Mortgage rate rising, lower house price?

Question

After the Trump victory, the bond market is really bad. This triggers a higher mortgage rate. The current 30 yr fixed is close to 4%. Does that mean the housing market will cool off more? What are your thoughts?

Chris Mason · Answer

That includes people that were lied to about where rates were at, at the preapproval stage, who are then told a very different number once actually in contract. All LOs either lie at the preapproval stage, or lose business to the folks that are lying. There is no third option as a mortgage lender. You lie or you lose business. I'm about to lose a deal right now because I refuse to copy Quicken Loans and quote 0.6% as a realistic property tax rate in LA County, CA, which means that "my" closing costs are several thousand dollars higher! (Hint: I as a lender do not pick the property tax rate, I can only pick how honest I am about it)

When rates go up a quarter, on top of having lied to someone by a quarter, the natural path of least resistance is to attribute the full ~0.5% difference to rates going up.

I typically qualify people 0.25%-0.375% higher than where rates are currently at for their particular scenario, and I show all my qualifying math, so my peeps going into contract right now currently think I'm a wizard because I'm mostly still honoring what I "quoted" or relatively close to it (I actually never "quote" people at the preapproval stage, I only qualify them, because quotes at the preapproval stage don't mean squat, but I get that when someone sees a number with a % next to it in a big spreadsheet with a bunch of math going on, they think it's a "quote").

Ken Teng · Answer

@Chris Mason 0.125-0.25? I am hearing a 0.5% increase in the bay area.

Chris Mason · Answer

I think my peers that are >75% refinance business are going to have trouble feeding their families. :P This is my little "I told you that wasn't a sustainable business model" moment where I get to gloat at them. Muahaha.

But, for homesellers and buyers, I've only ever had a single person respond to rates being 0.125% to 0.25% higher than expected by saying "oh then I'm not willing to pay the price for that house." Just one person.