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Chaos & Controversy in Real Estate
The fed fund rate is 5.25%. The Freddie mac 30 year fixed average is 6.69% which I don’t know anyone who’s writing loans from 6.5 to 6.75%. If you are, please let us know, I’d like to chat with you! Do you want see what the 30 yr fixed looks like over the past 10 years. Check out this graph…. Ugly isn’t it.
Let’s pull our time frame out a bit further. Take a look at the 30 year fixed rate graph out to 1973, and I have to tell you, our rates right now don’t look too bad over about the past 50 years. In fact, they look downright good. Over the past 10 years, not so much. But, we have never seen rates this high with values, inflation considered, this high.
Now this is important; the feds said the fund rate is going to end the year at least .25% higher than right now. So the idea that we’re pulling back on rates isn’t based in reality. The reason is the disappointingly slow decline in core inflation so far this year. In short, we keep buying stuff. And we’re buying it on credit! So the feds raise the fund rate which raises your credit card rate, as a means of giving you a moment to pause; thus far it hasn’t slowed our spending roll, so, rates keep climbing.
Do you get the feeling like we’re drunk in the middle of an epic, 3 year, non-stop bender and right now we’re just barely coming aware that when we stop drinking, we’re going to have hell to pay with a hangover for the ages. That’s what this roll feels like. As long as we keep spending, and employing folks, and having fun, then everything will be okay. Nevermind, it’s all on credit.
2023 is half over
Now most economists are now saying rates will remain at their current levels through about the end of they year. That sounded bad but, believe it or not, the years are half over. Frankly, that plays into the hands of the actual professional loan officer.
Remember we told you last week and at the top of the show, that of recently surveyed loan officers, 60% are living paycheck to paycheck! 30% say they’re getting out of the industry this year, or better yet, before rates come back down. Another 15% say they’re leaving unless they get to work less and get paid more! With that work ethic, I think the only job you’d be qualified for is a wholesale bulk cocaine smuggler. Of course that job comes with certain drawbacks, like living and catching the fancy of DEA agents! You might want to stick with loans!
I thought this was funny; according to Realtor.com economist Hanna Jones, “Despite this annual price decline, homes in many areas are out of the feasible price range for many buyers and still-high interest rates are discouraging homeowners from giving up their current mortgage rate and listing their homes for sale.”
To put it in my terms, when it comes to the housing market, too many people are too poor or stuck. All this is exasperated by new home builders playing the part of the Cartel and collectively not building homes to meet demand levels and then the fed is trying to artificially control rates through policy rather than market condition. You might say housing right now is a situation or event marked by chaos and controversy; which, if you didn’t know is the definition of a shit show. No joke, the actual dictionary definition. I’m going to request Webster, make an amendment to the definition that adds the statement, “also see the United States real estate and mortgage lending markets.”
Stick with it
Now on a lighter and better not, that’s equally true. We talked about ⅓ of the mortgage industry leaving for other, but not greener pastures. Attrition and time are the sweet sweet gifts to you the mortgage industry steady eddy. Let me explain, let’s just assume that mortgage volume remains the same. Let’s take you and two of your competitors, so 3 loan officers. If each one of you made 100k last year, good job! Now one of you quits, as is the case. With the same volume the 2 loan officers left standing should make 150K for the exact same amount of work. So with all the negative news were staring down, this scenario is also in the mix, and it’s absolutely going to happen. Stick with it my friends and you will be rewarded!
