While mortgage rates do not matter while the world is in this kind of turmoil, while humans are terrorizing each other and innocent children on both sides of the horror suffer…
War does move financial markets. When the market reopened on Tuesday, mortgage bonds rallied. Why would bad news be good news for interest rates? Because the supply and demand of mortgage bonds impacts the interest rate on a mortgage. In times of uncertainty, bonds can present as a safe haven for investors. So they flocked there on Tuesday morning and we saw an improvement on rates. We are hopeful it would stick but it turned out to be a dead cat bounce.
What is a dead cat bounce?
I learned this expression this week because it became relevant in the bond market. Imagine you throw a dead cat out a window from several stories up. It might bounce a bit, but the sad reality is that it’s still dead. Bonds were the dead cat, they bounced before we all realized they are still oversold and we went back to red drops for the rest of the week.
At this point it feels inappropriate to be using any analogies that relate to death so I’m going to switch gears.
Higher for Longer
Both inflation readings this week showed slight upticks – not good news. This proves that this strong labor market is supporting consumer spending. Of course that’s debatable because if you’re reading the full jobs report you make not confidently describe the jobs market as strong. And you might also talk to your friends and feel it yourself, folks are pinched. Maybe they are using their credit cards or maybe I’m just dead wrong and people are still rolling in extra dough. But regardless of all these theories, the numbers on inflation show spending is not slowing.
Charles Schwab’s managing director out of the UK said the question we are posing to the Federal Reserve and central banks around the world needs to shift from how many more rate hikes to a simple expectation that rates will be higher for longer. Basically, consumers will need to feel more pinched or pinched for longer before their spending habits change and in turn, the suppliers of the goods bring down their prices because the demand has cooled.
Strategies
I won’t be providing a new point of view when I say that we are in an inventory crisis. Stay with me though. I learned lots of new things this week. One of which was that millions of homes in the US are vacant. LendingTree did an analysis showing 5.5 MILLION vacant homes and not in the middle of B.F.E. These were found in the nation’s 50 largest metro areas. If I were a realtor, I would be scrambling to figure out how I locate these vacant homes in my market to approach the owners as potential sellers. These are the kind of scenarios where you could put together creative financing deals. I’m thinking subject to, assumable loans, seller carry financing or investor opportunities – just to mention a few.
If I were a buyer, I would be up my realtor’s ass to get this information and start doing some legwork.
To close with a little warning, be sure to get hyper-local with your data. National reports are showing that 32% of homes are selling above asking price. Most of you are here in Northern NV and we aren’t seeing that trend. If you are reading this from a different market, I’d love for you to chime in with what you’re seeing.