Even though rates are still lower than where they were in 2018 (and for much of the last 10 years), homebuyers are still often very upset that rates have climbed so much in recent months.
75% Chance They Will Refi – Soon
We frequently remind readers that homebuyers stress too much about rates in any case because so few of them keep their loans as long as they think they will (usually less than 7 years) because of refi opportunities and life events (relocation, need for larger or smaller home, or cash out needs for tuition, weddings, home improvements, debt consolidation, etc.).
But – in our current environment we are telling homebuyers that there is about a 75% chance that they will be able to refi into a lower rate (at “no cost” in most cases) within the next 18 months! I explain why below, and I encourage agents to share this blog with their clients who are nervous about “high rates.”
Many Actual Experts (Not Just Some “Mortgage Guy”😊) Predicting Fall
I make fun of pseudo “experts” being wrong all the time, but I am featuring some actual experts below who know their fields better than anyone and who put their money where their mouths are.
In this Wealthion video, investor and fund manager Lance Roberts explains why he thinks bonds are a great buy right now (because he thinks rates will fall). I give Mr. Roberts tremendous credence because he is putting his money where his mouth is – unlike so many other pundits – by buying bonds. Roberts focuses on our enormous debt loads and how much of a drag they are on the economy, and he says there is no political will for more government stimulus (which would exacerbate inflation).
In the most recent Eurodollar University podcast, Jeff Snider (head of research for Alhambra Partners) points out how much inflation expectations are falling, and why the employment market is so much weaker than many people realize.
And finally, the grandaddy of macro experts, Dr. Lacy Hunt, weighed in recently on this recent Wealthion video as well. Dr. Hunt is a renowned former Federal Reserve Chief Economist and highly respected in all macro circles.
He focuses on several key points:
Excessive Debt Loads: our debt load is so high now that all government spending and borrowing results in negative growth (unlike what our politicians tell us). In addition, current debt loads will keep our economy from ever growing like it did in the past;
Money Supply Not Growing: The money supply is not growing because banks are not lending (which is what actually grows the money supply);
Velocity of Money: Velocity refers to how fast money turns over in the economy – and it has to stay constant (like in the 1970s) or grow for inflation to remain. But – it is falling sharply per Dr. Hunt;
Reversing Quantitative Easing: This will lower demand for stocks and other assets that are fueling inflation; and
Demographic Issues: Our population grew by only 0.1% last year – the slowest rate ever. And – we need an increasing population (because families require a lot of spending) if we want to see our economy grow.
I am oversimplifying all of these points for brevity’s sake, so I highly recommend watching the videos.
Or, readers can just accept my summaries and remind concerned homebuyers that a future refi is very likely. 😊
Homebuyers of course should not wait for falling rates to buy a home because I have no idea when rates will fall.
But homebuyers should simply be aware of the high likelihood that they will be able to refi into a lower rate.
