How the Fed Impacts Raleigh Mortgage Rates

March 20, 2022 by Kevin Martini

2.9 Trillion - is the amount of mortgage bonds the Fed has purchased since March 2020. The Fed plans to reduce its bond holdings in the coming months which could drive up mortgage rates.

This is a Special Report by Raleigh mortgage lender and Certified Mortgage Advisor Kevin Martini on how the Federal Reserve impacts Raleigh mortgage rates.

THE FED IMPACTS FIXED-RATE MORTGAGES BY BUYING AND SELLING MORTGAGE BONDS.

Raleigh interest rates on fixed-rate mortgages change whenever the Fed buys or sells mortgage bonds, and whenever the Fed makes statements about buying and selling mortgage bonds. Since the pandemic hit the economy in March 2020, the Fed has purchased an eye-popping $2.9 TRILLION of mortgage bonds, making it the biggest buyer of bonds in the market. This purchase of mortgage bonds by the Fed is what caused caused Raleigh interest rates to go down to record levels.

raleigh mortgage rates by kevin martini a raleigh mortgage broker

However, as you can see from the chart above, mortgage bond prices fell off a cliff in Q1 2022 when the Fed announced it would be scaling back its massive bond-buying program. When mortgage bond prices go down, mortgage rates go up. The average interest rates on fixed-rate mortgages went up by 1% + so far this year according to Freddie Mac’s weekly survey of mortgage rates.

I expect more volatility in mortgage rates as the Fed continues to release more details about when and how it plans to roll back its bond-buying programs and reduce its bond holdings.
Raleigh Mortgage Broker & Certified Mortgage Advisor, Kevin Martini

THE FED IMPACTS HOME EQUITY LINES OF CREDIT BY CHANGING THE “FED FUNDS RATE” NOT MORTGAGE RATES.

Raleigh interest rates on home equity lines of credit (a.k.a. HELOCs) change whenever the Fed lowers or increases the “Federal Funds Rate.” That’s because HELOCs are based on the Prime Rate and the Prime Rate is based on the Fed Funds rate. The Fed increased rates in March 2022 for the first time since 2018 and indicated more rate hikes are on the way. This means that rates on home equity lines of credit are likely to increase significantly by the end of 2022.

WIth the projected increase in HELOCs cost, one should consider refinancing the balance into a new first fixed rate mortgage and lock in their housing costs.
Raleigh Mortgage Broker & Certified Mortgage Advisor, Kevin Martini

Credit cards, personal loans, student loans, auto loans and business loans are directly impacted when the Fed raises rates

MARTINI MORTGAGE GROUP TOP 3 RISKS TO RALEIGH HOME LOAN RATES FOR THE BALANCE OF 2022

Inflation

The nemesis to a bond is inflation because inflation erodes the bonds return. Right now, bonds are trading at negative yields relative to inflation. For example, if a bond investor is earning 3% and the inflation rate is 7%, the investor is losing 4%. At some point, it seems likely that bond investors may demand higher yields in order to account for higher inflation. This could drive up Raleigh interest rates even higher.

The Federal Reserve

The Fed has injected an eye-popping $4.516 Trillion into the economy since March of 2020 by buying Treasury bonds and mortgage bonds. 2.9 Trillion of the 4.516 Trillion of stimulus was mortgage bonds. This infusion caused Raleigh mortgage rates to go down to record levels. As the Fed unwinds the mortgage bond purchases, many economists are anticipating that Raleigh home loan rates will rise significantly.

Good News vs. Bad News

As a primer, news impacts Raleigh mortgage rates. On the aggregate, when negative news about the economy hits the wires, investors flock to the bond market for safety, driving down interest rates. When positive news hits the wires, investors shift their bias toward stocks and away from bonds, causing interest rates to go up. Many economists are anticipating that the economy will remain strong in 2022 however with geopolitical events and unwinding of the 2.9 Trillion of mortgage bonds, it is likely that Raleigh home loan rates may go up as a result.

Let’s Chat About Raleigh Mortgage Rates and How You May Benefits from Buying a Home Or Refinancing Your Current Home.

If you have question about this article, if you have questions about buying a home as a first-time homebuyer or as a repeat homebuyer, if you have questions about refinancing your current home loan, simply call the Martini Mortgage Group at PCL Financial by calling (919) 238.4934.

It is going to be a big day for Raleigh real estate today

March 16, 2022 by Kevin Martini

On the economic calendar is the Fed Interest Rate Decision! It is expected they will hike their benchmark Fed Funds Rate however it is CRITICAL to know the Fed does not directly control mortgage rates.

Let’s get technical with you for a hot second. Recently, the yield spread between the 10-year Treasury and 2-year Treasury has been trending lower. This increase in yield over time is known as the yield curve, which naturally moves up with maturity. But there is a phenomenon called an inverted yield curve, which has longer-term maturities yielding less than shorter-term maturities. This occurs when investors feel that prices in the future will decrease beneath present levels. When this goes inverted, it has been a very reliable recession indicator – YIKES!

Again, the Fed is expected to hike their benchmark Fed Funds Rate at their meeting on Wednesday March 16, 2022. This hike will push the short end of the yield curve higher, while the long end could move lower if it’s perceived that inflation is being reduced. This will cause an inversion at an even faster rate.

How will Raleigh real estate be impacted by a recession

If we are to see a recession, how will it impact housing? It is important to know recession does not mean housing bubble. Let me say it again, recession does not mean housing bubble. If look back at recessions since 1960, housing either remained essentially stable or increased in almost all of them.

Fresh on the minds of many is the recession in 2009. Please remember this fact, the recession was caused by the housing bubble, the recession did not cause the housing bubble. With the most recent recession in 2020, home prices rose.

Historically, home values perform very well during periods of inflation like we are experiencing today and during recessions too.

Is Raleigh real estate afforable?

Shifting gears, homes are still affordable today! In the most recent episode of the Martini Mortgage Podcast, episode 134 called “Home Affordability Today”, that dropped this week unpacks home affordability today. Spoiler alert, homes are less affordable today than they were 12-months ago however less affordable does not mean unaffordable. Real estate today remains what some call a ground floor opportunity level.

Buying a home this spring is smart and starting or continuing your homeownership journey can pay off significantly especially you take action sooner than later.
Raleigh Mortgage Broker & Certified Mortgage Advisor, Kevin Martini

Connect with a Mortgage Strategist with the Martini Mortgage Group by calling (919) 238-4934 if you want to learn more about what you have read or if you want to talk about the options available to you any your family.

Home Affordability Today

March 15, 2022 by Kevin Martini

Affordability, are homes affordable today? What are the components to home affordability? Is buying power the same as home affordability? OH MY, so many questions! In this special episode of the Martini Mortgage Podcast, Certified Mortgage Advisor Kevin Martini answers these questions and unpack home affordability today.

What is home affordability?

Home affordability is a measure of whether someone earns enough to qualify for a loan on a typical home based on the most recent price, mortgage rate and wage data.

…I want to share this with you. Remember, when you think affordability there are many factors to consider such as home prices, mortgage rates and income. Yup, when home prices rise and home loan rates rise, it does impact affordability, and experts project both of those things will climb in the months and years ahead. Simply put, that is why it’s less affordable to buy a home than it was over the past two years when prices and rates were lower than they are today. Keep top of mind that wages need to be factored into affordability as well. It is a fact that wages have been rising, and higher wages is a big reason along with historic low rates that, while homes are slightly less affordable, homes are not unaffordable today.
Raleigh Mortgage Broker and Certified Mortgage Advisor, Kevin Martini

martini mortgage podcast best raleigh mortgage broker — MartiniMortgagePodcast.com

It seems like today that whenever you hear the word real estate, you will also hear the word affordability. Right now, from a historical perspective, homes are still affordable. Granted, in spring 2021 homes were more affordable than they are right now in spring 2022. It is important to share, less affordable does not mean unaffordable.

My name is Kevin Martini and I am not just the host of the Martini Mortgage Podcast, I am also a Certified Mortgage Advisor with the Martini Mortgage Group which is located in Raleigh, North Carolina however I help families all over the great state of North Carolina and many other states too. Welcome to episode 134 of the Martini Mortgage Podcast where I am going to unpack home affordability today.

Let me share the Kevin Martini definition of home affordability. Home affordability is a measure of whether someone earns enough to qualify for a loan on a typical home based on the most recent price, mortgage rate and wage data. Buying power is sometimes confused with home affordability and it should not be. Sure thing, when mortgage rates rise, it will impact how much home you can afford but higher mortgage rates is not the only thing that impacts home affordability.

One of the three components of home affordability is home prices. An industry leader is CoreLogic and they are a trusted resource of real estate data. In their most recent U.S. Home Price Insights Report they highlight that home values increased 19.1% from January 2021 to January 2022. If you compare month-over-month data, home prices increased 1.4% in January 2022 over December 2021.This increase in home value has impacted home affordability but again, home are less affordability based on this metric, they are not unaffordable. Here is the good news, there is forecasted to be a deceleration of home values by CoreLogic.

Please don’t freak out with the word deceleration. In the simplest form, it just means homes are still going to appreciate, they are just not going to appreciate at the level they have. Make sense?

Oh by the way, real estate is hyper local and that data from CoreLogic is national data not local data about say Raleigh, North Carolina. Some markets like Raleigh, North Carolina are like to exceed national numbers.

Let me shift gears to talk about mortgage rates. I know that mortgage rates are higher this spring versus last spring. In fact, they are about one percent higher today. Yes, home loan rates are higher as compared to this time last year however but from a historical point of view, they are epic. Let me get very personally right now, mortgage rates today are more than 50% less than when my wife and I purchased our first home. When my wife and I purchased our first home we were able to secure an adjustable-rate mortgage in the mid 9’s and to be transparent, we thought it was a killer rate and looking back, it really was.

Where are mortgage rates headed? It is difficult to predict where home loan rates are headed with the current global uncertainty. The opinion of experts is mortgage rates will drift higher especially with the level of inflation we are experiencing. You see mortgage rates are based on Mortgage Bonds. A bond is a fixed assets and the return is eroded by inflation, so inflation typically accelerates mortgage rates however did you know that homeownership is a hedge against inflation. Again, mortgage rates are low even though thye have moved up over the last several years but these low home loan rates are a positive factor to home affordability.

The third component to home affordability is wages. Right now, wages is a very positive factoring mixed with the historical low mortgage rates. Wages are up right now and this increase in income has offset a portion of the higher home prices experienced.

Today, buyers’ income is still greater than required to qualify for a mortgage. On a national level the median family income was $88,417 and the qualifying income needed for a home loan was $60,096. As you know, the Martini Mortgage Group is located in Raleigh and that is considered in the South. Since real estate is hyper local let us look at the data for the South of the U.S. – median family income in the South was $80,683 and only $57,768 was needed to qualify.

Since we are getting hyper local, let us talk about the Raleigh Real Estate Report Card for March 2022. Raleigh is located in Wake County North Carolina and the population is over one million. Today there are over 400K renters in Wake County and over 25% of them, over 100,000 of the 400,00 renters can afford to purchase a home. It is important for me to highlight, the Wake County North Carolina affordably index is indication homes in are still affordable considering home prices, mortgage rates and wages.

Before I wrap episode 134 of the Martini Mortgager Podcast I want to share this with you. Remember, when you think affordability there are many factors to consider such as home prices, mortgage rates and income. Yup, when home prices rise and home loan rates rise, it does impact affordability, and experts project both of those things will climb in the months and years ahead. Simply put, that is why it’s less affordable to buy a home than it was over the past two years when prices and rates were lower than they are today. Keep top of mind that wages need to be factored into affordability as well. It is a fact that wages have been rising, and higher wages is a big reason along with historic low rates that, while homes are slightly less affordable, homes are not unaffordable today.

To find out more about home affordability in our local area, just call a mortgage strategist with the Martini Mortgage Group by calling 919.238.4934. We can discuss where home prices are locally, what’s happening with mortgage rates and how you and your family will be impacted by them.. Know this important fact, it should always be loan first and then go find your home. Deploying the loan first strategy will allow you to make an informed financial decision not an emotional one.

In closing, there is still a massive opportunity to buy a home today. Perhaps the home will not be as affordable as the one your buddy purchased last year but it will still be affordable and homes are not unaffordable today.

If you want trusted advice with a digital mortgage process that offer a great rate with certainty check out my website by going to: www.MartiniMortgageGroup.com – you can find some real world information there and you can also securely apply online or book an appointment with me. Be sure to check out the Raleigh Real Estate Report Card which can be found in the learning center.

My name is Kevin Martini and thank you for tuning into episode 134 which has been called; ‘Home Affordability Today’

Now it is time for the disclaimer:

This material has been prepared for marketing purposes only. This is not a loan commitment or guarantee of any kind. Loan approval and rate are dependent upon borrower credit, collateral, financial history, and program availability at time of origination. Rates and terms are subject to change without notice. The Martini Mortgage Group at PCL Financial is a division of Celebrity Home Loans, NMLS # 227765 with a Branch address of 507 N Blount St Raleigh, North Carolina 27604. You can contract Certified Mortgage Advisor and Producing Branch Manager, Kevin Martini NMLS# 143962 by calling the Branch and that number is 919.238.4934. For a full list and more licensing information please visit: www.NMLSConsumerAccess.org or by visiting www.MartiniMortgageGroup.com – Equal Housing Lender