First, apologies to the good folks at “Saturday Night Live.”
The real estate and mortgage market has been affected by two big things happening today.
1. The 8% inflation rate is causing the Federal Reserve to aggressively talk about five to 10 half-point hikes in the Fed funds rate to slow down inflation and the economy. This has caused mortgage rates to jump from 3.5% to 5.25% year to date, which has hindered affordability for buyers and decimated the refinance volume for mortgage lenders. Yes, buyers can now afford a little less, but our local Solano County market remains robust because we are the most affordable Bay Area county and buyers still outnumber sellers – making it a great time to list and sell to move up, down or out.
2. The stock market has been a nightmare in 2022 and is off to the worst start since World War II. Because of this loss of wealth, people like me over 55 in the private sector who are counting on our IRAs and 401(k)s are fearful, frustrated and can even become a little depressed and a bit hesitant to move up to the dream retirement home or buy a vacation home in 2022.
I wrote about investing in the U.S. stock markets in the past and how I have been convinced over the past 30 years by people a lot smarter and more educated than me that very few people can time the market, and that having a diversified investment portfolio in the stock market will get me a 7% to 10% return on average over the long run, which is better than cash and normally better than the inflation rate.
Let’s pray for a bottom soon.
On another note, and by way of an update about my recent column about Wall Street investing in single-family homes: A couple of Goldman Sachs-backed rental funds just purchased an entire 87-home community from DR Horton called Cypress Bay in central Florida. These investors know what I have been saying for many years is true. 2022 is nothing like 2008 for residential real estate because 100% of the buyers over the past 14 years have had to qualify for a mortgage.
Stated-income, aka liar loans, were outlawed after the real estate crash that spawned the Great Recession. Home values are real and not artificially inflated. Home values are 20% higher than they were two years ago because of the lack of inventory that still exists and the Fed-induced sub-3% mortgage rates we enjoyed during the pandemic.
So, keep believing!
Jim Porter, NMLS No. 276412, is the branch manager of Solano Mortgage, NMLS No. 1515497, a division of American Pacific Mortgage Corporation, NMLS No. 1850, licensed in California by the Department of Financial Protection and Innovation under the CRMLA / Equal Housing Opportunity. Jim can be reached at 707-449-4777.
