Today’s mortgage rates are top-of-mind for many homebuyers right now. As a result, if you’re thinking about buying for the first time or selling your current house to move into a home that better fits your needs, you may be asking yourself these two questions: 

1. Why Are Mortgage Rates So High?
2. When Will Rates Go Back Down?

Here’s context you need to help answer those questions.

1. Why Are Mortgage Rates So High? 

The 30-year fixed-rate mortgage is largely influenced by the supply and demand for mortgage-backed securities (MBS). According to Investopedia: 

“Mortgage-backed securities (MBS) are investment products similar to bonds. Each MBS consists of a bundle of home loans and other real estate debt bought from the banks that issued them . . . The investor who buys a mortgage-backed security is essentially lending money to home buyers.”

Demand for MBS helps determine the spread between the 10-Year Treasury Yield and the 30-year fixed mortgage rate. Historically, the average spread between the two is 1.72 (see chart below):

Last Friday morning, the mortgage rate was 6.85%. That means the spread was 3.2%, which is almost 1.5% over the norm. If the spread was at its historical average, mortgage rates would be 5.37% (3.65% 10-Year Treasury Yield + 1.72 spread).

This large spread is very unusual. As George Ratiu, Chief Economist at Keeping Current Matters (KCM), explains:

“The only times the spread approached or exceeded 300 basis points were during periods of high inflation or economic volatility, like those seen in the early 1980s or the Great Financial Crisis of 2008-09."

The graph below uses historical data to help illustrate this point by showing the few times the spread has increased to 300 basis points or more:

The graph shows how the spread has come down after each peak. The good news is, that means there’s room for mortgage rates to improve today.

So, what’s causing the larger spread and making mortgage rates so high today?

The demand for MBS is heavily influenced by the risks associated with investing in them. Today, that risk is impacted by broader market conditions like inflation and fear of a potential recession, the Fed’s interest rate hikes to try to bring down inflation, headlines that create unnecessarily negative narratives about home prices, and more.

Simply put: when there’s less risk, demand for MBS is high, so mortgage rates will be lower. On the other hand, if there’s more risk with MBS, demand for MBS will be low, and we’ll see higher mortgage rates as a result. Currently, demand for MBS is low, so mortgage rates are high.

2. When Will Rates Go Back Down?

Odeta Kushi, Deputy Chief Economist at First American, answers that question in a recent blog:

“It’s reasonable to assume that the spread and, therefore, mortgage rates will retreat in the second half of the year if the Fed takes its foot off the monetary tightening pedal and provides investors with more certainty. However, it’s unlikely that the spread will return to its historical average of 170 basis points, as some risks are here to stay.”

Bottom Line

The spread will shrink when the fear investors feel is eased. That’ll mean we should see mortgage rates moderate as the year goes on. However, when it comes to forecasting mortgage rates, no one can know for sure exactly what will happen.

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When you look at the numbers today, the one thing that stands out is the strength of this housing market. We can see this is one of the most foundationally strong housing markets of our lifetime – if not the strongest housing market of our lifetime. Here are two fundamentals that prove this point. 

1. The Current Mortgage Rate on Existing Mortgages

First, let’s look at the current rate on existing mortgages. According to the Federal Housing Finance Agency (FHFA), as of the fourth quarter of last year, over 80% of existing mortgages have a rate below 5%. That’s significant. And, to take that one step further, over 50% of mortgages have a rate below 4% (see graph below):

Now, there’s a lot of talk in the media about a potential foreclosure crisis or a rise of homeowners defaulting on their loans, but consider this. Homeowners with such good mortgage rates are going to work as hard as they can to keep that mortgage and stay in their homes. That’s because they can't go out and buy another house, or even rent an apartment, and pay what they do today. Their current mortgage payment is more affordable. Even if they downsize, with today’s higher mortgage rates, it could cost more.

Here's why this gives the housing market such a solid foundation today. Having so many homeowners with such low mortgage rates helps us avoid a crisis with a flood of foreclosures coming to market like there was back in 2008.

2. The Amount of Homeowner Equity

Second, Americans are sitting on tremendous equity right now. According to the Census and ATTOM, roughly two-thirds (around 68%) of homeowners have either paid off their mortgage or have at least 50% equity (see chart below):

In the industry, the term for this is equity rich. This is significant because if you think back to 2008, some people had to make the difficult decision to walk away from their homes because they owed more on the home than it was worth.

But this time, things are different because homeowners have built up so much equity over the past few years alone. And, when homeowners have that much equity, it helps us avoid another wave of distressed properties coming onto the market like we saw during the crash. It also creates an extremely strong foundation for today’s housing market.

Bottom Line

We are in one of the most foundationally strong housing markets of our lifetime because homeowners are going to fight to keep their current mortgage rate and they have a tremendous amount of equity. This is yet another reason things are fundamentally different than in 2008.

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Real Estate Is Still Considered the Best Long-Term Investment

With all the headlines circulating about home prices and rising mortgage rates, you may wonder if it still makes sense to invest in homeownership right now. A recent poll from Gallup shows the answer is yes. In fact, real estate was voted the best long-term investment for the 11^th consecutive year, consistently beating other investment types like gold, stocks, and bonds (see graph below):

If you’re thinking about purchasing a home, let this poll reassure you. Even with everything happening today, Americans recognize owning a home is a powerful financial decision.

Why Do Americans Still Feel So Positive About the Value of Investing in a Home?

Purchasing real estate has typically been a solid long-term strategy for building wealth in America. As Lawrence Yun, Chief Economist at the National Association of Realtors (NAR), notes:

“. . . homeownership is a catalyst for building wealth for people from all walks of life. A monthly mortgage payment is often considered a forced savings account that helps homeowners build a net worth about 40 times higher than that of a renter.”

That’s because owning a home grows your net worth over time as your home appreciates in value and as you pay down your mortgage. And, since building that wealth takes time, it may make sense to start as soon as you can. If you wait to buy and keep renting, you’ll miss out on those monthly housing payments going toward your home equity.

Bottom Line

Buying a home is a powerful decision. So, it’s no wonder so many people view real estate as the best long-term investment. If you’re ready to start on your own journey toward homeownership, let’s connect today.

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Oops! Home Prices Didn’t Crash After All

During the fourth quarter of last year, many housing experts predicted home prices were going to crash this year. Here are a few of those forecasts:

Jeremy Siegel, Russell E. Palmer Professor Emeritus of Finance at the Wharton School of Business:

“I expect housing prices fall 10% to 15%, and the housing prices are accelerating on the downside.”

Mark Zandi, Chief Economist at Moody’s Analytics:

"Buckle in. Assuming rates remain near their current 6.5% and the economy skirts recession, then national house prices will fall almost 10% peak-to-trough. Most of those declines will happen sooner rather than later. And house prices will fall 20% if there is a typical recession.” 

Goldman Sachs: 

“Housing is already cooling in the U.S., according to July data that was reported last week. As interest rates climb steadily higher, Goldman Sachs Research’s G-10 home price model suggests home prices will decline by around 5% to 10% from the peak in the U.S. . . . Economists at Goldman Sachs Research say there are risks that housing markets could decline more than their model suggests.”

The Bad News: It Rattled Consumer Confidence

These forecasts put doubt in the minds of many consumers about the strength of the residential real estate market. Evidence of this can be seen in the December Consumer Confidence Survey from Fannie Mae. It showed a larger percentage of Americans believed home prices would fall over the next 12 months than in any other December in the history of the survey (see graph below). That caused people to hesitate about their homebuying or selling plans as we entered the new year.

The Good News: Home Prices Never Crashed

However, home prices didn’t come crashing down and seem to be already rebounding from the minimal depreciation experienced over the last several months. 

In a report just released, Goldman Sachs explained:

“The global housing market seems to be stabilizing faster than expected despite months of rising mortgage rates, according to Goldman Sachs Research. House prices are defying expectations and are rising in major economies such as the U.S.,. . . ”

Those claims from Goldman Sachs were verified by the release last week of two indexes on home prices: Case-Shiller and the FHFA. Here are the numbers each reported:

Home values seem to have turned the corner and are headed back up.

Bottom Line

When the forecasts of significant home price appreciation were made last fall, they were made with megaphones. Mass media outlets, industry newspapers, and podcasts all broadcasted the news of an eminent crash in prices.

Now, forecasters are saying the worst is over and it wasn’t anywhere near as bad as they originally projected. However, they are whispering the news instead of using megaphones. As real estate professionals, it is our responsibility – some may say duty – to correct this narrative in the minds of the American consumer.

Owning a Home in Boerne Helps Protect Against Inflation

You’re probably feeling the impact of high inflation every day as prices have gone up on groceries, gas, and more. If you’re a renter, you’re likely experiencing it a lot as your rent continues to rise. Between all of those elevated costs and uncertainty about a potential recession, you may be wondering if it still makes sense to buy a home in Boerne today. The short answer is – it does. Here’s why. 

Homeownership in Boerne TX actually shields you from the rising costs inflation brings.

Freddie Mac explains how: 

“Not only will buying today help you begin to build equity, a fixed-rate mortgage can stabilize your monthly housing costs for the long-term even while other life expenses continue to rise – as has been the case the past few years.”

Unlike rents, which tend to rise with time, a fixed-rate mortgage payment is predictable over the life of the mortgage (typically 15 to 30 years). And, when the cost of most everything else is rising, keeping your housing payment stable is especially important.

The alternative to homeownership is renting – and rents tend to move alongside inflation. That means as inflation goes up, your monthly rent payments tend to go up, too (see graph below):

A fixed-rate mortgage allows you to protect yourself from future rent hikes. With inflation still high, when your rental agreement comes up for renewal, your property manager may decide to increase your payments to offset the impact of inflation. Maybe that’s why, according to a recent survey, 73% of property managers plan to raise rents over the next two years.

 Having your largest monthly expense remain stable in a time of economic uncertainty is a major perk of Boerne homeownership. If you continue to rent, you don’t have that same benefit and aren’t as protected from rising costs.

Bottom Line

A stable housing payment is especially important in times of high inflation. Let’s connect so you can learn more and start your journey to homeownership today.

Recent Blog Posts to read include:

• Tips and Pointers for Smart Home Warranty Shopping
• Tips and Pointers for Smart Home Warranty Shopping
• Why Buyers in Boerne Texas Need an Expert Agent by Their Side

Tips and Pointers for Smart Home Warranty Shopping

When it comes to protecting your home and its appliances, a home warranty can be a valuable investment. A home warranty is a contract that covers the cost of repairs or replacement of household appliances and systems. It offers peace of mind to many homeowners, knowing they are protected against unexpected expenses that may arise from home repairs. However, not all warranty providers are created equal, and it’s essential to do your due diligence when shopping for a home warranty. From Charley and Alisa Wasson of the Laughy Hilger Group, here are tips to help you make an informed decision.

Look for Comprehensive Coverage

When shopping for a home warranty, it is essential to look for a coverage that meets your specific needs. Before signing up for a warranty, read the terms and conditions to understand what equipment and systems are covered. The best warranties cover appliances like washing machines, refrigerators, and ovens, as well as HVAC, plumbing, and electrical systems.

Research Different Companies

It is essential to do your research before choosing a home warranty provider. Look up customer reviews and ratings online to get a sense of what others have experienced with the company. Additionally, you can also look up consumer advocacy organizations to see how different companies rank. Researching different companies can help you understand which offers the best services and deals.

Ask Questions

Make sure to ask questions when shopping for a home warranty. For instance, what are the specific items covered by the warranty, and what are not? How does the company handle claims, and what is the turnaround time for repairs? How does the company handle disputes or unsatisfied customers? The more you know about the company, the better informed you can be when making a decision.

Compare Offers Side by Side

One of the best ways to ensure you get the best home warranty deal is to compare offers side by side. Look at different providers in your area and compare their offerings, costs, and coverage. This will help you make an informed decision on which provider to use.

Screened Contractors

The contractors who perform appliance and system repairs will be a crucial part of the home warranty experience. It is essential to ensure that the warranty company hires only qualified and experienced contractors. Some providers have a rigorous screening process for contractors, so ensure this is something the provider requires. You can also ask for references and call them to ensure the contractor is reliable.

Verify Coverage Length

When signing up for a home warranty, it’s important to check the length of coverage. Most companies offer one-year contracts, but some providers offer longer or shorter contracts. You should understand the length of the plan and know when coverage starts and ends.

Keep Detailed Notes and Records

When it comes to home warranties, it’s vital to keep documentation of everything, including maintenance records, service calls, and repair receipts. Keep them in a digital PDF format to keep them more organized and easily accessible. Fortunately, there are tools available to help you manage everything about your PDFs, whether your goal is to delete PDF pages or change the orientation of individual pages. Keeping detailed records will help you file claims more efficiently and can even help aid in the resale of your home.

A home warranty is an investment that can save you significant amounts of money in the long run. It is essential to look for comprehensive coverage, research different companies, ask questions, compare offers side-by-side, determine if contractors are screened by the company, and check the coverage period length. Additionally, keeping detailed records is essential. By following the tips above, you can make an informed decision and rest assured that your home’s appliances are protected.

Tips and Pointers for Smart Home Warranty Shopping

When it comes to protecting your home and its appliances, a home warranty can be a valuable investment. A home warranty is a contract that covers the cost of repairs or replacement of household appliances and systems. It offers peace of mind to many homeowners, knowing they are protected against unexpected expenses that may arise from home repairs. However, not all warranty providers are created equal, and it’s essential to do your due diligence when shopping for a home warranty. From Charley and Alisa Wasson of the Laughy Hilger Group, here are tips to help you make an informed decision.

Look for Comprehensive Coverage

When shopping for a home warranty, it is essential to look for a coverage that meets your specific needs. Before signing up for a warranty, read the terms and conditions to understand what equipment and systems are covered. The best warranties cover appliances like washing machines, refrigerators, and ovens, as well as HVAC, plumbing, and electrical systems.

Research Different Companies

It is essential to do your research before choosing a home warranty provider. Look up customer reviews and ratings online to get a sense of what others have experienced with the company. Additionally, you can also look up consumer advocacy organizations to see how different companies rank. Researching different companies can help you understand which offers the best services and deals.

Ask Questions

Make sure to ask questions when shopping for a home warranty. For instance, what are the specific items covered by the warranty, and what are not? How does the company handle claims, and what is the turnaround time for repairs? How does the company handle disputes or unsatisfied customers? The more you know about the company, the better informed you can be when making a decision.

Compare Offers Side by Side

One of the best ways to ensure you get the best home warranty deal is to compare offers side by side. Look at different providers in your area and compare their offerings, costs, and coverage. This will help you make an informed decision on which provider to use.

Screened Contractors

The contractors who perform appliance and system repairs will be a crucial part of the home warranty experience. It is essential to ensure that the warranty company hires only qualified and experienced contractors. Some providers have a rigorous screening process for contractors, so ensure this is something the provider requires. You can also ask for references and call them to ensure the contractor is reliable.

Verify Coverage Length

When signing up for a home warranty, it’s important to check the length of coverage. Most companies offer one-year contracts, but some providers offer longer or shorter contracts. You should understand the length of the plan and know when coverage starts and ends.

Keep Detailed Notes and Records

When it comes to home warranties, it’s vital to keep documentation of everything, including maintenance records, service calls, and repair receipts. Keep them in a digital PDF format to keep them more organized and easily accessible. Fortunately, there are tools available to help you manage everything about your PDFs, whether your goal is to delete PDF pages or change the orientation of individual pages. Keeping detailed records will help you file claims more efficiently and can even help aid in the resale of your home.

A home warranty is an investment that can save you significant amounts of money in the long run. It is essential to look for comprehensive coverage, research different companies, ask questions, compare offers side-by-side, determine if contractors are screened by the company, and check the coverage period length. Additionally, keeping detailed records is essential. By following the tips above, you can make an informed decision and rest assured that your home’s appliances are protected.

Why Buyers in Boerne Texas Need an Expert Agent by Their Side

The process of buying a home for sale in Boerne Texas can feel a bit intimidating, even under normal circumstances. But today's market is still anything but normal. There continues to be a very limited number of homes for sale, and that’s creating bidding wars and driving home prices in Boerne back up as buyers compete over the available homes.

Navigating all of this can be daunting if you’re trying to do it alone. That’s why having a skilled expert to guide you through the home buying process is essential, especially today. Bankrate shares this perspective: 

"Advice and guidance from a professional real estate agent can be invaluable, particularly amid a hot or unpredictable housing market."

Here are just a few of the ways a real estate expert makes a big difference: 

• Experience – Real estate professionals know the ins and outs of what’s happening today, how it impacts buyers, and how to navigate any hurdles that may pop up.
• Education – Knowledge is power when it comes to buying a home in Boerne. Your advisor will simply and effectively explain market conditions and translate what they mean for you so you can feel confident in your decision. 
• Negotiations – Your real estate advisor advocates for your best interests. Having an expert on your side provides assistance with the purchase agreement. An agent can also help you negotiate potential seller concessions if the inspection reveals issues with the home.  
• Contracts – Real estate advisors guide you through the disclosures and contracts necessary in today’s heavily regulated environment. 
• Pricing – Making an offer and negotiating with a seller can be one of the most difficult and stressful parts of the homebuying process. A skilled Boerne agent will help you understand what similar homes are selling for so you have the full picture of what you may want to offer.

All of these reasons combined may be why 86% of recent buyers used an agent according to the latest Home Buyers and Sellers Generational Trends Report from the National Association of Realtors (NAR). NAR also has this to say about why an agent is so essential today: 

“A great real estate agent will guide you through the home search with an unbiased eye, helping you meet your buying objectives while staying within your budget. Agents are also a great source when you have questions about local amenities, utilities, zoning rules, contractors, and more.” 

What’s the Key To Choosing the Right Expert?

It starts with trust. You’ll want to know you can trust the advice they’re giving you, so you need to make sure you’re connected with a true professional. No one can provide perfect advice because it’s impossible to know exactly what’s going to happen at every turn – especially in today’s market. But a true professional can give you the best possible advice based on the information and situation at hand. 

They’ll help advocate for you throughout the process and coach you on the essential knowledge you need to make confident decisions. That’s exactly what you want and deserve. 

Bottom Line

It’s critical to have an expert on your side who is skilled in navigating today’s housing market. If you’re planning to buy a home this year, let’s connect so you have a real estate advisor on your side to give you the best advice and guide you along the way. Charley and Alisa are here for you.  210-478-8555.  Let's get started!

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This stunning 4 bedroom home in New Braunfels is the perfect place to call home. Lowest priced with 3 car garage in NB! With its spacious layout, modern finishes, and abundance of natural light, this home is sure to impress. It even has a dedicated office space for those working from home!  The home features a large living room and a gourmet kitchen with granite countertops, a modern backsplash, and stainless steel appliances. The primary bedroom is located downstairs and features a walk-in closet and en suite bathroom with spa shower. There are also three additional bedrooms and a large game room with a high ceiling upstairs.  You will enjoy the three-car garage, plus a large, fully fenced backyard with a covered patio, perfect for entertaining family and friends.   This home is located in a quiet neighborhood close to schools, shopping, and restaurants.  Don't miss out on this amazing opportunity to own a beautiful home in New Braunfels! Expected to sell quickly, you are encouraged to see it quickly!

Call Charley for information at 210-478-8555

See more pictures here:

Take a video tour of it here:

How to get your central air system inspected and tuned up for free from CPS

CPS wants to save you electricity!  If you are a CPS customer and own your home, and your HVAC is over a year old, you are probably eligible for a free HVAC check from CPS!  You can sign up for this, and get more information at their website at this link.

https://resi-savenow.cpsenergy.com/cps-energy/savings/ac-tune-up/register/