3 Big Things: 1. A look back at rates & inflation throughout history. 2. Home values are expected to double over the next few years. 3. Refinance now and, my advice, get cash out!

Hey there it’s time again for the three big things you need to know. I hope you find this very, very interesting because I certainly did. Pay attention whether you’re thinking about buying, refinancing or you’re just curious to know what’s going on in the economic field of mortgages and what rates are doing right now.

  1. So I went back and I did a little bit of research back to the 1970s. Now, a lot of you weren’t even born in the 1970s, but for those of you that were, you’ll remember. For those of you that weren’t, I think this is going to be a great lesson in history. So think about the 1970s…Oil prices jumped by 350%, massive layoffs and soaring inflation. So in the 70s it was the storm, but interest rates for fixed rate mortgages remained around 7.33%. Okay, so higher than today, But still 7.33%. Although throughout the 70s they remained below 9%, throughout the middle of the decade and in the 1980s, things started to peak. So in March of this year, we saw inflation rose to 7.9%. Now, I don’t believe it’s 7.9%, I think were much higher than that because in the inflation rate, they don’t consider housing, groceries or fuel. Well, what are you going to do, create a family budget with no housing, no groceries, no fuel? That’s ridiculous. But when we factor that in, I think inflation rate is much higher right now than 7.9%. But we go back in time again and inflation is causing anxiety right now, but it’s simply not comparable to the extraordinary events 40 years ago. So 1980s, we had the great recession and in the great recession we had the Iran crisis and interest rates soared to 16.35% in April of 1980, 16.35%!! Now, they briefly dropped to a staggering 12.18% in July of that year. In 1981, the devastating recession gripped the nation and mortgage rates peaked in October 16 of 1981 to 18.5%, Can you imagine? One year later, October 1982, inflation had finally fallen to a merciful 15%. Okay, I personally think we’re pretty close to 15% right now and you don’t hear that on the news, but you’re going to hear that from The Loan Arranger. Now, in 1983, mortgage rates dropped below 13% and although they briefly breached 14%, they never again hit 15%. On April 4, 1986, mortgage rates briefly returned to single digits. In 1987, the stock market crashed and interest rates rose again, mortgage rates fell below 9% during the entire 1980s. The 1990s began with rates around 10%. Now, we got the 1990s, the great cooling off period. Despite a brief spike at the tail of 1984 rates stayed below 9% for the entirety of 1990s. Then the 21st century, the great recession and the bursting of the dot com bubble. Then comes coronavirus. Each time already cheap money got even cheaper. In 2000 we started with mortgage rates just above 8%. Then in 2021, the recession hit. That spurred economic growth and lowered interest rates once again. By fall of that year, we were at 6.5%, where they remained despite some peaks and valleys. In 2008, when the housing crash sunk the global economy, rates plummeted again to below 5%. With the exception of two brief flare ups. In response to the pandemic, rates fell to historic lows below 3%. Borrowers became spoiled with the cheap money. That’s today’s rate, it’s running between 4.6% and 5.5%. Not near what it was 40 years ago. So yes, we were spoiled.
  2. It’s time to get a reality check and it’s still a great time to buy. Why? Because if you’re going to experience enormous appreciation values, and this is number two, values are expected double in the next 4-5 years. So don’t float your interest rate right now, lock! If you want to talk to me about extended locked periods, I have lock in rates that will lock you up to a year in advance, if you’re in contract.
  3. And then lastly, refinances. If you’re considering refinancing, refinance right now and do it for cash out. Don’t just do it to drop PMI, unless you’re already paying a super high interest rate.

Those are the three big things you need to know. I hope that was informative and I look forward to seeing you guys again next week. Same time have a great day.

#interestrates #mortgagerates #historyofrates #inflation #housing #groceries #fuel #thegreatrecession #floatingrate

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