President’s Message – November 2022

Aloha Smart Peeps!

The year is just blazing by, and it is that time of the year when it is extra important to have that attitude of gratitude.  When I go to the stores the Christmas displays are already up, and it feels like we skipped Thanksgiving altogether.  Well despite the lackluster performance of the stock market and high inflation in 2022, there is still much to be grateful for.  I know this is very cliché of me to say this, but as a natural optimist, we should always look at the glass half full.

Today’s Consumer Price Index (CPI) report showed that overall inflation in October increased by 0.4%, which was 0.2% below expectations.  The year-over-year (YOY) reading dropped from 8.2% to 7.7%, much cooler than the 8% expected.  The bottom line is that inflation is the arch-enemy of mortgage rates; if inflation goes down, mortgage rates will go down and vice versa.

Now we’re about to show you something many others do not see or are not talking about, and I will try to keep the explanation simple.  Below is a chart of monthly CPI.  The year-over-year reading on inflation is measured over the last 12 rolling months.  October 2022 reading just replaced the October 2021 reading which was almost double.  This is why the YOY reading came down so much.  If the next 4 months are similar to October 2022’s inflation numbers, then we can continue to see YOY inflation go down as the previous year’s readings fall off.  Whew, I know that was a lot!  The takeaway here is that with a little patience and luck, we could see some relief in the mortgage rate market.

When interest rates fall, home prices’ natural trajectory is to go up.  This is due to increased affordability and the lack of supply (listings) on the market.  There was a time not too long ago when buyers were competing against multiple offers and price escalations.  It is possible we could see that with a drop in rates.  So what do we do now?  I suggest you speak to your trusted Smart Money loan originator and position yourself to be ready to either purchase or refinance your home.  We have a saying here, “Date the rate, marry the home!”  Do you want to be in a position where you are competing against others while home prices are rising, or do you want to find your home today (marry the home) and watch others battle it out while you refinance into a lower rate (dating the rate)?

P.S.  Someone recently asked me what book I’m currently reading.  I’m someone that is constantly learning and surprise, surprise, I like reading about money.  The book I’m currently reading is The Book on Advanced Tax Strategies: Cracking the Code for Savvy Real Estate Investors by Amanda Han and Matthew MacFarland.  I know it sounds like a snoozer, but if you are a real estate investor or want to become a serious real estate investor, don’t skip out on this book.  There is a beginner volume and an advanced volume.  Start at the level you think you are or read both.  The book is written in a very simple manner that is easy to understand, even for the layperson.  It will help you ask your accountant the right questions and could bring you thousands in tax savings.  I want to thank Dr. Nakamura for introducing me to this book as it has filled in some gaps that I was not aware of.