Announcer:
4 Your Money is brought to you by NelsonCorp Wealth Management.
Brandy Auterson-Hurst:
It’s now time for 4 Your Money. We’re joined by David Nelson, CEO of NelsonCorp Wealth Management. Welcome back, David.
David Nelson:
Thanks, Brandy. Appreciate it.
Brandy Auterson-Hurst:
So high interest rates have kept housing activity like sales and refinances at a very low level. Do you think this is going to become a broader problem for the economy?
David Nelson:
Well, yeah, higher rates have certainly put a damper as far us on home sales. This is, again, many people believe when rates go up like this and you see things slow down, that obviously property values are going to drop, but that hasn’t been the case. We haven’t seen property values drop like many people would believe.
Now, I believe the compelling reason for this is the chart that I have today. If folks would look at the blue line, it’s showing us mortgage payments as a percentage of disposable income. Fancy way of saying how big is the payment going to be. And when we look at the right side of the chart, we see that the mortgage debt ratio over the past couple of years has ticked up a little bit, but it’s still at really all-time lows. Now, why that’s important again is that if you look in the history book and we go to the left-hand side, we see that rates have averaged much higher than they are today. So this is actually pretty good news. And again, going back to the ’80s to pretty much current, it was 5%. Today we’re looking at 4%. Even though it’s up a little bit, it’s still at all-time lows.
Brandy Auterson-Hurst:
Okay, so what could this mean for viewers working on their financial plans?
David Nelson:
Well, I think for younger buyers, individuals looking to buy, rates are probably going to be higher for longer than what people think. For those that are closer to retirement, be careful about refinancing, maybe getting a different home. Rates are probably going to stay up for a period of time.
Brandy Auterson-Hurst:
All right. Some good advice there. Thanks, David, as always.
David Nelson:
Thank you.
Brandy Auterson-Hurst:
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