Yesterday was a bad day for bonds. A poor 7yr note auction pushed the UMBS 30 2.5% coupon down 36bps to a floor of support at 101.80, while the 10yr T rose 8bps to 1.55, which is just 5 bps below the current ceiling of resistance of 1.60.

I always get nervous when the markets move sharply right before a holiday weekend, and with this weekend bringing in the New Year, it bears watching closely. As I have maintained for a while now, if you like it, LOCK IT!

I am interested to see activity in the housing markets this weekend. With buyers still hungry for homes and the excuse of waiting to after the holidays are over now past, it will be very interesting to see the first few weeks of January go, especially if we see mortgage rates ticking up as well.

So be aware of the markets and especially for those who are already in a tight situation. Rising rates as well as higher home prices can change debt ratios very quickly. So be sure all of your preapproved borrowers understand how the payment they are qualified for can no longer support the same house they saw just a few weeks ago. It’s important that people understand how a mortgage payment is calculated and the impact of every item on the list that contributes to the total payment, not just the rate!

Have a safe and happy New Year! 2022 will be a huge opportunity for those purchased focused originators!

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“It is better to look ahead and prepare than to look back and regret.” 
www.inspirational-picture-quotes.com

Are you thinking about buying a home this year but not sure if this is a good time to do it? 

Let’s explore the trail map for real estate and mortgages in 2022.  

Ask yourself these questions to give you confidence and make your journey more enjoyable.

Questions to Answer:

How long do you plan to keep this property? 

1. 1. (Will the property appreciate enough using conservative predictions to allow you to sell at a profit?) If you need to sell within the next two to three years, could you rent it for more than your house payment and maintenance costs?

   1. 2. Does the house payment fit comfortably enough into your budget to cover the mortgage payment and repairs on the home if you could not sell later and did not want to rent it out to anyone?

   2. 3. Do you have enough accessible savings or investments to make payments on the home for six months if you experienced an unexpected financial setback?

Choose an experienced, reputable realtor to help you determine the long-term appreciation in value on the house—not just over the last 2 years but look back several years to gauge the stability and growth of the neighborhood. Choose an experienced, reputable mortgage loan officer to help you explore the best mortgage options. Finally, consult with your financial advisor. 

Trail Map 

Let’s explore the trail map for real estate and mortgages in 2022.

Home Values

Forecasters predict that home values will continue to push upward around 7% to 8% for the year. If the predictions are correct, when you buy a home worth $300,000 today, a year from now, you may be looking at a gain in the value of around $24,000. That is a possible increase in wealth of about $2,000 per month.  

Home Inventory Levels

Lawrence Yun, the chief economist for the National Association of Realtors, predicted that inventory will increase in 2022 but not significantly in the following year.  

He predicts that the housing market will remain strong in the coming year. 

Builders will continue to struggle with supply lines and labor shortages. 

Mortgage Rates

Mortgage rates are predicted to go up as inflation rises. The Federal Reserve's actions will be key in determining how fast and how much rates rise. Historically mortgage rates go up as inflation rises and drop as inflation lessens.  

The Federal Reserve is currently tapering its aggressive purchases of mortgage bonds and treasuries. They plan to end the new purchases but may continue reinvesting about $70 billion per month from the profits on the bonds they currently have on the balance sheet. If the reinvestment continues, the rates should stay somewhere in the 3’s on the 30-year loan program. If inflation drops later in the year, the price on mortgage rates could fall again. 

The Federal Reserve plans to begin a series of rate increases throughout 2022 and 2023. Mortgage rates are not tied to the Federal Reserve Rates. Mortgage rates are expected to be influenced more by the inflation rate than other factors.

Rent Rates

The rise in rental rates vary from city to city. However, most predictions are that rental rates will continue to increase in 2022 by 5% to 10% for the year. Rising rental rates will continue to compel renters to gravitate toward buying a home.

Historically owning real estate with a fixed-rate mortgage has served as an excellent hedge of protection against the storms of inflation.  Owning your home creates multiple chances to profit when the value goes up, and the mortgage balance is paid down. Your home offers flexibility. You can rent it to tenants for income or borrow against it in an emergency. 

Which path to homeownership will you take?