November 1, 2022

The Federal Reserve will be increasing rates again tomorrow, and the consensus is that rates will go up by .750%. An increase does NOT mean that mortgage rates will increase by .750%, and then we will get another increase of .50 % to .750 % in December. The Federal Reserve is doing everything possible to slow inflation and bring prices back in line. According to Bank of America, credit card debt has increased to the highest levels in history. The Average credit card debt is now at $8537 per household, which is about $1100 higher than the 10-year average. Savings rates are currently at half the ten-year average, which tells another inflation story. People are spending more because things cost more; through the 3rd quarter, wages have risen with interest rates. Now, businesses report that hiring has become easier, and wage pressure is waning.

The Wall Street Journal took a survey of 65 Economists. Of those surveyed, 63% predict a recession in 2023, up from 49% in July. They anticipate the GDP to contract in the first two quarters of next year. They expect employers to respond by cutting jobs. Economists predict a 4.7% unemployment rate by the end of 2023 vs. the 3.5% currently. Of the economists surveyed, 30% think the Federal Reserve will start cutting rates late in 2023, while another 24% believe they will begin cutting rates in the first quarter of 2024.

I know this is a lot of crazy information, but this is the important part when it comes to Real Estate! Rates will continue to rise for the next few month, and then when the economy starts to sputter, say in the second quarter, bond traders will start buying bonds, and bond yields and interest rates will begin to go down due to the impending recession. Bad economic news is always good for interest rates! Many think the recession will last 8-12 months, which will be enough to cause the Fed to eventually lower rates and get us back to a level where rates are not the most significant factor in why people are not buying houses! The Fed moves VERY slowly when changing policy, but bond traders will not, so the Fed will not have to start lowering rates for us to see better interest rates.

Get your clients ready because they will be ready to go when rates hit 5% again!
Here is another blurb from another article I was reading this AM:
The share of prospective buyers actively searching for a home rose in every region between the second and third quarters of 2022: Northeast (54% to 62%), Midwest (51% to 53%), South (39% to 51%), and West (57% to 68%).
The next three months is likely the best time to buy going forward as many people are ready to pull the trigger, but they want to wait to do it because rates are too high! LOL! If you wait, you will compete with the masses waiting for the rates to drop before they buy! Do you want to compete next spring or summer when everyone is ready because interest rates are lower? You want to pay 10% more because your rate will be lower?

Mortgage rates opened up lower this AM, and now they are higher than yesterday! LOL! The markets are as volatile as a teenage boy going through puberty! Tomorrow’s rate increase is already built into the rates, and so is December! We will see what they think about future increases, and that is how the market will move!

• 30-year Government Loans (FHA / VA) is in the 6’s.
• Conventional Loans up to $715,000.00 - 6’s and 7’s
• High Balance Loans $715,001.00-$ 1,072,500.00 are in the 6’s and 7’s
• Jumbo loans above $1,072,500 are in the 6’s and 7’s
• 5/1, 7/1, 10/1 Arms are in the 5’s and 6’s
• Bank statement loans - They are available with 10% down again! 7’s + depending on down and credit score.
• Stated income loans – I have one bank with 30% down, but everything else has to be perfect! Interest rates are in the high 7’s - low 8’s.
• 0 down loans are in the high 7’s to low 8’s- 620 credit score min right now! Mid 6’s, for the most part, up to $735,000.00.
• Private Money lenders - hard Money Loans – 35% down!
• No Ratio Loans 30% down
• Debt Service Coverage loans with as little as 25% down
• Bridge Loans - are typically 7.49% with limited fees – But they get you where you need to go!

Interest rates are subject to change without notice! Above are LA County Loan Limits.

I will be around all week if you have any questions or if someone interested in buying a property! My cell is 661-714-6258, and my office line is 661-260-2970 xt. 2222. Please text me at 661-714-6258 or email me at Mike@AugustaFinancial.com. Have a great day and a better tomorrow! Please call me when you have a client that needs to borrow!