Mortgage rates fell sharply -and for the second straight week- as rising interest rates took hold within the housing market. The average 30-year fixed-rate mortgage rate dropped to 5.3% for the week ending July 7, according to data from Freddie Mac. This decline rate is the biggest decrease since 2008. Meanwhile, affording a home is getting even harder, with prices jumping over 17% from the year prior and financing reaching 7-year highs. Jelani Dorsey, Loan Officer at Goldstar Mortgage Financial Group, breaks down the demand for property and offers advice for those shopping for a new home.

Opening Bell

Mortgage Applications Fall for Second Straight Week Amid Higher Interest Rates

here to discuss all of this is july Dorsey loan officer at Gold Star mortgage Financial group. Thank you so much for being with us here today. You gotta talk to us about what you're seeing in terms of the demand for home buying and mortgage applications, because it seems crazy to me out there. Sure, absolutely. Good morning. Thank you, Shannon for having me on. So, what we're seeing obviously is there's obviously a slowdown um with mortgage applications across the board and some instances, some companies we see, you know, 70% slowing down in regards to mortgage applications. Our company is a little lower than that. Um but that's because obviously of the interest rate uh general and gradual y rise, excuse me, that the Federal Reserve has been doing. And so with that, that obviously helps uh kind of compress um you know, buying power that clients have and people they're looking to buy homes have out there. But just so you know, um although we did see a huge mortgage rate drop, um you know, the Fed is slated to increase um you know, the rate uh 75 basis points over the course of the year, we will see that uh increase. So um applications are down because we were in a low interest rate environment in 2020 2021 which were literally um unprecedented. So with interest rates rising, it's to combat inflation. Um But yeah, it's your point, I just wanted to let you know that, Okay, so Do you see any similarities between 2008 housing crisis and the current market conditions. I know everybody asks me that all the time. Um so with that, I don't see eyes like to say we're not going to see another 2008. I mean that was unregulated environment with a number of domino effects uh increasing and leading up to uh you know that financial harassed, but what we're seeing now is that we're in a low inventory environment, which means that, you know that there the building for housing isn't is consistent as it as it has once been, um shortage of inventory. So that's naturally gonna keep prices raising up and there's not a lot of houses that are on the market right now. So what you saw in oh eight, you saw a lot of houses sitting, you know, foreclosures, things like that, I'm not seeing that, and then also across the landscape of the United States, every market isn't necessarily the same, but as far as the consistency we're seeing when you have a low inventory environment, um and not a lot of houses sitting that aren't selling that in and of itself will not create a o a crash that we saw before. Those prices are definitely still high up there, but the average price of a home get this hit a record $450,000 in june now, that is a 17% higher price than last year according to realtor dot com. So do you anticipate home prices will go up in the major cities like san Francisco Tampa Seattle new york. So yeah, I do anticipate any time that you have a shortage on supply, you know that in and of itself is a simple uh, you know, marketing 101 or you know, economics one on one. Excuse me, tightening supply will increase um you know, the price of houses. So I do see prices continue to go up, but we are cooling off a little, okay, so this is, I'm seeing a seller's what's called a seller's market and we're slowly transitioning back to what's called a virus market. So we are going to school and johnny, sorry to interrupt you. It seems like a lot of that cooling is happening in the smaller cities and you know, midwest and places like that where my friends are like, oh yeah, we got plenty inventory here. We got home like what about new york? What about these big cities? Yeah, the big cities like new york. I mean honestly one of the things that, you know, we help combat that and with us being, you know, with our company, you know, we have some things that combat that, you know, with a certain type of pre approvals that will help home buyers and we'll get into that in a little bit. But we're gonna start seeing those crazy markets like new york, the florida's California's, those markets have always been crazy. We've seen the multiple offer environments and those type of markets. Um we've seen the housing appreciation in those markets um you know, rise um and you know more so than other areas, but those are going to continue to rise, but with with the fed rising interest rates, it's gonna pull everything back to a cooling off period. So those hotter markets, there'll be a cooling off period, but more so some other other markets, like you made mention of the midwest may cool a little bit sooner. Um but like you said different pockets in different areas um you know, they'll cool at a different time, but new york, it's a hot, it's always been a hot market. So it may take a little bit more time correct. This may be a strange question, but how do you think the school's decision to overturn roe versus wade is influencing home buying? Wow, you put me on the spot there with that one. Um but all that to say that I don't have enough data to actually answer that correctly. Now, that was obviously, you know, tree shaking in regards to that. So for me to make a comment on that, um I wouldn't have accurate data, but what I do know is that, you know, that is impacting obviously some of the lower income communities. Um you know, whereas people would have the advantage to, you know, do what they would feel that was right and just now they have to travel um to, to make certain arrangements and, you know, with gas prices, that also is affecting the economy, supply chain issues, there's a host of other things that are affecting everything, but with traveling and people have having to travel different places to actually um you know, do what what what they would need to do if they're pro choice and pro life or if they're if they're, you know, it doesn't matter, it's going to impact people because people that had something in their backyards now, they have to travel to other places to do so, and that that's that's gonna impact in and of itself. But as far as the housing market, I don't have necessarily enough data and intel to tell you definitively how that's impacted uh housing at this time. It definitely may impact the size of someone's family. So regardless of the size of the family, what advice do you have for those looking to buy their next home and the next maybe 3-6 months, you know, how can applicants better prepare for the home buying process? Absolutely. So what you'll need to do is obviously you need to make sure that the mortgage lender you're working with has your best interest. One of the things that we've been able to do is even in a rising interest rate market. And as you made mention with interest rates dropping with our company, we have what's called a one time float down policy. So people that are under contract, we actually can renegotiate for the lower interest rate on behalf of our clients. So you know, make sure, I mean it doesn't matter if you're working with me or any other lender, see if they have the ability to do that. And one of the things that we do with our company specifically when we issue out preapprovals, we go one step further and we have a fast what's called a fast pass pre approval. So we fully underwrite the loan even as what's called A T. B. D. Mean that to be determined there's no address fully underwrite the loan and remove the loan contingencies. And that language can actually be placed into the purchase contract. Um So outside of a clean title and appraisal, we can actually close alone in 14 days and that actually helps in a multiple offer situation a competitive market I like we've seen here. And so that's something that we're able to do. But also pay attention, consumers need to get more educated in regards to who they're working with and not just take things for face value. Make sure your mortgage lender is allowing you to lock the interest rate when you're under contract or see if they're able to fully underwrite a loan before they issue out of pre approval. It makes the offers that much more competitive. So on the other side of a cellar when they see a fully underwritten pre approval. You know, that's gonna strengthen your offer. And it can also compete against all cash offers which we've done for our clients. And some of these major markets, like the florida, is the California texas and what have you, wow, great advice and a 14 day closing. I need to write that one down. Thank you Jelani Dorsey loan officer at Gold Star mortgage Financial Group.