What Goes Up… Must Come Down

What Goes Up… Must Come Down

You may or may not have been alive when these opening lyrics from the song “Spinning Wheel” by Blood, Sweat and Tears was released. It was December of 1968, and the average mortgage rate for a home in the United States averaged roughly 7.5%. Over a decade later in 1981, average home mortgages peaked at an all-time high of 16.63%!

Fast forward to today, on the heels of an aggressive series of rate hikes to counter inflation, the fed, last month, hiked the benchmark interest rate again by .75% points.

But then a curious thing happened.

The following day, mortgage rates turned sharply lower.

The most popular mortgage—the 30-year fixed rate—fell from 5.54% to 5.22%. By Friday, it had dropped to 5.13%. In the days leading up to the Fed announcement, volatility was relatively muted, with rates receding from their mid-June high of 6%.

While this was happening, the Gross Domestic Product report (GDP) was released by the Bureau of Economic Analysis highlighting that the U.S. economy contracted for the second straight quarter, a hallmark of a recession.

The average mortgage rate for a home in the United States is roughly 7.5%

As expected, investors flocked to the bond market for protection, which caused a drop in yields. With mortgage rates fairly tied to 10-year treasury bonds, mortgage rates also dropped—faster than the yield on the risk-free bonds.

While it may seem contradictory, if the markets continue to see a steady stream of economic gloom and doom data, mortgage rates may continue to plunge.

What does this mean for home buyers? Are we entering a “new normal,” which includes levels of volatility within the mortgage space not seen in a prolonged period?

The unpredictability in the mortgage markets has coincided with a cooling off period for home prices. Much talk has been made about the “air coming out of the housing bubble,” but we’re not in a position to be sounding the alarm bells just yet. Even with the average 30-year fixed-rate mortgage finishing around 5.30% in July, down from the June highs of almost 6.10%, new purchases are still tapering off. By the end of June, Morningstar has confirmed that home pricing growth has declined for three straight months.

Mortgage originations are still adjusting from the recent market volatility. For the fourth straight month, rate-lock volume and cash-out refinancings dropped from the prior month and year over year. The decrease in the purchase lock count has dropped to pre-pandemic levels.

The biggest concern is the overall fears of buying a home in a recessionary environment.

The issue of new home buyers isn’t inventory, location, or interest rates. Its affordability.

Affordability is the real issue. With the average purchase price among homes dropping in July by approximately $10,000, this follows a normal trend of loss of buying power, which often occurs in a rising rate environment. Affordability is a real issue, as buyer’s credit scores have also fallen during this time frame.

The song’s name “Spinning Wheel,” sums up this environment in its entirety. Home buyers and those looking to refinance may indeed feel like they’re spinning their wheels trying to wait out the unprecedented series of rate hikes.

It could be worse. They could be playing The Doors’ “The End,” but then again, I’m dating myself. Maybe REM’s “End of the World As We Know It” might resonate better, but it doesn’t inspire a tremendous amount of confidence in the market environment!



Earning and Income statements made by our company and its customers are supplied directly from the company or customer. Any and all claims or representations as to income earnings made on our web sites or in our materials or information are not to be considered as average earnings. There is no guarantee that you will make these levels of income — in fact, most people do not — and you accept the risk that the earnings and income statements differ by individual. Individual performance depends upon each customer’s unique skills, time commitment and effort. Our programs are not designed or intended to qualify individuals for employment. Our programs are avocational in nature and are intended for the purpose of the personal enrichment, development, and enjoyment of individuals.

Past performance is not an indicator of any future results. All investments contain risk and may lose value. Any historical returns, target returns, expected returns or probability projections may not reflect actual future performance. Investors should not rely on forward-looking statements because such statements are inherently uncertain and involve risks. While the data we use from third parties is believed to be reliable, we cannot ensure the accuracy or completeness of data provided by investors or other third parties. We do not make any representations as to the accuracy or completeness of the information contained on this website and undertake no obligation to update the information. Neither Secured Investment Corp. nor any of its affiliates are registered investment advisors or broker-dealers and do not provide investment advice. No communication from Secured Investment Corp. or its affiliates through this website or any other materials is intended to be or should be construed as investment, tax, financial, accounting or legal advice.


Secured Investment High Yield Fund II, LLC is open to “accredited investors” only, through an offering made in accordance with Regulation D, Rule 506(c) of the Securities Act of 1933, as amended. In purchasing securities through a 506(c) offering, we are obligated to verify any participating investor’s status as an “accredited investor” in accordance with Rule 501 of Regulation D.

Circle of Wealth Fund III LLC has filed offering circulars and may make additional filings with the Securities and Exchange Commission covering its current offering of membership interests. Each investor should carefully consider the risk factors and other information discussed in the qualified offering circulars (including any amendments) before purchasing membership interests. The Offering Circular and other supporting documentation may be found at: https://www.sec.gov/cgi-bin/browse-edgar?CIK=1762825

Subscribe to the Lee Arnold YouTube channel