Mortgage Market Update - 03/03/2023

Happy Friday, hope this finds everyone aware of the steep increase in rates that we’ve seen over the last three weeks.?While today ended on a positive note, and we dipped right under the 7.00% bar, as of this Wednesday, March 1st, we were looking right at the highest rates we’ve seen in four months.??

With that news out of the way, lets dive into how the struggle of a first time buyer right now is so, so real.?For weeks we’ve covered the fact that less homes, by decade, have been built in the last 10years then any other time prior to 1950.?And that multi-family builds (apartments, properties with 4+ units, etc.) have been on the rise during this same 10-year window.?We’ve also addressed how big investors have been pulling money to purchase single-family homes to then rent back to Americans; JP Morgan Chase spending $1billion, https://www.businessinsider.com/jp-morgan-to-acquire-1-billion-of-single-family-rentals-2022-11; American Homes 4 Rent scores $500m loan for acquisitions, builds, https://therealdeal.com/la/2022/06/08/american-homes-4-rent-scores-500m-loan-for-acquisitions-builds/

On top of less new homes being built, and having to compete with hedge fund buyers, first time buyers now have to find a seller whose willing to give up their historically low interest rate.?With rates bouncing above and below 7.0% it’s been calculated that 99% of homeowners have a rate that is less than the current market offering of the 30year fixed rate mortgage.?The same Goldman Sachs researcher that put this data together stated the direct correlation between low rates and low inventory is 20%...people not wanting to let go of their rate is contributing to a 20% drop off in active home listings.?And all of these lower than current market rates are fixed…the United States has the lowest projected foreclosure rate of any housing market in the world right now.

With all this adversity staring first-time homebuyers in the face why not give up, throw in the towel, continue to rent??Homeowners are 40x wealthier than renters, that’s why.?This gap has only increased over the last decade and the trend will absolutely continue for the next decade.?Real estate isn’t a get rich quick game, but you do need a piece on the board in order to ride the long term wave.?Getting in now, or any time, means that you’ll eventually have equity in a tangible asset that is one of the best protections EVER against inflation.?You also have a rood over your head that no one can take away, and a forced savings account in the form of a mortgage.?If any first time buyer isn’t sure whether or not it’s worth the pain and struggle to own real estate they only need to review the statistics that the Federal Reserve has been kind enough to put together.

We’ve had a decade long run of decreasing rates, they were bound to go up.?But, they’ll eventually come back down and that’s when you can refinance.?It’s more important to think of the long term implications of real estate – they’re building less homes, hedge funds are buying as many homes as they can, and the difference in wealth between an owner and a renter is staggering – instead of the short-term discomfort of the current interest rate market.?Don’t lose sight of the big picture because of the currently staggering sticker price.

Let me know about any questions after reviewing this week’s piece.?I’ve been through multiple cycles in the housing market and it’s an honor to address any concern you have.