When A Tweet Impacts Your Rates

Mortgage rates swing on headlines, but the real story is how those swings change buyer behavior and competition. We map out why a brief jump into the mid-6% range can create a short window where your offer has a better shot at getting accepted. 
• mortgage rates moving from high 5s toward mid-6s and starting to trend back down 
• buyers hitting pause on affordability while pre-approvals keep stacking up 
• why spring markets create the most competition and how a slowdown helps buyers 
• Sioux Falls market indicators including pending sales and the under-$600k split 
• Florida price volatility and how renting can beat selling at a loss 
• legal minute on due on sale clauses and contract for deed risk 
• what we expect next for rates including why 7% feels unlikely without escalation 
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Transcript

Mike Ouverson 0:30

Hey folks, welcome to U.S. Home Talk. I'm your host, Mike Overson with Luminate Bank, bringing you the latest news in real estate and mortgage. With me on the show today, is Marcus Walgrave, Heg Realtors, South Dakota Home Team. He's in Sioux Falls, South Dakota. I'm up here in the Twin Cities area of Minnesota. And again, we're U.S. Home Talk. If you haven't caught our show before, we just talk about kind of current events across the country and in real estate and mortgage. Today's show, we are going to cover uh an update on mortgage rates, and we're going to talk about the opportunity that is out there to buy a home. Um, and it's one of those opportunities that might not be um just obvious, um, but it's gonna make total sense when we talk about it. So uh, in order to get a hold of us during the week, you can visit us at ushometalk.com. There you can connect with us uh directly. You can shoot us uh messages and questions if you want to. You can um uh get access to all of our past shows uh and all that fun stuff there. So check it out, check us out at ushometalk.com uh during the week. But of course, every Wednesday uh at noon, uh check out our podcast that we have going on here. Marcus, welcome.

Marcus Walgrave 1:40

Mike, how you doing?

Mike Ouverson 1:42

Good man, doing good. You know, we don't have ice on the lakes up here anymore.

Marcus Walgrave 1:46

Yeah, yeah.

Mike Ouverson 1:47

I did I did get the pontoon back out of storage. The pontoon was in the water for about an hour uh last weekend, uh, but it was you know 42 and about 30 mile an hour winds, so that didn't last long, but still was on the pontoon. That's the whole key there.

Mortgage Rates Before And After Iran

Marcus Walgrave 2:02

Not not on uh ice skates. You were you were floating instead of walking on ice this time. But that's right. Um, but I think we're the the kind of a sweet show today. That opportunity to buy, I'm excited you know to hear you uh uh you know share some information on that, Mike, because um you know this year it's it's been uh very ebb and flow, right, with the activity. I mean, we had some warm days in the end of February, weather was beautiful. Uh buyers were getting out there, you know, chasing homes, fighting over uh uh multiple offer situations, and then March came around, a couple snowstorms, geopolitical events, it kind of cooled off, and then there was some nice weather again, then it picked up again, and now it's you know cooled off again. So um, you know, you always kind of catch that. Is it a buyer's market or a seller's market? But there's always more to it.

How Rate Jumps Pause Buyers

Mike Ouverson 2:54

Yep, yep, there's always more to it, and every market's different too. You know, I know um I know all about our market. So I'm gonna talk today about our twin city, you know, metro market here in Minnesota. I imagine that your market there in Sioux Falls, South Dakota market is similar. You know, if you're in Florida, uh if you're in Arizona, Texas, it could be a different story, right? You know, so yeah, way different, way different. So we're gonna talk a little bit, um, a little bit about our markets up here, but let's talk mortgage rates first. And and our mortgage rate talk kind of leads into the opportunity to buy as well. So um it's funny how we um reference like time, like you know, our time framing references, like pre-COVID, during COVID, post-COVID stuff, right? My reference of time today is pre-Iran War, right? And post-Iran war. So if we go pre-Iran, right, we had a few months in a row there where we're riding a 5875 to 6%, maybe maybe 6.125, you know, the high fives to six mortgage interest rate, right, level. Um, and it was great. Things were clipping along, people were refinancing. Um, it was still kind of the winter time up here, so which is normally a slower time, but we still had home purchases going on and we're just ramping up for this busy spring, right? Now we get this Iran thing that happened, and our rates go up to six and a half, maybe six point six two five, um, what they peaked at about a week and a half ago. Okay. So what did that what did that ramp up of mortgage interest rates from the five, eight, seven, five to six and a half, let's say, what did that do right to our markets? So the spring market is typically the most competition that you're gonna face out there as a buyer, right? You make a you make an offer on a home out there, you might be competing against 10 to 12 other buyers potentially for that home in the spring. That same house, you know, in the fall or the winter, maybe you're only competing against two or three other buyers, right? So the opportunity to buy what we see with interest rates here. Now I will back up with interest rates. Now we're on the downward trend because there was what a ceasefire, I think, was uh for like a two-week like ceasefire, I think is yeah, like last Monday.

Marcus Walgrave 5:08

You like you said it kind of uh peaked up uh last week, you know, that that's six and a half, six and and and uh five A's. Um, you know, there was the the tweet that uh that there was you know some negotiations going on, and then everything kind of improved, you know, the the markets kind of improved then. Um but then yeah, uh you know, yesterday evening supposedly uh two weeks ceasefire.

Sioux Falls Snapshot By Price Band

Mike Ouverson 5:33

Yeah, and so that ceasefire from from from last night, um, because there was a deadline, I think, of 8 p.m. last night. Um, but even if we go back further, like I said, about a week, week and a half ago, right? We've actually have been now on a downward trend for interest rates. So a lot of the people I'm quoting now, 6.375, maybe six and a quarter. I haven't priced one out today yet. Maybe it's even six and eighth today, you know, because the market is doing better today. So we're on that backwards, you know, that downward trend again on there. But but what this uh, you know, temporary slide up in interest rates did, um, and I think gas prices and some other like consumer goods costs came into play here as well. But it it did put some buyers kind of just on pause, right? It's like, hey, we're gonna wait a few weeks and see how this thing shakes out, or we're gonna wait a month or two to see how this thing shakes out. Because maybe they're riding a line on their affordability. It's like this house, right, uh at a six percent interest rate is affordable, but as soon as it goes to six and a half or higher, right? Now it's we're kind of pushing our limits, so we might just hold off a little bit. So um, so it has slowed down um purchase offers, like like getting offers submitted to purchase a house, it's slowed that down a little bit. But as far as applications go, our applications haven't dropped off at all, right? So we're gonna have this backlog of buyers, right, that is coming up. That line, right, waiting to get in the door is growing every single day because those applications are still coming in, right? Now it's when does that line of pre-approved buyers there, when do they all get into the door and now start making offers again? That's to be determined. So your opportunity that you have now, if you were a buyer and you were competing against several other buyers on you know your offers that you're submitting for a house to buy, you're probably gonna see a little pullback on there where you're gonna have less competition, which might open the door now to get your offer accepted.

Florida Shows A Wilder Market

Marcus Walgrave 7:29

Yeah, definitely. I mean, we were talking about some uh of our monthly market indicators uh that our MLS put out here recently um at our uh brokerage uh agents meeting just earlier this week, and pending sales uh year to date. We're up almost 78% more pending sales year to date than we were uh last year at this time. Um I think that that's kind of speaks volume to what you're getting at with those five and three fours uh rates. You know, a lot of people are like, hey, we're gonna make a move on it, we're gonna get it going. Um the buyers maybe say, I'm gonna pump the brakes here here and to see how this kind of plays out over the next couple weeks, but they're not going anywhere, right? Um we were talking about some price ranges, and and in our market here in the Sioux Falls area, uh we reference as as the Sioux Empire, the Sioux Falls and the surrounding counties. Um if it's a home under 600,000, uh it's it's you know safe to say that you could you could you could safely say it's it's likely a seller's market and in that price range. Anything over 600, you know, the the month uh supply of homes drops off quite a bit. Uh or excuse me, uh uh jumps up quite a bit. You know, that there's quite a bit more months supply in that six hundred thousand plus uh price range. So then in there, it's like, well, yeah, I mean the buyers are you know, the buyers have more options, and and you could argue that it's a buyer's market up there. So um, you know, a lot of moving parts when you're trying to determine, you know, where you fall in this buyer-seller's market uh uh definition.

The Real Opportunity For Buyers

Mike Ouverson 9:00

Yep. Yeah, and I got some clients who are in Florida. Um I'm licensed in all 50 states, so I still help them out with you know their needs down there, even though they live down there and stuff. So I have one client that owns a couple houses down there, so they own a primary residence down there, they have a rental property. Well, they're gonna be building a brand new construction home for them to live in. And they were talking to me about the two homes that they own down there already, you know, and the one, the one they bought at uh$525 at the peak of the market, which would have been, I don't know, a year, year and a half ago or something like that. Like they said they probably could have sold it for like$650, and then now they think it's worth about the high fours, like$485 to$4.90. Right? Whoa, and it's just like and they they were saying that, and they're savvy, like they're savvy, they're not real estate professionals, but they are savvy, right? I've done like 12 or 13 loans for them. They've bought and sold lots of houses, they got their pulse on the market stuff, and that that really surprised me because we just don't see those fluctuations up here in our market, right? But that Florida market down there, right? A little bit more wild, a little bit more ups and downs, you know. So the the house that they're living in now, they're actually choosing to keep and rent that out because they can be like, if we sold it now, we would take a hundred thousand dollar loss on it, like a guaranteed hundred thousand dollar loss. But now if we rent it out and we have a renter making the payment, well, maybe in a year or two, we'll sell in a year or two and the market will come back, right? And then we don't have to sell it for a loss. So um, so anyway, yeah, so there's some opportunity out there, and again, we were talking about each market is different, right? So you definitely will want to plug in with your real estate professional there and see, hey, is there an opportunity for me to like take advantage of this of people kind of pulling back and like sitting and watching to see what happens in Iran before they get back into the market, start making offers? Might open a door for you.

Marcus Walgrave 10:50

Yeah, I mean, I think that that was something that we were talking about earlier in the week, right, Mike? I mean, we we were talking about this buyer opportunity, opportunity to buy, even if you're in a what would be deemed a seller's market. Um, you know, if if you're if if you're still in a position where, okay, hey, we were maybe getting quota at six six percent now at six and three eighths, um, you know, we're still gonna move forward with buying because we know that maybe twenty, thirty, forty percent of the buyers are like, hey, we're gonna we're gonna step back for a month. Well, now all of a sudden, you know, you're you're not you're not fighting with uh you know four or five offers. You might you know have to uh uh navigate the waters of of hearing that there may be some interested other buyers out there, but at least you're not in a bidding war. And and that's where that kind of like, yeah, you may not get today's great rate of or uh uh uh last month's great rate of five and three fours. Um, but at least you're not you know going 10, 20, 30 grand over uh over what you wanted to go to because you're in a bidding war.

Legal Minute Due On Sale Clause

Mike Ouverson 11:53

Yeah, I mean that's a great point there, Marcus. We're gonna pause for a legal minute here and talk a little bit more about this. I want to talk about what does the future look like? What does the next couple months look like here uh for interest rates and for our market? But we'll pause here for the legal minute.

Jeff O'Brien 12:07

This is Jeff O'Brien, attorney with Hush Blackwell with a U.S. Home Talk legal minute. A due on sale clause is a provision in the mortgage which provides that the borrower may not transfer title to the mortgaged property without the lender's express written consent. If the borrower does in fact transfer title without consent, such a transfer is considered a default in the mortgage, which allows the lender to declare the entire loan balance due immediately. One example of a transfer title which triggers the due on sale clause is a contract for deeds sale, which must be submitted to the lender for consent if the property which is to be sold on contract is subject to a mortgage which contains a due on sale clause. This is Jeff O'Brien, attorney with Hosh Blackwell with a U.S. Home Talk legal med.

Mike Ouverson 12:43

Appreciate that, Jeff. Uh contract for deeds. Um we we see those, I mean, I see those a little bit. Do you guys get much contract for deeds stuff in your market, Marcus?

Marcus Walgrave 12:53

Uh I mean, I think it kind of similar to to what we've always talked about. I mean, a a very small percent of of deals, kind of uh um uh the transactions uh play out that way with through a contract for deeds, things of that nature. Um so it it's it's here, but but you know, not very common.

Contract For Deed In Real Life

What Rates Might Do Next

Mike Ouverson 13:11

Yeah, yeah, same up here. Same up here. All right, so let's talk about let's talk about over the next couple months here, like what we expect to happen. So um, of course, the Iran stuff, that is the main driver of interest rates right now. If the news from over there is good, such as, and good news would be like, hey, they're coming to an agreement, there's a ceasefire now for a couple weeks. Like, if it's peaceful type of news, um, it's gonna be good for interest rates. Um the opposite type of news is gonna be bad for interest rates, um, from what I can see here, just based on the market and how it's reacted, right, up to this point. So um, what's gonna be happening moving forward here? Again, I think you just at least for the next month or two or whenever this uh right, whenever this thing subsides over there, right? Watch that. If the news is positive where it's peaceful, our interest rates will will stay nice. Um, if we get a run of bad news, um, just expect interest rates to go up. Now the good thing is is that uh they didn't go crazy, right? 5875 to about six and a half, maybe six point six two five, right? Three quarters of a percent is what they went to. Now we're on their way back down. Um do I see rates hitting seven again? I don't think so. What do you think about it?

Marcus Walgrave 14:22

Not unless Iran, you know escalates and and and becomes uh a bigger and bigger problem. Then, you know, then possibly.

Mike Ouverson 14:33

Yep, I would agree, you know. Um opportunity to buy. Um I think rates to eight says says Evan. Is that what you think Evan is?

Marcus Walgrave 14:44

That's like a that's like a campaign slogan. I don't think you're gonna win with that one.

Mike Ouverson 14:48

Yeah, I don't think rates to eight is gonna get you many votes there, but um and and funny, not funny though, right?

Marcus Walgrave 14:55

Because we do have we do have some a big election coming up this fall, and and so you know that there there's a lot of things that play to where you know letting rates go into the eights, it's not it's not gonna play well for for that that time of year. Um, so I I don't I don't see that happening.

Mike Ouverson 15:13

I don't either. I don't see that happening. Um, but what I do see is this kind of opportunity window that we have spoke about here, where you as a buyer will probably have less competition on the homes you're making offers on. I do think that will last here for a little bit yet. We're gonna have to have rates come down, we're gonna have to have gas prices come down, like we're gonna have to have that feel-good type of stuff to happen, right? And then it's gonna get then it's gonna get busy, it's gonna get wild, right? At that point. So once that happens, you got to know if you're competing against one or two other buyers today for a house, that turns into 10 or 12, right? At least in our market, that turns into 10 or 12 as soon as you know rates come down a little bit, gas prices come down a little bit, and so on.

Marcus Walgrave 15:53

And and just to kind of bring it all together, right? I mean, it it's we talked about this at the end of 2025, um, a lot of like in-year uh uh in-year stories and and and hey, how did everything play out at the end of 2025, forecasting 2026, and all the big uh players out there, you know, Fannie Me, Freddie Mac, uh some of the big banks, um, NER, excuse me, I mean, they were all saying, you know, in in 2026, the average mortgage rate when the when the year is done, yes, there's gonna be some higher ones and some lowers, but on average, the rate in 2026 is gonna be right around six and a quarter. It was something like that, right? It's 6.2, 6.25 is right around there. Um and and so, you know, the this this idea that like, hey, we're at 6.5 today or 6 and 3 eighths. Um, yeah, I mean, it it's pretty much what everybody was telling you that it is a rate that you you're probably gonna see um in 2026 anyway. So this buyer, uh, and and and you know, sadly enough, it it's um because they they've experienced the early 2020s, you know, uh a three-quarter of a rate jump over a month period isn't crazy. You know, it's like, oh yeah, you know, that's about normal. But like pre- you know, 2019 and before that, it was like, oh my goodness, uh a quarter of a jump over the last 60 days. That's crazy. Now it's like, okay, you know, uh a morning tweet can have can create something like that. So the buyer is more resilient towards unfavorable news. The rates are still where they were forecasted by a lot of people, um, you know, right around that sixth and a quarter, a little bit above it today. But to your point, Mike, it sounds like we're probably gonna get back down there. Um, but I tell you what, Mike, I I think that this this, you know, I think an event like this, and and I think with these high uh oil prices, you know, there's going to be bad inflation data down the road. Um, I don't think we're gonna get below 5.5. I know somebody else thought we were gonna hit it or get below it. Um, I just don't think we're gonna see it in 2026. I think that that if you can get that five and three quarter, five and seven eighths sticks flat, um, be excited about it and lock it in. Don't be like, let's let's hold off to get that five and a quarter. Um, I don't know. I just I don't I don't see it happening.

Mike Ouverson 18:14

Well, being that Jason's not on the show with us today, I mean I will just come up and say it. No, Jason, we can just say, Jason, you're wrong again about rates. So so if people watch our show, whatever Jason predicts for mortgage rates, just predict the opposite, and then you'll be right because he's been wrong for how many times in a row now?

Marcus Walgrave 18:33

He won't pay off either. He he's gonna buy us a steak dinner or something.

Final Takeaways And Sign Off

Mike Ouverson 18:37

Well, he keeps doubling down, you know, triple or nothing, quadruple or nothing. He keeps doing the or nothing until he wins, and then he's then he's back to even. So but no, folks, we we uh steak dinner. Steak dinner at uh yeah, at Manny's. Um but anyway, folks, thanks for watching our show today. Uh connect with us at any time during the week. ushometalk.com is where you can reach us at. Again, you can uh access all of our past shows. You can connect with us directly there as well. Uh so on behalf of myself and Marcus Walgrave there in Sioux Falls, South Dakota, we appreciate you listening. We'll see you next week.