Mortgage Rates, Uncertainty and Opportunity: What History Can Teach Us
With mortgage rates once again pushing towards 7%, I've been thinking about something bigger than where rates go next.
I've worked in the mortgage industry through some very different periods of uncertainty. None were alike, but each offers some perspective on today's market.
The Financial Meltdown: Housing itself was at the center of the crisis. Home values fell, foreclosures surged and mortgage rates eventually moved significantly lower. For buyers and investors financially positioned to act, the opportunity was largely about price.
COVID: This time housing wasn't the problem. An outside event essentially shut down large parts of the economy. Massive intervention by the Federal Reserve, including purchases of mortgage-backed securities, helped drive mortgage rates to historic lows. The opportunity became financing.
Today: We also don't have 3% mortgage rates or the Federal Reserve aggressively buying mortgage-backed securities as it did during COVID—not to be confused with the more limited Treasury MBS intervention recently discussed.
Instead, we have rates in the high 6%s, higher housing inventory, slower appreciation and considerable economic and geopolitical uncertainty.
So where is the opportunity today?
Maybe there isn't one for you. And that's an important part of this discussion.
But for someone who is financially prepared and already has a reason to buy—a first home, move-up home, vacation property or investment—today's opportunity may be something different:
Negotiating leverage.
More choices. Longer market times. Motivated sellers. Potential price negotiations and seller concessions. And in some cases, less competition.
There's another lesson worth considering.
Mortgage rates began their dramatic move higher in 2022. Nearly four years later, we've heard plenty of predictions about when rates would come back down. There have been brief opportunities, but the sustained decline many expected hasn't materialized.
Maybe the lesson isn't that we need to get better at predicting rates.
Maybe it's that we need to make decisions that don't require our predictions to be right.
If a purchase only works because you're counting on refinancing at a lower rate later, that's a risk worth considering.
If the property and payment comfortably work today, however, and a future rate decline creates an opportunity to refinance, that's potential upside.
The Meltdown, COVID and today are three very different stories. The opportunities were different too.
And today's market certainly isn't right for everyone.
But history does remind us of something:
Uncertainty and opportunity can sometimes exist at the same time.
