Wednesday, June 29, 2022

Someone recently told me a great story about a gynecologist that had a “perfect” track record of predicting the sex of a baby before the first ultrasound. He was renowned for always getting it right and attracted much attention. People could not understand how his guesses were impeccable.

This Doctor had a system where he would tell the woman what he believed the sex of the baby to be, and then he would write down the opposite prediction on a page in the patients file. Later, when they did the ultrasound, everyone would cheer in amazement if he was right. If his prediction was wrong, he would say, “wait, let me just check your file,” and of course, because the opposite guess was documented, his record remained intact.

People love to predict what might be happening in the future, especially regarding real estate, stocks, and interest rates. I think there should be an app that tracks all of these people so that we can document how often their predictions fail miserably.

In December 2021, just a few short months ago, when we were still quoting rates in the 2’s and low 3’s, the industry analysts came out with their predictions for 2022. Fannie Mae said mortgage rates would rise to 3.3%. Freddie Mac said rates would increase to 3.5%. The Mortgage Bankers Association said rates would go to 4.0%. The National Association of Realtors predicted an increase to 3.5%. Well, it didn’t take long to see that they were utterly wrong.

On February 24, 2022, Russia invaded Ukraine. We generally see a “flight to safety” during geopolitical and economic uncertainty” where money is drawn out of the stock market and invested into the bond market. This infusion of cash often sends yields lower. Most market analysts predicted that if the war in Ukraine drags on, it will help contain the 10-year US treasury and likely keep mortgage rates down.

Indeed, after hitting a high of 2.009%, the 10yr UST sank to 1.82 and reached a low of 1.69 on March 7. For a few brief minutes, late March 4 and early March 7, you could still get a “normal” rate. Since then, the 10yr has been on a tear. Despite the casualties and extended conflict in Ukraine, yields reached multi-year highs and topped 2.50% this week.

Finally, some predicted that the housing market would cool once mortgage rates increased. Here we are at a time when mortgage rates are approaching 5%, and there is no housing drop in sight. In fact, analysts are still predicting a 12-18% appreciation in values through 2022. Some are even forecasting a double-digit gain in home values in 2023.

So, where does that leave the average person trying to decide what to do with their home needs? In my 25 years in the real estate and finance industry, this is truly the most unpredictable time that I have ever witnessed. It’s tough to fault anyone for having faulty predictions – this is a very unique environment we are experiencing. As an American, I am concerned about how this will play out because I don’t see how we can easily navigate through all of the moving calamities.

My continued recommendation for anyone who needs to make decisions about their housing needs is to speak to a competent professional. Unfortunately, no one will be able to predict what the future will bring with accuracy. All you can hope for is expert guidance, in real-time, given the current fact on the ground today.

Shout out and happy birthday to Heather Benjamin, Malkie Benson, Tiffany Diamond, Jason Greenblatt, Alon Haim, Mashi Laufer, Jessica Lowy, Shira Rubinoff, Dmitriy Salita, Anne Samet, Ariella Steinreich, Uri Weingarten, Farhan Yousufi, and Devorah Zaken.

Shmuel Shayowitz is President and Chief Lending Officer at Approved Funding, a privately held national mortgage banker and direct lender. Shmuel has over 20 years of industry experience, including multiple licenses, numerous awards and coveted accreditations as a certified mortgage underwriter, licensed real estate agent, residential review appraiser, and real estate investor. His knowledge and expertise is highly sought after, and he uses his passion for educating people as a contributing writer, industry speaker, coach, and advisory board member.

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