Step Inside The Market - Week 28, 2023

StepInside Weekly 7/13

Good evening,

In this week’s recap, we will focus on the current trends within the residential real estate market and thoughts on HELOC’s vs Home Equity loans and what the “new normal” will look like for interest rates:

💥Over the last week, the average contract interest rate for a 30 year fixed mortgage increased by 22 basis points jumping to to 7.07% from 6.85%. This is the highest we have seen rates since November of last year!

While we did some see great news regarding inflation data this week, the expectation is that we will likely see another Fed Rate hike by the end of the month to make sure the inflation battle is seen through to the end.

👍 Even though rates increased, we did see seasonally adjusted purchase applications rise 2%, while refinance applications fell by 1%. With rates continuing to rise during the purchase season, we are likely to see application rates remain flat or slightly down.

📻 With many Americans, and likely your clients, building up great equity in their homes over the past few years, it is a great time to make sure they understand the key differences between a HELOC and a Home Equity loan. Here are three questions you should have them consider before pulling the trigger on one of these products:

1. Do you want a fixed rate or are you comfortable with a variable rate?

   1. Most Home Equity Loans are fixed while HELOC’s tend to have variable rates.

2. Would you prefer a lump sum or an open line of credit?

   1. HELOC’s act and feel more like a credit card, while a Home Equity Loan acts like your primary mortgage. If you’re looking to spend and pay back over time, a HELOC may be a great tool to do so, especially with many only having interest payments until the 10 year draw period comes to a close.

3. What do you intend to use the funds for?

   1. If your client is looking to consolidate debt or pay for a finished project, a Home Equity Loan may be a better option. However, if you are going through ongoing renovations or have costs over a period of time, a HELOC is likely the better choice!

💭 Finally, we wanted to share some thoughts from some Real Estate Experts on where rates are going and what the “new normal is”. Hint, it’s not rates below 3%!

• Please note, that historically, the rates have been closer to an average of 7% over the past 50 years, according to Freddie Mac data.

Thanks for reading, leave a comment or share your opinions with us on this article! We love to hear from other professionals.