< Back to JVM's Blog

$40,000 Dog! Rates Hit 3-Year High! Mortgage Stocks Might Be A Buy – Now :)

$40,000 Dog! Rates Hit 3-Year High! Mortgage Stocks Might Be A Buy - Now :)Rates Hit 3-Year High!

That was the headline in the WSJ today – so I want to remind agents and borrowers alike to get “Re-Approved” because higher rates mean higher payments.

Here’s the math:

$100,000 at 3% = $422/month (P&I Only)

$100,000 at 4% = $477/month (P&I Only)

So – a 1% increase in rates (like we have seen since last summer) results in about $55 more in payment per $100,000 borrowed.

$40,000 Dog!

I read about a man who recently paid $40,000 for a stray dog. His family was very upset and asked him why, and he said it was because the stray cat cost $50,000 – so the dog was a deal!

I actually stole that story from this recent and excellent Hidden Forces Podcast with guest Mohamed El-Erian (Professor and prominent economics advisor). El-Erian used the story to illuminate the mentality investors have when vastly overpaying for stocks or other assets (and why we may be in a bubble).

When I heard the story though, I immediately thought of mortgage company stocks – because I thought it was crazy that anyone would buy stock in a company that was so dependent upon refinancing revenues for profits. Because – what happens if rates go up and refis dry up – like we are seeing right now?

LoanDepot is the poster child of dying mortgage stocks. Its stock peaked at about $31.50 last year and is now about $4.50 – so I feel very sorry for the investors who paid $40,000 for that dog. 😊

Interestingly though, given that one more refi boom is somewhat likely, those mortgage company stocks (loanDepot, Finance of America, Rocket, UWM, etc.) may be good buys now that the markets have realized what they were buying.

NOTE: This is just an observation and should not be construed as investment advice in any way; please consult with a qualified investment advisor before making any stock purchases.

Final interesting sidebars: (1) El-Erian thinks that crypto will not take off like many investors think because governments will not let it; and (2) El-Erian thinks inflation is here to stay and that it is not transitory.

Jay Voorhees
Founder/Broker | JVM Lending
(855) 855-4491 | DRE# 1197176, NMLS# 310167