u/AdvisorJohnDowns

In the DMV, first-time homebuyers widely use several popular down payment assistance programs, and this move in mortgage rates affects each one differently. When a state program offers down payment assistance, it typically uses the profit within the mortgage to help subsidize the state funding. This is called "Premium Pricing" in the mortgage world.

When mortgage rates begin to trade with elevated volatility, the premium in the mortgage tends to evaporate. There are two reasons for this: investors are unsure whether this move in rates is temporary and the loan might prepay in a refinance sooner than expected, and/or they are unsure whether rates will go even higher. It's no different from homeowners getting cautious about buying when housing feels unstable. Do they want to buy now? What if prices move lower? Should they just wait it out? Bond traders are no different.

I bring this up today because, as of October 2nd, all Washington, D.C. down payment assistance programs were temporarily halted. That's right. No traditional DPA programs exist. DC Open Doors, DC HomeAdvantage, and DC4ME are currently unavailable. The reason: there's no premium pricing on mortgages right now.

(HPAP is a different animal... it's funded through the city budget rather than mortgage pricing, so it runs on its own track.)

The Maryland Mortgage Program (MMP) is still alive and well, only at elevated rates. While they change rates daily, First-Time Buyers will see rates ranging from 7.75% - 8.0% for the 3% - 5% DPA, while move-up buyers will see a rate of 8.125% with the 3% DPA as of October 2, 2026.

For DPAs to come back, we need to see stability in the bond market. If rates begin to trade sideways at this new higher level, DPAs will return as premium Wall St flows back into the bond market. Interesting times to say the least...

In October 2023, the 10-year Treasury Bond touched 5%, mortgage rates jumped to almost 8%, and everyone in real estate was panicking. Then rates dropped for 60 straight days, down to 6.5%. A similar move occurred in November 2022, with rates spiking to just over 7% before falling 1% over the following 60 days. Many in the industry are now wondering: are we setting up for the same type of reversal as mortgage rates just spiked to 7.5%, or is this time different?

While I'm in the "anything and everything can happen" camp, there are signs that this time might just be different. Elevated mortgage rates can stick around longer than anyone wants to see. Global rates may be repricing the cost of money as economic growth continues despite high energy costs. The Iran War may have been the catalyst, but it's also quite possible it just pulled forward the inevitable. Here are a few key points being discussed for why rates may remain elevated:

• Economic Growth - The Atlanta Fed's GDP tracker is near 5% for the quarter, one of the highest readings in years. When the economy is strong, investors demand a higher return to lend money long-term. Strong growth alone can keep rates elevated, even without inflation.
• Massive Borrowing (Supply) - The US Government is issuing significant debt (deficit spending, COVID debt rolling, war funding) while AI companies are borrowing hundreds of billions for infrastructure buildouts. This is old-school supply/demand principles - similar to when housing prices jumped in 2021 with all the demand; bonds are no different.
• Treasury Inflation-Protected Securities (TIPS) - By this measure, the bond market appears to be pricing in more growth than inflation. TIPS are also called the "real yield"...If the 10-year bond is trading at 5.25%, and 10-year TIPS yield 2.9%, this shows the market pricing in just 2.35% expected annual inflation. The war/oil premium may be a much smaller piece of this than most people think.
• Yen Carry Trade - People much smarter than me keep bringing this up as a pressure point on global rates. I don't understand it well enough to explain it. If someone here does, I'd love the plain-English version.

So what does this mean for real estate? At first, the logical response is: real estate transactions and buyer activity freeze. We are certainly seeing that in our company's numbers this September. I also wrote earlier about the local August data showing pending sales collapsing...that trend continued this month.

The real estate market seems to thrive more on rate stability than on the actual rate. Don't get me wrong, lower rates help spur demand...but stable higher rates allow people to plan, and those with income, assets, and life desires that support a move tend to act. When the rate of change causes wild swings in payments, plans get disrupted. Eventually, though, buyers and sellers recalibrate what it takes to transact, and the market starts moving again. Will that be later this year? Or will we need to wait until the spring? I guess we will see soon enough.

Any new catalyst can disrupt every prediction...an oil collapse, a balance-of-power shift in Congress this November, a data surprise...that's precisely why every major agency has been wildly wrong forecasting rates more than a quarter or two out these past few years. I hope rates go lower...I want them to go lower...I think real estate needs them lower...but there's a good chance that I just don't get what I want...

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In real estate, most data is aggregated into "Metropolitan Statistical Areas", or MSAs. When prices are rising, real estate industry participants use that to shrug off any weakness. "Sure, rates are higher, but DC home prices are still up YoY. Everything is fine!"

The Washington, DC MSA consists of real estate data from:

District of Columbia

Maryland: Montgomery, Prince George's, Frederick, and Charles

Virginia counties: Arlington, Fairfax, Loudoun, Prince William, Stafford, Spotsylvania, Fauquier, Culpeper, Warren, Clarke, Rappahannock

Virginia independent cities, which are counted separately from counties in Virginia: Alexandria, Fairfax, Falls Church, Manassas, Manassas Park, and Fredericksburg

West Virginia: Jefferson County

As you can see, it is a very large area consisting of very different micro-economies and housing markets. That's why they always say, "Location, Location, Location" when talking about real estate...because it really does change things. In fact, I've written in this room before about how different the real estate story is in the same city when separating the discussion into housing types...condos vs. single-family homes.

NOVA is mostly doing very well...Montgomery County is also strong. PG, Frederick, and Charles counties are meh, and DC is very mixed, with upper NW strong; the rest of DC is a wildcard.

This move in rates will affect housing this fall. The rate of change of this move is causing people to freeze in action...we've seen this story every single year since 2022. This time likely won't be any different. Transaction volumes fall, prices flatten, some sellers will cave to buyer demands, others will punt their listing until the spring and/or rent their current home instead of dropping the price.

Fun times...(I really can't wait until I say that and it's actually fun...)

If you haven't seen the news yet, mortgage rates just had a parabolic move, jumping to an average of 7.5%, while the 10-year bond hit 5.22%. For context, the 10-year hasn't been over 5.20% since June 2007.

In today's real estate market, it doesn't seem like it's the absolute rate that is driving market action. It feels more like it's the stability in rates themselves. When the rate of change is elevated, meaning the speed at which a large jump occurs, homebuyers fall into a natural state of paralysis. If you were running your budget off a rate of 6.625% from a few weeks ago, and now you're at 7.5%, that's a $400 monthly payment increase on a $680k mortgage. That's enough to give anyone pause.

Not only does the payment jump shock people, but thoughts of future price depreciation set in. Should they really buy now? What if buyer demand plummets and prices drop? Is it better to just wait things out?

The real estate industry will tell you that buying when rates are high is best because competition is reduced. I do believe that, and I am seeing that right now. Homes that seem set up for a bidding war are falling flat, winning bids, or selling for less. Sellers are afraid, and buyers are cautious. That is the perfect combination for negotiations to occur.

Last week, there was still some optimism in the mortgage arena, as many believed high energy costs were slowing the economy, and that some type of deal would occur between the US and Iran. This week, economic data threw cold water on that hope...signals are showing strength in hiring, wages, and broad-based economic activity. The UN speeches also dashed all hopes for conflict resolution overseas, likely until after the election.

Where we go from here is a bit of an unknown. The previous high-rate spikes over the last four years led to an initial steep drop in activity, and once rates normalized, activity resumed. I suspect that with this year's election, we may not see real energy flow back until November, once that's behind us.

One caveat: I'm also in an "Expect anything and everything...because it's all possible..." mindset. Nothing would shock me as politicians try to sway the election their way!

While the backdrop can be completely different, market behavior can follow the same patterns. In 2018, we were heading into Trump's first midterm election. The stock market hit a high on September 20th; the 10-year bond was peaking as the Fed had just hiked rates and talked tough about more increases. Oil prices were rising, later topping out on October 3rd at $76 as a result of escalating Iran sanctions. Mortgage rates began spiking, jumping .50% from mid-September through the election. Housing, coincidentally, stalled as affordability was challenged and the mood was heavy. All this with a Republican Congress that polls said is about to lose the House.

Now, where are we in 2026? Oil is spiking because of the conflict in Iran. Stocks are just below all-time highs. Mortgage rates have pushed another leg higher as the Fed just increased rates and signaled additional increases ahead. Housing, clearly stalled. The mood is heavy...and the Republican Congress is forecasted to lose at least one chamber.

In 2018, rates remained elevated through the election, then all markets unwound. The Democrats won the House. Stocks dropped 20%, oil finally corrected as Iran sanctions eased, and economic signals began to weaken. This caused the Fed to pivot in early 2019, and mortgage rates rallied throughout the entire year.

In that year, housing rebounded nicely. The value/price scare that we experienced in the fall/winter of 2018/2019 turned into juicy 5-10% appreciation gains by the fall of '19. That proved, yet again, how important mortgage rates are in the housing market. To me, the backdrop feels exactly the same...everything from the energy of locals as it relates to the political landscape, to the hesitation in homebuyers/sellers, to rates...stocks...oil...you name it. I still believe opportunistic buyers will be rewarded this fall selling season as a result.

47 now has 47 days until he finds out what the Congressional makeup will look like. Will we see a bunch of Hail Marys to fix narratives and help the election, or will we simply double down on current trends? TBD...

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Two weeks ago, I wrote that the buying energy shifted hard in July and August... conversations were still happening, but almost nobody wanted to write an offer. The August contract data is out from GCAAR, and the numbers prove what we were seeing!

I'm generally an optimist, and I look for the bright spots in markets. At the beginning of the year, I was pounding the table, saying this was the year DC jumps off the struggle bus...and it looked that way all year through July. It was that month that we were pleased with closed sales, both year-over-year comparisons and total dollar volume...but pending sales fell off a cliff. DC was down 8.6% YoY, and MoCo was down 4%. It was a sign of what was to come.

The July slowdown had several easy targets to blame. Rates started rising, oil reversed its June decline and picked up steam, and vacation season was in full swing. Still, there was some hope that the turmoil would settle down at some point, with June being the perfect example of what would happen if it did.

August was a continuation of that, but the hopes of an Iran resolution started to evaporate; rates moved even higher, as did oil prices. Basically, it wasn't just that nothing changed...it actually worsened. Hope then shifted to post-Labor Day, which was a week later this year.

As a result, buyers went on strike, properties took longer to sell, fewer contracts were written and fewer sales were closed. That chart shows the damage.

So let's see where we go from here. The Fed policy meeting is tomorrow, and he is expected to raise rates by 0.25%. Oil continues to push higher, as I type this, sitting at $106.50. A news headline said the Saudi pipeline might be offline until November. That's not going to help. Stocks are coming under some pressure. At first, it was the "AI will destroy us all" worries that had AI infrastructure stocks selling off...now that's shifted to economic worries because of high inflation and energy costs.

Last week I said there are several ways this plays out from here, and it's still too early to make a call. It's either 2018, and rates remain elevated while housing pauses until after the election...or it's like 2023, where something happens that causes rates to plummet, breathing life into housing while sellers are more forgiving.

We will find out soon enough!

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It's hard to believe what this chart is saying. 18.6% of the homes listed for sale in Washington, DC are underwater. Meaning the active list price is less than what the current seller paid when they acquired the property. I was curious, so I opened up Redfin and decided to hunt for a few to see if roughly 1 out of 5 is true. Here is what I found:

1. 20th St NE - Listed $399,999 - Last Sold June 2019 for $475,000 [Kingman Park]
2. K St NE - Listed $699,000 - Last Sold Sept 2020 for $755,000 [H St Corridor]
3. 4th St NE - Listed for $549,900 - Last Sold Dec 2019 for $815,000 [Eckington]
4. 15th St NW - Listed $1,380,000 - Last Sold July 2020 for $1,495,000 [Logan Circle]
5. Georgia Ave - Listed $469,000 - Last Sold May 2019 for $479,900 [Petworth]

I have to say, it felt like 1 out of 5...but it's probably even higher than that if we were measuring what sellers would be walking away with. As an example, I found quite a few properties selling for $5k-$15k more than their original sale price...but if we assume selling fees are 6-7.5% of the sale price, the true underwater count is likely a good bit higher.

Many people in real estate say, "It always goes up"...which, stretched out far enough in time, is very true. But in many cases, it moves the same way a Yo-Yo tracks going up an escalator. The direction can be up, but there are many periods when it's actually lower than it was recently.

Keep in mind, this isn't all of DC. Northwest, especially Upper NW, lives like the suburbs and has many sharp appreciation stories. NE/SE, Condos...that's where values have been challenged.

My personal feeling is that the commuting burbs of DC (NOVA & Montgomery County) benefited from DC's demise. Work-from-home freedoms, desire for more space, people beginning to have kids later in life, etc.- all that pushed people out during the lockdown phase of the pandemic. Moving forward, I wouldn't be shocked if we see the suburban markets plateau, or even drop in some areas...all while DC becomes more stable and resumes appreciation.

Does anyone have an opinion on DC from a real estate investment standpoint? I think over the next few years, it will outperform for a bunch of different reasons...but the easiest to point to is that it's been beaten up so badly, and the causes of the beatdown appear to be reversing and becoming tailwinds.

I'm curious to hear your thoughts!

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It's hard to believe what this chart is saying. 18.6% of the homes listed for sale in Washington, DC are underwater. Meaning, the active list price is less than what the current seller paid when they acquired the property. I was curious, so I opened up Redfin and decided to hunt for a few to see if roughly 1 out of 5 is true. Here is what I found:

1. 635 20th St NE - Listed $399,999 - Last Sold June 2019 for $475,000 [Kingman Park]
2. 301 K St NE #1 - Listed $699,000 - Last Sold Sept 2020 for $755,000 [H St Corridor]
3. 2016 4th St NE #2 - Listed for $549,900 - Last Sold Dec 2019 for $815,000 [Eckington]
4. 1534 15th St NW - Listed $1,380,000 - Last Sold July 2020 for $1,495,000 [Logan Circle]
5. 4016 Georgia Ave NW #2 - Listed $469,000 - Last Sold May 2019 for $479,900 [Petworth]

I have to say, it felt like 1 out of 5...but it's probably even higher than that if we were measuring what sellers would be walking away with. As an example, I found quite a few properties selling for $5k-$15k more than their original sale price...but if we assume selling fees are 6-7.5% of the sale price, the true underwater count is likely a good bit higher.

Many people in real estate say, "It always goes up"...which, stretched out far enough in time, is very true. But in many cases, it moves the same way a Yo-Yo tracks going up an escalator. The direction can be up, but there are many periods when it's actually lower than it was recently.

My personal feeling is that the commuting burbs of DC (NOVA & Montgomery County) benefited from DC's demise. Work-from-home freedoms, desire for more space, people beginning to have kids later in life, etc.- all that pushed people out during the lockdown phase of the pandemic. Moving forward, I wouldn't be shocked if we see the suburban markets plateau, or even drop in some areas...all while DC becomes more stable and resumes appreciation.

Does anyone have an opinion on DC from a real estate investment standpoint? I think over the next few years, it will outperform for a bunch of different reasons...but the easiest to point to is that it's been beaten up so bad, and the causes of the beatdown appear to be reversing and becoming tailwinds.

I'm curious to hear your thoughts!

It's quite obvious that mortgage rates heavily influence home-buying activity. We saw that in 2021, when rates were in the 3s, everyone wanted to buy a house...or three. Money was so cheap that affordability was high enough for almost everyone to qualify. As more people entered the market to buy, competition ramped up, and so did property prices as a result.

Then 2022 came, when rates lifted off from 3%, finally stopping at 8% in October 2023. As rates rose quickly, buyer confidence evaporated, and uncertainty about future home prices sidelined many people. Home prices began to stall, realtors began pitching two-year buydowns, and the hit tune, "Date The Rate, Marry The House," became a Billboard top 10 hit in the realtor world as they flooded Instagram and Facebook feeds with their posts and reels.

Then, to the surprise of many, housing found its footing and values began inching higher still. Not everywhere (DC certainly had many struggle spots), but mostly throughout the NOVA-Maryland region. The difficult period was when the rate of change was so aggressive. A mortgage payment increase of $200...or $400...or $600 per month for the same house over a 30-day period tends to paralyze people in thought and action. It makes total sense to me, as I was also paralyzed as a lender, quoting those changes and explaining the "why" behind it all.

So here we are, yet again, in a similar situation. Mortgage rates are now 1% higher than they were in the spring, and about 0.50% higher than they were just two weeks ago. It's a combination of many things...inflation readings coming in hot, oil prices over $100 as escalations in Iran continue, lots of debt issuance with the US Govt running heavy deficits, and the bond market competing for global capital against AI Infrastructure buildouts.

As rates were steady in the low-to-mid 6s, optimism was in the air, and homebuyers were getting active, especially in DC. As the July-Sept rate move took hold, energy has truly shifted...almost evaporating overnight.

I see two distinct paths from here, but only time will tell which holds true.

• In 2023, when the 10-year bond peaked at 5% (similar to right now) after a vicious 5-6 day move (just like right now), we had 60 straight days of rate improvements. Rates dropped from 7.3 to 6.1%. Guess what - the election is about 60 days away...and what does this administration likely want...low rates! Maybe it's an Iran deal (for the 1,475th time) causing energy prices to plummet; maybe it's economic data softening...in this case, probably a combination of both.
• In 2018, Trump's first time, rates jumped 0.30% immediately after Labor Day. (just like now)...and the bond market was complaining about deficits and inflation due to tariffs with China (no different today!), and rates continued higher all the way up to the midterm election. The Democrats won the House of Representatives...that spooked the stock market, which dropped 20%, and mortgage rates began to fall all the way through 2019.

To me, it feels more like 2018...but I'm hoping 2023 plays out! But it's too soon to say for sure...I'm not going to make any rate predictions for the fall until we get through the Fed meeting next Wednesday. After that, we should have more visibility into how rates will trade and more consumer metrics through conversations... If they continue the way they started this month, the fall season is already over...TBD.

Years ago, everyone would brag about their loyalty discounts. "I've been with them for 20 years"...and then I would get their home insurance policy, and it would be about double what I'm seeing from other reputable providers.

Property & Casualty Insurance (Home and Auto) rates skyrocketed in 2022. $2k policies became $4k-$6k almost overnight...and they kept rising! It wasn't until this year that I started seeing real premium relief.

What's interesting is that the formerly expensive providers are starting to come in fairly strong...State Farm, Allstate, USAA, etc. It's almost like everyone was priced out of the market on purpose for two reasons... they could, because everyone was expecting it... and they needed time to re-rate their risk models. Now, a few years into this inflation cycle, balance appears to be coming back to the market.

Personally, I saved about 35% on my home insurance and more than 20% on my auto insurance this year. It's still more than I was paying in 2022, but it's a lot less than what I was paying in 2025!

Maryland released an update to the Maryland Mortgage Program on September 4th - a new product called "First Homes for First Responders and Teachers." It's an enhancement to the existing 1st Time Advantage 5% product, and the improvement is simple: a half-percent (0.50%) lower rate than the standard version if you qualify. All participating MMP lenders have access to offer this program effective immediately.

Here is a quick breakdown of what the .50% actually means in real dollars:

• $300k home: $99/month, or $7,400 over five years
• $500k home: $164/month, or $12,300 over five years
• $700k home: $230/month, or $17,200 over five years

That's real money for the very professions that are usually priced out of the counties they serve.

Quick side note: savings with lower interest rates are twofold - your payment is lower, but you also have more money going toward principal with each payment. That's why the five-year savings are more than the monthly savings multiplied by 60 months. This analysis used MMP interest rates as of September 4th, 7.50% for the basic 5% DPA program and 7.0% for the new release.

Here are the professions and basic qualifications for the program: EMTs, paramedics, firefighters (including volunteers with 12 months of documented service), police officers, rescue squad members, 911 specialists, and state-certified teachers or school counselors, pre-K through 12. First-time buyers only, and at least one borrower has to work in Maryland... though they'll accept someone relocating with a signed offer letter from a Maryland employer, which is a detail I like.

Teachers and first responders don't get many financial breaks. It's nice to see Maryland offer one that actually moves the needle.

Fannie Mae dropped a major guideline change. It's one that will help many buyers who feel stuck in their current home and are limited by income, preventing them from moving to a new home that better suits their needs.

Quick background: When someone wanted to buy a new home but keep their current one as a rental (which is most move-up buyers right now, given how many people are sitting on 3%-ish rates), they often needed rental income from the current house to qualify for the mortgage on the new one. That meant scrambling to find a tenant while under contract. Lenders then wanted the signed lease, proof that the security deposit and first month's rent were collected and cashed, and an appraisal report validating that the rent was at market rate. All while juggling a purchase.

It was stressful enough that plenty of people just didn't make the jump.

Now the new rule: lenders can use an appraiser's rent schedule OR researched rent comps from Zillow, Redfin, etc. No lease, no tenant hunt during your contract period. We can simply use 75% of the supported market rent to offset the current home's payment when qualifying. The only main stipulation is that you need 6 months of reserves covering the departing home's full payment, in addition to normal reserve requirements.

One important note: there is still no equity requirement in the departing residence. This is huge for many areas in the US, but specifically in the DMV, where we have seen values drop quite a bit in some micro-areas.

Inventory in desirable areas of NOVA, Montgomery County, and parts of DC has been so low that many people with limited incomes just don't bother to engage. We also have areas of DC that are struggling to sell (hello condo market), where selling right now isn't the best option. Renting to get to the other side of the downturn is usually the best advice... and this rule helps those people too. If you bought a DC condo with a low down payment a few years ago, you might be underwater after selling costs. You couldn't sell without writing a big check, and you probably couldn't qualify to carry both payments either. Now there's a possible path forward.

One word of caution. This rule assumes you actually intend to rent the home. If you use it while planning to quietly sell after closing, that's misrepresenting your intent on a mortgage application, and lenders will likely be watching this post-closing.

I'll be watching how individual lenders roll this out over the next few weeks... some may add their own requirements on top. But as written, this is the most flexible this guideline has been in about 20 years! I'm glad to see guidelines addressing real concerns in the marketplace.

If you want to nerd out and read the exact rule, I'll drop the link in the comments...as you'll need to dig through the Fannie selling guide!

This dropped from Fannie Mae this week, and I think it's a bigger deal than the industry has realized yet, especially for anyone working with move-up buyers.

Quick background on the old rule. When someone wanted to buy a new home but keep their current one as a rental (which is most move-up buyers right now, given how many people are sitting on 3%-ish rates), they usually needed rental income from the departing house to qualify for both payments. That meant scrambling to find a tenant while under contract on the new home. Most lenders required the signed lease, proof that the security deposit and first month's rent were collected and cashed, and an appraiser's rent schedule to verify that the lease was at market rent.

It was stressful enough that plenty of people just didn't make the jump. And worse, it pushed some into the unethical gray zone of having a friend write a lease to check the box. (We all know someone who has at least thought about that...)

The new rule: lenders can now use an appraiser's rent schedule OR personally researched rent comps from Zillow, Redfin, etc. No lease needed. Same math as before: 75% of the proposed rent offsets the departing home's payment. The only other stipulation is that the borrower needs 6 months of reserves on the departing residence PITIA, in addition to normal reserve requirements.

And unlike when a version of this rule existed years ago, there's no equity requirement on the departing residence. That's significant for anyone who bought with a low down payment in the last few years and would be underwater after selling costs. They couldn't sell without writing a big check, and until now they often couldn't qualify to move either. Now they have a path.

While this rule just rolled out, there is one thing I'm still researching, and that's how lenders will police this. Someone will be tempted to use this rule knowing full well they plan to sell the house after closing, not rent it. Does that become an early payment default or a repurchase problem for the lender? If that fear takes hold, do lenders still require leases anyway as overlays to prove the intent to rent is real? I'm genuinely curious how this plays out over the next six months.

Either way, it's the loosest this guideline has been in a long time. I'll put the link to the announcement in the comments.

Every month, industry participants release their updated rate forecasts. After watching them for over 25 years, I can tell you that almost every time they are wrong... at least when looking beyond the next quarter or two. So why do they even give them?

In January this year, Fannie Mae's rate forecast had mortgage rates falling to 6% in Q2, and staying there throughout 2027. Of course, things changed quickly with the Iran conflict as oil prices spiked and global trade was, yet again, facing challenges. By July, they raised the range to end 2026 at about 6.4%, then to 6.2% in late 2027.

The August forecast gave us yet another big jump... moving up to 6.80% to end 2026, then settling at 6.7% through all of 2027.

The reality is, nobody knows. Every forecast makes assumptions, and conviction in those assumptions is what should be challenged. I wish analysts would say, "We think rates will remain elevated to an average rate of 6.7% through 2027 because we believe that energy costs will remain elevated, data center infrastructure buildout continues to compete with U.S. bond issuance, and the Federal Deficit remains elevated with fiscal restraint not in sight." At least with something like this, we would know why they are predicting this average mortgage rate.

Those who are in the low-rate camp point to energy costs rebalancing significantly lower with the Venezuela oil deal, global trade being remapped with either resolution in Iran, or a complete workaround that doesn't require resolution, the deflationary impact of AI and Robotics, and likely defaults in AI infrastructure buildout as costs surprisingly collapse due to AI innovation, or lack of sound economics supporting the massive spending projects.

Time will tell. For now, housing will do exactly what it's been doing the past four years that we've been dealing with higher rates. It will be slow, with appreciation likely to be steady in most areas, declining in some, and rising in others. A mixed bag of results based solely on micro-locations.

I hope you enjoyed my TED Talk on why you shouldn't pay much attention to an actual forecast; focus more on what's shaping those opinions!

I was talking to a friend this morning, and he is torn about what to do with a family home he is inheriting. He was initially thinking he would keep it as a rental after pulling some cash out and making some updates. His goal was to "earn some cash flow and build some equity."

But the more we talked about it, the more he realized he needed to understand his options better. I always say, "Every dollar you have can be earning or saving something." That means putting a value to every dollar and comparing it to the alternatives. Originally, he thought he could pull cash out, pay off some debt, renovate the house, and make $1k a month in cash flow.

This house is worth about $600k as-is. If he sold it, he would net approx. $555,000 after selling fees. He could have zero risk or worry, buy a bond, CD, or money market, and make roughly $2k per month in income. That solved his "earn some cash flow" goal.

If he wanted to focus on growth, he could take that money and invest it in mutual funds or a basket of stocks...historical annual returns are pushing 11%...which is $5k/month to start, and compounding market returns would have that money double every 6.5 years. So that $550k could be worth $1.1m in 7 years, $2.2m in 14 years, and $4.4m in 21 years.

He could also buy all the wrong stocks and lose money...so there's that.

After walking through the menu of options and what-if scenarios, I think he is going to speak to a realtor to get their thoughts on the house and market, talk to a financial advisor and a financial planner to get their opinions on investing and forecasting retirement, possibly a CPA, and then figure things out. Maybe he does a little bit of everything...pull cash out, renovate the home, rent it out...put the money he didn't use into the market, etc.

The reality is there is no right or wrong answer in these situations, there is only modeling out life's endless what-if scenarios and choosing the path that has the highest likelihood of hitting your goals!

This week, I've had two transactions that both qualified for an appraisal waiver... in one case, the realtor agreed with the value and said the buyer should utilize it. In the other, the exact opposite...the realtor thought it was inflated by at least $50k.

First, what is an appraisal waiver? It's basically a finding from either Fannie Mae or Freddie Mac, specific to a home, a sale price, and a buyer's full credit/income/assets of a buyer. Lenders literally just plug all that info into a system, hit enter...wait for a few minutes, and see if the waiver came in. The price needs to be < $1.0m, and the buyer needs a minimum of a 10% down payment on a condo or single-family home.

I will say that the data pool that the agencies have is incredible. It's literally every appraisal on every house with every lender since 2012, swept into a massive database. They know about the home that sold and, more importantly, how each appraiser measured the comps to that property. If one appraiser said it was a dated kitchen and adjusted up to hit a value, while another called it upgraded...the conflict would cause a poor rating, and underwriting requests more info. Over time, appraisers have become a bit more...honest. Subjectivity is now challenged as a result of the data being aggregated.

So back to this story. The one house the realtor agreed was worth the price was in Rockville, MD. It was in a more cookie-cutter style area with quite a few recent sales in the past year. The property where the realtor thought it was overvalued was located in Columbia Heights, DC...an area with fewer transactions, and one where, within a mile or so, you clearly have home prices much, much higher.

Data is data; it doesn't have eyes and ears. It doesn't feel the energy of a market as a realtor does. It doesn't see whether the seller trashed the inside of the house, or the backyard was a disaster, or the neighbor's house is boarded up, etc. It pulls data from a sale or refinance of this house within the last 15 years, and then looks at recent sales of similar square footage properties within a mile or so, and gives a confidence score....NOT a value. Well, it is a value... but you shouldn't look at it that way.

An appraisal waiver should be a validation of what you and your realtor come up with as a fair market value for the home. It should NOT be viewed as THE value for that home. When markets are softening or declining, values always come in with real appraisals. Why? Because recent sales are higher, or at least the same. If the market is moving in a different direction, or that house needs some TLC, the price/value needs to reflect that. To be clear, the bots won't help you here!

Last note - if a property doesn't get a waiver, it also doesn't mean it's not worth that much. It could just mean they (Fannie/Freddie) do not like the risk profile of you buying that house at that price with that down payment. It also may just mean they don't have enough data...what if they've given a bunch of appraisal waivers recently, and they just need to build their data pool back up again? It's an intricate system. Use it for what it is, it's helpful when it exists, it's somewhat meaningless when it doesn't!

Just a quick tip for anyone who owns a home. If you're like me, you've watched your home insurance premium more than double over the past few years. In fact, mine increased 300%! My renewal is mid-September, so I just started shopping around. I have a home insurance policy and two cars. The spreads between companies from high to low are:

• House - $3,500
• Cars - $2,250

Same coverage, all reputable companies...but some are way more expensive than others. Over the years, say from 2000 - 2020, I never noticed a huge variation between home policies. I could see a home's sale price and expect a certain premium, and almost everyone came in around that. Now, it's all over the place. I can't put my finger on why some are just so expensive...but they are. In my case, my mortgage payment is going to drop roughly $300 per month because I'm moving insurance companies and not just taking the auto-renewal. I'm saving almost $480 per month across the two policies... that's totally worth a few hours of phone calls. (...my wife disagrees, btw)

I recommend shopping around at least 60 days before your statement cycle rolls over, because most mortgage companies outsource their escrow payments, and you want to avoid them accidentally paying the old company.

Last thing I'll say is that I'm now mad I didn't do this sooner, and that I waited until the renewal period. In hindsight, I should have done this six months ago, and I would have received a refund from the old inflated policy and would have had this new low payment sooner. Shame on me for waiting...but hopefully this note helps you avoid the same mistake.