I Want It All… I Want It Now
My motivation for this week’s article is Queen’s 1989 hit “I Want It All”. While housing continues to slow, home prices are beginning to slide lower; unemployment is on the rise, but the American Consumer continues to spend money that, in most cases… they don’t have and at record levels. Credit card debt has now risen to over $1.17 trillion (a new record) while paying at an average interest rate of 23.37%; student loans and auto debt are now over $3 trillion, which is also a new record. Couple this with a national deficit which is now at record highs, and you can now see why mortgage rates are not moving down as quickly as many had projected.
Fortunately, this trend cannot continue. The day is coming when folks will eventually “cap out” their availability to credit. Part of the slowdown in housing can be attributed to this record spending by what were potential homebuyers who now don’t qualify. The Fed cutting rates only places a bandage on the bigger issue. Yes, it does lower interest payments on the “unsecured” debt but most likely only delays the inevitable of the total debt never being paid back.
The ”I Want It All, I Want It Now” mindset needs to change and change soon. Credit card spending is simply buoying an economy that is not as strong as what some stats may show. If credit card purchases continue, prices will not come down as demand continues to be relatively stronger than what it would be if it were not for unsecured lines of credit/credit cards. The slowdown in the economy would certainly be more identifiable. We would start to see overall mortgage rates begin to fall back below the 6% mark and maybe even further as the economy would show signs of slowing and mortgage rates would begin to fall back. However, at record level debt, both from the consumer and the US Government, falling mortgage rates may take longer than what was previously projected.
It seems the US Government and the American Consumer are reading the same book. Spending money they don’t have which in the long run will mostly likely not have a happy ending.
Remember… the BEST RATE… IS A LOCKED RATE… with a float down… ask me about our program that allows you to lock your rate and then float down if rates move lower.
Make sure you (or your buyer) get pre-approved before looking at homes so we can determine if you are looking in the correct price range and have you armed to submit an offer with a pre-approval letter!
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Blog post date: Thursday, December 19, 2024
