. All the stuff that results from the high Fed funds rates, such as job layoffs, reticence of banks to lend, hangovers from other borrowing at the higher rates, money locked up in the higher rate bonds, bank failures, hawkish policy, etc. take years to play out.

It’s very unlikely that we emerge from this without widespread lay-offs, and a lot of property sales—first by investors (which make up about 1/5 of property ownership now), then by retirees, and finally by main street who always react late and bottom-tick the market.

So, in the meantime, my opinion is that the best thing to do is rent and save up a stockpile in a high-interest savings account (which now can offer 4.75%) for when the housing market turns. (Of course, be prepared to move anywhere in the country where the crash is the worst. Mobility pays dividends.)

[rennaway]

This is fantastic! What are your thoughts on mean reversion? Throughout history, I cannot think of any time where an asset increases as much as real estate has in such a short period of time…average is still 33% in the last 3 years… and where prices have not corrected back to their historical trends over time. I do think it is a bit wild that people are saying this is the new baseline. So, if prices increased another 33% in 2-3 years from now… would that also be considered normal? Will house prices double every 5 years now forever to the point where starter homes in 2040 will be 2m a piece? I cannot see people having their cake and eating it too.

[Lovepuppies]

Hi
I was wondering if you guys ever have done a video or will be doing a video on small builder/lender/realtor ethics?

Is it ethical for a seller/ builder
to call the buyer's lender and discuss how much it would cost to buy down your rate since you did not wave the financing contingency that if rates go above 7% with 0 points you no longer have to proceed with the purchase? And then the builder, who is independent, can force the buyer to lock the rate that day, even though the house does not close for 60 days!
Isn't it the builder's realtor/ partner who needs to negotiate with the buyer first? Is the buyer's lender allowed to reveal the buyer's financial information to the seller other than do they qualify and are they pre-approved?
I feel that if the builder's realtor and builder are partners and the realtor is also escrow that they should not be allowed to negotiate deals with the buyer's lender and force their hand that if you do not lock that day and rates go higher you cannot get your deposit back that is held in escrow by the builder's partner, the realtor
Hope I am making sense. It just seems like a conflict of interest and meanwhile the builder has never taken the home off the market.
Any advice?
Am I wrong to find it a little strange and the lender does not want to continue processing the loan because they want upfront appraisal money and if you do not lock and interest rates go higher, they do not want to work for free so they will not continue your loan? I thought that lender have to keep going and give you a denial should rates increase. Because rates could be better by end of July.
It just feels one sided
Thank you so much in advance for any comments or advice!

[AlexOnBass]

I think they’ll remain high throughout the summer, but I also know we’re nearing an election year, and miracles happen when the government wants them to 😅

[noonionsplz]

If i am on a title to a house and my father is too, does he have to put it in a trust so i can get it fully, or will it automatically go to me?..

[alyross]

Why do we talk about jobs as if a job…is a job….is a job? As if the value added to an economy is the same if a Fortune 500 company creates a new COO job as McDonalds needing someone for 10 hours a week?This is why the “unemployment rate” is meaningless unless it’s being used to manipulate. Like right now.

[ThePUMPJUNKY]

Jeb is rude to Josh sometimes. Josh is smart