projected interest rates in 5 years | when interest rates going up?!

Real Estate Agent with Sand to Sea Properties, Inc. BRE 01379811, NMLS 331744

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.

Posted by

Lisa Delzompo (951-704-4559)

"May your home always be too small ... to hold all your friends!"

Is your home getting too small?  Need a FREE Home Valuation?  Preparing to Sell a Home?  Click here to submit a form online, or Call Frank at 951-326-7330 for a free consultation.

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Comments (4)

Don Baker
Lane Realty - Eatonton, GA
Lake Sinclair Specialist

Sorry that's not going to happen.  No one is going to take 60,000 less because plenty of people have the funds to pay more.  Just means more active duty people will be renting.

Apr 02, 2022 12:25 PM
Will Hamm
Hamm Homes - Aurora, CO
"Where There's a Will, There's a Way!"

Hello Lisa and thank you for the great information in your blog to share with us here in the Rain.  Make it a good day!


Apr 02, 2022 12:30 PM
John Pusa
Berkshire Hathaway Home Services Crest - Glendale, CA
Your All Time Realtor With Exceptional Service

Hello Lisa Delzompo 951-704-4559 very good helpful report about projected interest rates in 5 years.

Apr 02, 2022 01:21 PM
Lisa Delzompo 951-704-4559
Sand to Sea Properties, Inc. - Palos Verdes Peninsula, CA
Experienced, Trusted, & On Your Mission: Home

Hi Don, for awhile, that's going to be true, if the buyers pull back on offers. So far, they haven't acted that way much; what we're seeing is, military clients and folks who are financing are reaching higher in the monthly payment they're taking on. I encourage people to do some soul-searching and decide how high the payment can go and they sleep at night, regardless of what's going on in the market.

Apr 09, 2022 02:59 PM