Published November 9, 2023
Mortgage Rates Hit 23 Year High
Interest rates. People have been talking about interest rates for AT LEAST 4000 years. I don't have a source for that, however; they talk about usury in the Old Testament so I'm pretty sure it's been around for as long as people have been bumping elbows. As a real estate professional who is constantly talking with folks about their plans to buy or sell property, I can tell you that interest rates are a HOT TOPIC right now.
Tell me something I don't know
According to Mortgage News Daily, mortgage rates hit 7.49% in August marking the highest rates we've seen since 2000. Y2K was Bar Mitzvah season for me so while I was acting a fool on the dance floor, I imagine the adults were sitting around talking about interest rates. Just like me and my friends, and family, and clients are today. Fascinating.
Here's another one; mortgage applications are down 30% compared to last year, according to the Mortgage Banker's Association. This sounds like bad news, however; If you look at it a different way, that means that there are STILL 70% of the buyers that were out last year looking for homes despite the fastest run up in mortgage rate history (recorded history. I hear ancient Babylon was a wild market). Incredible.
Last one, I promise. Take a sip of coffee. Sales are on track to hit their lowest levels since 2008. Nationally, we are on track to record 4.3 million transactions compared to 4.1 million in 2008.
Cory, you're bumming me out
I get it. It's hard not to be bummed out when you see the most recent real estate news. It's also REALLY hard to zoom out when you're trying to make a move in the market of the moment. If you're a buyer right now, you're probably feeling angry, frustrated, and like you're getting the raw end of the deal. If you're a seller, you are probably concerned about your home's value and the possibility of losing equity as we head into some tough economic times. Those are all valid feelings and as someone who is having these conversations every day with folks, I feel you. I really do.
Wherever you are on your real estate journey, take a moment to feel your feels, and then take a deep breath and allow me to put some context around things and give you my prediction for the future.
DESPITE everything I just wrote above, mortgage delinquencies are at their lowest since 1979. With 5.03 million homes sold last year, we are still going to see 85% of that sold this year. Which to be honest, is truly remarkable considering that interest rates more than doubled since January 2022. Regardless of what the news is reporting, this market is resilient. You want to know why?
Pent up buyer demand
Here's my prediction: we have a huge demographic hitting their prime first-time home buying years coming of age and we have a TON of current homeowners that want to trade-up, however; they can't afford to trade-up their interest rates. It's like a singles ad "lonely first time buyer looking to meet a good time seller trying to get out of their house". These two need each other and the current market has put a wet blanket on their fiery romance.
When interest rates drop, we will likely see a wave of trade-up sellers list their home, however; they will also need to buy a home so it's not really going to impact our inventory of active listings. Buyers who have been sidelined this past year are going to come out in droves to gobble up what inventory IS available. This will cause a surge in the number of listings hitting the market AND the number of transactions happening, however; the number of listings might get worse due to the sheer number of buyers who are waiting to come out of the wood works. And we all know what happens when there are more buyers than sellers.
So is that really good news?
It depends which side of the table you're sitting on. If you are a buyer waiting for prices to come down to make your move, I would encourage you to reconsider. If you're waiting for a crash, I just don't see it coming. If you are a buyer that is qualified to buy a house NOW, yet wants to wait until interest rates come down, I would remind you that interest rates are only one factor that impacts your mortgage payment. Price is a huge player as well. So the question is, will a house at today's interest rate at today's price be more or less then the prices we're going to see a year from now? Even if the interest rate comes down? Because I can tell you that when they do come down, they will not come down to 3% or even 4%. The mortgage professionals I work with anticipate they'll come to the 5's.
If you're a seller; I think you'll be in good shape for the foreseeable future.
So there you have it. Your daily dose of reality. As always, I'm here to answer any questions you might have. If I don't know the answer, I promise that I know someone who does.
Be smart. Be Safe. Have a wonderful find.
