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It’s no secret that 2023 was a difficult year to buy a home. With mortgage rates briefly topping 8% and home prices breaking records throughout the year, many would-be sellers simply decided not to bother listing their homes, exacerbating already tight inventories.
New data from the U.S. Census Bureau published last week shows how drastically housing inventory has changed since 2020, while weekly data from Altos Research offers some insights on where it goes from here.
Census Bureau data on housing inventory estimates details two cycles this decade – the onset of the pandemic and the rise of interest rates – that have been catastrophic for the nation’s for-sale housing inventory.
The onset of the pandemic and government lockdowns sparked a frenzy for homes, especially those away from crowded downtowns and with ample space for home offices and homeschooling. Prospective homebuyers were armed with low interest rates, paused student loan payments and stimulus checks.
The number of owner-occupied homes skyrocketed, quickly depleting the number of vacant for-sale homes. Renters occupied fewer homes, and fewer vacant homes were reserved for them.
The number of homes “held off market” – second homes, vacation homes and others that are neither for-sale, for-rent or occupied – shrank. This could be because their owners snagged profits amid rapidly rising prices, because those who can afford second homes paused buying, or a combination of the two.
Seasonal housing, too, dropped considerably. This is likely due to the fact that seasonal housing – defined as homes intended for periodic occupancy such as for holiday resort guests or farm workers – could be profitably sold to meet soaring homebuyer demand and was not needed during the pandemic’s travel restrictions and weak travel demand.
Most of the trends begun in 2020 continued in 2021 except for renter-occupied homes, which rose above 2019 levels in the second half of the year. This was likely a reflection of the prolonged decline in vacant homes for sale, which made it difficult for would-be buyers to find a home to purchase.
Many of the same pandemic forces that set off the homebuying frenzy also fueled a frenetic pace of inflation. In 2022, the Federal Reserve began taking action to combat these market forces by raising interest rates, starting the second cycle of inventory changes.
Over two years, the Federal Reserve hiked rates 11 times for a total increase of 5.25 percentage points, the fastest pace of hikes in four decades. It has held rates at an effective rate of 5.33% in every meeting of the Federal Reserve Open Markets Committee since July 2023, including in their meeting last week.
Mortgage rates followed suit, walloping buyers’ purchasing power. The sudden run-up in rates discouraged would-be sellers from listing their homes, as they would be faced with much higher monthly payments for the same size home were they to sell and buy another home – if they even qualified for the same size home as they currently own.
This squeezed inventory even further throughout 2022 and 2023, pushing home prices to record highs month after month.
The high-rate environment further pushed owner occupancy up while pushing homes held off market, seasonal housing and homes vacant for sale down. That the number of owner-occupied homes rose throughout 2023 – an abysmal year for home sales – shows just how tightly recent homebuyers are holding onto their low rates.
High rates, combined with low for-sale inventories and high home prices, have also resulted in a surge in home renters. There were nearly 2 million more renter-occupied homes in the fourth quarter of 2023 than in the same quarter of 2019.
The environment has also prompted many homeowners to list their homes for rent rather than sale. The number of homes vacant for rent in the fourth quarter of 2023 was up 4% since the same quarter five years ago, while the number of homes vacant for sale was down 36%.
The extremes of the 2020s have dealt big blows to for-sale inventories. First the 2020-2021 housing frenzy took a big bite out of existing inventories, then the 2022-2023 streak of rate hikes kept would-be sellers from replenishing those inventories.
The 2020s have also seen for-sale inventory siphoned from second homes, vacation homes and seasonal homes. Homebuilders, too, have added to for-sale inventory, pushing the total number of homes in the U.S. up 8.7% since the fourth quarter of 2018. But none of these valves have alleviated the shortage of for-sale homes or the resultant high home prices.
The majority of homes that would be up for sale are being held by owners with low mortgage rates who would rather stay put or rent than sell, a phenomenon known as the “mortgage rate lockdown.” Plus, boomers are aging in place for longer, further depleting available housing stock. In fact, the number of owner-occupied homes is at an all-time high, while the percentage of homes that are owner-occupied is well above pre-pandemic levels.
The only apparent change that could induce significant for-sale inventory back into the market, then, is lower mortgage rates. How quickly would sellers return if rates were lower? We got an early test in December and January when the FOMC forecasted rate cuts in 2024.
As rates began falling steeply from October through December and hovered around 6.6% in January, new listings increased on a year-to-year basis in 14 of 15 weeks, according to data from Altos Research, which, like HousingWire, is owned by HW Media.
The data is an encouraging sign that owners with homes to sell will be responsive to mortgage rates, suggesting rate cuts this year could bring about a rapid uptick in homes for sale.
Less encouraging, however, is how soon the market might see rate cuts. Mortgage rates rose above 7% this week for the first time in 2024 following a strong jobs report and comments by Federal Reserve Chairman Jerome Powell that suggested cuts were less imminent than many bond and equity traders had assumed.
Source: housingwire.com
As painful as it can be to see interest rates topping 7% when they hovered over 2% in late 2020, waiting for them to come down again could bite would-be homeowners. Although today’s rates mean homebuyers can expect to spend more on interest over their loan’s lifetime, they’re actually close to the 50-year average — and besides, if they plummet again, the market will once again be flooded by buyers who have been sitting on the sidelines.
Still, interest rates are a big deal when it comes to how much home you can comfortably afford — and the ongoing health of your personal finances. In this article, we’ll walk through a little bit of mortgage rate history and context, as well as offering ways to decide whether you’re ready to buy or not, regardless of the market.
Since Americans just witnessed a historic mortgage interest rate drop in 2020, today’s 7% and 8% rates seem astronomical. (And, to be fair, coupled with a median national home sales price over $400,000, they can pack a powerful punch: After interest, a 30-year mortgage could easily cost twice the amount of the loan.)
Still, it’s important to remember that when you look at the big picture, today’s rates are actually not that big a deal. Yes, they’re the highest they’ve been since the year 2000, but they’re about on par (or slightly under) the rates buyers saw in the 1990s — and less than half of the 17% and 18% interest rates buyers paid in the early 1980s.
The rise and fall of mortgage rates is tied to complicated economic factors, including inflation, the Federal interest rate, and the yield of 10-year Treasury bonds. It’s not totally predictable, but one thing’s for sure: It will continue to undulate over time. What’s more, attempting to time the market to purchase a house might not be the best financial move, even if it does save you money on interest.
💡 Quick Tip: SoFi’s Lock and Look + feature allows you to lock in a low mortgage financing rate for 90 days while you search for the perfect place to call home.
While no one can fully predict the future, experts do weigh in with their predictions for the mortgage interest rate. In 2024, projections suggest a mortgage interest rate drop to about 6%, or slightly lower — but still, we’re likely to stay far from the 2% and 3% free-for-all we saw a few years ago.
So how much do interest rates really impact how much house you can afford? Glad you asked! Let’s do some math.
Say you’re going to buy a $400,000 home — which is just a little less than the U.S. median sale price right now. You’ve saved up a 20% down payment, or $80,000, and plan on taking out a 30-year mortgage.
With a fixed interest rate of 7%, your monthly payment would be about $2,129 per month, before additional costs like homeowners insurance and property taxes. At 6.5%, that payment goes down to $2,023, and at 6% it drops to $1,919. (So a percentage point drop equates to $210 per month in savings, or $2,520 per year.)
However, it’s over the long term that interest really has the opportunity to add up. In the exact same scenario, over the 30-year lifetime of the loan, you’d pay approximately the following amount in total interest:
• 7%: $446,428
• 6.5%: $408,142
• 6%: $370,682
As you can see, just a single percent difference can save you nearly $100,000 in the long run. So while it’s not possible to perfectly time the market, it is worth shopping around for the lowest possible interest rates you can qualify for.
(Keep in mind, too, that you can always pull your own customized numbers using a mortgage calculator.)
💡 Quick Tip: Don’t have a lot of cash on hand for a down payment? The minimum down payment for an FHA mortgage loan is as low as 3.5%.1
The question of whether you’re ready to buy a home — or if it makes more sense to wait — is one that depends on far more than the going market interest rate. Here are some ways for first-time homebuyers to decide what might be the right move, right now.
These are good reasons to consider going ahead with the homebuying process, high interest rates or no:
• You’re financially (and emotionally) ready. Your credit score is in tip-top shape, you’ve saved up a down payment, and you’re planning to stay in your new home for at least five years — which means you could feasibly refinance once interest rates drop substantially and still break even on closing costs. (A home affordability calculator can help you figure out just how much house you can reasonably afford.)
• The market looks good to you. These higher interest rates mean the housing market is moving far more slowly than it used to, so the amount of available inventory may give buyers who are ready to buy more time to shop around and find something they really like. This dynamic can also drive home prices down, creating more value for you as the property appreciates over time.
• It’s time to move. Regardless of the housing market, life goes on — and if you’re expanding your family or relocating, you may not have a choice about moving. If the opportunity is presenting itself and you’re financially ready, this could be a great time to get started on building equity and generational wealth as a homeowner.
On the other end of the spectrum, there are some good reasons to wait on buying a home, even when interest rates are low:
• You’re not financially (or emotionally) ready. If a monthly mortgage payment would leave you cash-poor, you don’t have a substantial emergency fund saved up, your job security is in question, or you’re not quite sure you’re ready to commit to a given locale, buying a home might not be the right move for you — yet.
• You can’t get prequalified by a mortgage lender. Perhaps you’re in a decent amount of debt or have an iffy credit history. If you can’t qualify for a loan right now, take the time to work on those factors and get ready for the future.
• The market looks meh to you. If you can’t find a home you like, you probably shouldn’t buy one. After all, it’s a major investment — and while we’re not suggesting you have to wait for an absolutely perfect house to come along, you should be happy with your purchase!
While interest rates are of course a relevant factor for would-be homeowners, so long as you’re financially prepared and planning on staying in your new home for at least a few years, higher interest rates shouldn’t deter you. After all, you can always refinance once rates drop.
Waiting for interest rates to drop can be a bit like waiting for Godot: You might get stuck in the in-between. If your finances are in shape and you’ve found your dream home, now could still be the right time to take the leap and become a homeowner.
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Not necessarily. While lower interest rates can subtly lower a monthly mortgage payment — and save buyers potentially hundreds of thousands of dollars over the lifetime of a loan — it’s not the only factor to consider if you’re otherwise ready to buy a home. (Plus, qualified buyers can always refinance their purchase down the line when rates drop again.)
It’s probably as good a year to buy as any. Many experts expect interest rates to drop a bit this year, from their current position between about 7% and 8% to somewhere between 5.5% and 6.5%. And it’s unlikely that interest rates will plummet back down to 2% or 3% as they did a few years ago.
November and December tend to be favorable times to buy a home for buyers looking for the best deal possible. That’s because the holidays and winter weather may keep some buyers from shopping during this time, which means sellers might be more motivated to make a deal. You won’t get to see your new home in the height of its summer beauty for months — but you’ll get to find out whether it’s well insulated!
Photo credit: iStock/Andrii Yalanskyi
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*SoFi requires Private Mortgage Insurance (PMI) for conforming home loans with a loan-to-value (LTV) ratio greater than 80%. As little as 3% down payments are for qualifying first-time homebuyers only. 5% minimum applies to other borrowers. Other loan types may require different fees or insurance (e.g., VA funding fee, FHA Mortgage Insurance Premiums, etc.). Loan requirements may vary depending on your down payment amount, and minimum down payment varies by loan type.
¹FHA loans are subject to unique terms and conditions established by FHA and SoFi. Ask your SoFi loan officer for details about eligibility, documentation, and other requirements. FHA loans require an Upfront Mortgage Insurance Premium (UFMIP), which may be financed or paid at closing, in addition to monthly Mortgage Insurance Premiums (MIP). Maximum loan amounts vary by county. The minimum FHA mortgage down payment is 3.5% for those who qualify financially for a primary purchase. SoFi is not affiliated with any government agency.
+Lock and Look program: Terms and conditions apply. Applies to conventional purchase loans only. Rate will lock for 91 calendar days at the time of preapproval. An executed purchase contract is required within 60 days of your initial rate lock. If current market pricing improves by 0.25 percentage points or more from the original locked rate, you may request your loan officer to review your loan application to determine if you qualify for a one-time float down. SoFi reserves the right to change or terminate this offer at any time with or without notice to you.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
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Source: sofi.com
Here’s one solid assumption for mortgage rates for 2024 — they’ll act like a yo-yo. Again.
To see the extremes that home loans go through, my trusty spreadsheet looked at swings in Freddie Mac’s weekly 30-year average fixed rate going back to 1972.
And over the past half-century, the average year’s highest rate was 8.4 percent vs. a 7 percent low. That translates to a typical 12-month period having a 1.4 percentage-point swing between the top and bottom mortgage rate.
Yes, rate volatility is fairly normal.
But the size of rate gyrations during the past three years has not been normal.
Remember, the Fed aggressively used interest rates to first stimulate a coronavirus-chilled economy, only to then hike rates to fight an overheated business climate.
Well, 2023 was sort of mainstream with rates running from a 7.8 percent high to a 6.1 percent low. That’s a slightly above-average 1.7-point spread, top to bottom.
Still, this was the 11th widest gap in any year during the past half-century.
Yet those fluctuations look tame vs. 2022 when rates ranged from 7.1 percent to 3.2 percent as the Fed ended its cheap-money policy. That 3.9-point chasm was the third-largest rate swing in a half-century. Bigger swings were seen in 1980 and 1982, another period when rate hikes were used to battle inflation.
And somehow all this recent mortgage turmoil followed a far calmer 2021 when the Fed used cheap money to prop up the coronavirus-chilled economy.
Rates moved only between 3.2 percent and the record-low 2.65 percent in 2021 — a half-point spread that was history’s sixth-smallest gap.
Simply stated, history clearly shows mortgage rates rarely move in a straight line.
Do not forget, the ups and downs of rates put huge spins on a borrower’s purchasing power. These fluctuations can make or break many a homebuying deal.
During the past half-century, there’s been an average 15 percent difference between the monthly mortgage payment tied to a year’s highest mortgage rate compared to the size of the monthly check at the lowest rate.
Last year, there was a 19 percent swing, history’s ninth-largest gap swing.
And that looks stable vs. a painful 2022 and the largest gyrations of the past half-century — a 55 percent difference due to the Fed increasing rates aggressively.
All that excitement came after a placid 2021 when purchasing power swung only 7 percent.
Still, history strongly suggests that mistiming the mortgage market can be an expensive mistake.
Bottom line, I took this rate-swing history and applied it to 2023’s year-end 6.6 percent average rate to create a forecast range for 2024.
Some simple math suggests the average 30-year mortgage rate will run between 7.3 percent and 5.9 percent in 2024. And that’s without doing much thinking about the Fed’s next moves, how the economy might fare, or what’s next for inflation.
By the way, history says a year’s average mortgage rate landed within this forecast formula’s projected range 80 percent of the time.
Lansner is the business columnist for the Southern California News Group. He can be reached at [email protected].
Source: sandiegouniontribune.com
The average long-term U.S. mortgage rate eased this week, welcome news for prospective homebuyers as the spring homebuying season approaches.
The average rate on a 30-year mortgage fell to 6.63% from 6.69% last week, mortgage buyer Freddie Mac said Thursday. A year ago, the rate averaged 6.09%.
Borrowing costs on 15-year fixed-rate mortgages, popular with homeowners refinancing their home loans, also fell this week, pulling the average rate down to 5.94% from 5.96% last week. A year ago it averaged 5.14%, Freddie Mac said.
The cost of financing a home has been mostly easing in the weeks since the average rate on a 30-year mortgage hit 7.79%, the highest level since late 2000. So far this year, the weekly average has ranged between 6.60% and 6.69%.
Initial and recurring applications for US unemployment benefits both rose to a two-month high, suggesting some slowdown in the labor market.
Initial claims increased by 9,000 to 224,000 in the week ending Jan. 27, according to Labor Department data released on Thursday. The median forecast in a Bloomberg survey of economists called for 212,000.
Continuing claims, a proxy for the number of people receiving unemployment benefits, rose to 1.9 million in the week ending Jan. 20.
The US labor market has defied economists forecasts over the last year despite elevated interest rates, but there are signs of cooling. Fewer people are quitting their jobs than at the peak of the pandemic recovery and recent high-profile job-cuts announcements from companies including United States Parcel Service Inc. may be early signs that unemployment will pick up in coming months.
Source: bostonherald.com
Our experts answer readers’ home-buying questions and write unbiased product reviews (here’s how we assess mortgages). In some cases, we receive a commission from our partners; however, our opinions are our own.
Borrowers saw mortgage rates drop dramatically late last year, and experts have been calling for rates to go down this year as well. But a key economic indicator suggests the path to lower rates could be somewhat rocky.
On Friday, the Bureau of Labor Statistics released January’s jobs report, which showed that the US economy added many more jobs than expected last month.
In January, 30-year mortgage rates averaged around 6.34%, which is just nine basis points down from the previous month’s average, according to Zillow data.
Mortgage rates are expected to fall this year once the Federal Reserve starts lowering the federal funds rate. The Fed first started aggressively raising rates in 2022 to combat record high inflation. Inflation has since come down substantially, and Fed officials have indicated they’re ready to consider cutting rates this year.
But this latest labor market data could push back the Fed’s timeline for lowering its benchmark rate. Since the economy is doing so well in spite of the Fed’s hikes, officials may decide to wait longer before they start cutting.
The longer the Fed waits to start cutting rates, the longer borrowers will likely have to wait for lower mortgage rates. We’ll need to see some more data, including the latest Consumer Price Index numbers, to get a better idea of when a Fed cut might come.
Mortgage type | Average rate today |
Real Estate on Zillow
Mortgage type | Average rate today |
Real Estate on Zillow
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Mortgage rates started ticking up from historic lows in the second half of 2021 and increased dramatically in 2022 and throughout most of 2023.
But many forecasts expect rates to fall this year now that inflation has been coming down. In the last 12 months, the Consumer Price Index rose by 3.4%, a significant slowdown compared when it peaked at 9.1% in 2022.
For homeowners looking to leverage their home’s value to cover a big purchase — such as a home renovation — a home equity line of credit (HELOC) may be a good option while we wait for mortgage rates to ease. Check out some of our best HELOC lenders to start your search for the right loan for you.
A HELOC is a line of credit that lets you borrow against the equity in your home. It works similarly to a credit card in that you borrow what you need rather than getting the full amount you’re borrowing in a lump sum. It also lets you tap into the money you have in your home without replacing your entire mortgage, like you’d do with a cash-out refinance.
Current HELOC rates are relatively low compared to other loan options, including credit cards and personal loans.
We aren’t likely to see home prices drop this year. In fact, they’ll probably rise.
Fannie Mae researchers expect prices to increase 3.20% in 2024 and 0.30% in 2025, while the Mortgage Bankers Association expects a 4.10% increase in 2024 and a 3.30% increase in 2024.
Sky high mortgage rates have pushed many hopeful buyers out of the market, slowing homebuying demand and putting downward pressure on home prices. But rates have since eased, removing some of that pressure. The current supply of homes is also historically low, which will likely push prices up.
House prices usually drop during a recession, but not always. When it does happen, it’s generally because fewer people can afford to purchase homes, and the low demand forces sellers to lower their prices.
A mortgage calculator can help you determine how much house you can afford. Play around with different home prices and down payment amounts to see how much your monthly payment could be, and think about how that fits in with your overall budget.
Typically, experts recommend spending no more than 28% of your gross monthly income on housing expenses. This means your entire monthly mortgage payment, including taxes and insurance, shouldn’t exceed 28% of your pre-tax monthly income.
The lower your rate, the more you’ll be able to borrow, so shop around and get preapproved with multiple mortgage lenders to see who can offer you the best rate. But remember not to borrow more than what your budget can comfortably handle.
Source: businessinsider.com
Mortgage rate declines from their two-decade peak in October are allowing buyers to buy homes worth tens of thousands of dollars more than they did a few months ago, according to real-estate platform Redfin.
Prospective buyers able to afford $3,000 monthly payments are well-suited to acquire a home priced at $453,000 at a 6.7 percent home loan cost compared to $416,000 when rates hovered near 8 percent. That means buyers are potentially able to add $40,000 to the cost of the home they can buy, Redfin pointed out.
Mortgage rates soared to around 8 percent on the back of the Federal Reserve’s hiking of rates beginning in March 2022 to the current range of 5.25 to 5.5 percent to battle inflation that had at one point skyrocketed to a 40-year high. Recent economic news suggests that inflation has slowed and the market now expects the Fed to begin cutting rates sometime this year.
This shift has contributed to a fall in rates over the last few to under 7 percent sparking activity in the housing market. As of January 25, the 30-year fixed-rate mortgage stood at 6.69 percent, according to Freddie Mac.
The drop in rates has also given buyers the potential to save hundreds of dollars in monthly mortgage payments. A typical home selling at $363,000 at a 6.7 percent mortgage will mean an estimated monthly outlay of $2,545. The same home would have cost an owner more than $2,700 in monthly payments when rates had jumped to nearly 8 percent in November, according to Redfin.
The market is starting to shift as a result of these potential savings with buyers coming out of the sidelines and looking to buy.
“Late last year, many listings sat on the market as buyers sat on the sidelines, hoping for rates to drop,” Shoshana Godwin, a Redfin Premier agent in Seattle, said in a statement. “Now, buyers are snapping up homes because even though rates haven’t plummeted, people are realizing that the longer they wait to buy a home, the more competition they’re likely to face.”
Redfin analysts are forecasting mortgage rates to decline over the months ahead with some level of fluctuations over the year.
Freddie Mac chief economist Sam Khater suggested last week that should mortgage rates continue to trend downwards, spring could be a busy season for the housing market.
“Potential homebuyers with affordability concerns have jumped off the fence back into the market. Despite persistent inventory challenges, we anticipate a busier spring homebuying season than 2023, with home prices continuing to increase at a steady pace,” Khater said in a statement.
Newsweek is committed to challenging conventional wisdom and finding connections in the search for common ground.
Newsweek is committed to challenging conventional wisdom and finding connections in the search for common ground.
Source: newsweek.com
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“What do hospital gowns and insurance policies have in common? You’re never covered as much as you think you are.” Although loan officers are not insurance experts, they are seeing the escalating cost of homeowner’s insurance impact affordability. (Last Friday’s TMC show focused on why insurance costs are rising.) Insuring homes is not the only issue, however. The average bill for the repair of an American vehicle is $4,437, and for an electric vehicle that is up to $6,618, about 49 percent higher. Collision insurance claims have increased 64 percent between 2018 and 2022, fueled by increasingly sophisticated cars and more complicated things that need to get fixed when they get broken. No longer are we just hammering out dents, but rather we’re taking computers out of the car and fixing it. Insurance costs may be on the agenda (the why’s mortgage rates certainly will be) when the California Association of Mortgage Professionals (CAMP) presents the 2024 Economic Forecast today with Dr. Michael Frantanoni and yours truly at 1PM ET/10AM PT. (Today’s Commentary podcast can be found here and this week’s is sponsored by Calque. With The Trade-In Mortgage powered by Calque, lenders help their clients negotiate a lower purchase price, reduce their interest payments, and eliminate PMI. Hear an interview with Polly’s Troy Coggiola on the evolving capital markets landscape and his new role at the company.)
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“Today at 1pm CT we have an electric panelist lineup made up of Industry leaders that are going to spill the beans on ten strategies they are focused on to increase sales and reduce costs with minimal investment in 2024. Some of these strategies are directly saving 50-80 percent per month on the larger costs that lenders face, and others allow them to close more loans, faster. Come and join Kevin Peraino, Chief Lending Officer at PRMG, Delfino Aguilar, Chief Production Officer – TPO, Kind Lending, David Lykken, Founder & Chief Transformation Officer at Transformational Mortgage Solutions, LLC (TMS), and Richard Grieser, VP of Marketing at TRUV as they share the revenue generating and cost saving must have strategies that you can put into practice today! RSVP now and we hope to see you there!”
Since leaving retail and joining the UMortgage platform, Ravi Patel, Branch Manager and Top 1 percent Loan Originator has seen his business reach new heights despite some of the most challenging housing market conditions in more than a decade. “In a competitive market, speed can make or break many of the deals that my team and I are working on,” Patel shared. “The responsiveness and availability of our incredible Operations team have hugely benefitted my business and are just a few of the many ways that being on the UMortgage platform has exponentially increased my production.” Join Ravi this Thursday, February 1st at 2pm ET as he shares his own secrets to success and the reasons he chose UMortgage as the platform to grow his business during Loan Originators Powered by UMortgage.
Mortgages with Millennials is back today at 1PM ET! And Kristin Messerli and Robbie Chrisman are talking about Overlooked Strategies to Win with Millennials, addressing products and marketing, as well as hiring, and retaining. They will be joining you live today with the talented Melissa Langdale, sponsor from The Mortgage Collaborative, and Joe Soto, a top producer and FirstHomeIQ Ambassador. Register here.
The California Association of Mortgage Professionals (CAMP) is presenting the 2024 Economic Forecast with Dr. Michael Frantanoni and Rob Chrisman on Tuesday, January 30th
1PM PT. “Unlock the Future: 2024 Economic Forecast Revealed! Dive into a World of Opportunities and Growth. Discover Key Insights, Trends, and Strategies for Success in the Upcoming Economic Landscape.”
Join Appraiser eLearning for a one-hour webinar featuring Mark Calabria, acclaimed author of Shelter from the Storm: How a COVID Mortgage Meltdown was Averted. Calabria, former director of the Federal Housing Finance Agency (FHFA), will lead a frank conversation about what we can expect this year in the realm of housing policy, January 31st, 2pm ET / 1 pm CT.
Wednesday the 1st, looking for more in-depth commentary on weekly mortgage news? Register here for “Mortgage Matters: The Weekly Roundup” presented by Lenders One. Every Wednesday at 2PM EST/11AM PT is a dive into a range of mortgage-related topics, including market trends, interest rate fluctuations, innovative mortgage products, and industry advancements. Listen to a unique mix of age perspective, expertise, and charisma to the screen, ensuring that the information is not only educational but also entertaining. Hear from This week hear from Scott Olson of the CHLA.
Register for MMBBA’s meeting, Thursday, February 1st at 11:00 AM. Industry compensation expert Ari Karen from the law firm of Mitchell Sandler presents the 2024 Loan Originator Compensation practices update. The topic of utilizing different referral “buckets” for loan officer compensation is a highly controversial practice and noted legal expert Ari Karen will tackle this topic head on for MMBBA members.
Join MMLA in the Northern Michigan region for the first in a series of casual “Lunch and Learn” events at the Silver Spruce Brewing Company on Thursday, February 1st, 11:30 – 1:00. Holly Hack, Broker/Owner at Exit Realty Paramount, will discuss market trends in the five-county area and offer solutions to help get the deal across the finish line.
In Colorado, register for CoAMP’s 2-hour course on Thursday, February 1st, 2:00 – 4:00 PM designed for Realtors (CE included) and MLOs to better understand the benefits and nuances of VA home loans and how to use them to best serve our Veteran population and help dispel the myths and rumors about VA financing for homes. Held at 7979 E Tufts Ave in Denver, CoAMP MLO Members attend for free. Cost for Non-Member MLO and Realtors is $20 (includes CE credits).
Friday, February 3rd, is this week’s episode of The Mortgage Collaborative’s Rundown covering current events in the mortgage market for 30-45 minutes starting at noon PT, 3PM ET, in “The Rundown”. This week’s co-host is Jeff Rosato with Nationwide Mortgage Bankers to discuss the capital markets.
On February 6th at 10AM PT join me for Insellerate’s upcoming webinar, alongside its CEO and Founder, Josh Friend. Together, we’ll explore the 2024 Market Forecast, providing insights into mortgage industry predictions, strategies for navigating economic uncertainty, discussing capital markets developments, and hosting an interactive Q&A session. Reserve your spot now to stay ahead in 2024.
Join the National Association of Mortgage Brokers, CoAMP, Freddie Mac and the Denver Metro Association of Realtors on Tuesday, February 6th, 11am – 2:00pm for NAMB Road Show Denver. This free event, which includes lunch, features informative sessions giving you tools and resources to help you and your consumers. in-depth Realtor-Lender Partner panel. Freddie Mac Affordable Lending Manager Nora Guerra, as she shares the state of the Colorado housing market; housing trends in the area; and innovative ways to navigate the road ahead in creating an impactful mortgage business for you.
MBA of Mississippi Gulf Coast Chapter’s February Luncheon will be held on Tuesday, February 6th, 11:30am – 1:00pm (CST) at Salute Italian & Seafood Restaurant.
The Federal Reserve Bank of Dallas is offering an invite to join economic experts and business and community leaders across Texas for the Dallas Fed’s annual Texas Economic Outlook event. Whether you attend in person in Dallas or virtually, it’s a great opportunity to get the latest information on the Texas economy while expanding your network. 2024 program will take place Friday, February 9, 11 a.m.–12 noon CT. Registration is free and open to the public. In-person attendees are invited to come early to the Dallas office for refreshments and networking ahead of the presentation. Pia Orrenius, vice president and senior economist, will release the Dallas Fed’s forecast for Texas employment growth for the year and share details on factors likely to influence the Texas economy in 2024.
Capital Markets
Mortgage rates dropped to open the week ahead of a big dose of quarterly reports from companies, the latest Federal Open Market Committee (FOMC) policy statement, and the release of the jobs report for January. However, most of the downward move in rates yesterday was due to concerning geopolitical developments, as three U.S. soldiers were killed by a drone strike in Jordan and Houthi rebels attacked a U.S. destroyer and a British merchant ship.
Day one of the two-day FOMC meeting gets under way today in Washington, DC., and though no change in the fed funds rate is expected, it’s a big week for central banks. The Bank of Japan’s meeting yielded expectations for an April rate hike, while the latest Bank of Canada announcement suggests an earlier initial rate cut than markets had priced in. An initial rate cut from the European Central Bank is expected in April, and our Fed is a coin toss for a March rate cut. Central bank rate cuts should help pave a path for lower rates that should help housing markets as we enter the spring homebuying season.
In the United States, today’s economic calendar may have a few things that will move interest rates: Redbook same store sales for the week ending January 27, followed by Case-Shiller and FHFA house price indices for November, consumer confidence for January, December job openings from JOLTS, Dallas Fed services for January, and various Treasury auctions. We begin the day with Agency MBS prices are better by a few ticks (32nds), the 10-year yielding 4.06 after closing yesterday at 4.09 percent, and the 2-year at 4.31.
Employment
Steve Adamo, President of Residential and Consumer Lending looks to continue to expand OceanFirst Bank’s Residential Lending division. In 2023, the Bank saw top producing Loan Officers join the team as well as expanding its geography in the new metropolitan market of Washington D.C. OceanFirst Bank blends the benefits of an independent mortgage company with the stability of a banking environment. The Bank provides their Loan Officers with a strong portfolio, direct agency lending, retained servicing, innovative marketing and technology products and services, and the ability to lend nationally as a National Association bank. Additionally, our NeighborFirst program has benefits such as a low-down payment, no Private Mortgage Insurance (PMI), and no LLPAs based on credit score or loan amount. Contact John Costa, SVP and Head of Mortgage Sales, or 609.444.6121, to take your business to new heights.
In the Northwest and California, Banner Bank is searching for Mortgage Loan Officers looking to create lasting Realtor and builder relationships at a bank focused on the market today. Banner has opportunities for lenders looking for local decision making with FHA, VA, USDA, state bond and true Portfolio lending opportunities along with servicing retained Fannie and Freddie loans to assist in client retention. Additional highlighted products cover CRA lending with private label no payment down payment assistance to help assist all borrowers with the right opportunity. Banner is the right fit for an established team, or the individual looking to grow their business and take the next step in their career. Please send resumes to Aaron Miller.
Download our mobile app to get alerts for Rob Chrisman’s Commentary.
Source: mortgagenewsdaily.com
Our goal is to give you the tools and confidence you need to improve your finances. Although we receive compensation from our partner lenders, whom we will always identify, all opinions are our own. Credible Operations, Inc. NMLS # 1681276, is referred to here as “Credible.”
Taking out a mortgage comes with many costs — some upfront and some paid over long lengths of time. On a $300,000 mortgage, those costs might surprise you.
In fact, on a traditional 15- or 30-year loan of this size you might pay anywhere from $72,000 to $155,000 just in interest.
Learn more about how much a $300,000 mortgage will cost you in the long run:
Monthly mortgage payments always contain two things: principal and interest. In some cases, they might include other costs as well.
On a $300,000 mortgage with a 6% APR, you’d pay $2,531.57 per month on a 15-year loan and $1,798.65 on a 30-year loan, not including escrow. Escrow costs vary depending on your home’s location, insurer, and other details.
Here’s a quick look at what the monthly payment (principal and interest) would be for a $300,000 mortgage with varying interest rates:
Annual Percentage Rate (APR)
|
Monthly payment (15 year) |
Monthly payment (30 year) |
---|---|---|
$2,531.57 | $1,798.65 | |
$2,572.27 | $1,896.20 | |
$2,613.32 | $1,896.20 | |
$2,654.73 | $1,945.79 | |
$2,696.48 | $1,995.91 | |
$2,738.59 | $2,046.53 | |
$2,781.04 | $2,097.64 | |
$2,823.83 | $2,149.24 | |
$2,866.96 | $2,201.29 | |
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Check out: 20- vs 30-Year Mortgage: Is an Unusual Option Right for You?
To get a $300,000 home loan, you’ll want to get quotes from at least a few different lenders. Though this can be done by reaching out to each mortgage company directly, you can also compare lender options with an online marketplace like Credible.
Once you receive your quotes, you’ll want to compare them line by line. You should look at the interest rate, total costs on closing day, any origination fees, mortgage points you’re being charged, and more.
After you determine the best offer, you can move forward with that lender’s application and submit any required documentation.
Credible makes the process of comparing lender options easier — and it only takes a few minutes.
Find My Rate
Learn More: How to Know If You Should Buy a House
Before taking out a mortgage of this size (or any home loan for that matter), you’ll want to have a good handle on the total costs of the loan. That includes your closing costs, the down payment, the total interest you’ll pay, and the monthly payment the loan comes with.
You’ll always pay more interest on longer-term loans. So, for example, a 30-year loan would cost more in the long haul than a 15-year one would (though the 30-year loan would have a smaller monthly payment).
With a 30-year, $300,000 loan at a 6% interest rate, you’d pay $347,514.57 in total interest, and on a 15-year loan with the same rate, it’d be $155,682.69 — a whopping $191,831.88 less.
Use the below calculator to see how much interest you’ll pay, as well as what your home will cost you every month.
Enter your loan information to calculate how much you could pay
With a
$
home loan, you will pay
$
monthly and a total of
$
in interest over the life of your loan. You will pay a total of
$
over the life of the
mortgage.
An amortization schedule breaks down how much you’ll pay in interest and principal for every year of your loan’s term.
At the start of your loan, the bulk of your monthly payments will go toward interest, but as you get further into the loan term, more will be applied to the principal balance.
Here’s what an amortization schedule looks like for a 30-year, $300,000 mortgage with a 6% APR:
Year
Beginning balance |
Monthly payment |
Total interest paid |
Total principal paid |
Remaining balance |
|
---|---|---|---|---|---|
1 | $300,000.00 | $1,798.65 | $17,899.78 | $3,684.04 | $296,315.96 |
2 | $296,315.96 | $1,798.65 | $17,672.56 | $3,911.26 | $292,404.71 |
3 | $292,404.71 | $1,798.65 | $17,431.32 | $4,152.50 | $288,252.21 |
4 | $288,252.21 | $1,798.65 | $17,175.21 | $4,408.61 | $283,843.60 |
5 | $283,843.60 | $1,798.65 | $16,903.29 | $4,680.53 | $279,163.07 |
6 | $279,163.07 | $1,798.65 | $16,614.61 | $4,969.21 | $274,193.86 |
7 | $274,193.86 | $1,798.65 | $16,308.12 | $5,275.70 | $268,918.16 |
8 | $268,918.16 | $1,798.65 | $15,982.72 | $5,601.10 | $263,317.06 |
9 | $263,317.06 | $1,798.65 | $15,637.26 | $5,946.56 | $257,370.50 |
10 | $257,370.50 | $1,798.65 | $15,270.49 | $6,313.33 | $251,057.17 |
11 | $251,057.17 | $1,798.65 | $14,881.10 | $6,702.72 | $244,354.45 |
12 | $244,354.45 | $1,798.65 | $14,467.69 | $7,116.13 | $237,238.32 |
13 | $237,238.32 | $1,798.65 | $14,028.78 | $7,555.04 | $229,683.28 |
14 | $229,683.28 | $1,798.65 | $13,562.80 | $8,021.02 | $221,662.27 |
15 | $221,662.27 | $1,798.65 | $13,068.08 | $8,515.74 | $213,146.53 |
16 | $213,146.53 | $1,798.65 | $12,542.85 | $9,040.97 | $204,105.57 |
17 | $204,105.57 | $1,798.65 | $11,985.22 | $9,598.59 | $194,506.97 |
18 | $194,506.97 | $1,798.65 | $11,393.20 | $10,190.61 | $184,316.36 |
19 | $184,316.36 | $1,798.65 | $10,764.67 | $10,819.15 | $173,497.21 |
20 | $173,497.21 | $1,798.65 | $10,097.37 | $11,486.45 | $162,010.76 |
21 | $162,010.76 | $1,798.65 | $9,388.91 | $12,194.91 | $149,815.85 |
22 | $149,815.85 | $1,798.65 | $8,636.75 | $12,947.06 | $136,868.78 |
23 | $136,868.78 | $1,798.65 | $7,838.21 | $13,745.61 | $123,123.17 |
24 | $123,123.17 | $1,798.65 | $6,990.41 | $14,593.41 | $108,529.76 |
25 | $108,529.76 | $1,798.65 | $6,090.32 | $15,493.50 | $93,036.26 |
26 | $93,036.26 | $1,798.65 | $5,134.71 | $16,449.11 | $76,587.16 |
27 | $76,587.16 | $1,798.65 | $4,120.17 | $17,463.65 | $59,123.51 |
28 | $59,123.51 | $1,798.65 | $3,043.05 | $18,540.77 | $40,582.73 |
29 | $40,582.73 | $1,798.65 | $1,899.49 | $19,684.32 | $20,898.41 |
30 | $20,898.41 | $1,798.65 | $685.41 | $20,898.41 | $0.00 |
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Here’s what an amortization schedule looks like for a 15-year, $300,000 mortgage with a 6% APR:
Year
Beginning balance |
Monthly payment |
Total interest paid |
Total principal paid |
Remaining balance |
|
---|---|---|---|---|---|
1 | $300,000.00 | $2,531.57 | $17,653.84 | $12,725.00 | $287,275.00 |
2 | $287,275.00 | $2,531.57 | $16,868.99 | $13,509.85 | $273,765.15 |
3 | $273,765.15 | $2,531.57 | $16,035.74 | $14,343.11 | $259,422.04 |
4 | $259,422.04 | $2,531.57 | $15,151.08 | $15,227.76 | $244,194.27 |
5 | $244,194.27 | $2,531.57 | $14,211.87 | $16,166.98 | $228,027.30 |
6 | $228,027.30 | $2,531.57 | $13,214.72 | $17,164.12 | $210,863.17 |
7 | $210,863.17 | $2,531.57 | $12,156.08 | $18,222.77 | $192,640.41 |
8 | $192,640.41 | $2,531.57 | $11,032.14 | $19,346.71 | $173,293.70 |
9 | $173,293.70 | $2,531.57 | $9,838.88 | $20,539.97 | $152,753.73 |
10 | $152,753.73 | $2,531.57 | $8,572.02 | $21,806.83 | $130,946.90 |
11 | $130,946.90 | $2,531.57 | $7,227.02 | $23,151.83 | $107,795.08 |
12 | $107,795.08 | $2,531.57 | $5,799.06 | $24,579.78 | $83,215.29 |
13 | $83,215.29 | $2,531.57 | $4,283.04 | $26,095.81 | $57,119.49 |
14 | $57,119.49 | $2,531.57 | $2,673.51 | $27,705.34 | $29,414.15 |
15 | $29,414.15 | $2,531.57 | $964.70 | $29,414.15 | $0.00 |
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Finding a mortgage can be quite simple — especially when using a tool like Credible.
When filling your mortgage application out, you’ll want to have some financial details on hand, including your income, estimated credit score, homebuying budget, and info regarding your assets and savings.
Find My Rate
Here’s a step-by-step guide on how the mortgage process usually goes:
Keep Reading: How Long It Takes to Buy a House
Source: credible.com
A strong U.S. economy will be a boon for the housing market, Mortgage Bankers Association’s (MBA) chief economist said on Thursday, as it will buoy demand and as inflation continues to fall, mortgage rates will decline as well making home loans more affordable for buyers.
The U.S. economy accelerated at a faster-than-expected clip in the fourth quarter of 2023 at 3.3 percent, the Commerce Department’s Bureau of Economic Analysis revealed on Thursday.
Meanwhile, the personal consumption expenditures (PCE) price index—the Federal Reserve’s preferred measurement of inflation’s progress—jumped by 1.7 percent during the quarter. Core PCE, which excludes the often volatile food and energy prices, increased by 2 percent.
These dynamics bode well for the housing market that has been struggling under the weight of record-high mortgage rates, sparked in part by the Fed’s hiking of rate at the most aggressive clip since the 1980s to fight soaring inflation.
The Fed’s funds rate currently sits at 5.25 to 5.5 percent—the highest they have been in two decades—and policymakers have signaled that they will slash rates should inflation come down to their 2 percent target.
But an economy that may avoid a recession as inflation moderates without the Fed’s tight monetary policy doing too much damage to the jobs market would help the housing sector.
“Stronger economic growth will benefit the housing market, keeping demand robust,” Mike Fratantoni, MBA’s chief economist, said in a statement shared with Newsweek. “Moreover, today’s report also showed further reductions in inflation, which will enable the Federal Reserve to cut rates later this year—as they have been hinting.”
Mortgage rates ticked up slightly for the week ending January 25, Freddie Mac said on Thursday, with the 30-year fixed rate averaging 6.69 percent.
“The 30-year fixed-rate has remained within a very narrow range over the last month, settling in at 6.69% this week,” Sam Khater, Freddie Mac’s chief economist, said in a statement.
Rates look to have stabilized, Khater suggested, encouraging buyers to jump off the fence.
“Despite persistent inventory challenges, we anticipate a busier spring homebuying season than 2023, with home prices continuing to increase at a steady pace,” he said.
A slowdown in rates could have a negative impact on home buyers, some analysts say.
A decline in the cost of home loans would encourage more purchases, and this increase in demand will spark competition at a time when there is a limited supply of homes for sale.
More buyers who can afford mortgages entering the market will push up prices, analysts from Goldman Sachs said this week.
The investment bank’s experts project prices to soar by 5 percent in 2024, a marked revision from their earlier expectation of a 2 percent jump. That trend will continue through next year when prices are forecast to increase by nearly 4 percent, which is also a change from a previously estimated increase of close to 3 percent.
Amid the price increases, Goldman Sachs analysts anticipate that rates will fall to 6.63 percent for the year. This drop in rates from the near 8 percent highs of November 2023, will make house loans more affordable, sparking more demand for properties.
“We have very low inventory of houses for sale, which is generally supportive of prices, along with generally stable demand that is coming from things like household formation,” Roger Ashworth, senior strategist on the structured credit team at Goldman Sachs, said this week.
On Thursday, new home sales climbed up by 8 percent in December, according to government data, while prices declined to two-year lows. The fall in prices and a rise in sales was partly due to builders offering inducements to buyers, according to Yelena Maleyev, a senior economist at KPMG.
“Builders have pivoted to building smaller homes and offering more discounts and concessions, such as mortgage rate buydowns, to bring in buyers sidelined by rising mortgage rates,” she said in a note shared with Newsweek.
But the data from the U.S. Census Bureau also showed that inventory of newly built homes fell last month after going up the previous months. There were 453,000 houses available for sale at the end of December, which accounts for 8.2 months’ worth of supply.
This constituted a 3.5 percent decline from the same time a year ago, Maleyev pointed out.
The lack of inventory also comes at a time when the used homes market has struggled. Sales are down in that segment amid a lack of supply of homes as sellers are reluctant to give up their low rates for new home loans hovering in the mid-6 percent.
This lack of supply will be key to how prices shake out and the outlook for the year is not encouraging.
“If mortgage rates fall below 6 [percent] in 2024, more owners will feel comfortable listing their homes for sale, alleviating some of the shortages, but not enough to close the supply gap,” Maleyev said.
Newsweek is committed to challenging conventional wisdom and finding connections in the search for common ground.
Newsweek is committed to challenging conventional wisdom and finding connections in the search for common ground.
Source: newsweek.com
The stock market is hitting new highs. What should we make of this?
This week, the S&P 500 reached yet another record high — marking its fourth consecutive day reaching a new all-time high.
Last Friday (the first of these four consecutive trading days) marked the first time in two years that the S&P 500 finished at an all-time high.
Here’s an 11-minute video recapping what happened:
After two years of not achieving any new highs, the S&P 500 is now breaking records daily.
How do we interpret this? Here are a few things to keep in mind:
(1) The high is comprehensive.
The S&P 500 — which tracks 503 stocks — represents about 80 percent of the overall market.
It’s a more comprehensive indicator of the overall market than the Dow Jones, which tracks only 30 large companies. The Dow took a slight dip today, but both the Dow and the NASDAQ hit new highs in December.
The Dow is an excellent indicator of how large companies are faring. But the S&P 500, by virtue of tracking a much bigger basket, is a better reflection of how the overall market, including small and medium sized companies, are also performing.
(2) The tech sector dominates the all-time highs.
Tech companies make up the largest chunk of the S&P 500. Here’s a chart of the top ten companies by weight for SPY, an exchange-traded fund that tracks the S&P 500:
Source: slickcharts
The top ten companies in SPY are nearly all in the tech sector. This stands in contrast to the wider, more expansive range of sectors that comprise the top ten Dow Jones companies by weight:
Translation: while the overall market (including small and mid size companies) is doing well, the bulk of the gains are still being driven by tech.
The same small group of megacap companies — the “Magnificent Seven” (Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia and Tesla) — that drove much of last year’s growth continues to lead the way, fueled by hopes of an artificial intelligence boom.
But what’s interesting is that the equal-weighted S&P 500, in which every company within the index gets the same weighting, is only slightly lagging the standard S&P 500. Yes, equal-weighted is behind, but not by much. Translation: even without the oversized influence of the Magnificent Seven, the index is running strong.
The market has also priced in the expectation that the Federal Reserve will lower interest rates this year, which leads to the next point …
(3) The Fed will send new signals at the end of January.
The next Fed meeting is Jan 30-31, at which point we’ll know whether the Fed is ready to start cutting interest rates yet.
The Fed held rates steady during their last two meetings, held in September and November 2023.
They’re widely expected to cut rates in 2024, but the debate that economists and market-watchers are holding is when? — could it be as early as next week? (Unlikely, but possible.) Or will it happen during one of their following meetings on March 19-20 and April 30-May 1st?
Many analysts expect that the Fed will hold rates steady this winter and begin cutting in the spring or summer, but the substantial improvement in inflation data has some people feeling optimistic that these cuts might come sooner than later.
The Fed rate cuts are expected to unleash pent-up demand for everything from cars to houses and make capital more accessible for companies.
Homebuying, in particular, is expected to rise as interest rates drop, leading to a projected minor climb in home prices this year. (Mortgage interest rates are at their lowest point since last May.)
Summary: Big Tech is fueling record-high market growth, inflation is under control, and the overall economy looks resilient.
The average person is starting to feel better about their wealth.
The U.S. Consumer Sentiment Index is at its highest point since July 2021. As the name implies, this index measures how confident and optimistic people feel about their finances.
This survey, conducted by the University of Michigan, shows huge gains in households feeling more confident that inflation is behind us, jobs are strong, and income can keep up with expenses.
The index climbed a cumulative 29 percent over the last two months. That’s the biggest two-month leap since 1991.
That said, we’re still no where close to our 2018-2019 confidence levels.
What’s the takeaway from all of this?
Economic data is strong. Markets are on a tear. Consumer sentiment is improving. The year ahead has plenty of cause for optimism.
Blackstone CEO Steve Schwarzman, at the World Economic Forum in Davos, mentioned that he thinks “animal spirits” — the role emotions play in the markets — will be strong this year.
Given how much is riding on consumer confidence in this (almost) post-inflationary world, that’s particularly apt.
For more detail, watch the latest YouTube breakdown.
And I’ll see you in the next newsletter!
— Paula
Source: affordanything.com