A D.C.-area realtor explains artificial intelligence is being used on home listings, not just to write descriptions, but to virtually stage homes.
You may have already seen it — an empty condo transformed into a sleek, modern space with designer furniture. But when you show up for a tour, it’s just bare walls.
Some realtors are now using artificial intelligence not just to write descriptions, but to virtually stage homes. It’s a cost-saving tool for sellers who may not have the budget for physical staging.
“It creates nice images online that can show the potential of the property, and hopefully you get those buyers to come in and see the property,” said Eldad Moraru, a D.C.-area realtor with Compass Real Estate agency.
Moraru warns that AI staging can backfire if buyers walk in expecting fancy lighting or upgraded appliances, only to find none of it was real.
“There is a little bit of that bait and switch feeling … their expectation was not met,” he said.
He believes physical staging is still the most effective way to help buyers connect emotionally with a space. Cost, however, is often the reason that sellers choose AI.
It is best practice to disclose AI use in a listing, but Moraru noted that buyers often miss it while skimming through photos and descriptions. He also cautions sellers that while AI can help write property descriptions, it often misses the emotional or personal details that truly sell a home.
“It might have been the way the sun sets every night, or the breeze, or the trees in the backyard,” Moraru said. “Things that the buyer of your home is also going to fall in love with.”
For many potential homebuyers, location is very important, and so are popular spots that make a neighborhood special which could really move a home further up on a person’s list of properties to look at.
“Maybe it’s that amazing coffee shop that everybody loves and everybody congregates at down the street,” he said. “You might want to put that in there. AI is probably not going to pick up on that.”
The bottom line for sellers is to use caution if AI is used with a listing, he said. For possible buyers, before falling in love with a listing, check the fine print and be ready for a reality check when you walk through the door.
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Real estate agent and reality television star Ryan Serhant.
Newspix
Real estate has been historically slow to modernize, but AI is changing that. The integration of artificial intelligence is transforming how buyers and sellers interact with agents, fundamentally altering competitive dynamics in the industry.
With AI reshaping daily operations of a real estate agent’s business by automating tasks — from generating property listings to conducting neighborhood analyses — the agent’s focus in day-to-day activities will shift.
Ryan Serhant, CEO of Serhant and reality TV star of “Owning Manhattan,” says AI is already making real estate less about access to information and more about the agent building deeper relationships. He predicts a mindset shift is on its way as agents leverage AI and at the same time are forced to find new ways to differentiate themselves in an increasingly competitive market. “If we are all using AI and have the same level of expertise, who wins? It’s the game of attention,” said Serhant at the CNBC Evolve AI Opportunity Summit in New York City this past week.
Buying a home is the single largest investment most Americans make in their lives, which makes real estate a business where greater success can be achieved with greater personal touch on the part of the agent. Serhant says the big advantage he sees in use of AI is having more time for the real estate agent to provide personalized attention to their clients.
“The product in sales is no longer just the skill set,” Serhant said. “It is the attention to the skill set.”
His own company, Serhant, has developed a service called “Simple” for sales automation to handle daily tasks in customer relationship management, which typically consumes over 60% of agents’ time.
AI tools are being used to streamline lead generation, automate marketing campaigns, and provide predictive analytics to identify opportunities, but that is not replacing the critical role of the agent in providing top performance. Serhant says AI won’t virtualize relationships, but for the real estate agents who embrace the AI revolution — which he says is a necessary move to make — it will strengthen their relationships.
Making access to real-time market data and sales insights less onerous may allow agents from small boutique firms to compete on a more equal footing with larger real estate corporations. “There is a trust factor in sales. … It isn’t about who is the largest, but who is the most empowered,” Serhant said.
That also stands to benefit homebuyers and sellers, Serhant said, with a wider selection of suitable agents with enhanced personalized services and greater focus on the client.
The real estate industry is still in the initial stages of adopting AI and understanding remains low among real estate professionals, but the interest is there. Generative AI was ranked among the top three technologies expected to have the greatest impact on real estate over the next three years by investors, developers, and corporate occupiers, according to JLL Technologies’ 2023 Global Real Estate Technology Survey. But the survey also finds that real estate professionals have very low understanding of AI compared to other technologies.
According to Serhant, agents who understand how AI can empower their business are going to have huge opportunities over the next 20 years to take significant market share.
No tech innovation comes without risks, and wire fraud remains a major challenge for the real estate industry, which will be exacerbated by AI. The FBI reported a big year-over-year increase in wire fraud cybercrime losses in 2023, driven significantly by real estate transactions. Improved artificial intelligence technology is facilitating real estate scammers.
Fraud can’t be ignored, said Serhant, but he believes real estate will adapt to the risks inherent in new technology in the same way the business has in the past, such as with digital listings. “With every advancement in technology, greater rules get put into place that can help stop those fakes,” he said.
Gen Z has taken the lead in the homeownership race.
In 2023, the homeownership rate for adult Gen Zers, or those between 19 and 26 years old, was higher than the homeownership rate for millennials and Gen X when they were 24, according to Redfin, a real estate company.
The race is close, though. About 27.8% of 24-year-old Gen Zers are homeowners compared to 24.5% of millennials when they were the same age. Gen X had a lower rate at 23.5%, Redfin reports.
“I’m so happy with buying a home,” said 24-year-old homeowner Dominic Verrichia, who bought his home in Ventnor City, New Jersey, in October 2020, when the 30-year fixed mortgage rate was 2.83%, according to Freddie Mac.
“I didn’t know if I was making the right call [buying a home],” said Verrichia. “I didn’t know if it was going to turn me upside down.”
Gen Z makes up only 3% of homebuyers, the National Association of Realtors reported. This generation is entering homeownership with the lowest income and is unlikely to be married or have children under 18 in their household.
“It is an incredibly difficult housing market right now,” said Jessica Lautz, a chief economist at the NAR. “We have very limited housing inventory, and have had very limited housing inventory for a long period of time. It has pushed up home prices at the same time that interest rates are at a higher point than they have been in the last few years, which is making the real estate market really unaffordable.”
So how can Gen Z afford homes sooner than their elders could? What implications will that have for the housing market and the U.S. economy?
Watch the video above to learn how Gen Z is winning the homeownership race and how they compare to past generations when they were the same age.
My husband Martin and I met in Brussels in 2012, when I literally stepped on his toes at my neighborhood farmer’s market. At the time, I was working as a security manager at NATO headquarters, and he was on a business trip from his home in the Netherlands.
Three days later, we went on our first date. Five weeks later, I moved to Washington, D.C., to take a post at the Pentagon. Almost a year and a half later, we decided we’d get married and he’d join me in D.C.
As a Marine Corps reserve officer, I took advantage of my VA loan benefits, and we bought a small home in 2014. We brought our newborn daughter home there in 2016.
But we always knew we wanted to move back to Europe eventually.
When the pandemic hit, it gave us time to pause and plan our long-awaited return to Europe.
We wanted to be a short drive away from my in-laws in my husband’s hometown of Rotterdam as they aged. We ultimately chose Brussels, the capital of Belgium and the administrative center of the European Union. We calculated that we could live there for less than D.C. or theNetherlands, and it’s only 90 minutes from Rotterdam.
It helped that I already had a solid network of friends in Brussels, too.
Jessica calls Martin her “90-day fiancé.”
Courtesy of Jessica van Dop DeJesus
We sold our D.C. home for $899,000 in 2021 — a 67.7% increase compared to what we’d paid for it. And after a year renting in Brussels, we started looking for a place to buy. Our two main requirements: It had to be walking distance to our daughter’s school and have an outdoor space big enough to eat outside.
Six months and 20 apartments into our search, we finally found “the one” in Saint Gilles, the neighborhood south of the city center where I’d lived before.
I fell in love with the 14-foot ceilings, the Art Nouveau buildings, and the great parks nearby.
One of Jessica’s favorite things to do in Brussels is go to the markets. There are cafés nearby where she likes to order a coffee or, “if I’m feeling a bit festive,” a glass of wine.
Federico Campanale
We offered 547,500 euro, or $586,767, for the apartment in Brussels, leveraging the cash we had from the sale of our D.C. home to put down a 10% down payment of $58,677 and securing a 20-year mortgage with a 3.59% interest rate.
We live in a street-level duplex in a building with only three apartments. It’s slightly smaller than our D.C. home, but it’s been worth it. Our neighborhood is equivalent to Logan Circle in Washington, D.C., where a place like ours could easily cost double or more. We’ve been able to add our own touches.
The front door leads into our dining room — one of my favorite parts of the apartment because of its high ceilings and large space for our long dining table, where we host many dinner parties.
Jessica is a food and travel content creator, and cooks pretty much every day. She loves that she and her family can host dinner parties in the dining room.
Federico Campanale
Next to the dining room is our living room, where I made a “fitness nook” with my stationary bike and weights so I can work out while watching TV.
We added an American-style stove and oven that fits my Thanksgiving turkey, as well as a wine fridge to our galley kitchen. We put in terrazzo floors as an homage to my childhood home in Puerto Rico.
“In Europe usually ovens are very tiny, but not the case with me because I love a big Thanksgiving turkey,” Jessica says.
Federico Campanale
Toward the back of the first floor, a small room doubles as an office and a sitting room. Large sliding doors lead to our two-level terrace, one with a large table we use in the warmer months.
Jessica and her family like to eat outside on the terrace in the warmer months. Above and beyond the patio, she says, “we have a beautiful view of the city hall.”
Federico Campanale
The bedrooms, laundry room, storage, and bathroom are on the bottom floor.
Lack of closets and storage space is common in European apartments. Fortunately, the former owners made a storage system under the stairs, which we use for extra clothes, household items, wines, and photography equipment.
“My daughter’s room still has the home’s original tile, which we love,” Jessica says.
Federico Campanale
We have an average-sized bedroom with a walk-in closet and a small guest bedroom with a full-sized bed.
Our bathroom is big for European standards with a shower and tub, and we plan to renovate it in 2025.
The bedroom is “very basic,” Jessica says.
Federico Campanale
Currently, our monthly housing costs in Brussels include our mortgage ($2,931) and condo fee ($65) as well as utilities such as electricity ($73), gas ($70), water (about $50), and internet and cable ($68).
I miss being within driving distance of my family in Western New York. The main sacrifice of this move is being so far from people I’m close to. But we’re happy to be in Brussels.
Our neighborhood, Saint Gilles, has always been one of my favorite parts of the city, filled with Portuguese, Brazilian, Eastern European, Italian, Latin American, and North African restaurants and shops. We even had a Latino-themed Christmas market with Colombian food stands and live salsa music sponsored by the town hall last year!
Our daughter, now seven, is a half-Dutch, half-Puerto Rican, third-culture kid, so we wanted her to grow up in a diverse community.
Jessica’s seven-year-old daughter already speaks English, Dutch, and Spanish, and will start learning French at school next year, too.
Federico Campanale
Belgium shares borders with four countries: the Netherlands, Germany, Luxembourg, and France. This close proximity makes it easy to take a quick weekend trip to explore even more places and cultures.
I can’t say leaving the U.S. for Europe meant the end of all our problems. But I feel more content and at ease here. I don’t worry as much about school shootings, for example, or the potential loss of employer-sponsored healthcare. We can afford to live, get childcare for our daughter, eat and cook like the foodie I am, and travel regularly.
And we can embrace a slower pace of life and a culture that prizes friends and vacations at least as much as work.
Jessica van Dop DeJesus is a freelance journalist, a digital media strategist, and the founder of The Dining Traveler, a multimedia digital platform covering food and travel. Jessica was raised in Puerto Rico and began traveling as a young Marine over 25 years ago. She currently serves as the Latinx facilitator for the Breaking Barriers in Entrepreneurship program for Bunker Labs, providing mentorship to aspiring veteran entrepreneurs. Follow her on Instagram, Facebook, Twitter, Pinterest, and YouTube.
Want to make extra money outside of your day job? Sign up for CNBC’s new online course How to Earn Passive Income Online to learn about common passive income streams, tips to get started and real-life success stories. CNBC Make It readers can use special discount code CNBC40 to get 40% off through 8/15/24.
If a low credit score is keeping you from buying a home, you’re not alone. Nearly a quarter of Americans under 35 say that bad credit is preventing them from owning a home, according to CNBC’s Your Money survey conducted by Survey Monkey.
What does it take to buy a home? The minimum score needed can be as low as 500, but will ultimately depend on your lender and what type of mortgage you’re applying for.
“The higher your score the better, of course,” Melinda Opperman, Credit.org‘s chief external affairs officer, tells CNBC Make It.
To qualify for a conventional loan, the most commonly used mortgage loan, you’ll typically need at least a credit score of 620, Experian says. Some lenders may require you to have a score above 660.
Credit scores range from 300 to 850 and measure how well you’re managing your debt. Here are the credit score ranges that qualify as poor, fair, good, very good and exceptional, according to Experian.
Poor: 300 to 579
Fair: 580 to 699
Good: 670 to 739
Very good: 740 to 799
Exceptional: 800 to 850
Lenders use these scores to determine how risky it would be to lend money to you, which is why having a higher score can help you qualify for the best mortgage rates.
“The score is a measure of risk, so the lower your score, the more risk the lender is taking with you,” Opperman says. “The higher your score, the lower the risk, so a lender will charge you less interest the higher your score gets.”
When it comes to mortgages, a higher credit score can save you thousands of dollars in the long run. This is because your credit score directly impacts your mortgage rate, which determines the amount of interest you’ll pay over the life of the loan.
The national average for a 30-year fixed-rate mortgage is 6.98% as of Sept. 20, according to FICO. Your credit score would need to fall between 760 and 850 to qualify for that rate, per FICO’s website. If it does, your monthly payment on a $300,000 loan would be about $1,992, according to CNBC Make It’s calculations.
On the other hand, the average mortgage rate for credit scores between 620 and 639 is 8.57%. With that higher interest rate, your monthly payment would increase to around $2,322 on the same loan, according to CNBC Make It’s calculations.
That difference can really add up over time.
Over the course of 30 years, someone with a mortgage rate of 8.57% would pay an additional $118,714 in interest, compared with someone with the 6.98% mortgage rate, according to CNBC Make It’s calculations.
CNBC Make It’s mortgage calculator can help you understand how different mortgage rates would impact your potential monthly payments and interest charges.
Don’t panic if your credit score isn’t quite where you want it to be yet.
One option for improving your score before applying for a mortgage is to lower your credit utilization ratio, says Ted Rossman, senior industry analyst at Bankrate.com.
Your credit utilization rate, a measure of how much of your available credit you’re using at a time, plays a big role in how your credit score is calculated. Say you have a $3,000 credit limit and a balance of $600. Your credit utilization rate would be 20%.
Ultimately, you should try to show credit reporting agencies that you can successfully manage various types of credit by consistently keeping your debt low and by paying your bills on time, Rossman tells CNBC Make It.
“Improving your credit score it more of a marathon than a sprint,” he says.
Want to earn more and land your dream job? Join the free CNBC Make It: Your Money virtual event on Oct. 17 at 1 p.m. ET to learn how to level up your interview and negotiating skills, build your ideal career, boost your income and grow your wealth. Register for free today.
Indeed, everyday home expenses, including utility bills, property taxes, insurance and home maintenance, cost the average homeowner $14,155 a year, not countingthe typical mortgage payment, according to a June report from Zillow and Thumbtack.
Many homebuyers just focus on the principal and interest of their mortgage payment, said certified financial planner Vince Darling at the Stonebridge Group in Forest Lake, Minnesota. “This can lead people to penny-pinch once they move into a new home.”
More from Life Changes:
Here’s a look at other stories offering a financial angle on important lifetime milestones.
Here are three of the most common surprise homeownership expenses and how to prepare for each one, according to experts.
As a first-time homebuyer, it’s easy to overlook property taxes since you’ve never paid those levies directly. Rates often vary widely by city or county, making it harder to plan for the bill.
Based on your home’s assessed value, it’s important to know which jurisdictions levy the taxes and how often reassessments happen, said Richard Auxier, senior policy associate at the Urban-Brookings Tax Policy Center. “A good person to call up would be the local representative,” he suggested.
Another major expense can be homeowners insurance, with an average yearly premium of $1,428 for $250,000 in dwelling coverage, according to Bankrate.
However, it can be significantly higher in disaster-prone areas, said CFP Kevin Brady, vice president at Wealthspire Advisors in New York. These policies may not cover key weather events, so check your coverage carefully, he said.
Typically, you’ll need separate policies for floods and earthquakes. You may face a separate deductible and provisions for hurricanes and other windstorms.
With premiums on the rise, you may start shopping for a policy and gathering quotes before putting in a home purchase offer.
The cost of home repairs and maintenance can also be a hidden expense for first-time homebuyers.
Annual maintenance costs soared to an all-time high during the second quarter of 2023, reaching $6,493, compared with —$5,984 one year prior, according to Thumbtack.
While a good home inspector can prepare prospective buyers by sharing the condition of a roof or major systems that typically need replacing at set intervals, many experts recommend extra savings for inevitable expenses.
As a first-time homebuyer, you need to make sure you have a sufficient cushion for surprises — I’d argue 5% of the home’s purchase price at least.
Nicole Sullivan
Co-founder of Prism Planning Partners
“As a first-time homebuyer, you need to make sure you have a sufficient cushion for surprises — I’d argue 5% of the home’s purchase price at least,” said Nicole Sullivan, a Libertyville, Illinois-based CFP and co-founder of Prism Planning Partners.
“Be aware that anything that comes up on the home inspection will need to be addressed and could happen sooner rather than later,” she added.
U.S real estate investment trusts today manage $4.5 trillion in real estate worldwide. Many groups on Wall Street offer these tax-friendly funds to retail investors.
KKR’s real estate business is one of the big players in the REIT game. The private equity firm manages multiple REIT funds. The KKR Real Estate Select Trust, which currently manages $1.5 billion in assets, paid a dividend of 5.4% to its investors in July 2023.
But the benefits extend beyond returns.
“When you look at the after tax equivalent of that yield, it is very compelling.” said Billy Butcher, CEO of KKR’s global real estate business. “The depreciation from our properties has covered 100% of the income generated by our properties, and there’s no tax on that dividend,” he said in an interview with CNBC.
Larger funds sometimes contain a diversified pool of assets. Categories may include office, student housing, casino, timberlands, radio and cell towers, server farms, self-storage properties, billboards, and much more.
“Back in the 1960s, there were three or four different types [of REITs], said Sher Hafeez, a managing director at Jones Lang LaSalle, a real estate services firm. “Now, I can count at least 20 different types.”
Top performing REIT sub-sectors in recent years include data centers, self-storage properties, residential housing and tower REITs. Residential housing delivered a return of 16% from 2010 to 2020, according to a S&P Global Investments report.
The investor-friendly tax rules can also increase the pace of large-scale development.
“Having REITs there as a potential exit helps the market, and helps the availability of financing,” said Michael Pestronk, CEO and co-founder of Post Brothers, a Philadelphia-based housing developer.
Some funds like Invitation Homes and American Homes 4 Rent were founded in the yearslong slowdown in U.S. home construction. At the time, REITs bought and managed commercial-scale properties, which could include products like master-planned communities or traditional apartment complexes.
In recent years, publicly traded trusts have targeted single-family rental market, and today, these REITs have grown tremendously — enough to build new neighborhoods in their entirety.
Watch the video above to learn the fundamentals of real estate investment trusts.
A new housing development built along a canal near the Mokelumne River is viewed on May 22, 2023, near Stockton, California.
George Rose | Getty Images
Lawrence Yun has as big a stake in the Federal Reserve’s moves as any economist: As the chief economist for the National Association of Realtors, his industry is a target of the Federal Reserve’s efforts to tame inflation with higher interest rates.
But the housing’s industry’s bigger problem right now may be the bond market, and specifically, spreads between treasuries and mortgage rates that suggests homebuyers’ economic challenges may not decline even as the Federal Reserve is nearing the end of its interest-rate hikes. There is a historically-wide difference between the 10-year treasury bond, a benchmark for pricing mortgages, and the actual price of an average 30-year loan. Usually around 1.75 percentage points, and as low as 1.3 in 2021, the so-called mortgage spread is hovering at more than 3 percentage points now. And that is propping up mortgage rates, keeping home owners from selling their homes and buying nicer ones, and hurting first-time buyers, Yun said.
“Buyers know 3.5% mortgages aren’t coming back,” Yun said. “So 5.5% would bring out buyers.”
Why mortgage spreads should move lower
Logically, mortgage spreads should move down sharply from here, thanks to the recent spate of good economic news, and bring relief to home buyers who have seen affordability deteriorate sharply since 2020.
Traditionally, spreads widen when markets fear a recession. They spiked before the financial crisis of 2008, for example. Collapsing spreads help revive housing activity after a recession arrives, or can prop up the housing market in a crisis, which happened in 2021 as the Covid pandemic threatened an economic crash. But as the Fed began raising interest rates in March 2022, mortgage rates rose even faster than bond yields.
The case for wide spreads this past year was two-fold. Partly, it was rooted in the idea that the 10-year treasury yield would rise as the Fed hiked more. Fear of a 2023 recession also contributed — evidenced by a sharp widening of spreads in March, after Silicon Valley Bank failed.
Now, both cases are evaporating. Last week’s inflation report showed consumer prices rose just less than 3% for the 12 months ending in June, down from more than 9% a year earlier. Low inflation should persist into the fall, because the government’s measure of housing inflation lags private market data that has been moving lower since last summer. The consumer price index is expected to only start to reflect the now year-old dip in rents and home prices in parts of the U.S. by year-end.
The recent inflation news pushed the 10-year treasury lower, touching 3.76% after reaching 4.09% earlier in July. Mortgage rates also dropped, to 6.89% last Friday from a recent peak of 7.22%, according to Mortgage News Daily. But the spread between the two was little changed.
How much the big mortgage spread costs homeowners
If the spread between 10-year bonds and mortgages were to revert to normal, it would make a huge difference in monthly payments for home buyers.
On a $500,000 mortgage, for example, a 7% interest rate spits out a monthly payment of $3,327, plus taxes and insurance. That falls to $2,934 if rates go to 5.8%, which would represent a 2 percentage-point gap between treasuries and mortgage rates, and to $2,777 with mortgages at a spread of 1.5 percentage points — back within the range of the long-term average, 1.75 points.
The closing of spreads alone would save that borrower $6,600 a year in payments. A $500,000 loan would typically require about $150,000 in pretax annual income.
“People consider changing their cable company for $30 a month,” Yun said. “$600 a month is a big number.”
A narrowing of spreads last fall, which reversed in February and March, helped stabilize a falling real estate market, according to Logan Mohtashami, lead analyst for HousingWire in Irvine, Calif.
But bond market and housing experts are skeptical of whether the spreads will narrow, and mortgage rates fall, as fast as homebuyers might like.
The Fed is widely expected to raise the Fed funds rate at its meeting on July 25-26, with futures prices implying a 96.1% chance of a quarter-point increase, according to the CME Group Fedwatch Tool. That will support Treasury yields, at least in theory.
More than that, the Fed has stopped buying up mortgage securities as the bonds on its balance sheet mature. That depresses the price mortgages can command in secondary markets or from federally-backed loan buyers like Fannie Mae and Freddie Mac, and puts pressure on lenders to demand wider spreads from borrowers, said Rob Haworth, senior investment strategy director at U.S. Bank in Seattle.
Banks may also seek bigger spreads on loans made in the next few months because of the risk the mortgages will be repaid quickly when borrowers refinance next year as rates fall, he added.
“One might attribute it to quantitative tightening,” Haworth said. “The Fed is a seller.”
Indeed, the Fed has signaled that it doesn’t want mortgage rates to fall soon, according to Mohtashami, citing comments made by Minneapolis Federal Reserve Bank president Neel Kashkari who said in February that lower rates and a hotter market would “make our job harder” in controlling inflation.
“I assumed the spreads would stay high until the Fed cried Uncle and started cutting rates,” Mohtashami said. “If the banking crisis hadn’t happened in March, they would be lower.”
But markets have defied the Fed before, as recently as this week, when the 10-year Treasury yield dropped even as traders remain convinced the central bank will hike rates at least once more.
If the drop in inflation is sustained — a big if — and rising consumer confidence pushes any recession further into the future, markets are likely to reset interest rates with or without the central bank.
The Fed will raise rates at least once more, but the second rate increase many investors have expected may be delayed or canceled if inflation stays tame, said Doug Duncan, chief economist at Fannie Mae. That would let last week’s modest dip in mortgage rates continue, even though Fannie doesn’t expect the central bank to cut interest rates until at least early next year, he said.
How banks think about lending rates
Fannie Mae’s forecast calls for rates to be near current levels through 2023. But the Mortgage Bankers Association of America sees the 30-year rate dipping to 5.2 percent next year.
Banks’ reaction to changing spreads may be tricky to predict, Duncan said. On the one hand, banks would have to watch out for more prepayments if interest rates come back down, pressuring them to keep spreads wide, he said. But that might be overwhelmed by an increase in the value of mortgages that banks already own, as loans from the late 2010s and 2020 that pay lower rates regain value they lost as rates rose, he said. In that case, more banks would probably be more willing to let spreads fall, he added.
Mortgage rates could come down quicker than expected if banks respond to rising mortgage-bond values by relaxing spreads, Duncan said. When the Fed tried to talk markets into tightening credit in 2013, mortgage spreads actually became smaller, loosening mortgage credit, Haworth said.
“Unless rates go back to 3 percent, banks are still going to be better off, even if prepayments pick up,” Duncan said.
