Market Update - October 2nd, 2023
Hello all! Time to get those Halloween decorations out as we have made it to October! We are here to breakdown another crazy week in the mortgage world! Here we go!!
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Government Shutdown Averted! (For Now)
Congress finally passed a short-term funding bill on Saturday to keep the government open through November 17th. If the government shutdown would have gone through, we would have seen minimal impacts for us in the mortgage world. We have encountered shutdowns before (2018) and know how to navigate from past experience. So, rest assured, if we don’t pass another spending bill on November 17th and we do shutdown, the impacts to lending and real estate should be minimal.
Key Takeaway: Congress kicked the can down the road again and only extended government funding for another 45 days. Unfortunately, this means we will have to endure another government battle right before Thanksgiving. Regardless if another funding bill gets passed or not, the real estate and mortgage market should not be significantly impacted.
Mortgage Rates Creep to 23+ Year Highs
Nick and I hate feeling like a broken record, but we feel it would be an injustice if we don’t tell you what’s really going on with mortgage rates. We saw rates creep to levels last week that I personally haven’t seen in my 14 years in the business. Rates are firmly in the mid-7 range and I even quoted a few 8% rates for people with less-than-perfect credit situations. The market firmly believes in the Fed’s notion that they plan to keep interest rates “higher for longer”. We believe the interest rate market worsened this week due to traders being very cautious ahead of this week’s important economic data and numerous Fed members set to speak. We have a few job reports coming out on Tuesday and Friday. If those reports come out strong, expect rates to push higher. Mortgage rates need weak economic data and signs of a slowing economy in order to improve from here.
Key Takeaway: Rates continue to push higher. Numerous Fed members speak this week, which could influence the mortgage rate market. We expect them to reiterate their stance that rates need to be higher for longer until we see more signs of a slowing economy.
2-1 Buydown More Important Than Ever Right Now!
With rates being at all-time highs right now, you need to make sure you are educating yourself and your clients on options to ease the pain of high interest rates right now. With the market starting to ease, sellers have less power in negotiations, which is great for buyers! We are starting to see seller concessions being negotiated back into contracts. We can use those seller concessions to permanently buy-down or temporarily buy-down the rate. A 2-1 Temporary Buydown is paid by the seller in the form of seller contributions and reduces the borrower’s rate by 2% in the first year and 1% in the second. This graduated payment plan gives the buyer time to potentially refinance if we enter a lower rate environment in the next 12-24 months. You would need to get around 2.2% of the purchase price in seller concessions in order to cover the full 2-1 Buydown for the buyer.
Key Takeaway: A 2-1 buydown is a great tool to use in this high interest rate environment. Only caveat is that it has to be paid by the seller in the form of seller concessions. If the home has been sitting for a couple weeks, don’t be afraid to ask for seller contributions to pay for your buyers rate buydown.
Instagram Posts from Last Week
Don’t hesitate to reach out if you need anything at all. Have a wonderful week!