On June 5th, I wrote this article “3% mortgage rates will be gone by Friday” and although I’m glad I was right, there is something I missed. Rising mortgage rates have never scared me before. The process is usually slow and deliberate. Plus, mortgage rates are a lagging indicator. Meaning, if mortgage rates are going up, then other good things are happening in the economy. Rates going higher usually suggests a lot of confidence in the financial markets, which usually means things like employment, GDP, etc. are looking good. This time it’s different.
Because the mere existence of the 3% mortgage is artificial in nature, everything has changed. When this thing unwinds for real, it will be violent. According to my Mortgage Expert in San Diego, Jon Jerotz, who has been top 1% in the Nation two years in a row, mortgage rates in San Diego went up about 1% across the board in the past 7 calendar days. That’s an unprecedented move for the worse and has completely caught all of us off-guard. Check out this article on CNBC: ‘Unprecedented’ $80 Billion Pulled From Bond Funds. The numbers are staggering.
The one problem with rates going higher is the one thing none of us expected – rates going up at record velocities. Keep in mind, this out-flow in the Bond Market and this spike in interest rates is taking place WHILE THE FED IS STILL BUYING MORTGAGE BONDS! Not just buying mortgage bonds, but buying them at the clip of $85,000,000,000 worth per month. That’s Billion with a “B”. Can you imagine what this looks like if the Fed becomes a seller? You get the point.
The facts are, rates going up this quickly are going to be bad for the housing market and there’s no way around it. This is a Seller’s Market, which means it’s a good time to sell. The best time to sell in the next decade is taking place right now. I expect the San Diego Real Estate market to soften as rates rise, which we could see as quickly as 30-60 days from now.
If you have an adjustable rate mortgage you’ve been riding on the way down, now is the time to take a very close look at fixing that rate in. That is, if you want to stay in the home for the long-haul. Call Jon Jerotz at 760.522.2298
Categories: Bankruptcy, Buying Real Estate, Government Absurdity, Loan Modification, Mortgages, San Diego Real Estate Market, Selling your home, Short Sale, stop a foreclosure, Tax Resolution, The Life Plan, The Mortgage Debt Relief Act