Rates Up, Prices Up or Down?
Watch the original video: Rates Up, Prices Up or Down?
Here is your Monthly Mortgage Update for October 2022. In this month’s video I discuss current market statistics to help break down exactly what is happening in the market and what to expect moving forward. Watch my video to learn more.
🤓 Inflation, Mortgage Rates & Recessions
Interest rates have more than doubled since the first of the year, making many concerned about the economy and certainly the housing market. Let’s look at a few slides so we can better understand what is happening and what to expect.
First, let’s look at the correlation between inflation and 30-year mortgage rates since 1970. Currently, inflation is at the highest point since the 70’s. Any time inflation has gone up, the Fed has stepped in and raised rates, causing inflation to deflate every time. As you may have noticed, when inflation rises, mortgage rates rise with them. Although the Fed rate is not tied to mortgage rates, mortgage rates have been correlated with inflation over time. So what this really shows us is that when inflation comes down, we can expect mortgage rates to lower as well.
🏠 Housing Inventory
Here in Shasta County buyers may be looking at higher mortgage rates, but they are finding deals that we haven’t seen in a long time.
If we go back to 2007, the peak of the housing market there were 3.8 million homes for sale. Today there are only about 1 million homes for sale nationwide. What we need to keep in mind is since 2007 there are 14 million more households in need of a home. On top of that, when speaking to builders around the nation, I have found that they are slowing down production, meaning there will not be enough inventory to meet the demand of households that need to rent or buy. This will continue to put pressure on prices and will most likely keep prices from falling too far.
🤔 Benefits of Buying
If you rent a home today, that rent will cost you twice as much in 9 years. So even with rates where they are, most people see the benefit of locking in a payment and having a hedge against the rise in rent prices that we will inevitably see.
⁉️ Are We in a Recession?
A recession is defined by two consecutive quarters of low or negative growth in our GDP, which we currently have. Although the government has not announced we are in one, most of the CEOs of large companies and hedge fund managers are saying that we are in a recession and we will be able to call it that officially by the first quarter of next year.
👍🏼 Lower rates by this time next year.
I would rather buy a house at a lower price with a higher rate, like we are seeing today than buy a house at a higher price but lower rate. If you can get a house at a lower price, you can always refinance your loan, but you can only buy that home once. In today’s market there is less competition, more inventory and sellers are often willing to cooperate with the buyer. So, although rates may be high, many buyers are finding great deals, at great prices, making it a great time to buy.
🙏🏼 Thank You.
As always thank you for all your support. If you have any concern about how this market will affect you or if you have any sort of transition in your life, please give me a call. Talk to you soon, have a great day.