With Q1 of 2022 in the books, I think it’s worth a look back at some of our early-year predictions and what we had hoped we would see in the mortgage market and housing market.
Early this year we predicted mortgage rates rising (not a shocker) but had hoped that by the end of March we would see them in the upper 3% ‘s. I had commented that if mortgage rates were under 4% at the end of March, I would have been extremely happy however we did not get our wish.
According to the Bloomberg survey, the National Average for a 30-year fixed rate is now 4.9%. I personally hate using “averages” as there are too many variables for an “average” to create an accurate depiction of where mortgage rates really are and based on what I’m seeing the average 30-year fixed rate is in the 4.25% to 4.625% range as of late.
The war between Russia and Ukraine has thrown a curveball at markets and many believe this has delayed some of the Fed’s policy changes. The U-6 all-in unemployment rate decreased from 7.2% to 6.9% and is back at the same levels we saw in January of 2020 pre-pandemic. This is a good sign economically however we have also seen the 2-Year Treasury yield and 10-Year Treasury yield invert for short periods of time.
Are we in a Recession yet?
This historically has been an indicator of a recession and if we look back at some of my earlier commentary, I still feel as if we’ll see a recession hit soon. I don’t want to be a fear-monger as history has shown us that recessions are not always a doomsday scenario. In my opinion, the length of the recession lasts is more important than the fact that there is/was a recession.
For example, we had a recession in 2020 that lasted roughly 2 months and most of us forgot. However, the recession of 2007 lasted 1 year and 6 months which I’m sure we all remember vividly. Other than “The Great Recession” of 2007 which was fueled by the housing collapse the housing market has historically done well during recessions.
According to the Case Shiller US House Price Index, of the last 8 recessions (other than 2007) home prices increased or flattened during the recession.
2007 was the only instance where home prices dropped during a recession which is good news.
The bad news is we are still seeing ultra-low inventory levels which again leads me to believe that if we do in fact see a recession it should not be a disaster for housing.
Historically recessions have been good for mortgage rates since as stocks sell off money moves into bonds and as more money moves to bonds the price of the bond goes down.
We’ll be carefully monitoring the Fed’s ability to lower inflation. I believe if the Fed is successful at lowering inflation, we will start seeing recessionary levels in the stock market and mortgage rates will reap the benefit later this year. While anything is possible this is what we will be monitoring closely over the course of Q2.
We’re continuing to have a rate lock bias where if you find the right home at the right price or can refinance and save money/get cash out there doesn’t appear to be a better time than now in the short term.