Mortgage Rate Collapse: Suddenly the game has changed

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Mortgage Rate Collapse: Suddenly the game has changed

AJ WongBusiness Member
Real Estate Broker · Oregon & California Coast · Member since 2022 · 822 posts · 695 votes

Mortgage rates declined to their lowest levels in over a year, a sample of more than a dozen industry professionals said they were quoting most borrowers in the high 5% to low 6% range on government loans and in the mid-6% range for conventional mortgages. High credit profile DSCR borrowers are seeing rates in the 7% range.

Quotes vary based on credit scores, points and other factors.

The lower rates haven't quite had a foothold in the market yet, meaning active buyers don't have much competition...yet. 

If lower rate trends continue and stay consistent, expect the news to reach sidelined buyers and an uptick in buyer activity towards the end of summer into the anticipated September rate cuts. 

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V.G JasonPro Member
Investor · Member since 2022 · 3k+ posts · 3k+ votes
2y

This can happen all it wants to. You can get a million more applications on Monday morning, it's irrelevant if the applications aren't qualified. 

Anyone who bought a low rate, isn't re-fi'ing. Anyone who bought a high rate, isn't re-fi'ing cause it's a miniscule change and cause they're likely underwater. Anyone who is a first time home buyer, likely isn't equipped with a downpayment or a solid profile right now in a precarious time as unemployment ticks up. The small % that are? Great for them.

The game hasn't changed, it's pricing for a fall. It's a proactive, not a reactive one. It should tell you what's really behind the curtains-- a nice little hit.

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  • Matthew CrivelliBusiness Member
    Lender · MA · Member since 2021 · 1k+ posts · 1k+ votes
    2y

    We are quoting 700+ credit borrowers at 6.57% on a 30Y fixed Non QM DSCR purchase at 75% of purchase. In the last week the 5Y treasury yields deflated 50bps. Really good to see!

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  • Joseph Chiofalo
    Banker · Henderson, NV · Member since 2023 · 316 posts · 73 votes
    2y

    HI AJ, 

    We've seen an uptick in applications this week as the rates dropped. 

    The DSCR products for investors are pricing below 7% on a 30 year fixed with healthy credit and reserves.

    Its a great time for investors to tap into the equity they've accumulated over the past few years on a cash out refinance with improved terms. 

    1Reply
  • V.G JasonPro Member
    Investor · Member since 2022 · 3k+ posts · 3k+ votes
    2y

    This can happen all it wants to. You can get a million more applications on Monday morning, it's irrelevant if the applications aren't qualified. 

    Anyone who bought a low rate, isn't re-fi'ing. Anyone who bought a high rate, isn't re-fi'ing cause it's a miniscule change and cause they're likely underwater. Anyone who is a first time home buyer, likely isn't equipped with a downpayment or a solid profile right now in a precarious time as unemployment ticks up. The small % that are? Great for them.

    The game hasn't changed, it's pricing for a fall. It's a proactive, not a reactive one. It should tell you what's really behind the curtains-- a nice little hit.

    4Reply
  • Chris SeveneyBusiness Member
    Moderator
    Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes
    2y

    @V.G Jason

    I agree

    Even if fed reduces rates it will take months before it has any impact

    The job market is far worse than media is making it out to be due to it being an election year. Rates will come down and homes will hit the market but you will continue to have the problem that most people cannot afford a home and the numbers do not work for investment purposes.

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  • Chris Martin
    Investor · Willow Spring, NC · Member since 2009 · 5k+ posts · 3k+ votes
    2y

    Glad I refreshed before posting. I agree with both prior posters. @Chris Seveney post was more succinct than mine.  

    Anecdotally, the last rental (LTR) I sold was to an OO, Owner Occupant. Of the 50+ showings, no investors (there were maybe 2-3 at most) were interested. The numbers only appeal to OO, and for sure affordability is key. For the NOO "motivated buyers," some of them buying other people's properties in this market, will end up like the 2006-7 "FOMO investment" buyers who lost their property at the courthouse steps in 2010-12. 

    I post this because, in my area, the numbers just don't work, and worse, rents are under increasing pricing pressure. Even unleveraged, 4-week T-bills have better return in most cases. So (directed at motivated buyers) be patient. Keep in mind, I'm a long-term rental operator and hold (typically) for a generation or more. I operate in a pretty solid market but remain on the sidelines, as I have for a while. 

    Interestingly, to me at least, the 4-week T-bills didn't fall much in the last week or so while longer-term bills did.

    1Reply
  • V.G JasonPro Member
    Investor · Member since 2022 · 3k+ posts · 3k+ votes
    2y
    Quote from @Chris Seveney:

    @V.G Jason

    I agree

    Even if fed reduces rates it will take months before it has any impact

    The job market is far worse than media is making it out to be due to it being an election year. Rates will come down and homes will hit the market but you will continue to have the problem that most people cannot afford a home and the numbers do not work for investment purposes.

    Mortgage rates are simply reflecting a price of front running the market.

    Those gullible will fall for the bait. Just stay patient folks, this is telling you exactly what it's telling you. We need to drastically cut rates to entice buyers, it's the start of the fall. A crash will not happen due to inventory(local-regional factors at play), but you're pricing for general correction upon the eve of the slow and doomy Q4. Nothing like that sounds promising. 


    0Reply
  • V.G JasonPro Member
    Investor · Member since 2022 · 3k+ posts · 3k+ votes
    2y
    Quote from @Chris Martin:

    Glad I refreshed before posting. I agree with both prior posters. @Chris Seveney post was more succinct than mine.  

    Anecdotally, the last rental (LTR) I sold was to an OO, Owner Occupant. Of the 50+ showings, no investors (there were maybe 2-3 at most) were interested. The numbers only appeal to OO, and for sure affordability is key. For the NOO "motivated buyers," some of them buying other people's properties in this market, will end up like the 2006-7 "FOMO investment" buyers who lost their property at the courthouse steps in 2010-12. 

    I post this because, in my area, the numbers just don't work, and worse, rents are under increasing pricing pressure. Even unleveraged, 4-week T-bills have better return in most cases. So (directed at motivated buyers) be patient. Keep in mind, I'm a long-term rental operator and hold (typically) for a generation or more. I operate in a pretty solid market but remain on the sidelines, as I have for a while. 

    Interestingly, to me at least, the 4-week T-bills didn't fall much in the last week or so while longer-term bills did.

    Just hang your cash in a HYSA, rotate into buying BDCs before ex-div date, rotate back to HYSA and dropping into smashed mega-cap equities and quality cash-flowing small caps. Let this simmer down and throw some aggressive bids into quality properties upon rate cuts timing(so post labor day). 

    Don't jump into the fray of a reduced rate, it's just gamesmanship. 
    2Reply
  • John MorganPro Member
    Rental Property Investor · Grand Prairie, TX · Member since 2018 · 2k+ posts · 2k+ votes
    2y

    @Matthew Crivelli

    Those are great rates. Do you lend in TX?

    0Reply
  • John MorganPro Member
    Rental Property Investor · Grand Prairie, TX · Member since 2018 · 2k+ posts · 2k+ votes
    2y

    Expect a surge in applications from people on the sidelines. It’s made me jump back in the game.

    1Reply
  • AJ WongBusiness Member
    OP
    Real Estate Broker · Oregon & California Coast · Member since 2022 · 822 posts · 695 votes
    2y

    10 Yr Treasury is down to 3.791...that's nearly 80 bps in two weeks. 

    If interest rate trends continue or hold, we're entering a subtle new phase in the market. Expect a spike in mortgage applications (I'm not sure what other lenders are seeing) but we've issued 20+ Pre Quals the past few weeks and the majority of borrower inquiries are very well qualified. 

    The end of summer pulse will absorb some of the elevated inventory. Buyers will maintain their slight advantage in smaller markets and anticipate strong competition is top markets. 

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  • John LitzPro Member
    Reno NV · Member since 2022 · 74 posts · 56 votes
    2y

    Rates will need to drop at least another point before I will even consider refi. More in a stabilize/optimize time for my properties. If I find a great deal of course I will jump but that is always the case regardless of rates

    0Reply
  • Jeremiah Dunakin
    Member since 2022 · 186 posts · 192 votes
    2y

    .5% is a nothing burger.its just for political showmanship and people have for years been saying rates wil come down between summer and fall. Gas prices will also fall.  People at 2.7% ain’t moving People at 5.25 ain’t moving 6.5/7 don’t move the needle. 

    0Reply
  • V.G JasonPro Member
    Investor · Member since 2022 · 3k+ posts · 3k+ votes
    5mo

    This is why you don't predict, you just prepare. 

    2Reply
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