What If?
My inspiration for this week’s article came from Christian singer Matthew West’s 2019 song “What If.” There are many questions and predictions as to where mortgage rates will be heading for the next several months, including the ones you have read from me. Many believe that rates will be lower in the coming months, with predictions of the FED making several more cuts between now and next spring and mortgage rates falling back to the 6% range or maybe even into the high 5% range by the end of Q1 2025. The belief surrounds the idea inflation will finally get to the FED goal of 2% and that the economy will hit its “soft landing” that the FED wants to achieve but never has. In theory, this could get mortgage rates back down heading into Q1 of next year. This thought process is why many believe that housing sales are down significantly, as many potential buyers are sitting on the sidelines waiting for rates to get back to 6% or lower. As I have written in many articles before, I do believe we will see rates move to lower levels, but not for the reasons mentioned above. I believe we will see rates taper back down, but not for “healthy” economic reasons. I believe we will see rates come back down due to a noticeable slowing in our economy from factors like unemployment rising over 4.5% soon, retail sales falling, overall manufacturing slowing, and inflation continuing to fall. Let’s call it a mild recession, and with recessions… we see rates fall.
But “What If” we do deport many undocumented farm and construction workers, which will influence both groceries and new home prices? Tariffs do raise the prices of not only foreign-purchased items but also those purchased here locally, and due to the slowing economy, our already record-level Federal deficit goes even higher. If these were to happen, coupled with their ancillary effects, inflation would rise again, which would push rates like the 10-year treasury from its current level of around 4.40% to possibly 5.5%, which would then push 30-year fixed rate mortgage rates very close to 8%. Again, I am not predicting a doomsday for housing, but it is certainly a possibility that we need to at least consider. If you have been tracking rates over the past month… yes… they have already risen by almost .75%. An omen to what may come? So, you may get not only a higher sales price but also an even higher mortgage rate. Buying now may be the safe move as opposed to waiting and seeing what happens. If I am right about rates being lower in 2025, refinancing will always be an option, but “What If” I am wrong? As I have always said… I am only sometimes right… the market is always right! Buying now just might save you a lot of money.
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!
Thank you for reading this blog. I hope that the facts and insights I share provide value to you.
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Blog post date: Thursday, November 21, 2024
