President’s Message – December 2022

Aloha, Smart Peeps!

I can’t believe I’m saying this, but Merry Christmas and Happy New Year.  I’m surprised how quickly 2022 just blew by, and we’ve made another trip around the sun.  This is the last newsletter for 2022, and I hope you all find value in these updates.

For most of this year, we have spoken about inflation, as it is the primary driver of what mortgage rates do.  In simple terms, inflation can be defined as too many dollars chasing too few goods.  Between 2020 and 2021, the Federal Reserve increased the nation’s money supply by 40%, causing the highest inflation readings since 1982.  This action made everything from food, cars, computers, clothes, and other goods go up in price.

However, there has been a reversal recently.  The money supply decreased by 1.5% over the last seven months.  This is the most significant decline in the money supply on record going back to 1959.  Here are some charts from the CEO of Compound Capital Advisors, Charlie Bilello.  2022 is the first calendar year in more than 60 years that the money supply is decreasing.

So, I’ll get to the point.  We feel inflation is taming, and we will see mortgage rates decrease going into the first half of 2023.   Does this mean you should pause buying your home?  Absolutely not!  Right now, buyers have much leverage to negotiate and receive seller’s concessions to limit closing costs or temporarily buy down their rate.  As soon as mortgage rates drop again, there will be a frenzy.  Remember seven months ago when multiple offer situations were everywhere?  Buyers were waiving contingencies, prices were getting bid up over listing, or cash buyers were bullying everyone needing a loan.  That is not where you want to be.  You want to be in a position to take advantage of gained equity and use that to refinance at a lower rate when rates do come down again.  Like we always say, date the rate, marry the home.  This is the Smart Money way!  Happy Holidays everyone!

Daryn Ogino | NMLS #278557