Buying a Home in a K-Shaped Economy: Mortgage Rates, Closing Costs & Planning for 2027

Kristen Ambos: Hey everyone, and welcome to the Always On Point podcast here with Kristen Ambos, sponsored by my parent company, Point Mortgage. So glad to have you guys back.

This week, you know, there's a lot going on with the economy, the market. As I'm taping this, you know, we're really waiting for the CPI report to come out. What does that mean? That's the inflation report in layman's terms.

Why is it important? Well, I want to go into a couple different aspects right now of what we're going to look for for the rest of this year and into 2027, as I see things with the information I have right now.

So, one of those things that is very important to understand is we are in a K-shaped economy. So, what does that mean? Well, if you look at a K, there's a high end, and there's a low end. And those are some of the things I've been talking about with real estate agents as well, as they're getting into: what does 2027 look like?

The reality is, right now, as we get into Q4 for the rest of 2026, in our industry, we should already be planning for Q1 and Q2 of next year. So, we need to be prepared now. What do we need to adjust in our businesses and our thought processes to make sure that we're leading our clients into the best information we can?

If you have a real estate agent or a loan officer who can't physically tell you what they've researched and know for 2027 and the rest of this year, I would double-check. You know, just start looking at interviewing your loan officers and your real estate agents.

Right now, it's very uncertain. And when the economy is uncertain, people lean on real estate agents and loan officers more than ever, because they know they can't do it on their own. It's not an easy for-sale-by-owner market because price points are everywhere. Some houses are going for $20,000 over, some are sitting for two weeks and no one has any idea why, because it's comped out correctly. It's just a very uncertain time in the market.

The other piece of the K economy that's very important to know is if you're thinking about getting into the housing market, there's two things to look at, in my opinion.

One, when the market is volatile and inflationary, the inflationary systems keep going up, which is likely to happen and has been happening. When you start to see a lot of inflation, we're on the cusp of where inflation is going up. The Federal Reserve holds back. They want to keep inflation low.

Well, when inflation is higher, that means interest rates typically don't drop. And right now, the Federal Reserve has basically told us that they are either going to keep rates stable or maybe even give a price influx up a little bit by the end of 2026.

Now, what does that mean in general? Well, I would say that this is the fourth August we are in the same rates year over year. This, as I'm filming this, we're in the beginning of September. But rates are up as high as they've been since June 2025.

Part of that is because inflation is high right now. Why is inflation high? Well, let's go back to the price of gas. That alone is a huge driver right now.

I watch another podcast on my own time, and they made a really great point that I wanted to share with you guys today, because I just felt like it was as easy to understand as it could be.

And the gentleman that was doing the podcast, his name is Valhalla, and whether you follow him or don't follow him, or view the same politics or not, this one sentiment that he had really hit home. And he is from Oregon, and he specifies that he's from Oregon, and he specifies that he has a really good friend who's a big farmer out there.

And he was talking to his farmer friend about the K-shaped economy and what this is really doing for him, the cost of gas, especially diesel. Diesel's up higher than it's been.

And he said, "I go through 10,000 gallons of diesel a month."

Earlier, we were told gas would be closer to $3. He said, "So I budgeted in $4 to make sure that I had myself hedged accordingly for additional cost prices."

In Oregon, diesel is around $7 a gallon. Well, that's $3 more a gallon than he had budgeted, which equates to about $30,000 a month in diesel to run his farm. There's no way he can make money doing that.

So, what does he have to do? He has to increase the cost of the goods, the food, coming off of his farm to then sell to people. What does that do to people like you and I? We have to pay more for our groceries. What does that mean? We put less in savings.

It doesn't get any more clear than that with simple groceries and gas. So, those are the big inflationary things going on right now, and it's just survival mode.

So, the K-shaped curve, you have some up here, they're not feeling it at all, and then you have others down here who are trying to figure out how they're just going to drive to work, and maybe pack their own lunch to go. That's a massive discrepancy in that K-shape.

And that's why it was so important for me to bring that up today, because I think we really need to focus on that as we go into Q4 and Q1 of next year, and even thinking Q2.

Now, I know a lot of things can change between now and then, and believe me, after being in the market about 25 years, I've seen it all happen.

But if we don't prepare for the inevitable, which is not rates going down to 5%, but likely staying where they're at, or potentially clicking up a little bit, that's why I feel it's important to share this with you, because you need to understand, in layman's terms, why the rates are probably going up.

So, there's also a lead analyst I watch from HousingWire, and his name is Logan Mohtashami, and he really deciphers out what the economy is doing as far as interest rates are concerned.

And obviously inflation, he's watching it, too, and he talks about that. Anyone in our industry is very hyped on inflation right now. If you're not, start studying. You should be. And the reason why is because that's the discrepancy that we need to understand going into 2027 with the economy, right?

So, with all things said, the other thing that Logan discusses, that I've watched very carefully, is that there's nothing that shows that rates should be under about 5.75%.

So, if you're out there waiting for rates to come back to 3% or 4%, there's nothing out there saying that. There hasn't been anything out there saying that.

Right now, rates are the highest they've been since June 2025, as I just said a few moments ago. And if mortgage spreads were where they were last year, rates would probably be about 7.5% right now, and they're not.

They're, you know, in the mid-6s to probably around 7%. If you're doing a cash-out refinance, they might be a little higher than that. If you've got not-so-great credit, it might be a little higher than that. But the average rate right now is 6.89% in the nation. And that's on a 30-year fixed.

So, with that being said, we need to prepare ourselves, right?

But I think, as I've spoken about a few weeks ago on the podcast, it's not the question of waiting till rates come down, it's buying before rates go up.

But the other key point in this, and this is the other part of the conversation I wanted to have today, is the adjustable-rate mortgage.

Now, I've talked about the adjustable-rate mortgage, I feel like until I'm blue in the face, but I don't know if it really is discussed and heard over and over again enough. So, I want to talk about it again.

And the reason why is because I've recently run into clients where they've said, "Well, where is your adjustable-rate mortgage at?"

And my first question, if you've listened to this podcast going through and through, is: What are your long-term goals?

If your long-term goals, if you're young, and your long-term goals are staying home with the kids, having babies and staying home with the kids, then 30-year fixed.

If you are looking at retirement in the near future at all, in the next 5 to 10 years, you want a 30-year fixed.

And the reason why is because the loan officers at credit unions, most often, or banks, most often don't discuss that that little interest rate drop to go to an adjustable-rate mortgage may cost you a lot more later.

In fact, I've actually had real estate agents tell me that their fiscal responsibility is to make sure that their client's getting the lowest interest rate out there.

But here's why I want to tell you that as a real estate agent, remember: You're not supposed to be quoting interest rates. And a lower interest rate does not mean fiscal responsibility.

And the reason why is because if you're thinking that you're pushing them in, and you are really being their advocate for being fiscally responsible, where are you going to be in five years when they can't refinance to get to a lower interest rate, and the rate goes up 2% adjusted on that ARM, or another 2%? Was that being fiscally responsible for them?

No, it wasn't! And that's okay, because you're a real estate agent. You're not supposed to know, because you're on the real estate side.

I don't even begin to say I understand what goes on with your commissions, your split on commissions, your brokerage split on commissions. I don't even speak to it about clients. Why? Because I'm not licensed to speak on it, for one.

And for two, I don't know what's fiscally responsible for a client, because if I say the lowest commission is fiscally responsible, well, what if they make less money on their house? What was that, then? Or was it better for them to pay more commission and actually sell their house for more money?

So, see that example? So, taking the lower interest rate is not always the fiscally responsible move.

It's working with a loan officer and having that person strategize to their own specific needs, both now and 5, 10, 15 years down the road.

And so, that's why I want to make sure that if you are a borrower and you're working with a real estate agent that's like, "No, no, no, call my lender, they have really low adjustable interest rates," don't always assume that that lowest rate is the fiscally responsible move.

As I'm not going to say that the lower commission is the fiscally responsible move, because I don't believe it is.

I think everybody has a different scenario, and I think we need to stay in our lanes as professionals of what that looks like.

And why that's going to be even more important as we head into this K-shaped economy, so I want to pull it around full circle for you, is because there are people at the lower end of the K that can absolutely afford to be in a home, but they might not have the closing costs, right?

So, what are some ways we can help with closing costs? Well, one, you could always get a seller credit, right? Or can you? We can assume we can get seller credits or negotiate them, but not all the time. Depends on the home.

So, then if we don't get a seller credit, how are we going to get this client who needs the money to get into a home for down payment? Maybe they have the down payment, but let me just really focus on closing costs and prepaids right now.

Well, if they're in Brown County, they could take out NeighborWorks and then get a match from CBGB. Those are some really great options for their closing costs and prepaids.

If I'm in the Appleton market, I might look at Appleton Housing Authority. If I'm in a different county, I might look at their county DPA, and that can help.

But what if those aren't? Well, I've had clients take a higher interest rate to get a lender credit back, so the lender will then pay their closing cost, because for them, the hardest part is just getting in the house with the funds they have available.

They can afford the home. They can afford the payment, they can afford it at the higher interest rate. They just can't get into it without that.

So, are we going to tell them that it's not fiscally responsible to take a higher interest rate to get in the house, and then if they don't, they lose 4, 5, 6% year over year for the next three years?

Of course not! Of course that little bit of a higher interest payment, allowing them to get the house to then earn that equity, is going to be a better fiscal move for them.

So, that's why I'm saying it's not the lower interest rate that always has it. And we are going to not only have to look out for the top of the K, we're also going to have to look out for the bottom of the K.

And understanding that spread, and understanding what clients need in between that, is so very important. And that's why I wanted to talk about it today.

It's not really a conversation anyone wants to have, but I would be willing to bet if you, as a consumer, picked up the phone and called four loan officers today and said, "Tell me about the K market," three of them are going to tell you something that they don't even know themselves, because they don't understand it, or they'll be Googling it as you're on the phone with them.

And if it doesn't make sense, that's the reason why.

So, I wanted to get out and share that, because you're going to start hearing that in the news, in markets, in the industry, social media, a lot more lately.

And you're going to start hearing loan officers talk about it in social media, TikTok, Reddit, whatever social media, YouTube platform you're on, they're going to be talking about it.

But it's very important to understand the why. Why does that matter going into the next six months, three months? What does that look like for you?

I can't tell you the amount of clients I've already sat down with who are looking to plan a buying next spring, and we already have them all set up, strategized. They're good to go.

They've never felt stronger and had more information given to them than they had when we sat down. Their words, not mine, but gosh darn it, it makes me feel good every time, because that means I did my job.

That means I looked at them and we went over their specific ability right now. What can they pay off to get a higher credit score, to get a better interest rate in 3, 4 months? What can they do to save between then?

And we're having open conversations about that.

So, that's why it's important to understand the K-shaped economy, the potential difficulty for saving the next few months, understanding what your DPA or down payment assistance options are, as well as understanding what can I do to get the costs I need to close.

There's a lot of options out there. And our team really here does want to help you, because there's also a lot of markets I've worked through that are difficult markets, right, quote-unquote "difficult markets."

But we've always had a good year, because it's about giving the right information to get out there to educate your clients to making sure that they know the moves they're going to make and they feel comfortable with those.

So, that's what I have for you this week. I just felt like it was important to wrap that right around, because they're all pieces of each other, and every one of them has a step and a means to the end.

So, if you have any questions at all, let us know. We have, last month alone, we put three 20-and-younger people into homes.

So, if you're young and listening to this, it's possible. If you're a real estate agent and listening to this, it's possible to get your younger people in. Strategy is what matters most.

So, any agents out there, if you feel like you want a partner on understanding more on that K-shaped economy and what you can do to help your clients understand that, pick up the phone, give me a call, happy to have that conversation.

Until next week, I just want to thank you all for listening. It's because of you continuing to tune in that we keep doing this, and I am just so grateful for it.

So, thank you so much, here at the Always On Point podcast with Kristen Ambos. We'll see you next week.