Mortgage Rates Increase And How It Affects The Housing Markets

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This BLOG On Mortgage Rates Increase And How It Affects The Housing Markets Was UPDATED And PUBLISHED On February 29th, 2020

What is the impact of the increase in mortgage rates on housing markets?

Are Days Of Low Mortgage Rates Over Mortgage Rates Increase Again

After the election of President Donald J. Trump, the economy has been booming like never before in history.

  • Unemployment rates are an all time low
  • The Dow Jones Industrial Average is at a historical high
  • Unemployment rates for Black, Hispanic, and Asian Americans are at historical lows
  • Women unemployment rates are at a 65 year low
  • Homeownership is at a historical high
  • Home prices are at increasing double-digit year after year despite the highest mortgage rates since the Real Estate Crash of 2008

Gustan Cho Associates had a stellar year in 2018 and 2019 appears to be stronger for 2020.

Housing Demand Remain Strong Despite High Mortgage Rates

Mortgage Rates Increase again last week to set the worst mortgage rates rise on record.

  • Mortgage Rates were fluctuating hourly last week
  • MBS, mortgage-backed securities, plummeted 314 basis points
  • Mortgage-backed securities are what drives mortgage rates up or down
  • If mortgage-backed securities drop, Mortgage Rates increase
  • Majority of banks are now quoting conventional mortgage rates of 4.75% or more
  • Not too long ago conventional mortgage rates were at 3.5%

Jumbo mortgage rates are in the 5.0% and some mortgage bankers are quoting jumbo mortgage rates north of 6.0%.

Locking Mortgage Rates Before Rates Increase Again

Which means blocking mortgage rates from rising rates again

Many borrowers have been floating their mortgage rates hoping it will drop.

  • For the past 7 weeks, there was no correction and most of them now are contemplating locking their mortgage rates
  • Borrowers who had a borderline high debt to income ratio mortgage loans are no longer qualified for their mortgages unless they pay points for lower mortgage rates

This is due to pricing adjustments on lower credit score borrowers.

Federal Reserve Board Chairman Ben Bernake

Federal Reserve Board Chairman thinks that the economy is recovering and is doing well.

  • He is thinking of stopping buying bonds  
  • Several market analysts are predicting mortgage rates in the 6.0% range by the end of the year
  • Could it be possible? 
  • Absolutely

As discussed earlier, some mortgage bankers already have conventional rates in the 5.0% range and jumbo loans north of 6.0%.

Home Prices Rise Despite Increasing Rates 

Why house prices are rising despite rising rates

Home prices have been going up as well.

  • With mortgage rates spiraling out of control, maybe this might slow down home sales
  • Personally, I think that the economy is far away from a recovery
  • Ben Bernanke could be making a major mistake in thinking that the economy is in good shape and that an interest rate hike is good for the economy
  • Look around you

Do you feel the economy has recovered?

Mortgage Rates Increase Means Less Buying Power

If mortgage rates rise over 6%, this would mean less buying power for home buyers.

  • This could mean fewer buyers who are qualified for homes and less competition in the market place due to more inventory
  • Most of our viewers will probably see many fluctuations in the real estate market
  • Nobody has a crystal ball
  • History has proven itself that when something rises rapidly in a very short period of time, it also corrects itself

This has proven itself in both the stock market and bond markets.

Related> Signs Of Mortgage Rates Rising

Related> Comparison Of Mortgage Rates

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