The Accunet Mortgage Show (3/31/19 Episode)

Learn more about mortgage in realty highlights in the week and the world with Brian Wickert, David Wickert, and WTMJ’s Mark Seigrist.

The Accunet Mortgage and Realty Show, February 10th, 2019

This week on the Accunet Radio Show:

Brian and David wish their mother (and grandmother, respectively) a happy birthday, and take a look at how interest rates have changed in the last 84 years of her life, and the implications of inflation on the housing market. They also go over America’s top 10 fastest-appreciating markets in the country, take a look at Wisconsin’s appreciation and affordability, and give us an update on Austin, the young man attempting to get approved for a loan with a commission income.

This week’s highlights:

  • After you reached out to a lender for pre-approval, did you start getting letters from other lenders you don’t recognize? These are called “Trigger Leads, and they come from Experian, Equifax and TransUnion.
    • What’s a Trigger Lead? Basically, it’s when other lenders pay for your information so they can offer you a deal without knowing the nuances of your situation. They sign a contract with credit bureaus saying, “Whenever someone in this geographic zone has a credit check by a mortgage lender, send us their information so we can solicit them.” And yes — this is 100% legal.
  • The Federal Reserve is still holding steady. They claimed they won’t raise rates in 2019, and they might even cut rates by an eighth or a quarter.
  • Rates don’t have to drop by a full percent to make a refinance worthwhile! This all depends on your loan amount. Let’s say you got a loan 6 months ago at 4.875%. Pretty good rate. Dropping your rate to 4.25% (just a 0.625% difference) would lower your monthly payment by $1,000 a year!

How does inflation affect the housing market?

Inflation = The cost of things previously vs. that same basket of goods and services today. Basically, inflation causes housing prices (along with pretty much everything else) to go up.

Let’s look at an example: If I lend you $100,000 at 3% for a year, I would (hopefully) get back $103,000 a year from now. Let’s say I wanted to buy a nice car and a nice boat with that $100,000 when you paid me back with interest. Well, if inflation caused the price of the car and the boat went up from $100,000 today to $102,000 a year from now, my loan to you doesn’t look so hot, because I really only made $1,000 (or 1%) after taking inflation into account.

Inflation is pernicious and erosive; It’s the enemy of interest rates.

So how does this impact our housing market?

Well, if we have low inflation (like we do right now), interest rates can stay low, which is great for first-time homebuyers. Economists all thought that with the unemployment rate dropping (down from 5% to 3.9%), wages would skyrocket, causing inflation to skyrocket, too. That’s why the fed raised short-term interest rates: To keep the economy from growing too fast.

According to the FHFA is among the top-10 fastest-appreciating markets in the country

What is appreciation in the housing market?

Home price appreciation is the difference between two sales of a single home. For instance, if you bought your home in 1995, and sold it in 2008 for more than you originally paid for (just for making your mortgage on-time – not including any upgrades you might’ve made), that’s known as appreciation. As long as you bought your home before prices started inflating, appreciation is a very good thing.

StateAppreciation Rate (Q4 2017 – Q4 2018)
Idaho11.93%
Nevada11.20%
Utah9.80%
Georgia8.25%
Arizona8.17%
Washington7.94%
Wisconsin7.64%
Montana7.39%
Michigan7.35%
Missouri7.26%

That being said, there’s really no such thing as a “State of Wisconsin housing market” — it’s all dependent on the smaller housing markets that comprise the state’s. Which asks the question, what’re the appreciation rates for Wisconsin metropolitan areas?

AreaAppreciation Rate (Q4 2017 – Q4 2018)
Racine, WI10.6%
Eau Claire, WI9.0%
Fond du Lac, WI8.9%
Janesville-Beloit, WI8.3%
Sheboygan, WI8.2%
Green Bay, WI7.8%
Oshkosh-Neenah, WI7.6%
Milwaukee-Waukesha, WI6.2%
Appleton, WI6.1%
Madison, WI5.8%
Wausau-Weston, WI4.5%

What does this mean? Well, pretend you bought a $200,000 home in Racine County in 2014. In 2019, that home would be worth $261,160 just for paying your mortgage on-time.

So, if you’re going to buy a house, do it now, and stretch your budget as far as it can go! The home you buy will be worth way more in 5 years, and the longer you wait, the more inflation impacts home pricing without benefitting you.