Watching the minute by minute updates all day of the Dow movements, on Monday (8/24/15), was like taking my grandsons to the boardwalk last weekend to ride the amusements. At times, it was frightful, exciting, and, a little scary? In the end, it was all very tiring. When all was said and done, I had spent a great deal of money and I was beat.
We saw the Dow drop over 550 points in one day. Wow, traders were nuts, investors were worried, news reporters had a field day reporting everything from doom and gloom to “not to worry”. Everybody became an expert on the stock markets, leading indicators, 401K investment returns and losses, bonds, short and long-term rates and the potential (or not) of a rate hike by the Fed. I was up, down, up again and then down. In the end, I was beat.
As usual there are two sides to every story (sometimes three). With stocks declining, money moved to bonds, this helped to keep interest rates low, and may have put a damper on the Fed’s plan to raise rates in September.
Low mortgage rates will help more consumers afford homes. Plus, those homeowners who didn’t take advantage can now take another ride on the refinance market roller coaster. This is good for lenders as they may see continued business from home sale financing and a new wave of refinances.
At the upper end, many banks have a heightened interest in jumbo loans, both in purchases and refinances, as rates there have recently dropped slightly. On a side note, with a drop in the price of oil, we may start to see lower prices at the pump providing consumers with a little more spendable cash. That’s good for everybody, except maybe those who invested in oil futures.
Not everyone has huge investments in the stock market, oil futures, nor are they near retirement so as to panic over the return on their retirement accounts. Over time and distance, the markets will rise and fall, just like the roller coasters. Sometimes it’s a little scary, but in the end it levels off. So, I say enjoy the ride.
Now is still a great time to buy a home, as rates are low, home prices are reasonable, and mortgage money is readily available. Lenders who have positioned themselves to be flexible and match their loan expenses to loan volumes can take advantage of lending opportunities, both in purchases and refinances. It’s all about expense management, manufacturing a quality loan and good old fashion customer service.
Consumers are still a little worried about the stability of the economy, especially now that we’ve seen how global markets affect our own. Pre-qualifications are becoming increasingly more important, not just for prospective buyers but to Realtors and builders as well. A preapproved buyer is golden. Being preapproved also benefits the consumers as it gives them the confidence to shop for a home they know they can afford.
Lenders need to do their part by helping to educate consumers on the benefits and process of home financing and the various products and programs available to do so. Many consumers believe they still need at least 20% down to buy a home. It’s time to kill that myth.
To service potential home buyers, lenders need the technology to meet their needs, quickly and accurately and provide online preapprovals and applications, with quality checks along the way, to quickly identify problems which may cause delays and defects.
Today, things move more quickly and everyone wants immediate response and gratification. TRID will force a more complete and timely process. Are you prepared? If not, your ride may not be much fun.
The game has changed. Don’t just go along for the ride.
Be prepared; be proactive; play different.