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Mortgage rates: Homebuyers ‘have to change what their priorities are,’ housing expert says

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DLB Financial Services CEO Debbie Boyd joins Yahoo Finance Live to explain how the new Fed rate hikes will affecting the housing market and homebuyers in particular.

Video transcript

JEROME POWELL: If you're a home buyer, somebody or a young person looking to buy a home, you need a bit of a reset. We need to get back to a place where supply and demand are back together and where inflation is down low again, and mortgage rates are low again. So this will be a process whereby we ideally, we do our work in a way where the housing market settles in a new place, and housing availability and credit availability are at appropriate levels.

SEANA SMITH: That was Fed Chair Jay Powell noting the slowdown in housing this afternoon, saying that the market does appear to be softening. Now his comments, though, coming as we got data out earlier today showing that mortgage demand is about half of what it was just about a year ago.

We want to bring in Debbie Boyd, DLB Financial Services CEO. And Debbie, when you take into account what Powell was just saying, we need to get back to a place where supply and demand are balanced, where we are right now is a far cry from that. But today's rate hike, what does that mean for housing? And how long do you think it's going to take in order for us to get back to where-- to get back to what Jay Powell was just talking about?

DEBBIE BOYD: This is the new normal. I don't think we're going back. We may have more houses on the market. We've got a double whammy. We've got seniors staying in their houses longer. So they're not vacating the premises. We've got younger people marrying when they're older and having kids in their mid-30s now. They're starting to look for houses. And they want to be in the $400,000 range. Well, with the Fed changing the rates, they're going to be buying about $100,000 less than a house than they could have at the end of last year.

So in the mortgage business, we've been warning people all along that the rate hikes were coming. I don't think they believed us. I think they believe us now. They're going to have to change what their priorities are and what they're willing to do for a new home.

DAVE BRIGGS: 30-year fixed north of 6%. Many had hoped if those rates went up, the prices would then come down. But Jerome Powell also said there that he expects prices to increase in the short-term. Is that what you're seeing? And how long will that continue?

DEBBIE BOYD: Well, there's no reason for the prices to go down. Every house that sells is the new limit for the next house to sell. So builders are, typically here in the Dallas area, they're selling two houses in a neighborhood, increasing the price 10%, selling a house and increasing the price 10%. Why would they take less when supplies are still going up? Labor, we're still short of labor, and we're not able to get workers. So those guys are going to have to start paying people more to show up to the jobs.

So it's going to be a problem, not only because of inventory, not a lot of inventory homes, but the builders are building as fast as they can. They don't have all the supplies that they need. We are still backordered on refrigerators, washers and dryers, windows. So you can't build without windows.

RACHELLE AKUFFO: Exactly. We do know that a lot of people really got comfortable with that 2% mortgage rate. People thought it was going to last forever. So then is it that people just weren't positioned correctly? Were they just not really planning for the future as to where rates would have to go?

DEBBIE BOYD: I don't think they were really paying attention to anything. And, you know, it is a personal family issue always. So if you're making lots of money and you're employed, what does it matter to you if gas prices go up a little bit? Well, people are figuring out it matters a lot. So I don't think they were prepared. We have been saying this all along. I went back and watched the videos that I did with you guys last year. And I said inflation is going to be over 7%, and everybody thought I was crazy. Yeah, I was low. I wasn't even high enough.

So, yeah, we knew it was coming in the mortgage business. We've tried to prepare our buyers not to sit on the sidelines and wait. A lot of people are out of the market now. That is true. That's because they rented an apartment. And they're in a year lease. They're not doing loan applications because they can't get out of their leases now. So they're stuck until next year around this time. So we're going to see some more movement again next year, but it's going to be after January.

Those people are in leases because they could not fight with the competitiveness of the market back in April, May, June of last year. They thought it would end like that at the end of the year. And it got very, very competitive. They kind of got lost in the shuffle. Not everybody likes all of that busyness and all of that bidding. A lot of people just bowed out.

SEANA SMITH: Debbie, you mentioned homebuilders' sentiment, how they're feeling right now. We just got that homebuilder confidence of results, the results of the survey out earlier today, falling for the sixth month in a row in June. When we talk about the impact that that eventually has on housing, we already have a shortage supply. Is that going-- a supply shortage. Is that going to get even worse?

DEBBIE BOYD: I think so. You can only build-- we've got a lot of brand new neighborhoods starting, but all the houses are kind of like in this picture. They're at various stages of starting. And you see some of them sitting there empty, but the lots are sold. The people want the houses. They just can't build them fast enough. So we are going to see a shortage of houses. There's been a shortage for years. And it's really not the homebuilder's fault. They were keeping up fine with demand.

I think-- like, I'm in Dallas. So we have high to high demand. Everybody's moving here. Well, it's also the age of the people are coming of age now with families that they want to buy a house. This is going to be the largest group of 20, 30-year-olds buying since the baby boomers. And they're all wanting to buy now. They should have been buying 10 years ago.

But statistics show something different. They didn't want to move out early. So now we have them all moving out at once. So we have kind of a meeting of a perfect storm, is what I call it. You've got the older people staying in their house because of reverse mortgages. You've got people with 2% rates. They're not moving any time soon.

DAVE BRIGGS: Dallas, clearly, I think, an exception to the rule of this case, now as is Tampa, as is Phoenix, and probably a handful of other markets. But coming full circle to where Jerome Powell talked about, how far away do you think that place is, where we do see some softening, as he called it?

DEBBIE BOYD: I think it's going to be a long while. The supply chain is still a problem for builders. I work with several builders. And I have clients that locked rates with me last week, and their house will be done in November. So we are still blowing and going down here in Texas. But it's not that way for every state. So if you don't have a lot of demand in your area, and you've got people that are sitting at those 2% and 3% interest rates, they're not moving.

So it's going to take new homebuilders in those areas to get new homes built, or people are just going to have to move to areas where there is affordable housing. That means the suburbs. That means changing jobs. And if you can work from anywhere, we're going to see a lot of other people not being able to afford the big cities, and they're going to have to go to smaller cities to live and work.

DAVE BRIGGS: OK, Debbie Boyd, DLB Financial Services, good to see you. Thanks so much.

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