Posts

Inflation Up; Rates Up; Explained In Terms of Porsches; All About “Buying Power”

THE REFI BOOM THAT WASN’T When rates plunged a few weeks ago in response to renewed COVID concerns and weak economic news, the entire mortgage world was gleeful b/c we thought we had another refi boom on our hands. But alas, it was not meant to be, as strong employment numbers AND INFLATION crashed the […]Read More

Holy High Appraisal Fees, Batman! Please Warn Clients!

Economist Milton Friedman famously said, “Inflation is always and everywhere a monetary phenomenon.” (meaning that it is always caused by increases in the supply of money) But, when it comes to appraisals Milton might be … wrong,** as hard as it is for me to type that. 😊 Appraisal fees have risen from as low […]Read More

Rent Vs. Buy Comparisons In The Age Of Inflation

$500,000 HOME APPRECIATES $200,000 IN 9 MONTHS My wife Heejin bought a house in Plano, TX, in November for $519,000. We put down 20%, and our PITI is $2,725. The house was rented for $3,700 per month when we bought it, so we could have cash flowed nicely from the start. The tenants moved out […]Read More

Beware of VACATIONS :) Rates Way Down Again; Why? Stimulus Will End

HOLY LOW RATES, BATMAN! (Wallowing in Wrongness) For months now, I have been repeating the warnings of various pundits about runaway inflation and rising rates. But rates seem to continually fall despite inflation concerns, and this week was another example as rates fell precipitously again. I and many others (like Barry Habib) thought we’d see […]Read More

Why The Fed Probably Can Never Raise Interest Rates

Paul Volcker was the 6 foot, 7 inch tall Fed Chairman who raised the Fed Funds Rate to 20% in 1980 and shoved the United States into a massive recession. As a reminder, the Fed Funds Rate is the rate that banks charge each other to borrow “reserves” overnight, and it is currently 0% – […]Read More

Fed Speaks – Rates Up; Paying Off Student Loans With Mortgage; Interest-Only Loans

Fed Chair Powell spoke yesterday and sent the bond market into a tizzy, as investors sold off their bonds and pushed rates sharply higher. What crazy thing did Powell have the audacity to say? He acknowledged that the economy is strengthening and that there is an uptick in inflation. In addition, a statement by the […]Read More

Inflation Way Up & Rates Down? What Does The Bond Market Know?

I blog about inflation over and over b/c its potential to send interest rates into the stratosphere and to disrupt our entire economy is so strong. The last time we saw significant inflation in the 1970s, the stock market tanked and didn’t recover for a decade and interest rates remained in double digits for years. […]Read More

4 Must-Know Facts About INFLATION, Housing, And Mortgages

INFLATION, HOUSING & MORTGAGES With inflation here and only expected to get worse, many potential buyers are getting nervous and wondering what to do. As a result, I thought I’d address a few major considerations today. 1. HOUSING IS AN INFLATION HEDGE/PROTECTION AGAINST INFLATION As a hard asset, housing tends to appreciate with inflation like […]Read More

Inflation Is Here! Why Didn’t Rates Climb More?

Inflation numbers came in sharply higher today and rates increased – but only a little. Here is a brief summary of the numbers from the Bureau of Labor Statistics. Long story short: Inflation numbers are higher than expected and at their highest level since 2008. So, the question is why didn’t rates spike up further […]Read More

There’s A HUGE GLUT OF WOOD, So Why’s Lumber So Expensive?

On Friday, I blogged about whether or not borrowers can roll their closing costs into their loans. Several savvy agents responded and pointed out that I forgot one more way borrowers can get credits for closing costs: agents can credit a portion of their commissions too if they so desire.  We never recommend that to […]Read More

Cage Match Of The Century: Inflation vs. Deflation; Diversify!

WHY NO INFLATION AFTER 2008 After the 2008 mortgage meltdown, the Fed and congress stepped in with trillions of dollars of “Quantitative Easing” (buying of Treasuries and Mortgage-Backed Securities) and stimulus spending – and numerous market watchers and pundits, e.g. Arthur Laffer, predicted massive inflation. They were all wrong for several reasons, including the fact […]Read More

Why A Giant Stuck Ship (Suez Canal) Impacts Mortgages & Real Estate

YouTube gets me – and thank goodness for that b/c it sends me entertaining videos all day long, every day! This is why I know that Komodo dragons eat deer alive (Komodo saliva paralyzes the deer), why I know about the mating habits of cicadas (they only live a few weeks and come out every […]Read More

Inflation Makes Mortgages An Asset; DON’T Prepay Your Mortgage

Dave Ramsey is a financial guru who encourages paying off all debts, including our mortgages. Here are Ramsey’s 7 Steps for taking control of our finances. A lot of other finance “gurus” of sorts take serious issue with Ramsey though b/c his advice only works in a world with minimal or falling inflation – a […]Read More

2021 Predictions: Rates, Inflation, Housing & Affordability

I often point out how difficult, impossible and/or ineffective it is to make predictions for anything nowadays. This is because we are in uncharted waters when it comes to this much Fed and government involvement in our economy, making it impossible for anyone to predict accurately b/c there are no precedents to rely on. BUT […]Read More

Will Mortgage Rates Fall Again? What Are The Variables?

I received numerous questions in regard to mortgage rates yesterday, e.g. Will they come down again? Should I lock now or wait? What do I think will happen? As always, my answer was don’t wait to lock in your rate b/c nobody has a clue what will happen. VARIABLES AT PLAY I responded that way […]Read More

Why 13% Interest Rates In 1980 Were Effectively LOWER Than Today’s; Real Rates vs. Nominal Rates

Mortgage interest rates were just under 19% in the early 1980s, as shown in this table by Freddie Mac, going back to 1971. BUT, “real rates” were sometimes LOWER than where they are today. This was a point that an inflation hawk made on a podcast I listened to recently. He borrowed money to finance […]Read More

What Will Happen To Mortgage Rates in 2021

Here is my bold prediction for mortgage rates in 2021: They will go up and down. You can take that to the bank! OK – here’s a more specific prediction – they will edge up about 1/2 percent before coming down again to where they are now or even lower. This is from rate-guru, Barry […]Read More

Fed: “We’ll Ignore Inflation & Keep Rates Low Forever!” Or Not

Media outlets are abuzz with news about The Fed’s new commitment to keep rates low pretty much forever and to also change its inflation targets. This WSJ article is just one of many I saw today discussing this. So what does this mean? The Fed will no longer give credence to what is called the […]Read More

Why COVID-19 Is Not Hitting Housing Prices

A few weeks ago, I blogged about why we are not seeing more foreclosures despite our severe recession and a huge number of delinquent borrowers. The reasons include: (1) borrowers have more equity and won’t abandon it; (2) lending guidelines have been much stronger since 2008; and (3) the housing market is on fire, making […]Read More

How Low Can Rates Go? Not Waiting To Refi

One of the most interesting aspects of the COVID-19 crisis is its effect on interest rates. In “normal” times, mortgage rates correlate closely with the 10 Year Treasury Bond. In other words, when the 10 Year moves higher so do mortgage rates, and vice versa. Also, “the spread” or the difference between the 10 Year […]Read More

What Your Clients Want to Know; Wage Inflation Too

All of our clients – past and present – want to know two things right now: (1) what is really happening to mortgage interest rates; and (2) what is happening to home values – particularly their own. I know this b/c we are getting so many inquiries from clients, and, more significantly, b/c so many […]Read More

Jumbo Market Lives; Inflation = Windfall; Why Lenders Are Terrified of Forbearances

I am repeating this b/c I am still getting so many questions: The Jumbo Market Definitely Lives. Jumbo buyers with 20% down can buy up to $1.6 million in CA and up to $1.4 million in Texas with 1st/2nd Combo Financing. I recently blogged about combo financing here. Traditional jumbo lenders remain in the marketplace […]Read More

5 Bold Predictions For The Post COVID-19 World; COVID-19 Updates; Reason to Refi

Forbes Publisher, Rich Karlgaard, published 5 Bold Predictions for the Post COVID-19 World. He imagined what we might see by the Spring of 2021 and predicted the following: A rebounding world economy with a fantastic global growth rate of 4%. Fully resumed global travel b/c human nature makes people want to travel no matter what. […]Read More

Why I Was So WRONG About Interest Rates Rising – Part CCXXIX

If you Google the word “Wrong,” the below picture pops up in the results: OK… that is a real photo taken at a holiday party (in a photo booth – thank you Danny Winkler) when I really did think rates were going to shoot up. BUT, I am pretty sure I was not thinking about […]Read More

What Moves Interest Rates

I’ve touched on interest rates often in recent months b/c the most recent drop has been so surprising. Examples: Are Low Rates the New Normal? Rates Hit 19-Month Low; Will They Stay Low Borrowers and agents alike are nevertheless still asking if rates will stay low or move lower, so I thought it was time […]Read More

“Rates Hit 19-Month Low” – Why? Will They Stay Low? Rate Roll-Downs

Rates hit a 19-month low and the headlines prompted some of our borrowers to ask about “rolling down” their locked-in rates. RATE “ROLL-DOWNS” Rates, however, have been hovering very close to their current levels for the last few months. So, while rates have bottomed out, the improvements have been marginal. When lenders lock in a […]Read More

Are Low Rates The “New Normal?” The Fed Is Irrelevant

For years I have been repeating the predictions of various market experts about how interest rates have to go up at some point. And for years, I have been dead wrong! My wrongness was only illuminated again with the recent dramatic drop in rates. All this only makes me think that low rates may now […]Read More

Inflation: The One Reason No Buyer Should Get Cold Feet

Everyone knows there are many reasons to buy a home, including: (1) enjoying the pride of ownership; (2) locking in a low interest rate; (3) fixing your housing payment; (4) taking advantage of tax savings; and (5) building equity, among other things. But, most people do not appreciate how important real estate can be as […]Read More

Is Inflation Back? Houses Are An Inflation Hedge!

INFLATION RAVAGED THE 1970s The only thing that ravaged the 1970s more than the bad music, hair and clothes was the high rate of inflation. High inflation rates hurt economies b/c they create uncertainty, increase interest rates and decrease purchasing power and economic investment, among other things. Inflation is primarily a result of the Fed […]Read More

Inflation Concerns Explained – How They Affect Real Estate

The Fed is expected to raise short term rates this month b/c employment numbers are adequately strong. But, one area that remains a concern is inflation, or the lack thereof. The Fed actually desires a little inflation, and they do not understand why there is so little. The WSJ had an article this morning on […]Read More

Why We Don’t Recommend 15 Year Loans – Future

We often have borrowers request 15 year fixed rate loans (or even shorter maturities), and we typically discourage them. The reason is that we expect significant inflation to set in over the next several years. Our reasoning is: why saddle oneself with a much higher payment now while money is more valuable? Our advice is […]Read More

Inflation Fears Could Push Rates Up Sooner Than Expected

Inflation fears are a major reason why rates may shoot up sooner than expected despite the Fed’s efforts to keep rates low. Buyer’s of Bonds, Mortgages and Mortgage-Backed Securities are concerned are about inflation b/c they want to make sure the return from their investment in these instruments exceeds the rate of inflation (or remains […]Read More

Real Estate as an Excellent Inflation Hedge

Buyers ask us all the time if we think “now is a good time to buy real estate.” We say “yes” for a variety of reasons (historically low rates, rock-bottom prices, cash flowing rentals, etc.) that we have highlighted many times. But, there is one reason we want to highlight b/c we have seen it […]Read More

We Repeat “Lock Now/Buy Now” for Good Reason

Our “Daily Comments” go out to thousands of professionals and get posted on the Web daily. We get nothing but accolades from our readers with an exception – a “know it all” college kid at UC Davis. He says things like “blah, blah, blah…lock now and buy now; you say it every week; we get […]Read More

Fence Sitters Should Fear Inflation

We mention this frequently but we think high inflation rates are on the horizon. High Inflation has two effects on housing (1) it drives rates and payments way up; and (2) it drives up real estate prices, as “hard assets” usually appreciate with inflation. We will focus ONLY on rate increases today, as an illustration […]Read More

Inflation Here; Buy Real Estate as Hedge, Investment, for Cash Flow

Inflation is clearly rearing its ugly head, as indicated by surging commodity prices. This is what pushed rates up yesterday, and this is a huge reason why we think Real Estate is a fantastic investment right now. Why to Invest in Real Estate: 1. Real Estate is a hard asset and an excellent inflation hedge; […]Read More