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Mortgage Rate Update 10/20/2020

Sean Zalmanoff here with this week’s mortgage rate update. There is a lot going on in the world of finance and a lot going on in our government. We are two weeks, actually two weeks today away from an election. Our TVs are going to be ours again, and we will not be bombarded by political ads, so at least there’s that to look forward to.

Pelosi and Mnuchin are meeting today to hopefully hammer out a stimulus deal. Now there’s talks; is there going to be stimulus, is there not going to be stimulus? Listen, I guarantee you, if there’s one thing that is an absolute for certain bet, there is going to be a stimulus package. Now what nobody knows is if this is going to happen today, is it going to happen tomorrow or is it not going to happen until after the presidential election? That’s what nobody knows the answer to right now, and the details that our leaders are trying to figure out for us.

Let me just give you a couple of little tips and breakdowns on what the stimulus actually means to us. First of all, the economy needs it. There is something that has to be done for a large portion of workers who have not yet gone back to work in our service industries, and based upon the way things look right now, we’re probably not going to go back until next spring at the earliest. There will be more stimulus that happens for these people. The size of the stimulus is in question and exactly how it gets distributed are the two main factors.

Now, as far as what that means for rates, eventually this is probably going to put some upward pressure on rates. We’ve talked about it before; inflation is the archenemy of bonds. The more that we do to stimulate the economy, the more inflation rises and the more bond rates rise as well, and bonds are directly correlated to mortgages and how they’re sold. All that being said, right now rates are still about the best they have ever been. If you have not gotten off the fence to buy your house, you should really think about doing that. If you haven’t refinanced yet, call us, let us help you.

I have a staggering stat that I don’t know if this is the highest rate ever, but if you’re wondering, “Well Sean, you’re talking about the stimulus. Man, what happens if something goes wrong? What happens if it doesn’t happen?” First of all, mark my words, it is going to happen.

New homes sold right now, but not started, is at 69% of the homes that are being produced in the market. We’ve had high permit numbers. We’ve had high buildings start numbers. I’m not going to share all those with you because this number is the most impactful for me. 69% of the homes that are being started today are sold before the ground is even broke. That is crazy. That number is high. Again, I don’t know if it’s a record, but it is really darn close if it’s not.

What does this mean for you? You’re like, “Hey, listen Sean. I live in St. Louis, man; we don’t have a lot of new homes that are being built.” Do you live in some other urban area where there are not a lot of new homes being built? How does this affect you? Well, the fact that there aren’t new homes being built in our areas, you’ve seen it over the last six months, prices are increasing fairly to pretty dramatic in some areas. All this does is when they’re saying all the homes that are being built out further are being sold before they’re even started, it just puts more upward pressure on the price of homes.

It’s just simple math. It’s supply and demand. There is not enough supply of homes. This goes all the way back to the great recession when there was an amazing amount of oversupply. Then the decade happened afterwards, where we never started to build enough homes again. Now that we have this amazing housing boom with these really low rates, that is causing pressure and it’s causing home prices to rise.

Now the great thing about it is home affordability, even though home prices are close to record highs, home affordability, remember we talked about this too, it’s at the best level that it’s been since 2016 because of rates being so inexpensive right now. The homes are costing a little bit more; it’s still the cheapest it’s been in four years to buy a home.

Hey, we would love to help you. I’m Sean Zalmanoff, Better Rate Mortgage. My team is here to make your life better and provide you updates on what’s going on in the world. I appreciate you. Have an awesome day y’all.

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