One of the side effects of dealing with Covid and having to stay home for the last two years has been an increase in anxiety. When people are anxious, depressed, or worried, they tend to buy more to make themselves feel better. As a result, there has been a sharp uptick in at-home online buying, which has created an enormous demand for products. The concentrated effort to feed this huge buying spree has led to a lack of supplies, with goods sitting on container ships waiting to be unloaded. Products that are available get snapped up as quickly as they are placed on shelves, contributing to the inflation puzzle. What does this have to do with mortgages? If people are spending more money to ease anxiety, there’s less money in their bank accounts for buying or refinancing a home. The Fed has changed direction in talking about inflation in general and no longer refers to it as transitory. On the positive side, rising wages have been a beneficial aspect of inflation, especially for essential workers. However, employers need to offset those wages to keep businesses viable and pass on those costs to consumers. This part of inflation will stay with us, but the unemployment rate should eventually go back down, and supply-chain issues will be resolved, helping to lower inflation in other areas.

Volatility in the stock market is also an important element to monitor when considering a home purchase, and stock inflation can influence that decision. Most people have a good portion of their money (401k plans, insurance funds, company benefits, etc.) tied up in the stock market. When the market yo-yos, it introduces a great deal of uncertainty into the equation, and if prospective buyers are anxious about the stability of their investments and long-term retirement plans, they are less likely to be willing to spend money on a down payment for a mortgage. But are they missing out on the bigger picture? Jeff’s guests this week include:

– Justin Simpers from Orion Lending discusses purchasing and cash-out refinancing.

– Kurt Lehrmann of Logan Finance talks about non-QM and non-agency loans.