Mortgage Rate Forecast (And why it doesnt matter)

According to projections put forth by Fannie Mae and Freddie Mac, mortgage interest rates are likely stabilize in the mid 5% range through the rest of the year and potentially dip into the high 4’s in 2023. This would bring a welcome sense of balance to an already equalizing housing market and level out supply and demand imbalances. So what do these rate forecasts mean for home affordability and buyer demand? Well, despite what the news might have you believe, it’s a bit more complicated than that.

Fannie mae and freddie mac have given their predictions for where mortgage rates are headed in 2023 here’s everything you need to know the week of september 7th and why none of it matters according to a new report from fannie mae and freddie mac mortgage interest rates are likely to stabilize in the mid 5 range throughout the rest of the year and possibly even

Dip in the high fours in 2023 so if you’re looking for an indication of possibly where the housing market is headed that’s one piece of information also super not that important here’s why we talk a lot about interest rates when it comes to home affordability the housing market and the broader economy in general the reality is if we’re focusing just on the housing

Market interest rates are simply one function one variable of a much more complex conversation around the landscape and market variables that affect home affordability there are way more important variables like inventory levels buyer demand building costs mortgage products available wages at any given point that affect home affordability and they all work together

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To create the market landscape at any given time so let me paint you a picture let’s say that i was trying to buy a home in august of 2021 i might be able to lock in a three percent interest rate which sounds awesome right it’s also only one variable of the equation the other variables at play mean just as much as the three percent rate that i might have been able

To lock in i would also be buying at historically low inventory levels with super high buyer demand and increased building costs and they’re very simple reasons for this as well the kova 19 pandemic created a logistical nightmare that increased costs to build new homes also created a work-at-home environment which increased buyer demand and sent everybody on a

Buying frenzy in the housing market because they’re able to move all over the country at will with low inventory levels high buyer demand and increased building costs home prices increase substantially and so what would have needed to happen at that time is to lock in my three percent rate i probably would have also had to make a substantially over asking price

Offer on a limited amount of inventory come to the table with extraordinarily more cash than in any normal market environment waive all my contingencies and guarantee the sale even if the home didn’t appraise i would have to make all of those sacrifices that i couldn’t take back especially my cash outlay in order to lock in a three percent rate which by the way

Rates are temporary because that is the beauty of refinancing fast forward to today and we’re in a completely different environment i may lock in a mid 5 rate on my mortgage today i also have a little bit slower buyer demand because prices have increased so much and rates have increased which has led to an increase in inventory nearly triple what it was last year

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At this time and a little bit more seller flexibility meaning instead of having to compete with 50 offers and just to lock in that low rate on a house that i might not even want i have to go 50 or 100 000 over asking price money that i won’t get back i can actually make a reasonable offer come to terms with the seller at market value lock in a good interest rate

Still that i could refinance in the future and not have to waive all my contingencies and pay an arm and a leg to lock in that deal so while the news would have you believe that a rise in interest rates is actually a bad sign for time to buy or the housing market or whatever that’s just noise the reality is that’s one small variable in a much broader and complex

Conversation the sacrifices that i would have to make to lock in a super low rate and a low inventory high demand market are not always worth the expenditure because if i have to waive all my contingencies and go far over asking price and lock that deal in with cash not getting the benefit the full benefit of this interest rate flash forward to today set flash

Forward today twice in this video but we’re gonna roll with it now i have the ability to make stronger decisions i might pay a slightly higher interest rate but i’m also not going to have to go well over asking price and and and pull out all the stops just to get a home that i might not even want i’ve got more choices i’ve got more time to breathe i can lock in

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A solid deal and get the home that i want this is why out of all the variables that affect the housing market interest rates are actually about the least important when it comes to home buyers because they have the biggest effect on the other variables higher interest rates usually lead to higher inventory which depresses prices and gives buyers more buying power

And negotiating power it all works in tandem with itself that’s why the reality is the best time to buy a home is always when it’s right for you because all the market forces work in balance to bring pros and cons to the landscape at any given time so if you’re interested in buying a home and you actually want to have some breathing room maybe have more inventory

And get the home that you want at a price that makes sense give us a call or give your favorite living and dfw agent a call and we’ll talk to you soon you

Transcribed from video
Mortgage Rate Forecast (And why it doesn't matter) By Livian DFW