1% Less, 5 Million More: The Significant Impact of Dropping Mortgage Rates
webadmin • July 19, 2024
1% Less, 5 Million More: The Significant Impact of Dropping Mortgage Rates
In today's housing market, mortgage rates stand at about 7.5% for a 30-year fixed-rate loan. While these rates seem high compared to the historically low rates below 4% in 2020 and 2021, they are not unusually high when viewed through a broader historical lens.
"You have an entire generation of homebuyers that can't imagine rates above 6%," notes Danielle Hale, chief economist at Realtor.com, pointing out the generational shift in rate expectations. For those who remember the near 20% mortgage rates of the 1980s, today's figures seem more reasonable. This context is vital for understanding the current state of mortgage rates.
Historically, a 7% mortgage is more the norm, with 4% seen as an outlier. Understanding this can help set realistic expectations for buyers and investors in today's market.
In conclusion, while the allure of lower future rates is strong, the current economic indicators and market conditions suggest that taking action now, with a strategy to refinance later, is a prudent decision. This proactive approach ensures that prospective homeowners can navigate the market effectively, avoiding the pitfalls of waiting for a "perfect rate" that may not return in the near future.
"You have an entire generation of homebuyers that can't imagine rates above 6%," notes Danielle Hale, chief economist at Realtor.com, pointing out the generational shift in rate expectations. For those who remember the near 20% mortgage rates of the 1980s, today's figures seem more reasonable. This context is vital for understanding the current state of mortgage rates.
The Unlikelihood of Returning to 4% Mortgages
Despite hopeful buyers wishing for lower rates, experts, including those from Realtor.com, suggest that the days of 4% mortgages are not likely to make a comeback anytime soon. Predictions hold that rates might ease to around 6.5% by the year's end.Historically, a 7% mortgage is more the norm, with 4% seen as an outlier. Understanding this can help set realistic expectations for buyers and investors in today's market.
The Current Housing Market Dynamics
Buyers and Sellers in a Holding Pattern
The housing market currently is experiencing a unique form of stasis. Potential homebuyers are delaying purchases in hopes of a decrease in interest rates, and sellers are waiting for better selling conditions. This waiting game has created an equilibrium where not much movement occurs on either side. Such a situation makes it challenging for the market to gain any momentum.Federal Reserve's Influence on Mortgage Rates
Chair Jerome Powell of the Federal Reserve has indicated optimism about reaching inflation targets, which could lead to lower interest rates ahead of schedule. Traders have reacted to Powell’s recent statements and the latest inflation data by betting on rate cuts starting possibly in September, with more expected later in the year. This anticipation affects both current mortgage rates and market activity, giving prospective buyers something to consider when planning their purchases.Strategic Mortgage Decisions for Prospective Homeowners
Why Waiting May Not Be Wise
Given the potential for mortgage rates to drop by 1%, an estimated five million additional buyers could enter the market. This increase in buyers could drive up home prices and competition, making it strategically sound to buy now and refinance later. Purchasing at current rates with the plan to refinance when rates decrease can maximize buying power and secure desirable terms in the long run.The Advantage of Buying Now and Refinancing Later
For those looking to enter the housing market, the current rate environment suggests that buying sooner rather than later might be the best move. Securing a home now allows homeowners to take advantage of refinancing options when rates drop. This approach not only positions buyers to benefit from potential rate reductions but also secures their investment against price escalations.In conclusion, while the allure of lower future rates is strong, the current economic indicators and market conditions suggest that taking action now, with a strategy to refinance later, is a prudent decision. This proactive approach ensures that prospective homeowners can navigate the market effectively, avoiding the pitfalls of waiting for a "perfect rate" that may not return in the near future.
Here at Luminate Home Loans, we’re always looking for ways to offer more value to our clients and partners. That’s why we’re thrilled to announce that we’re now a wholly owned subsidiary of Luminate Bank®—and soon, we’ll officially transition under the Luminate Bank® name.
For years, homebuyers have been hoping for a return to the ultra-low mortgage rates seen during the pandemic. But as we move through 2025, it’s becoming increasingly clear that today’s rates—hovering between 6% and 8%—aren’t going anywhere.
Luminate Bank® Welcomes Josh Eifert as Chief Financial Officer, Honoring Legacy of Dave Turk [Minneapolis, Minn.] – [2/4/2025] – Luminate Bank® is proud to announce the appointment of Josh Eifert as its new Chief Financial Officer, succeeding Dave Turk, who has played a pivotal role in shaping the company's strong financial foundation. Josh brings a wealth of experience and strategic vision to Luminate Bank, with 26 years in the banking industry. Most recently, Josh served as CFO at Tradition Capital Bank in Edina, Minnesota, where he led the financial strategy during its remarkable growth from $300 million to more than $2.5 billion in total assets. Before his tenure as CFO, Josh contributed to Tradition Capital Bank in other key financial roles. He began his career with Norwest and Wells Fargo Banks, gaining extensive expertise in financial and operational capacities. Luminate Bank's leadership transition reflects the company's thoughtful succession planning, ensuring its financial strategies remain robust and forward focused. Under the leadership of Dave Turk, Luminate Bank has built an exceptional financial infrastructure, delivering consistent results and creating a foundation that positions the company for continued success. Luminate Bank's CEO, Marc Campbell, shared his confidence in the appointment: "Josh not only brings exceptional financial acumen and strategic insight to Luminate Bank, but he also embodies the principles that define our organization: integrity, innovation, and a steadfast commitment to excellence," Luminate Bank's CEO, Marc Campbell, shared with confidence. "His leadership will ensure our financial strategies succeed and inspire confidence across all who depend on us." "I am honored to join Luminate Bank at such an exciting time. The company's remarkable history of financial excellence and its forward-thinking approach align perfectly with my values and vision," stated Josh Eifert. "I look forward to collaborating with the talented leadership team to build on this strong foundation and drive continued success for our customers, employees, and stakeholders." Josh graduated from the University of Minnesota with a degree in finance and completed the Graduate School of Banking at Colorado. CEO Marc Campbell expressed gratitude for retiring CFO Dave Turk's contributions, saying, "Dave has been instrumental in positioning Luminate as a financial leader. His dedication, insight, and stewardship will always be a part of our company's legacy." Josh Eifert will officially assume his role on February 18, 2025. About Luminate Bank® At Luminate Bank, We Open Doors—empowering individuals and families to achieve their financial dreams through personalized service and innovative digital solutions. As a nationwide bank headquartered in Minneapolis, Minnesota, we are committed to helping our clients meet their financial goals with a blend of modern technology, traditional values, and the trusted guidance of experienced professionals. Known for our exceptional commitment to customers, we take pride in delivering a seamless, supportive experience for every step of the journey. Our dedicated mortgage division has branches and a team of loan originators across the US, making expert home financing solutions accessible to communities nationwide. Luminate Bank is committed to safeguarding your money and accounts with FDIC insurance coverage up to applicable limits. Learn more about how we can open doors for you at www.luminate.bank , follow us on Instagram, LinkedIn, and Facebook, or call (952) 939-7200. For media inquiries, please contact: Debbie Schwake, CMO debbie.schwake@luminate.bank
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