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Market Risk as it Relates to Housing and Interest Rates

Written by Posted On Wednesday, 24 August 2022 06:50
Housing Market | Interest and Mortgage Rates Housing Market | Interest and Mortgage Rates

I have been keeping a close eye on the housing market and the path of interest rates in conjunction with what the chairman of the Federal Reserve has had to say since early this year.  Last week, it was reported that the volume of transactions through July for housing were down six months in a row.  The Fed has been very vocal that they want housing prices to soften.  The problem with the current data is that housing activity may be declining but housing prices are not.  Herein lies the problem.  Housing is connected to large swaths of the economy.  The Fed wants housing prices to soften to help them with their war on inflation.  The Fed’s current plan is not yielding any signs of progress toward their telegraphed objective with housing prices.  The risk, as I see it, is that the Fed may seek to press rates higher to force their objective and adversely affect housing prices.

  This will occur through additional short term rate increases, jawboning to the media their intentions, and the outright withdrawal of liquidity through Fed balance sheet reduction expected to double in September.  This means that the risk this Fall is for higher mortgage rates.  I see a possibility that rates for mortgages could rise a percent to a percent and a half over the recent peak.  This could put the rates in the seven plus percent range.  This, in my opinion, would definitely affect housing and I believe also pressure supply and demand to the point that prices would also soften.  What does this mean for you?  If you are in the market for a home, regardless of the mortgage loan type, there may be an increased sense of urgency.  Again, the Federal Reserve has telegraphed their expectations.  Home prices are the issue.  It is odd that prices would not be affected at this point in the cycle of Fed tightening.  It is clearly related to the extreme amount of excess liquidity in the system.  It’s the Fed’s next move.  I see rate risk to the upside. What do you see?  

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GOmilan

Hello, my name is George Omilan (NMLS #873983).  I am the President and Principal of Jefferson Mortgage Group LLC (NMLS# 935554 - nmlsconsumeraccess.org) with thirty years of experience in the mortgage business.

Jefferson Mortgage Group LLC is a licensed mortgage provider serving all of Virginia, Maryland, Florida and Pennsylvania with a focus on a full line of Traditional QM (Fannie Mae, Freddie Mac), government insured HECM Reverse Mortgages, and Non Traditional Non QM Mortgages commonly referred to as Specialized Forward Mortgages including “Alt-A Investor loans” at 80% LTV, both Full doc and No Income-No Employment (No Doc) for the investor community. Our expanded niche products also focus on the more traditional FHA & VA with Lower Score and higher Debt-to-Income Options, Fixed & Variable Jumbo loans, and Private Label Reverse mortgages for higher priced homes. We are also highly focused on specialized loans for the Self-Employed borrowers with our Bank Statement & Asset Dissipation Programs. We are committed to offering a full range of “Non-QM Loans” for expanded qualification, where the banks and large-scale lenders dare to go.

With our traditional QM mortgages (FNMA, FHLMC, and High Balance) for purchasing, we will run the delegated underwriting for you ahead of time without a designated property requirement; thereby providing an extra degree of confidence with your prequalification for your contract presentation and your optional decision to waive certain contingencies.

Our newest move back into specialized forward mortgages is a welcomed change. As the principal of Jefferson Mortgage Group, this category has been where the majority of my experience and expertise was developed. I am happy to see the re-emergence of specialized loans for the self-employed and investor communities. The need for Alt-A and Non-QM Loans in general is vast and the need for more flexible documentation types, higher debt ratios, lower credit scores, higher loan-to-values, is important to our real estate market. This is an area where we will work hard to serve the customers in our markets.

https://www.jeffersonmortgage.com/

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