projected interest rates in 5 years | when are interest rates going up?!
It's already happening. I've done hundreds of loans since 2007. That was when the market started to tumble after all those stated-income loans that stated income that borrowers did not actually have.
So I learned on 30-year fixed loans only.
What i've seen since then are primarily full-documentation loans amortized across 30 years. That means, the borrower had to show income documents showing the person is actually earning that income.
Rates for the last several years have been in the 2s, as you know. I just closed a loan where the VA borrower had a 2.99% interest rate on a $570,000 purchase, 100% financed since it was a military veteran, APR 3.387...
That monthly payment will be $3,139/mo plus HOA fees of about $150 each month.
We have several new buyers with similar incomes - military pay is very rigid (by rank) - and veterans getting into escrow today would have an interest rate of 4.125%, APR 4.397.
That monthly payment with the same taxes and insurance on the same purchase price would jump $371 per month by to 3,510/month, and, again plus the HOA fee of $150/mo.
Military buyers are on tight budgets, so it gives us a good indicator of how this type of borrower will perceive the situation.
These borrowers are telling us, "I really can't go any higher!"
So if their monthly payment can't go higher and the interest rate is as high as it is, how do we keep the payment where it's comfortable? The purchase price has to come down. How much?
In this example, the purchase price would drop from $570,ooo to $510,000 to keep the same lower payment.
An agent pointed out that a lot of homes in the inland empire are being bought with cash by buyers coming out of the coastal areas, so a lot of them will still be wanting to buy at current prices. There just won't be as many financed purchases in these price points.
But to me, it's yet another indicator of a shift that should greatly cool the seller's market it has been.
And a final reminder: anyone like me trying to predict the market has some chance of being right. If they really had a crystal ball, they'd be sitting on a beach somewhere. I use the deck of an RPV condo as my office when I'm here, so I'm kind of doing that, but you know what I mean.
Drop indicators you're seeing of either a market turn - or not - down in the comments. Questions? You know what to do.