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Here’s what we’ve got for you today:

1. Mortgage Rate Landscape & Short-term Forecasts 🏔️

2. The Two Major “Obstacles” Aspiring Homeowners See - CNBC 🏡

3. Videos of the Week 📽️

By the way, this article - Buyer’s Window has Reopened is the most clicked link in this newsletter, you should check it out if you are interested.

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[Read Time: 4-5 min]

Rates Today 📈

Mortgage Rate Landscape & Short-term Forecasts 🏔️

There has been major volatility day-to-day - with the market moving 20-30 bps per day. But, if you take a step back and look at the market from a broader lense since Feb 14th (the day after the Fed meeting) there the market has stayed basically flat.

Rates have been stuck between 7.25% - 6.875% for weeks.

Today, Feb 29th (wow cool!😎) we received PCE data that came in matching forecasts. While this is not market shifting, it does buck the trend of negative reports we have seen over the last two weeks.

Where do we go from here?

Depends on who you ask -

• NY Fed President Williams thinks there is still space for three rate cuts this year.

• If you ask CME Group - they are predicting two cuts this year - the first being in June.

• If you ask market commentators like Barry Habib - he thinks rate cuts should have happened last May…

In the short term - prepare your buyers to have interest rates around 7%.

Until we get consistent, positive economic data, I do not expect the 10yr Treasury (and thus mortgage rates) to start falling.

In the mid-term (next 4-6 months) - there is a storm brewing in the housing market and buyers should get ahead of it by asking for 2-1 buydowns or concessions.

We have likely moved the goalpost on the first interest rate cut until the middle of summer at best. That means, in the heat of the summer housing market, we will also begin to see rate cuts. This is a perfect storm for buyers.

If the timing does happen like this, expect a flood of buyers into the market. If you have clients that love “getting a deal” - they have about 45 days to get it.

The Two Major “Obstacles” Aspiring Homeowners See - CNBC 🏡

Anyone reading this knows that a large percentage of potential homebuyers are priced out of the market today. CNBC did a survey asking those buyers what they viewed as a major obstacle.

• 51% - point to a high cost of living

• 54% - say they have insufficient income given where home prices are now

Notice that neither of these hurdles has anything to do with a down payment. I consistently see mortgage brokers, lenders, and even agents on Instagram harping on “little to no down payment” or “limited down payment” loan options. That is not the problem. 

Lower down payments do not solve this issue.

Several potential buyers in your database simply cannot afford the monthly payments - either practically or to even qualify for the loan. But most of those buyers may have the down payment they need.

If they do not want to wait on the summer housing market you can do a couple things today:

• Negotiate a 3-2-1 (or 2-1) - saves $500-$900 per month on payments (or more depending on loan amount)

  • If possible I’d recommend a 3-2-1. This gives buyers until 2027 before they would need to make a payment at 7% interest. Even for the most pessimistic out there, rates will fall by 2027.

Instead of focusing on down payment, let’s start looking at ways to reduce monthly payments - the clear hurdle for these buyers.

Videos of the Week 📽️

Thanks for reading - that is all we have for today 😎

Please forward this to your friends and colleagues if you found it valuable.

— Michael F DiLucchio