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Is anyone awake at the helm?

Waquis Editorial Staff

So, we'll start 2025 with a wake-up call. Unless you've been asleep for the past three years, then you'll know the mortgage industry is in a downturn not seen in 40 years. With interest rates hovering above 7%, both new home sales and re-finances are at historic lows.


The "experts" assured everyone that the mortgage industry would rebound by the end of 2024 once inflation was under control and the Fed began to cut interest rates. Alas, both happened with inflation down near 2.5% (after hovering over 8% for much of 2022 and 2023) and the Fed cutting a full percentage point.


Yet mortgage rates stayed the same.


Yes, economists love to reference their charts and statistics and predictions and prognostications. But the truth is, most of them are doing little more than guessing. And, to the average citizen on the street, high interest mortgage rates are the number one source of both stress and eating away at their monthly budget (even more than inflation). The difference between paying 4% and 7% interest on a $400,000.00 house is almost $800.00 per month in payments. For a an household income of $120k, that is eating up almost 8% of their budget.


Over the life of a 30 year loan, it's the difference between paying $287k in interest and $1.2m! Yes, that's almost one million dollars in interest payments.


With home prices at record highs, the average middle-class family simply can't afford a starter home around $400k and 7% interest. It's unsustainable. And, with 70% or more of household holding mortgages with an interest rate of 5% or lower, nobody is going to move until mortgage rates loosen up and return to the 5% range. As a result, very few homes are coming on the market resulting in low inventory and driving up home prices even further.


Let's home that cooler heads prevail in 2025 and the housing market can return to some kind of normalcy and health.


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