Mortgage Rates Go Over 5%....Yawn.....No Housing Crisis Yet

Interest rates closed with the weekly average of over 5% for the 1st time in 10 years. Now, new loans had been issued at 5% for a week, but the latest statistics show the loans closing now, or locked in 30 days ago, are averaging over 5%. And the real estate press is posting headlines that this new standard will cause the market to stop. Will it?

There are a number of factors that show the market remains extremely healthy despite these rates.

One factor is that prices are not that high when adjusted for inflation over time, they just appear to be so much higher, especially given the extreme inflation of the last few years. This graph below shows the difference between the current price and then then adjusted price for inflation, and by that standard the current prices are not so high. Also, the homes now are both bigger and have more features, and those factors are NOT factored into the prices.

The biggest issue, that is going to be a major political issue, and will drive real estate industry fear, is affordability, as our economy is clearly splitting into two groups: those that can afford to buy a home and those that cannot. Look at this chart showing the dramatic rise during the COVID period:

 For those that own homes, times are better than effer. There is more equity in homes owned than ever, one factor that will prevent a housing crisis as sellers have a lot of room to reduce prices before they will turn them back to banks.

Additionally, those buying homes have better credit than ever. Notice in the graph below from Wells Fargo that shows almost all the increases in sales are in the highest category of credit score. Again in the 2008-2010 housing crisis many of those that lost homes had never had a home before, the current bulk of new homeowners are extremely creditworthy.

All this activity has been happening while a tide of new buyers is getting ready to buy, as the population of homeowners that buy will be dramatically increasing as the millennials and GenZ enter the housing market.

So, what do to?

If you are looking to sell, this is still the best market to sell in during my career, and you should get a great price and the flexibility to make the sale work for you. The best thing you can do to get top dollar is to remove anything you can and get rid of what can be thrown out, donated, or stored. Clean and fix what can be done by a handyman to create a great first impression, but otherwise save your money.

If you are buying, you should look for escrow fallouts, be patient when buying, and make sure to get the loan rate locked in that makes sense for your transaction.

How can I help you? Call, text, or email me.
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I host two FREE Real Estate Zoom calls every week:

Real Estate Flipping / Investing Focused:
Tuesday 3PM Pacific Time
Link: https://www.eventbrite.com/e/so-cal-real-estate-investment-meetup-tickets-80900334077
Topic: So Cal Real Estate Investing Meetup
This group is for Landlords, Fix and Flip, Traditional and Non-traditional Real Estate Investing, as well as all Real Estate Service Providers (Agents, Title, Contractors, and more.),

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Thursday 4PM Pacific Time
Link: https://www.eventbrite.com/e/how-to-get-your-first-sale-in-probate-real-estate-tickets-67396261031
Topic: How to Get a Sale NOW in Probate Real Estate

There are lots of programs that promise to help you sell a LOT of homes, but how do you get your 1st sale? As the baby boomer ages, the number of homes being passed on to heirs continues to increase. I'll share with you 11 different ways that I have generated a listing or buyer sale that do not cost you any money.