Another thought day in the bond market!
First let me start by saying today would have been my mother’s 95 birthday. Happy Birthday in Heaven Mom!
Yesterday was another bad day in the bond market, Things seemed to be doing okay until the Fed meeting at 2pm, and then things got bad; then got much worse. Losing more than 60bps on all the news. It seems the markets have had enough of all the jibber jabber by government officials and are realizing that inflation is real and the people in charge are having challenges dealing with it.
You can’t blame the markets for the issues when a series of mixed messages and what could be considered nonsense comes from those who should know better. FYI, you can’t solve inflation by printing and spending more money!!!
That said, we must prepare ourselves and our clients for the reality of higher rates and the volatility we are seeing and may continue to see going forward. Use factual local information in conjunction with the national numbers. Rates were at their lowest just over a year ago. Since then, we are up more than 1% in rate on a 30yr fixed, and about 18% higher in the cost of the homes people are looking to buy. Of course, your property appreciation rates may vary so get YOUR local information but be prepared to do the math. Those that chose to wait until rates or home prices went lower have suffered a great deal. With rents also jumping higher, the waiting didn’t work out! You need to ask your clients, “Do you think prices are going lower? Do you think rates are going lower? What if home prices rise another 5 or 10%? What if at the same time mortgage rates rise another 1%? What is the cost of waiting?
The great part about buying a home with a fixed rate loan is you have locked in the price of the house AND your P&I payment! Price appreciation or higher rates no longer impact you! The fact is, your house payment as it relates to your overall budget as it relates to your income will likely go LOWER over time as prices and incomes go up over time! So, while not perfect, the current market does provide an opportunity if you take the time and do some math.
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