SW Florida Mortgage Rates - what is going on??
Rates moved on us this week. If you had a buyer pre-approved two weeks ago at one payment, that payment looks different today.
Here's the good news. There's a fix for this, and it doesn't require waiting for the Fed. It requires negotiating. More on that below.
Short version: oil and inflation.
The conflict in the Middle East pushed oil prices up again. Higher oil means higher costs to make and move just about everything. That feeds inflation, and inflation is what drives mortgage rates.
The 10-year Treasury climbed right alongside it. Mortgage rates track that closely. Freddie Mac's weekly survey came in at 6.55%, but daily pricing has been running higher than that all week. Some lenders touched a one-month high.
Nothing broke. This was a market reaction to news, not a structural shift.
The FOMC meets July 28 and 29. Honest answer? Nobody knows, and the people who say they do are guessing.
The case for a hike: Inflation is still above the Fed's 2% target. Oil is elevated. The June meeting minutes showed a split committee, with a real chunk of members open to at least one increase before year end.
The case for a hold: The Fed has held steady all year at 3.50% to 3.75%. They've been patient, and a lot of forecasters think if a hike comes at all, it comes later in the year, not next week.
One thing worth remembering. The Fed does not set mortgage rates. They set the overnight lending rate. Mortgage rates follow the bond market, and the bond market often moves before the Fed does. We've seen meetings where the Fed hiked and mortgage rates went down.
Here's the deal. When rates jump, most agents go straight to a price reduction. That's the reflex. But a seller credit toward a rate buydown usually does more for your buyer's payment than the same dollars off the price.
Think about it from the seller's side too. A credit at closing doesn't reset their comp. A price cut does, and it follows the whole street.
A seller credit can go toward closing costs, prepaids, and discount points. Points are what buy the rate down. Roughly speaking, about one point buys down the rate by a quarter percent, though it moves with the market and loan type.
The buyer also has the choice between a permanent buydown and a temporary one, like a 2-1. The temporary version gives them a big payment break in years one and two while they wait for a refi window. The permanent version is locked in for thirty years. Which one fits depends on the buyer, and that's a conversation I'm happy to have with them directly.
This is where deals get blown up. You can't just write in whatever number you want. Every program has a ceiling on seller contributions.
Call me before you write the offer and I'll tell you the exact number your buyer's program allows. Takes two minutes and it keeps the credit from getting cut at underwriting.
Drive around Cape Coral, Fort Myers, Lehigh, anywhere. The builder signs all say some version of the same thing. Rate as low as. Closing costs paid. Incentive package.
Builders aren't doing that out of generosity. They're doing it because they know buyers shop payment, not price. They'd rather protect the sticker number and pay to fix the payment.
Now look at your resale listing sitting next door. Same square footage, maybe a better lot, real landscaping, no CDD. And it's losing to new construction because the builder is handing the buyer a 5-point-something rate and the resale seller is offering nothing but a clean house.
Your resale sellers are competing with that whether they like it or not. If they want to sit at the same table, they need to bring something to it.
This is a great listing appointment conversation. A seller who won't drop price ten grand will often say yes to a ten grand credit, because it doesn't touch their number and it changes the buyer's payment more than the price cut would have.
Ask for the seller credit as a dollar amount, not a percentage.
Percentages get renegotiated when the appraisal or the price shifts. A flat dollar figure survives. It's cleaner for the title company and cleaner for underwriting.
Also, spell out what it's for. "Seller to credit buyer $X toward closing costs, prepaids, and discount points" gives me room to use it where it helps the buyer most. A credit written only toward closing costs can leave money stranded if the costs come in low.
Have a good weekend,
Mike Steele
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