Mortage Rates, An honest discussion | Luxury Living International Ultra Luxury Real Estate

Mortgage Rates : What Now ?

The headlines are everywhere, mortgage interest rates are at a 40 year all time high. As if supply chain issues weren't enough to deal with, high mortgage rates have brought (most) of the daily real estate market to a significant slowdown.

The question du jour : what is going to happen to mortgage rates ? Mortgage rates at this time are a direct reflection of policy and inflation.

This Too Shall Pass.

Mortgage rates will come down – it’s just a matter of time. The hope is we continue to see more positive news on inflation, and that’ll bring mortgage rates down. This will give prospective homebuyers more buying power and lead to more homeowners throughout the country.

What Can We Do In The Meantime ?

1.The Good News.

Inventory has stabilized from the 2020 buying and upgrading nesting phase. This presents opportunities for buyers who didn’t want to buy at market highs, with now, more realistically priced inventory. With all things being equal at any given time ( market conditions etc ), what is the one differentiating factor ? Purchase price. You make your money when you buy! This IS a buying opportunity.

2. Is It Time To Think Like An Investor ?

Why are Blackrock, JP Morgan ( and many others ) purchasing homes ( and entire developments ) ? Reasonable stabilized purchase prices and a generation of younger people, Millennials, Gen Z, who are shell shocked at seeing higher interest for the first time ( ask your parents ), have been opting to rent - and they are renting at all time and forever escalating rental rates.

The long game: a) throwing away good money on rent is simply not an option as a healthy financial strategy.
b) Back to our answer of why investors are indeed buying : when markets are down ( stock and digital ),hard assets are the investment of choice. Brick and mortar, real estate, not only withstands the test of time, but is the one asset that creates and protects wealth into the generations.

3. How To Deal With Those Pesky Mortgage Rates ?

Consider ARMs : Adjustable Rate Mortgages No, we are not referring to the scandalous subprime negatively amortizing interest only mortgages, that made more people appear millionaires on paper, only to be left in ruin in 2008! ( that’s an entirely different discussion ) Reference instead the “ traditional “ arms You may want to ask your parents, or grandparents, who put a roof over your head in the 70s-80s, when interest were Double Digits ( shockingly yes ). They did not do 13% 30-year fixed rate mortgage rates. The market still moved. People still bought homes. They opted for the traditional ARMs, where the mortgage rate is fixed for 5-7 years ( or time frame you choose ), and then adjusts per market conditions there after, or most likely the buyer refinances down when interest rates come back down.

interest Rate Buy Downs: For long term purchasers, it may make sense to buy down the interest rate In other words, pay a fee, points, ahead of time, to commit to a long term mortgage at a more agreeable rate.( until. you want to refinance ). While more money up front, remember you’re buying at better home price and building long term equity ( instead of throwing money away on high rent and being housing unstable / dependent ).

We hope this answers some questions and sparks a few more ! Contact us at [email protected] or text 305-889-8400