There are a lot of very sad mortgages getting “Dear John letters” right now, and I am sure it is heartbreaking for them.
I say that somewhat facetiously simply because people are refinancing in droves right now, rendering a lot of naysayers wrong (again).
Marry the Home; Date the Rate
For years up through 2022, agents and loan officers alike repeated the mantra: “Marry The Home; Date The Rate”
The meaning was this: Worry about the house because it is more permanent; don’t worry about prevailing interest rates, as you can refinance later when rates fall.
So, when rates remained higher for the last few years, social media lit up with complaints about “evil” loan officers and agents misleading buyers with that errant phrase.
But – did they mislead anyone?
Barry Habib posted this short and excellent video in August – making three excellent points, and putting the naysayers to bed.
Here are Barry’s three points:
- Most homes have appreciated across the country over the last few years – at an average rate of 12%. So, marrying the home definitely made sense for most buyers. A $500,000 homebuyer is now $60,000 wealthier.
- There have been SEVEN INTEREST RATE DIPS over the last two years – and he shared the below chart that I shamelessly stole. So, despite the naysayers, there were actually numerous opportunities to break up with a rate.
- Yes, housing appreciation has slowed, but wait until rates drop further… Lower rates bring buyers back into the market and drive prices back up. I mentioned in this recent blog (Housing “Crash Bros” Destroyed By Jason Hartman!) that even a 1/2 percent drop in rates makes homes affordable for an additional 2.7 million buyers.
This is a reminder that rates, even when trending upward, never move in a straight line – and that we’re always likely to see sharp dips.
It’s also a reminder that it’s probably OK to still “Marry The House And Date The Rate.”
One more thing: Houses are an inflation hedge. So, if anyone is ever in a situation where rates are continually screaming higher with no chance ever to break up with their rate, it will mean we will be in a highly inflationary environment. And anyone who is not married to a fixed asset, like a house – to protect against inflation – will be in a world of hurt.
