US Housing Market/Mortgage Rates

A great deal of our home loans are financed through foreign investors. They own a lot of the securities issued by Fannie and Freddie Mac. This is why the US housing market effects the global markets. We saw this in 2008. Today, home prices have exceed the highs of the last crash so I wonder what's next to come. I really hope things don't turn out the way it did the last time around.

Our mortgage rates are tied to the US 10 year bond. Whenever the 10 year bond percentage goes up, mortgage rates will follow. For example, today's 10 year bond rate is at about 2.8% and the mortgage rates are at about 5% on a 30 year fixed for an applicant with high qualifications. The 10 year bond fell sharply to about 0.6% in April of 2020 (shortly after our 2 weeks lockdown); the mortgage rates then were as low as 2.5% on a 30 year fixed. This is incredible. I heard on the evening news the other day that the Fds are in talks to raise the rates by 200 basis points. Basis points is a percentage of a percent. 50 basis points equates to .50%; 100 basis points equates to 1%. If the rates are raised by 200 BP then this means the mortgage rates will go from about 5% to 7%. This is incredible.

Are you loan officer / mortgage broker?

While mortgage rates typically follow the 10-year bonds it doesn't mean it has to mirror it percentage to percentage. Back in 2010 10-year yields was at 4% yet mortgage rates were at 5%.

You need to know about how much Mortgage Back Securities (MBS) is out there which also affects rates

Treasuries and MBS compete for the same investors, and they tend to move in the same direction. However, Treasuries carry less risk than MBS, because the Federal government does not default on its obligations, while mortgage borrowers sometimes do.

Maybe got hacked

Fixed rate, never touch the equity, no fear, no worries.
Homes in my neighborhood are $1.5 mil. for mediocre 3b2b. Little blue collar homes. We’re all millionaires on paper. Just like my 401k. My pension? Not so much.
My current mortgage is about $359,000 @ 2.3% fixed when most like in the early to mid 2000s were signing 1.? APRs. Bought almost ten years ago. People scream, take out the money and invest it. In what, Joe Biden’s economy and have a larger mortgage rate? Cheaper than any 1b1b apartment in town and includes a two car garage.
Most people that had financial problems years ago lied about their incomes, bragged about the deal they got, their 1% APR, sucked out all the equity, bought every toy they could imagine with adjustable mortgage rates, then values dropped, rates went up because that’s what they do. Always adjust UP, and then cried how they got ripped off.
Never had a problem with my other home then either.
Fixed rate, never touched the equity. Used the same mortgage company then as I did for this home. Same guy for twenty years. When I sold that other home I only paid 1.8 percent to the realtor.
Most of you may be too young to remember a low mortgage rate was around 9% in the 80s. Like credit cards there was no regulations on how the banks could or when they would adjust them. Also if you sold your home and didn’t buy a home of equal or more value. You paid 45% capital gains tax on the equity made. My first wife and I got adjusted right out of our home and had to pay those capital gains because I got laid off during the housing boom then and all the aerospace companies restructuring and closing. Hard to make a home payment went you get let go and your mortgage rate goes from 9% to 14% in six months.
Yep. That happened and those were the rates back then and considered low.

I am hearing prices are starting to come down. It is crazy that starter homes in OC are $700,000 right now!

The mortgage on my first house was 17%. The wost thing it was an adjustable loan and went up for a short time. On top of that we had a second and a third.
Today I am at a fixed 3% for 20 years.
Taking equity out right now and not investing it very carefully is foolish with inflation at a real 7% and climbing!

I remember when I was a kid and my dad complained that rates for mortgage at that time were 19%!!! That's like buying your with a credit card and paying monthly for it with credit card rates!!

I'm no longer in the industry actually. I'm just some guy trying to raise points so I can sell some corals and used equipment here. I remember Jose saying that we can post about things that are non-reef related so I did. I did it to raise my points! The truth is that I was watching a lot of Bethany McLean videos on youtube and got a bit carried away. If I was an LO or broker, fishing for leads here would be a pretty desperate move. I would never think about doing such a thing. I would be better off advertising in Penny Saver instead

After reading my post again, I see what you're saying. Yes, I agree, they don't mirror it % to % but they do trend together closely. Although I don't have the exact conversion ratios, I've been following the 10 Year bond for a long time and what I noticed is that if the 10 Year rates rise by 1% (over the course of time) then the mortgage rates will follow just shy of that 1%. This is not always the case because there are so many different ingredients that determine mortgage rates, whether it's in the operations cost wholesale/retail margins, the cost of what these MBS securities are being sold for, and a long list of other factors that I don't understand. Thanks for the 2010 info, I'll take that into consideration next time I bring this up to anyone.

I would have to disagree on your last comment however, MBS's are actually backed by Fannie Mae and FreddieMac as I recently learned and they are back by the Fedds.