Words from our Lender

Both stocks and bonds opened higher to start the week. It’s clearly the week after a Holiday, as we have TONS of things happening that can impact the market.

To start we have St. Louis Fed President, James Bullard speaking at 10am Monday morning. Last time he spoke, he brought up raising the feds fund rate to 7%! Of course, that caused volatility in the market, and we saw a big swing. There was an article that was posted in the Business Insider titled “Buckle in for a brutal free-fall in home prices as the US housing is in massive bubble, experts say”. I do think this article could get some attention on social media and I think it’s important that we know about it. The article cites 7 housing experts, although you may have heard of them, I wouldn’t call them experts...Some are calling for a 10% decline while others called for a 20% decline. A 20% decline would be a doomsday like scenario. Something like what we saw during the housing bubble. From the spike in 2007 to the trough in 2009, home prices declined by 20%.

Back in 2007, there were 4M homes for sale VS 122M today. Also, back then, builders were putting up record numbers of homes while demand was falling. Today, the demand is waning, but builders learned their lesson and single-family starts are down 22%, and permits are down 21%. While some experts are predicting a similar type of crash, the dynamics are very different!

Last week the Case Shiller reported that home values nationwide have only come down 1.5% from their peak, but the data is lagging 2 months. I do anticipate further softness, but nothing close to a 20% decline. If rates come back down towards the 5% range, I believe all the buyers in hibernation (because of the high rates) will come back in the market! With the low inventory supply, it sets up for a reacceleration in home prices. We do plan to start the day floating all loans, of course if the market shifts, we will be locking right away!

Conventional loans under 715K are at 5.99% - 6.25%, High Balance loans up to 879K 6.99% - 7.5%, VA & FHA loans range 5.75% -6.125%!