Realogics Sotheby’s International Realty’s 2025 Market Report features an insightful Q&A with Carese Busby of Movement Mortgage. We’re providing the full interview below, packed full of helpful information about mortgage rates, the benefits of owning, the US economy, and more. Watch her interview with RSIR President and CEO Dean Jones on how owning a condominium can build wealth here.
Q&A With Carese Busby
What are the fundamental benefits of homeownership?
- Appreciation = Home equity growth year over year
- Fixed rate mortgage = predictable payments and cash outflow and stability
- Owning real estate is a great inflation hedge. it’s a hard asset and its value is not easily eroded by inflation
- Tax advantages like mortgage interest, property taxes, PMI, and capital gains exclusion
- Homeowners build 40x more wealth than renters on average
- 70% of millionaires built their wealth through homeownership
Why is renting not actually cheaper than owning a similar home?
Renting is unpredictable and while people need a place to live, rent payments don’t build wealth. Instead, renters buy the landlord’s house for them. Over time, rent increases over time, making it difficult to budget and plan for the future. Plus, renters lose out on the benefits of homeownership, including their payments going toward building their own wealth along with the other significant long-term financial benefits and stability.
Why have mortgage rates more than doubled since 2020?
In simple terms, the United States government has spent too much money. There was too much money chasing too few goods which increased prices. The cash infused into the US economy during Covid led to the lowest interest rates in our lifetime and overstimulated the market. That, combined with the additional stimulus packages signed into law in 2021 and 2022, exacerbated an already overheated economy and inflation rose quickly. The Federal Reserve increases the Federal Funds rate in an effort to slow the economy and consumer spending. By making everyday purchases more expensive, there is less demand and consumers buy less. Less demand causes prices to decrease or stabilize, which helps to curb inflation. While there isn’t a direct correlation between the Fed Funds rate and mortgage interest rates, Federal Reserve moves do have a ripple effect on other interest rates, including mortgage rates.
What is the difference between the Fed funds rate and prevailing mortgage rates?
- Fed Funds rate is a short -term rate and is the overnight interest rate at which banks borrow from the Federal Reserve and lender to each other to balance each night. It’s a key tool used by the Federal Reserve to influence the overall economy and to curb inflation. It primarily influences credit cards, home equity lines of credit (aka HELOC), and other short-term loan rates.
- Mortgage rates are long-term rates and are closely tied to the 10-year Treasury yield. When Treasury yields rise, mortgage rates follow. Supply and demand for mortgages also influence mortgage rates along with inflation expectations. While there isn’t a direct correlation between Fed Funds and mortgage rates, the actions of the Federal Reserve influence consumer confidence, which influences bond market investment and activity, which in turn influences mortgage rates.
How is the US inflation rate affected by the Fed funds rate?
When inflation rises above the target set by the Federal Reserve of say 2%, the Federal Reserve increases the Fed funds rate. It becomes more expensive for banks to borrow money and banks pass on these increased costs to consumers and businesses in the form of higher interest rates on loans, credit cards, and mortgages. This leads to reduced spending by consumers and decreased investment by businesses. This slows the economy with the goal of maintaining price stability at the target inflation rate. When inflation is too low, the Federal Reserve may lower the fed funds rate to stimulate spending and the economy.
Why is there not a direct correlation between the Fed funds rate and prevailing mortgage rates?
Fed funds rate is short-term rate and mortgage rates are long-term rates.
What are helpful metrics to watch to better predict the trajectory of mortgage rates?
The 10-year Treasury yield is the best guide to see the direction of mortgage rates. These bonds are considered a benchmark for long-term interest rates.
What do you believe will be the general trend for mortgage rates in the first half and second half of 2025?
- I don’t anticipate much movement in the first half of 2025 as the markets are waiting to see things shake out with the proposed policies of the Trump administration.
- I expect rates will continue a steady, but slow, downward trend in the second half of 2025.
At what point does it make sense to refinance an existing mortgage to receive a net benefit on a monthly basis and on an absolute full burden basis?
- It all depends on the unique situation for every borrower. It’s important to look at factors such as how far into the loan a consumer is, if they have PMI on the loan, how long they anticipate owning the home going forward, and what the goals are for the refinance – i.e. lower payment, get cash out for home improvement or debt consolidation. All of these factors can drive refinance decisions.
- If the consumer wishes to lower their payment and stay on the same amortization, the rule of thumb is .5% to 1% rate reduction. However, even small increments can make sense depending on loan size.
- If the consumer wishes to refinance to a shorter-term loan, from say a 30-year fixed to a 15-year fixed, refinancing makes sense as the savings can be substantial both monthly and over the life of the loan.
What are the allowable personal income tax deductions for homeowners and how might that change with policies heralded by President Trump?
- Under the Tax Cuts and Jobs Act (TCJA) effective 2018, consumers can deduct mortgage interest through standard deduction or itemized deduction. Most people opt for the standard deduction because on average their yearly mortgage interest is less than the standard deduction. If consumers’ mortgage interest is more than the standard deduction amount, they can choose to itemize so they can write off more. State and Local income or sales taxes are also allowed to be deducted under itemization along with some other deductions.
- The TCJA expires this year and if an extension is not passed, an estimated $4 trillion in tax increases are set to take effect on January 1, 2026, and would revert back to pre-TCJA levels and therefore, tax hikes.
- The TCJA lowered individual tax rates, doubled the child tax credit, essentially doubled the standard deduction in an effort to reduce the need for itemization, and doubled the estate and gift tax exclusion amount per decedent.
- Pre-TCJA allowed consumers to deduct mortgage interest and state and local taxes. However, they will need to go back to itemizing these deductions.
Why doesn’t President Trump just issue an executive order to lower rates and encourage more home sales demand?
A presidential executive order doesn’t have the power to influence interest rates and encourage demand. The Federal Reserve operates independently of the president and consumer confidence and sentiment are largely responsible for home sales demand. The better consumers feel about the economy and their future, the more likely they are to spend money. The more nervous they feel, they tend to hunker down and spend less.
What is the difference between the “Housing Recession” and the “Great Recession”?
- The Great Recession was a systemic financial crisis, and the housing market was the match that lit the fire that started it all. Nearly all sectors of the economy were affected, not just housing. It was triggered by a bursting of the U.S. housing bubble and very loose credit guidelines. At that time in 2007 to 2009, there was plenty of inventory of homes and demand was even with supply; if you could fog a mirror, you qualified for a home loan, and risky home loans were made to consumers that couldn’t afford their loan. As the crisis unfolded, more and more people defaulted on their loans as they lost their jobs, and many major financial institutions collapsed due to liquidity problems associated with how they were leveraged. There were widespread foreclosures and plummeting home values.
- A housing recession, by contrast, is specifically within the housing sector which may or may not lead to a broader economic recession. It’s caused by an oversupply of homes, rising interest rates, declining consumer confidence, and changes in economic conditions. The impacts are limited to the housing section and will lead to a decrease in construction jobs and a slowdown in related industries.
If the housing market is experiencing a 30-year low for sales volumes, won’t there be a flurry of bank-owned properties for sale soon like during the Great Recession?
No, not unless there is an oversupply of homes and not enough demand to buy them. The Puget Sound community is in an inventory crisis and there is not enough supply of homes to meet demand. Even if demand decreases, there are still plenty of buyers that will buy these homes and that will eliminate default risk. Defaults were high in the Great Recession because there was an oversupply of homes and not enough people who wanted to buy them.
What might be some of the incentives being explored by the Trump Administration to encourage first-time homeownership?
Trump’s plan includes tax incentives for homebuyers, cutting unnecessary regulations on home construction, and making some federal land available for residential construction. He’s pledged to tackle zoning and other construction regulations in order to accelerate housing production. Trump says housing costs will be lowered through reducing inflation and stopping illegal immigration.
Why are so many Generation X and Millennials perpetually renting instead of buying their first home?
These generations have significant headwinds unlike older generations. Rising home prices outpace their wages and price them out of the market, student loan debt strains finances and limits their ability to qualify for a loan, and constraints saving for a down payment keep these consumers from buying a home. Furthermore, the cost of essential expenses have risen which further squeezes Gen X and Millennial budgets, and job instability and lifestyle preferences for more mobility and flexibility have led to lower homeownership rates for this demographic.
How can tech workers with Restricted Stock Units qualify for a mortgage but not be required to sell a bounty of stock when buying a home?
Borrowers with RSUs can qualify for the loan using the RSU as part of the income qualification component without having to sell the stock to qualify. They can choose to use other funds for down payment and closing costs.
How do you reconcile making a purchase to would-be buyers that point to higher mortgage rates and higher home prices?
Consumers have to live somewhere and think big picture. They have to consider whether they would like to buy their own home or buy their landlord a home. The Puget Sound market is driven by limited inventory, irrespective of rates. Heightened mortgage rates are actually preventing housing prices from increasing further. Fewer buyers are in the market with the current rates and as interest rates decrease, more buyers will come back into the market and cause upward pressure on prices because there isn’t enough new housing inventory to fill the gap. The question potential homebuyers need to ask themselves is whether they prefer to buy the house at today’s price and refinance the loan when rates decrease or pay more for the same house at a lower rate. Waiting and timing the market won’t work in a seller’s market and we are in a perpetual seller’s market, and like in Vegas, the house always wins. The odds are stacked against buyers. Rates are temporary because you can always refinance but you can’t rebuy the house.
What is your response to would-be buyers who are waiting for an economic recession or glut of inventory to hit the market before making a move?
Wait at their own peril. The math is not in the buyer’s favor for the foreseeable future. There is a math problem in the Puget Sound region. More people want to buy than there are houses to meet the demand. Regardless, low inventory trumps everything else including interest rates. This means home prices will continue to rise for the foreseeable future because more people are lined up to buy homes than there are homes available. Economics 101 tells us that prices will continue to rise in this environment with those factors present.
How can parents help their children purchase their first home in a tax-friendly way?
Parents can give their children down payment funds while they are still alive versus waiting until they have passed on and/or co-sign on the loan to help them qualify. Many don’t realize they can gift well beyond the annual gift limits without a tax liability. The biggest challenge for most first-time homebuyers is the down payment, so having the parents help through down payment assistance can allow the first-time homebuyer to purchase sooner and start accumulating wealth through equity.
What submarkets and product segments are you seeing that feel like a particular opportunity today?
Condos, condos, condos. Condos used to be the go-to for first-time homebuyers for their starter home but over the past two decades, the starter home has evolved to $1 million-plus homes. Condos are not nearly as competitive as townhomes and single-family homes, and there may be flexibility on price and/or seller credit opportunities which can help buyers with more favorable loan terms. Condos are a great way for a first-time homebuyer to get into the market and start building equity. Condos are also a great way for downsizers to sell large homes they owned for years and potentially buy a condo and a second home somewhere they like to travel. It’s also a great opportunity for consumers who are now returning to work in urban areas to buy a second home condo to stay at during the work week and return to their primary home on weekends that they may have purchased outside of commuting distance during the Covid era.
What have been the recent trends for would-be buyers preparing for prequalification and what does that say about the volume of competitive buyers in competition for a limited supply of homes?
There has continued to be a steady flow of would-be buyers who want to get pre-approved and ready to buy. Some are still waiting on the sidelines and not in a hurry to buy due to uncertainty and waiting for lower rates. When things are uncertain and there is less competition, that is when it’s most favorable to buyers. My concern is when rates do start decreasing, the market will be flooded with buyers who’ve been on the sidelines because there is so much pent-up demand that it may push the lower to modestly priced buyers out of the market. Prices will rise and competition will be fierce in an already limited inventory situation.
How would you describe the US housing market and the state of the mortgage industry to provide borrowers with confidence in the system?
Housing is the backbone of the United States economy, and it supports many adjacent industries. It’s simple supply and demand. The US housing market is strong and resilient. The challenges include low inventory, increasing prices, and affordability. Higher rates are keeping many would-be sellers from listing their homes causing a “lock-in” effect. The mortgage industry is well-regulated, and buyers have to qualify and demonstrate they can afford the mortgage payment in order to get approved for a loan, which wasn’t the case pre-Great Recession. Buyers should feel confident buying a home in this environment.
What are some key advantages of working with Movement Mortgage for a home purchase?
- Movement donates 49% of the profits on every loan Movement closes to the KM Foundation which supports employee-nominated nonprofits in the communities we serve. We are a socially responsible company that believes in contributing to make our communities stronger.
- Movement is an industry leader with a patented process for speed and efficiency in processing loans.
- Movement has a local presence in communities around the US, and we take a relationship-based approach that emphasizes holding our clients’ hands through the homeownership journey and providing personalized guidance.
- Movement offers a diverse range of mortgage products designed to cater to various borrower needs.
View the full interview here >>
Disclaimer: Movement Mortgage and RSIR recommend seeking the advice of an estate attorney or CPA to discuss specifics as every situation is different.