Late last week, NAR’s VP of Demographics and Behavioral Insights Jessica Lautz weighed in with her view of the importance (and lack thereof) of mortgage rate fluctuations. The title of last Thursday’s CNBC interview spells it out:

“Mortgage Rates Matter Less Than You Think.”

To the extent that her insights are valid, that would be good news, since borrowing rates have doubled from two years ago. Dr. Lautz is a psychologist by training, so her views center on how people perceive information (like changes in St. Cloud mortgage interest rates)—and how they tend to react to them. Her reasoning:

·         About a quarter of May transactions were all-cash sales—so only the remaining three-quarters of buyers are affected at all

·         Because of the past years’ runup in real estate equity, many homeowners are “able to leverage” those gains to offset rate increases (those with a decade of homeownership have accumulated an average of hundreds of thousands of dollars).

·         Research indicates that rate gyrations “matter less today than they have historically.”

·         Ultimately, as if to underscore her view that borrowing costs may “have less of an impact on home buyers’ psyche than you think,” mortgage demand has been growing: applications have increased for three consecutive weeks.

For rate-watchers troubled to learn that Mortgage News Daily’s Index passed the 7% mark last week, that was offsetting news. In fact, even MND quickly pointed out that “points” (a single point is 1% of a loan’s balance, paid upfront to lower the rate) are added to come up with the Index figure. Removing points, which vary by lender, “would turn a 7.125% rate into a 6.625% rate.” They also attributed last week’s spike to favorable economic data, which could also work to empower homebuyers in the long run.

Buyers and sellers are surely aware of St. Cloud mortgage rates, but it does seem to be true that once a real estate move is determined to be on the horizon, the week-to-week gyrations in either direction are rarely a controlling factor. Call me whenever it’s a good time to talk over your ideas and how they will fare in today’s St. Cloud market. 

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