Procrastination at Its Finest

As I was thinking of and planning out the content of my financial blog, a few short years ago, I had no idea how drastically the U.S. housing market was going to change. My aim was to outline financial vehicles that have historically played a role in building wealth in America, starting with homeownership.

When I started my career in real estate over a decade ago, I was processing mortgages with interest rates primarily in the threes—a 3.25% APR was commonplace. I would be intrigued whenever I saw a mortgage rate that started with a 2. I would analyze the loan to see what led to such low rate. Did they opt for an adjustable-rate mortgage (ARM) with a low introductory rate? Did they choose a 15-year mortgage over the traditional 30-year mortgage (which pretty much always comes at a lower rate)? Or did they buy down the rate through discount points (another term for upfront prepaid interest)? I would always think to myself, “good for them,” for getting such a low rate and paying less interest than the rest of us!

Back in the mid twenty-teens when we were looking to purchase our first property. You can only imagine the look on my face as I scoffed at the 4 and a quarter interest rate being offered on our very first mortgage. It was a short loan term and we knew it would only be a starter home, so we went with it. My emotions were all over the place on the day of closing. With the excitement of being a proud new homeowner, the indignation of the “high” interest rate, and the relief of finally getting to the closing table (it was a short-sale that took several months to finalize), I signed the stack of closing documents. What I would give to go back to that rate today!

The COVID-19 pandemic of 2020 ushered in a wave of changes across several aspects of society as we knew it. The ways in which we lived, worked, and entertained ourselves were instantly changed and challenged by the restrictions and the safety precautions of the corona virus. Any and all jobs (mainly white-collar jobs) that could be performed outside the office were quickly transitioned to remote work. The domino effect was now employees had a choice and a wider range of options of where they could live. No long tethered to the residences within the constraining square mile radius of the office, folks were free to relocate to wherever their heart desired.

This led to the home buying frenzy sparked in 2020, exploding into 2021. It was literal pandemonium in the housing market. Demand for homes across the county skyrocketed as people moved from city centers out to the sprawling suburbs and countryside. These newcomers had increased buying power, specifically those coming from higher cost of living states moving to lower cost of living states. The increased demand on properties led to a decrease in actual supply/inventory of homes to purchase, which then led to the remaining houses on the market increasing in sales price. This created an environment of pure homebuying chaos. Most homes were being sold within hours or a few short days of being listed. The norm was having multiple offers on a home, with potential buyers bidding up the final sales price tens of thousands of dollars over asking. We saw buyers foregoing home inspections, leaving them susceptible to future repairs and no negotiating power. Buyers even resorted to purchasing homes sight unseen.

What followed, starting in 2022, had not been experienced since the 1970s. The federal government began hiking interest rates in an effort curb growing inflation. As you may know, inflation is the increase of prices, typically as wages remain stagnant, which leads to less buying power for consumers a.k.a. the average American. With interest rates higher than they had been since the Great Recession of 2008, it was becoming financial harder for Americans to afford purchasing a home.

Fast forward to 2024 and the saga continues. The current housing landscape is almost unrecognizable—to me; someone who has watched and participated in the record low mortgage rates of the past two decades. I mentioned I did not know the housing market could change so drastically, so quickly—no one did. But in all reality, we should have. Just like the highs of the stock market, did we expect to ride the waves of low interest rates forever? They say history is a good indicator of the future. We know what goes up must come down—did we not anticipate the reverse?

My mom recently celebrated a milestone not many minorities (or immigrants) get a chance to commemorate. She paid off her 30-year mortgage. It had an interest rate over 9%, which was indicative of the times. My takeaway from that is the new norm going forward may not be mortgage rates as high as the nines or as low as the twos; it may land somewhere near the average, like 6%. And we may just have to be content with that.

Join me as I navigate these choppy housing waters we have freshly entered. Let’s delve into the current state of the housing market, the homebuying process, and real estate overall. If I’ve learned anything about how quickly the tide can change, it’s not to procrastinate. Had I started writing when I originally planned to, I’d be offering up a whole different piece of advice, not asking those who did not get in on the lowest interest rates of a generation to settle on and be happy for a mortgage with a 6% interest rate.