Rents are Still Increasing

A Wall Street Journal article reminds us increasing rents have a significant impact on overall inflation… and inflation tends to drive mortgage interest rates.  The Mortgage Blog addressed this back in May 2023, and it’s time to revisit the topic.

A key concept from the 2023 post is this:  44.4% of the consumer price index (CPI), a key measure of inflation, is “shelter inflation.” Shelter inflation measures the change of rental costs – not home prices paid by home buyers. The rapid increase of residential rents beginning in early 2021 has been a major factor driving high inflation. Logically then, if rents decrease, the overall inflation rate / CPI index should decrease too.

Our original post went on to note economists were hoping increased apartment construction would cause lower rent inflation.  But one year later, we get this headline, “Rents are Still Rising and Pumping up Inflation.”  So what is happening now?

First the good news, rent growth slowed from double-digit highs during the pandemic to 5.7% in March 2024.  While an improvement, it is still well above the average shelter inflation rate of 3.3% during the 2015 to 2019 period.  Economists are still predicting shelter inflation will continue to decline as more rental units are built.

According to an economist quoted in the article, shelter inflation is usually higher than the overall inflation rate.  This economist believes shelter inflation is still higher than normal and needs to fall further to lower inflation and hopefully lead to interest rate cuts.

Increases for “asking rents,” or rents on new leases for available units, have now dropped to a level close to zero.  These asking rents are considered a leading indicator for the overall rental market.  Analysts think the volume of newly built apartments will drive down what landlords can charge for asking rents.

On the other hand, “renewal rents,” or rents for tenants who want to renew their leases, were 7% higher year-over-year in January, in a study of several large US cities.  The article quotes renters whose landlords requested annual rent increases between 15% and 30%.  The research firm Attom reported median rent for a three-bedroom home is increasing faster than wages in more than 50% of the counties they studied.

A large percentage of leases have renewal periods in the spring and summer seasons.  This renewal timing could coincide with new apartment supply reaching a peak.  If this does happen, the additional supply could limit landlords’ ability to raise rents, which could then have a cascading effect of lowering shelter inflation, leading to lower overall inflation. The goal here is mortgage rates could improve with continued cooling inflation coupled with the Fed lowering the Federal Funds Rate. 

In the meantime, expect mortgage rates to remain in the range they currently sit. 

Thinking about buying a home in Georgia? Give me a call to discuss your options soon. While it may seem smart to wait for possible lower shelter inflation to push interest rates down, lower rates could cause a serious increase in competition and drive home prices even higher.  I recommend buyers proceed now while the competition is not as fierce and they can negotiate better deals. If rates do drop significantly, refinancing an existing mortgage is usually a great option.

“Spread” Impact Now Decreasing…

In July 2023, I posted about the impact of the “spread” on this Mortgage Blog. The “spread” is the difference between interest rates for 10-Year US Treasuries vs mortgages. Financial experts consider 10-year Treasuries to be the financial instrument most similar to a mortgage based on overall risk. Because mortgages have a greater default risk than Treasuries, mortgage rates are higher.  For many years, the spread was consistently between 1.5% and 2.0%. As noted in the prior post, starting around October 2022, the spread had grown to about 3.0%. The post concluded that should the spread shrink back to a more normal historical level, mortgage rates would decline and help borrowers.

I spotted a recent Wall Street Journal article documenting that the spread had been declining for 8 straight weeks. The article noted that, while declining, the spread was still “far larger than the historical average.” It also noted that the spread decline was giving mortgage rates “an extra push lower.”

The article then goes on to explain why the spread exists in the first place. As with so many financial rates, it all has to do with risk. When conventional mortgages are closed, lenders sell the loans to Fannie Mae or Freddie Mac. Fannie and Freddie then package mortgages into mortgage backed securities (MBS) and sell them to investors. The investors consider MBS to be riskier than 10-Year Treasuries, so Fannie and Freddie must deliver higher interest rates to persuade investors to buy MBS instead of Treasuries. These higher interest rates flow through to home buyers. So what makes MBS riskier than Treasuries?

When homeowners pay off their mortgages early, the note holders lose their stream of interest income. Mortgages are paid off when the homeowners sell their homes, or when interest rates decline and the homeowners refinance their higher rate mortgages, paying them off with their new lower rate mortgages. The risk caused by early loan payoffs causes investors to require higher interest rates for MBS.

The largest buyers of MBS have been the Federal Reserve and banks. Since early 2022, they have been buying less MBS. With lower demand for MBS, Fannie and Freddie had to increase the rates they pay to investors still buying MBS. That also increased MBS rates vs Treasuries.

Some good news….the Federal Reserve has recently indicated that it might cut interest rates later this year, as economic data shows cooling inflation numbers.

Bottom Line: The Federal Reserve lowering rates + a shrinking spread could deliver a significant boost to home buyers in the coming months by lowering mortgage rates and improving affordability.

Are you considering a Georgia home purchase? Give me a call to discuss your options soon. While it may seem attractive to wait for the spread to shrink and interest rates to drop, that could cause a serious increase in competition. The extreme competition for available homes in 2020 and 2021 caused many buyers to pay more than the listing price for their homes and surrender buyer protections just to win the contract. I recommend that buyers proceed now, while the competition is not as fierce and they can negotiate better deals. If rates, do drop significantly, refinancing an existing mortgage is usually a great option.

Buyers are back due to lower rates

Interest rates dropped tremendously from their 2023 high back in October. Rates went from just over 8% back into the low/mid 6s by December. Rate are still holding in this range, and buyers are back out looking at homes.

The Spring Market is starting early in 2024. There is so much pent up demand due to home buying needs/decisions being pushed off from 2023. There are already signs of a heated market again.

Last week a client went to look at a home, fully renovated, and on the market two days. By the time my client went to view the home, it had multiple offers including some over list price and waiving contingencies. This was reminiscence of the 2020-2021 home buying experience.

Currently, buyers are more optimistic now when it comes to buying in 2024 versus 2023 with rates down so much from their most recent high. Couple this with the expectation rates will continue to improve during 2024, and we are likely to see more buyers entering the market. This could result in another extreme seller’s market where homes receive many, many offers.

Beat the crowd. Go out and look now as it feels the market will only get more challenging as we move further into 2024. If you are looking to purchase in the state of Georgia, contact me today. I can can get you prequalified quickly and pre-underwritten so sellers will know your offer is already approved pending the appraisal and clean title!

Are rate buydowns worth it?

While the average 30-year, fixed-rate mortgage is off it’s high of 8%, homeowners face added affordability challenges, as reported by Freddie Mac. In response, some borrowers are turning to mortgage buydown points as a strategy to permanently or temporarily lower monthly payments.

What are buydowns, and are they worth it?

There are two types of buydowns. There is a permanent and a temporary. The permanent buydown is easier to explain as most people pay 1% of the loan as a fee to get a lower rate. If it is a fixed rate loan, as long as the loan exists, the rate will stay the same and be permanently lower versus getting rate with no points.

A temporary buydown can be a great thing. The temporary buydown allows homeowners to enjoy reduced monthly payments during the initial years of homeownership. For instance, on a $500,000 loan at an 8% interest rate, monthly payments would normally be around $3,670. With a short-term rate drop to 6%, those payments can decrease to about $3,000. Notably, while mortgage buydown points offer short-term savings, interest rates incrementally increase over time.

There are several options out there for temporary buydowns such as a 3-2-1 buydown or a 2-1 buydown. Here is how they work using a 3-2-1 as an example. Let’s say a buyer is using a $500,000 loan to purchase a home with a 6.875% 30 year fixed rate. In a 3-2-1 scenario:

• The rate is 3.875% in year 1, and the principal and interest payment is $2,352.
• The rate increases to 4.875% in year 2, and the payment increases to $2,647.
• In year 3, the rate goes to 5.875%, and the payment increases to $2,959.
• After the third year, the rate goes back to its original amount of 6.875%, and the payment becomes $3,286.

The payment difference between year 1 and year 4 is almost $1,000, so it is easy to see why buydowns can be enticing. To get these payments, the difference in the payment between the full rate of 6.875% and the reduced rates each year must be paid up front. In this scenario, the cost for the buydown is over $22,000.

If the buyer is responsible for the full amount, there isn’t much incentive to opt for a temporary buydown. I mean, paying $22,000 up front to save money over a few years. The buyer is just pre-paying their own payment. The trick to making this work is having the seller fund the cost of the buydown.

Going back to our example, let’s say the purchase price is $560,000 and the buyer is putting just over 10% down to get a loan amount of $500,000. The seller could contribute up to 6% of the purchase price on a conventional loan; meaning, the seller could easily fund the entire $22,000 should they decide to offer the money as part of the home buying process.

One last thing on temporary buydowns… say the seller chooses to fund the full amount. The money is put its own escrow account. After a year, say mortgage rates improved and the homeowner chooses to refinance their mortgage. Any leftover funds in the buydown escrow account is refunded directly to the homeowner. The buydown funds belong to the homeowner, and go to the homeowner on a monthly basis until exhausted OR as a cash refund back to the homeowner in the event the mortgage is paid off.

In short, the permanent buydowns ones are easier to decide on as almost everyone pays at least one point on the mortgage, and the benefit lasts the entire life of the loan. Temporary buydowns are not really worth it unless the seller is willing to cover some/all of the cost of the buydown.

Want to know more about buydowns? Contemplating ways to lower the rate on a home purchase? If you are looking to purchase in the state of Georgia, contact me today. I can run rate scenarios and get you ready for the purchase of your next home!

Reality check on mortgage rates

The era of ultra-low mortgage rates is over. Low rates flourished for 11 years, as the 30-year mortgage remained below 5% from February 2011 to April 2022. Since then, rates have remained mostly above 5%, averaging 6.72% in June in Freddie Mac’s weekly survey and over 7% in July and August.

Some forecasters predict that rates will decline over the next 12 months (could be challenging without a recession, and more on this topic next week). Even with a decline, they don’t foresee rates dropping below 5% anytime soon.

For those looking to buy a home, it’s tempting to be in denial about the state of mortgage rates. “People are still working through their five stages of grief on this mortgage rate stuff,” says Lisa Sturtevant, chief economist for Bright MLS, the real estate listing service for the mid-Atlantic region. “And I think you have to reach the stage of acceptance at some point that certainly rates aren’t going to come down to where we were back during 2020 and 2021.” (When the median 30-year rate was 2.99%.) 

Fannie Mae, the Mortgage Bankers Association and the National Association of Realtors all forecast a gradual, moderate decline in mortgage rates through at least the first three months of 2024. Those three organizations are not alone in their prediction that mortgage rates will go down, but no one expects rates to plunge back to where they were two years ago. “I still think we’re going to see rates stabilizing and then moving slowly down this year and we’re going to end 2023 at 6%,” Sturtevant says. Danielle Hale, chief economist for Realtor.com, said in an email that “our base expectation is that it will take until the end of this year or early next year before mortgage rates get back to 6%.”

It’s not realistic to put a home purchase on hold in the hope that mortgage rates will return to 2020 and 2021. The median rate over the past 30 years is 5.77%, and we’ve returned to this reality.

For those looking to buy their first home, they’re probably going to pay well above 5% on a 30-year mortgage, and need to establish a budget with this in mind. While current home owners may dread giving up a lower rate to purchase a new home, eventually “life moves on.” People needs change… downsizing, growing family, retiring, new job, etc. It is hard to keep life on hold over a low mortgage rate.

Embracing this new mortgage rate reality will hasten people toward owning a house that meets their current needs. And as discussed previously on this blog, budget for the purchase now knowing there could be a chance to refinance later. Even if rates go from 7% to 6% (as forecasted), this is a $230 savings per month. Rates change, but finding the right home in our low inventory environment is hard. Budget, find the right home, and maybe get lucky with a refinance in the next year or so.

If you are looking to purchase your new home in the state of Georgia, contact me today! As we approach the last few months of the year, the past two winter seasons have been slower in terms of buyers out in the market. Keep this in mind. Perhaps this winter will be the same. Beat the 2024 Spring rush and buy in 2023!

Impact of the Spread

After a mostly stable June, mortgage rates have been rising for over a week, prompting articles on why rates are high and when rates might decline. I found some articles about the “mortgage rate spread” which may help explain one aspect of why rates are high now relative to recent years (one example).

Mortgage rates are influenced by many economic factors – inflation, recessions, Treasury purchases of mortgage-backed securities bonds (MBS bonds), and more. Financial analysts have noted that, in recent months, the “spread” between interest rates for 10-year US Treasuries and mortgage interest rates has increased. Financial experts consider 10-year Treasuries to be the financial instrument most similar to a mortgage based on overall risk. Because mortgages have a greater default risk than Treasuries, mortgage rates are higher. For many years, mortgage rates have consistently been between 1.5 and 2.0 percentage points higher than the 10-year Treasury yield, and that is the “spread.”

Now the spread has grown to about 3.0 percent. Since mid-2008, the spread has reached 3.0% in October 2008 – January 2009, in April 2020, and now (beginning in October 2022). In the first two instances, the world’s economies were facing the crises of a financial crash and the start of the global pandemic. These were times of great economic uncertainty.

Today, it appears that inflation concerns, recession worries, and the recent rapid rise of interest rates have created so much economic uncertainty that the spread resembles that of crisis times. Rapidly rising mortgage rates create uncertainty for lenders, and that uncertainty leads them to set rates higher and higher to protect against risk. Also, the Federal Government purchased billions of dollars of MBS bonds during the pandemic. Federal purchases pushed mortgage rates down. Now the Fed has stopped buying MBS bonds (and the Federal Reserve is trying to sell some of its bond portfolio). Less demand for MBS bonds forces mortgage rates higher, to attract investors who have other options.

With relatively high interest rates and crisis level spreads, you may wonder, “when will interest rates drop?” Well, in January, I watched an “expert,” who claimed to have accurately predicted the mortgage interest rate peak in November 2022 and subsequent decline, predict that mortgage rates would begin declining in April 2023 and into May. He presented a compelling argument based on lots of inflation data and analysis. His analysis got my hopes up. Sadly, the prediction did not come true.

Some industry experts now predict rates will decline in the second half of 2023. Others predict rates won’t begin falling until 2024. I noted last fall that some experts were predicting rising interest rates while others were predicting falling rates. These conflicting and often inaccurate forecasts lead me to conclude that it’s almost impossible to predict where rates will go. This reminds me of the mantra I once heard from a Realtor, “Marry the house and date the interest rate.” This still holds true. If you can afford to buy a house now, do it while there is less competition for homes that are available. (See the last few paragraphs of this recent post.) Hopefully, when rates do begin falling, the spread will go back to a more normal level and speed the drop of mortgage rates. And when that happens, those who are successful in buying now can then refinance to a lower rate.

To pay points, or not to pay

In an ongoing quest for affordability, more buyers are paying points to lower the mortgage rate on their loan. Paying points (also known as rate buydowns and discount points), is an option available to buyers who wish to reduce their monthly payments by “buying down” the interest rate on their loan.

The points are often presented in the form of an upfront fee; essentially, borrowers pre-pay interest to lower their rates and, therefore, lower the amount they pay every month for the life of the mortgage. Sometimes it makes sense to pay points, and other times it does not. One’s timeline for owning the home helps decide whether or not to pay points.

Now I don’t mean timeline as in “multiverse,” which seems to be in a lot of movies and TV shows these days. I mean will someone own/stay in the home long enough for it to make sense to pay points.

As said above, when someone chooses to pay points, they are paying a percentage of the loan amount to get a lower rate. To decide whether or not it makes sense to do it, divide the savings from the lower rate by the cost to get the rate. The answer is the break even point on the up front investment.

Let me give an example of each:

• Before covid, the difference between paying points versus no points only got someone a rate 0.125% better. It wasn’t worth paying the point to lower the rate as the break even point was so far away. For fixed rate loans, I rarely even discussed paying points with clients. On a $300,000 loan at 6%, the principal and interest (P&I) payment is $1799. Paying 1 point to lower the rate to 5.875% reduces the payment to $1775. The savings is $24 per month. When you divided the cost (1% of the loan amount = $3,000) by the savings ($24), the break even point is 125 months. It would take over 10 years to begin to save money by paying the $3,000 at closing. Not worth it! This is why so many buyers opted for the “no point” route on their rate.
• Since Covid, the difference between points and no points is much greater. The gap is often 0.375 – 0.500% better in rate. Today is it 0.375% better. Using the same example, a $300,000 loan at 6% is $1799. The payment at 5.625% is $1726 ($73 less per month). Now the break even point is just 41 months ($3,000 / $73). Most people plan to be in a home for at least 3-5 years. With a break even point of roughly 3.5 years, most people choose to pay the point in this situation. In fact, it is pretty rare these days for me to discuss not paying points with clients.

Paying points is now the way almost all of my clients go. Even if someone planned to be in the home for 20 years, I wouldn’t pay points in the first example. Waiting 10+ years to start saving money isn’t worth it to me. Saving money after a little over 3 years, now this makes way more sense.

So that is it. Pretty straight forward. When deciding whether or not to pay points, keep this in mind:

1. How long do you plan to stay in the home? Life happens, but what is the plan today? 5 years? 7 years? 10+?
2. Figure out the break even point. Take the cost (1% of the loan) and divide by the monthly savings.
3. Then compare the break even point to your time line. It’s that easy!

Almost everyone is paying points these days. Join the crowd as you look to purchase your new home! For those of you looking to purchase a home in the state of Georgia, contact me today! I can get you ready to make an offer in just a few minutes, and work toward getting your loan pre-underwritten to make your offer stronger.

Updated adjustments for mortgage rates

As of May 1, 2023, the updated interest rate adjustments officially went into effect. I use the word “updated” because these adjustments to interest rates are not new. They’ve been around for a really long time. I am getting a lot of questions about this, so what is going on and how is it impacting mortgage rates?

The first thing to know is the interest rate adjustments – known as Loan Level Price Adjustment / LLPAs – have been around longer than I’ve been in the mortgage industry. LLPAs aren’t new. While the amount a person is putting down on the home does impact the adjustments (for example, once putting 40% down, the LLPAs are gone for anyone with a 640 or higher credit score), the majority of the impact to rate involves the credit score. The better the score, the better the rate.

Pretty straight forward. So what changed?

The actions of the Federal Housing Finance Agency (FHFA) decreased the gap between the highest credit scores and the lowest credit scores. Before the change to LLPAs, the gap between the highest and lowest credit scores was about 1.500% in rate. So if the best rate one could get with a perfect credit score was 6.000%, the rate someone could get who barely qualified with their credit score was around 7.500%. With the changes, the gap is now about 1.000% apart (say 6% vs 7%).

How did FHFA “close the gap?” They redistributed the LLPA adjustments. Those with lower credit scores are not being as negatively impacted as they were prior to the change. Those with better credit scores are receiving more of a negative impact than prior to the change. Those with excellent (780+) credit scores are seeing no change at all. Using my previous examples:

• Again, before the change, the gap between the best credit scores and lowest qualifying score was about 1.500%.
• With the change, lower credit scores are seeing about a half point improvement in their rate, no change to excellent credit scores, and those in between are seeing rate increases anywhere from 0.125%-0.250% higher for those with good credit, and 0.250-0.375% higher for those with average credit.
• People with good (720-769) and average (680-719) are seeing a negative change while those with 620-679 are receiving the most benefit with the new adjustments.

Does this mean someone with a below average credit score is getting a better rate than someone with average, good or excellent credit? Great question! I’ve received a lot of great questions recently. Let me address some of them:

• Why did FHFA do this? Per official statements, they made the change as part of a strategy to help with housing affordability.
• When did this start? Officially, the changes began on May 1 for loans being delivered to Fannie Mae and Freddie Mac. In reality, it started months ago. It can take anywhere from 2-4 months for a loan to be bought by Fannie/Freddie; meaning, the new adjustments have been in place for several months now.
• Is it true I may have a higher interest rate putting 20% down versus someone who put 10% or 15% down? Yes, this is true. However, know this has always been the case. Those putting 20% down have seen higher credit score adjustments than those putting 25%+ down OR 5%-15% down. This actually isn’t anything new.
• Does this mean someone with a 620 credit score can get a better interest rate than someone with a 680 score? No absolutely not, a 680 score would have a rate around 0.500% better.
• What about if my score is is 740, is someone with a 620 score getting a better rate? Nope, they aren’t. With a credit score at 740, the interest rate would be around 0.750% better.
• Why is someone with a 620 credit score getting a better rate than me if I have an 800 score? Someone with a 620 credit score definitely isn’t getting a better rate than an 800 score. The interest rate is 1% better in this scenario.
• If this is part of a strategy to help with affordability, why is there an additional increase to the interest rate for those with a debt to income ratio over 40%? If the logic is affordability, why is FHFA adding an adjustment that will make someone’s interest rate higher who already has a higher debt load? I understand more “risk” so a higher rate. Yet again, if these changes are about affordability, then this specific adjustment makes no sense and is counterintuitive… which is probably why FHFA reversed course and removed this adjustment. The negative adjustment for those with 40%+ DTI ratios was eliminated.
• Is this going to be permanent? “Permanent” is an interesting word here. I would expect there will always be rate adjustments based on credit scores. So in that sense, yes. This isn’t the first time FHFA changed LLPAs. They’ve been tweaked a few times in my 17 years in the mortgage industry. There was less news coverage with the changes during the housing crash when those with lower credit scores received much harsher credit score adjustments. What we’ve witnessed in the 10+ years since the housing crash is an even larger affordability gap in home ownership. Maybe there are better ways to help with housing affordability (perhaps stopping Wall Street from buying up homes to permanently rent out… maybe more/better/new tax incentives for builders who construct affordable housing. Almost all new construction homes are at price points way outside of a first time homebuyer’s price range), yet I understand the thought process of FHFA trying to do something… anything.
• Is there any pushback? Why yes, there is. A letter signed by the treasurers, auditors, and other high level state representatives was sent to FHFA asking this to be reversed. A total of 27 states (from out west, the deep south, midwest, northeast, blue states, red states… a hodgepodge of states) signed the letter. If anything changes, I’ll be sure to post about it.

Whew! That’s a lot of information! If you’ve read this far, congratulations! This is definitely longer than my normal posts, but it is a lot to cover. The bottom line is ultimately, nothing is new here (which is why I worded the title “updated” instead of “new”). There are still adjustments to interest rates based on credit scores. The difference is the redistribution of those adjustments. Whether it is a good or bad thing is up for debate (plenty are debating it). I am trying to simply present the facts of the situation.

Thank you so much for reading!

Hopeful Sign for Mortgage Rates?

The rapid rise of mortgage interest rates since late 2021 attracted a lot of attention. Now everyone wants to know where future rates will go. Some economic experts have predicted higher future rates while others have predicted lower rates. The Mortgage Blog recently included a post how mortgage rates often settle into a “consistent range.”

A recent article detailed how the increasing supply of rental apartments could improve mortgage rates. At first I was skeptical about how the increased supply of rental units could improve mortgage rates for home buyers, but after reading the article and thinking about it, it makes sense.

A fundamental fact to remember is that “mortgage rates hate inflation.” When inflation rises, mortgage rates usually rise too. And when inflation decreases, mortgage rates typically decrease. As an example, on February 3, 2023, the government released the January jobs data which indicated strong employment demand and low unemployment. Wall Street immediately reacted, “That means higher inflation!” Mortgage rates rose 1/2 of one percent in the next week.

The article notes that 44.4% of the consumer price index (CPI), a key measure of inflation, is “shelter inflation.” Shelter inflation measures the change of rental costs – not home prices paid by home buyers. The rapid increase of residential rents that began in early 2021 has been a major factor driving high inflation. Logically then, if rental costs decrease, the overall inflation rate / CPI index should decrease too.

What would cause landlords to reduce rents? The answer is, either lower demand for rentals or a higher supply of units available for rent. The data shows that there is an historic number of 5 unit (or more) residential buildings under construction. This increased future supply will likely cause greater competition among landlords, and thus lead to lower shelter inflation. The lower shelter inflation will help generate lower overall inflation. And, if mortgage rates follow the historical pattern, they will decrease over time in response to the anticipated lower inflation rate.

The unanswered question for me is, “When will mortgage rates drop due to the increased supply of rental units?” The article did not say. But if you want to buy a house in Georgia now and you can do it with the current mortgage rates, I recommend you buy now and do not wait for lower rates that will likely lead to increased competition for homes. Buy the house now and grow your equity instead of paying rent. And when rates fall in the future, we can refinance your mortgage to take advantage of those lower rates. Give me a call if you want to know how much home you can afford now.

Banking crisis and mortgage rates

Last month I mentioned mortgage rates settled into a range of 6.25%-6.75%, and it would take something to break them out of this range (up or down). Well, enter the banking crisis. My post went up three days before Silicon Valley Bank failed.

I will not get into all of the details of what caused the banking crisis. There are better sources for this information. In fact, The Atlantic published a good summary of the events. You can read it here (it was free to read when I found it, so hopefully it is still not behind a paywall).

Instead, I’ll focus on the impact these few bank failures had on mortgage rates. In short, rates improved!

When I published my post on March 7th, mortgage rates were at the higher end of the range I mentioned. As discussed, if bad things happen in the economy (such as an actual recession), rates will improve. Well, banks failing isn’t great, and mortgage rates responded by improving and moving below 6.250%. At the time of this post, rates are just under 6%. Several months ago when rates got this low, they got worse. What happens now?

Mortgage rates could hold onto these gains this time. Perhaps even improve a little more. The pressures on mortgage rates increasing (mainly out of control inflation) subsided over the past couple of months. While inflation is still higher than the Federal Reserve’s preferred target, it is much better than where it was in 2022. Combine this with the economy showing signs of slowing (job openings fell month to month showing a possible cooling in the labor market), mortgage rates may stay just below 6% or move even lower in the weeks to come.

Of course, perhaps this post jinxes rates like my post from a month ago did and they get worse. If rates do get worse in April, I’ll try the reverse-jinx post in May to see if I can get rates lower again. With great power comes great responsibility! 🙂