Mortgage Report / Interest Rates

Crystal ball anyone?

The graph below is a history of the refinance index vs 30-year fixed rate.  What does history tell us about the future? In normal situations, it is widely accepted that everything, from galactical stars and planets to the electrons in an atom have a pattern to follow for ever and ever… But the year 2020 has been a norm breaking year. With the pandemic’s impact on economy here in the U.S. and all over the world, with the highest level of social unrest in our recent history and with the highest ever contested election in our country, property values keep rising and real estate market is booming in So Cal. Thanks to the low 30 year fixed rate mortgage.  I wouldn’t be surprised if the earth reverses its rotation around the sun before the year end…

The 2 graphs below show the refi index vs 30-year fixed rate and the purchase index vs 30-year fixed rate.

The refinances peaked early this year when the rates were in the mid 3s and they have tapered off towards the end of the year, even though the rates have lowered to 2s.  Why is that? For some who refinanced early this year, may not be cost effective to refinance again for only .5% or so savings in the rates. For others, they may not qualify due to loss of income caused by the pandemic and lastly, some maybe half asleep or too involved in politics and social matters, overlooking their finances. Well, congratulations to the first group, my thoughts and prayers go out to the second group, and for the last group, here is your wake up call.  Rates may not last this low forever and if they do into the next year, I guarantee you, with the impact of the unemployment caused by the pandemic surfacing in our economy and the upcoming new policies by new administration in the horizon the lending guidelines will be tightened and toughened soon, making qualifications more difficult, especially for the self-employed and commission earners in certain industries.

Take advantage of the lower rates while you can.

A quick reminder to So Cal property owners: The market action index reported by altos.com shows a strong seller advantage in almost every market in So Cal.  If you have to sell your properties in the next 12 months, now it’s the best time. Low rates and low inventory has created a buyer frenzy like no other time in history.