4% is New Psychological Level

I am working late this evening after taking some great family time with my young kids and their grandparents. You only live once, or so they say.

The term once seems so finite and hard to place into a quantum world.

No surprise I'm reading financial news and looking for nuggets to see the near future.

One theme developing is the news stories talking about 4% mortgage rates.  Here are some articles on the topic if you want to go deep on the topic:

http://money.cnn.com/2013/06/13/real_estate/mortgage-rate/

http://www.usatoday.com/story/money/personalfinance/2013/06/13/mortgage-rates-near-4/2420219/

http://www.bloomberg.com/news/2013-06-13/u-s-mortgage-rates-rise-for-a-sixth-straight-week.html

What do I think about it?

Well.....this should not be unexpected.  Why not?

Mortgage rates hit record lows.  Eventually there is a record low that will stay such a record for many years.  The Federal Reserve has made this a manipulated marketplace with their monthly quantitative easing.  They are about 85% of the buy side of this market.  Manipulated.....I said that already, right?

My gut tells me the record lows are now in our collective rear-view mirror.

Rates are not upwardly trending.  What is not yet known is the slope we ascend.  How fast will they rise?

That answer will be found in how the economy heals and when, and at what intervals, the Fed raises their Overnight Rate.

The mortgage marketplace is going through a shift from a predominantly refinance transaction market to one of predominantly purchase transactions.  The purchase market sure does not feel what I'd call robust.  This is based on my own conversations with clients, financial advisors, CPAs, Realtors and acquaintances.

Low inventory is a positive to the health of the purchase market.

Tight mortgage finance underwriting guidelines persist.  This slows how much activity can be handled based on the workloads of originators, processors, underwriters, closer and so on.  It deters possible buyers who have resistance and reservations to undertake, as my own client named it, their "financial colonoscopy" that is getting a mortgage loan approved these days.

It is tough out there.  Yes.  But, you know, it had the usual bumps but we still closed the above clients new home purchase in 28 days from application.

However, the seasoned mortgage folks, the ones in the business from the 1990's or earlier, they are the ones that will power this market.  New entrants should align with these people as their mentors.  To do so will provide a clear direction on how to do well in this line of work.

Well, rates are headed higher.  If you want to stay on top of where they head please stop by here from time to time.  Or, join my mailing list here.

I think about this stuff all day long so you don't have to.

Brett Grendahl
Contact Me