Tag: mortgage rates

A Debt-Ceiling Crisis Would Hit The Housing Market Like A Hurricane

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The housing market may be in for a disaster if the United States hits the debt ceiling.

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Natural disasters like hurricanes and snowstorms tend to temporarily halt housing market activity in affected areas.

If the United States breaches the debt ceiling, it would hit the housing market like a natural disaster. Whenever there is a major weather event, like a hurricane or snowstorm, the places directly in harm’s way see a steep decline in home selling and buying activity. For example, in October 2022, the number of homes that accepted an offer plummeted by over 50% year over year in the three Florida metros directly hit by Hurricane Ian, double the national decline. However, those markets mostly recovered by the new year. If the U.S. hits the debt ceiling, without a deal in Congress to raise the country’s borrowing limit, it would have a similar effect on the housing market. Home sellers and homebuyers would temporarily back off the market during the turmoil but would return once the dust settles.

Locations Harmed Most By Debt Ceiling Crisis

The United States may breach the debt ceiling sometime between June and August, and if that happens, the U.S. may miss payments to federal workers, contractors and vendors, or Social Security recipients to avoid defaulting on its debt. The length and severity of this economic disaster would depend on how long it takes Congress to raise the limit, which hinges on bipartisan cooperation.

The economic harm would be most severe in places with a high concentration of federal employees, contractors, vendors and military personnel, such as Washington D.C. and Virginia Beach, VA. Anyone who is missing income would likely be reluctant to make a big financial commitment, like buying a home.

Areas with the highest shares of older people will face the most disruption from missed social security payments, such as Florida and Maine. Retirees who rely on social security income will be hesitant to spend, which would be a drag on the economies in these places. The slowdown in economic activity may slow down homebuying overall.

On the other hand, places like Salt Lake City and Minneapolis would be the least affected because they have relatively young populations and few federal employees.

Mortgage Rate Volatility

The broader housing market could still be affected by swings in mortgage interest rates. Fear about the U.S. defaulting on its debt would push rates up. That’s because the potential for default makes all U.S. investments riskier, including mortgages. However, increased recession risk would decrease mortgage rates. The White House has stated a debt default would result in millions of jobs lost and a decline in economic growth. In this scenario, rates would fall because the Fed would have to lower short-term interest rates to spur economic growth. The last time the debt ceiling was breached in August 2011, mortgage rates decreased.

What Homebuyers Should Know

If you are planning on buying a home this year, there is a chance that you might be able to get a better deal on a mortgage rate if and when the debt ceiling is breached. So follow the news, and ask your lender to provide updated information on any changes in the rate they can offer. However, mortgage rates could go up instead of down. To have the best of both worlds, lock in your interest rate now with a float-down option. A float-down option will enable you to take advantage if mortgage rates fall.

However, even if you are lucky enough to get a relatively low rate, you may find that sellers have backed off the market because of economic uncertainty. The lack of inventory would be especially dire given that new listings are already down almost 20% from last year. A lack of supply could lead to more competition for homes on the market. To be prepared, get preapproved for a mortgage ahead of time and set alerts for homes that match your preferences on real estate apps like Redfin
RDFN
. That way, you can submit an offer quickly before someone else beats you to the punch.

What Home Sellers Should Know

With all the uncertainty around how big of an impact a breach of the debt ceiling might have on the economy and mortgage rates, I expect many potential home sellers to back off the market. If rates do fall, home sellers who brave the market may find themselves with multiple offers from buyers eager to take advantage of lower interest rates. However, if rates go up instead, home sellers may find it more challenging to match with a buyer.

Home Sales And Prices

All in all, I expect many potential home sellers to be scared off by the uncertainty. Sellers only have one chance to debut their home, while buyers can be more flexible about timing their offers. Therefore, I expect breaching the debt ceiling will constrict supply more than demand, and will negatively impact the volume of home sales more than level of home prices. And then once the debt ceiling is lifted, the housing market will return to normal, or at least normal for 2023.

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Daryl Fairweather, Contributor

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May 18, 2023
U.S. Debt Default Would Cause Mortgage Rate Spike, Home Sales Slump

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U.S. debt default would cause borrowing costs to jump.

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A default on the nation’s debt, if Congress is unable to raise the federal debt ceiling in coming weeks, would boost mortgage rates by at least two percentage points and cause a slump in home sales as costlier financing puts real estate beyond the reach of more Americans, according to Jeff Tucker, a Zillow senior economist.

While it’s still unlikely the federal government will fail to pay its bills, the chances have increased in recent weeks because of an ongoing stalemate in Congress, Moody’s Analytics said last week. The chance of a debt default now stands at 10%, up from a previous estimate of 5%, the research firm said.

“Any major disruption to the economy and debt markets will have major repercussions for the housing market, chilling sales and raising borrowing costs, just when the market was beginning to stabilize and recover from the major cooldown of late 2022,” said Zillow’s Tucker.

The average U.S. rate for a 30-year fixed home loan likely would rise to 8.4% in coming months, he said, from last week’s 6.35%, as measured by Freddie Mac. That increase in borrowing costs would cause home sales to slump by 23%, while the U.S. unemployment rate likely would balloon to 8.3% from last month’s 3.4% as the economy entered a recession, Tucker said.

It would be a “self-inflicted disaster,” Tucker said.

Jaret Seiberg, the housing policy analyst for Cowen Washington Research Group, views Tucker’s estimates as possibly too conservative.

“Our view is that the Zillow report may be a best-case scenario as our concern is that credit markets will freeze up if there is a default,” Seiberg said.

Comments made by former President Donald Trump during a CNN “Town Hall” last week increased the chances of a debt disaster, Seiberg said. Trump told CNN’s Kaitlan Collins a debt default “could be nothing” and might be just “a bad week or a bad day.”

That stands in stark contrast to remarks he made while he was in the White House. On July 19, 2019, Trump described the nation’s obligation to pay its bills as “a very, very sacred thing in our country” and added, “I can’t imagine anybody ever even thinking of using the debt ceiling as a negotiating wedge.”

With a razor-thin Republican majority in the House of Representatives, even a few hold-outs inspired by Trump’s remarks could doom a chance to come to an agreement about raising the debt cap, Seiberg said. Negotiations over the debt ceiling aren’t about how much to spend – they’re about paying bills already incurred.

“We continue to view a default as unlikely, but that is premised on our belief that politicians realize how dangerous a default would be for the economy,” Seiberg said. “The problem is that unlike in prior fights, not every political leader agrees, as we heard this week from former President Donald Trump. It is why we cannot rule out a default.”

While economists agree that a failure of the U.S. government to pay its bills would be a recession-inducing catastrophe, they don’t agree on the “X date,” meaning the day a default would begin. Treasury Secretary Janet Yellen puts the month as June, and the earliest potential day as June 1. The U.S. Treasury said in January it would use “extraordinary measures” to move money around to delay a default as long as possible.

Goldman Sachs economists estimate the U.S. “will likely exhaust its cash and borrowing capacity by late July.” Zillow puts the default date as “almost certainly by August, depending on the flow of income tax receipts this spring.”

“It is impossible to predict with certainty the exact date when Treasury will be unable to pay all of the government’s bills,” Yellen told the Independent Community Bankers of America on Tuesday. “Every single day that Congress does not act, we are experiencing increased economic costs that could slow down the U.S. economy.”

The mortgage market is already showing signs of investor fear. Last month, the spread between 30-year fixed mortgage rates and 10-year Treasury yields reached the widest in almost 40 years. When spreads are wide, the mortgage rates that track the 10-year Treasury yield are higher than they normally would be as investors demand a risk premium.

In May’s first week, the spread was 2.95 percentage points, close to the 3.07 in mid-March that marked the widest margin since 1987, and beating the 2.96 in late December 2008 that was the biggest spread of the Great Recession, comparing Freddie Mac’s weekly rate average with 10-year Treasury data from the Federal Reserve.

“We are already seeing the impacts of brinksmanship,” Yellen said. “The U.S. economy hangs in the balance.”

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Kathleen Howley, Senior Contributor

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May 16, 2023
If The Debt Ceiling Isn’t Raised, Higher Mortgage Rates Will Hurt Home Sales

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U.S. debt default would cause borrowing costs to jump.

getty

A default on the nation’s debt, if Congress is unable to raise the federal debt ceiling in coming weeks, would boost mortgage rates by at least two percentage points and cause a slump in home sales as costlier financing puts real estate beyond the reach of more Americans, according to Jeff Tucker, a Zillow senior economist.

While it’s still unlikely the federal government will fail to pay its bills, the chances have increased in recent weeks because of an ongoing stalemate in Congress, Moody’s Analytics said last week. The chance of a debt default now stands at 10%, up from a previous estimate of 5%, the research firm said.

“Any major disruption to the economy and debt markets will have major repercussions for the housing market, chilling sales and raising borrowing costs, just when the market was beginning to stabilize and recover from the major cooldown of late 2022,” said Zillow’s Tucker.

The average U.S. rate for a 30-year fixed home loan likely would rise to 8.4% in coming months, he said, from last week’s 6.35%, as measured by Freddie Mac. That increase in borrowing costs would cause home sales to slump by 23%, while the U.S. unemployment rate likely would balloon to 8.3% from last month’s 3.4% as the economy entered a recession, Tucker said.

It would be a “self-inflicted disaster,” Tucker said.

Jaret Seiberg, the housing policy analyst for Cowen Washington Research Group, views Tucker’s estimates as possibly too conservative.

“Our view is that the Zillow report may be a best-case scenario as our concern is that credit markets will freeze up if there is a default,” Seiberg said.

Comments made by former President Donald Trump during a CNN “Town Hall” last week increased the chances of a debt disaster, Seiberg said. Trump told CNN’s Kaitlan Collins a debt default “could be nothing” and might be just “a bad week or a bad day.”

That stands in stark contrast to remarks he made while he was in the White House. On July 19, 2019, Trump described the nation’s obligation to pay its bills as “a very, very sacred thing in our country” and added, “I can’t imagine anybody ever even thinking of using the debt ceiling as a negotiating wedge.”

With a razor-thin Republican majority in the House of Representatives, even a few hold-outs inspired by Trump’s remarks could doom a chance to come to an agreement about raising the debt cap, Seiberg said. Negotiations over the debt ceiling aren’t about how much to spend – they’re about paying bills already incurred.

“We continue to view a default as unlikely, but that is premised on our belief that politicians realize how dangerous a default would be for the economy,” Seiberg said. “The problem is that unlike in prior fights, not every political leader agrees, as we heard this week from former President Donald Trump. It is why we cannot rule out a default.”

While economists agree that a failure of the U.S. government to pay its bills would be a recession-inducing catastrophe, they don’t agree on the “X date,” meaning the day a default would begin. Treasury Secretary Janet Yellen puts the month as June, and the earliest potential day as June 1. The U.S. Treasury said in January it would use “extraordinary measures” to move money around to delay a default as long as possible.

Goldman Sachs economists estimate the U.S. “will likely exhaust its cash and borrowing capacity by late July.” Zillow puts the default date as “almost certainly by August, depending on the flow of income tax receipts this spring.”

“It is impossible to predict with certainty the exact date when Treasury will be unable to pay all of the government’s bills,” Yellen told the Independent Community Bankers of America on Tuesday. “Every single day that Congress does not act, we are experiencing increased economic costs that could slow down the U.S. economy.”

The mortgage market is already showing signs of investor fear. Last month, the spread between 30-year fixed mortgage rates and 10-year Treasury yields reached the widest in almost 40 years. When spreads are wide, the mortgage rates that track the 10-year Treasury yield are higher than they normally would be as investors demand a risk premium.

In May’s first week, the spread was 2.95 percentage points, close to the 3.07 in mid-March that marked the widest margin since 1987, and beating the 2.96 in late December 2008 that was the biggest spread of the Great Recession, comparing Freddie Mac’s weekly rate average with 10-year Treasury data from the Federal Reserve.

“We are already seeing the impacts of brinksmanship,” Yellen said. “The U.S. economy hangs in the balance.”

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Kathleen Howley, Senior Contributor

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May 16, 2023
New mortgage rules could lead to some homebuyers paying more

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A little-known mortgage surcharge is getting an overhaul on May 1 that could impact home buyers in very different ways, potentially helping those with lower credit scores by lowering their costs. But some borrowers with stronger credit scores could end up paying more.

The revamp of the so-called loan-level price adjustment (LLPA) fee is causing consternation among some mortgage professionals, who note that buyers with high credit scores will effectively be underwriting those with low scores.

The backlash to the overhaul spurred the Federal Housing Finance Agency, which levies the fees, to issue a statement this week to call such concerns “a fundamental misunderstanding.” Sensitivity about the change in fees may be heightened given the affordability crisis in the real estate market, which is pricing many buyers out of buying a home.

What is the purpose of the fee change?

The new mortgage fee structure is meant to help people who historically have struggled to purchase their first homes, such as lower-income households that may have lower credit scores, by reducing their closing costs, Zillow economist Orphe Divounguy told CBS MoneyWatch.

“Housing affordability remains the biggest challenge for home shoppers today,” he noted. “Some borrowers will pay slightly lower fees, and some other borrowers will pay slightly higher borrowing costs than they did before.”

Here’s what to know about the changes.

What is a loan-level price adjustment fee?

These are fees charged by Fannie Mae and Freddie Mac that are chiefly based on a homebuyer’s credit score and the size of a down payment. They often are rolled into your closing costs, which can be an overlooked factor by some people in buying their first home.

LLPAs were introduced around the time of the 2008 financial crisis to help offset the risks borne by Fannie and Freddie Mac, the federally backed mortgage institutions overseen by the Federal Housing Finance Agency (FHFA).

“It’s a way of insuring the taxpayers against borrowers defaulting on their loans,” Divounguy said.

The new fee only impacts homebuyers, and doesn’t have any impact on people who already own their homes. It also won’t impact the roughly 40% of mortgages that aren’t backed by Fannie Mae or Freddie Mac.

What is changing on May 1?

The FHFA is recalibrating the fee structure for LLPAs starting on May 1 by lowering fees for some borrowers and hiking those for others.

“The spread of fees between low and high credit score borrowers won’t be as big,” Divounguy said.

For instance, starting next month a homebuyer with a credit score between 640 to 659 — considered “fair” — and who has a down payment of 5% will incur an LLPA of 1.5%. Prior to the change, the fee for this group of buyers was 2.75%. That means someone purchasing a $200,000 home would pay an LLPA fee of $3,000 under the new structure, down from $5,000 previously.

But some purchasers won’t get as good deal as they did before. For instance, homebuyers with credit scores of 740 to 759 — considered “very good” — and putting 20% down will face a new LLPA of 1%, compared with 0.5% previously. For the purchase of a $200,000 home, that means the fee will double to $2,000.

Why is the change drawing criticism?

Some experts believe the new rules are unfair because they effectively penalize buyers with higher credit scores, while others are worried the change could have a potentially chilling impact on purchases.

The National Association of Realtors has come out against the overhaul, arguing that the new fee structure could hurt some buyers at a time when affordability remains challenging.

However, the changes are complex and don’t uniformly increase LLPAs for people with high credit scores. Some people with good credit scores will see no change, while a few types of borrowers with high scores could see a slight improvement. For instance, buyers with a credit score of above 780, considered excellent, and who make a downpayment of 5% will see their LLPA decline by 0.625 percentage points.

That could have an “unintended consequence,” noted Rajiv Sethi, a professor of economics at Barnard College and Columbia University, in a blog post. “Those with reasonably high credit scores and substantial wealth [could] choose to lower their down payments strategically in order to benefit from lower fees,” he wrote.

What does the the government say?

FHFA director Sandra L. Thompson said in a statement on Tuesday that the fee change is being misinterpreted and that the new payment structure is part of an overhaul that started in 2021 partly as a way to “maintain support for purchase borrowers limited by income or wealth.”

“Higher-credit-score borrowers are not being charged more so that lower-credit-score borrowers can pay less,” she said. “The updated fees, as was true of the prior fees, generally increase as credit scores decrease for any given level of down payment.”

So are home buyers with higher credit score buyers actually paying more?

No, because those with higher credit scores are still paying less than those without strong scores, experts say.

“Having a good credit score continues to confer an advantage under the new fee structure, although to a diminished degree at some levels of the loan-to-value ratio,” Sethi noted.

But, as noted above, the fees have been cut for many types of borrowers with lower credit scores and raised for those with higher scores, meaning that the spread between the two types of borrowers is now narrower.

Should I lower my credit score to get a cheaper fee?

One media report cited an unnamed expert advising people to lower their credit scores to get a better fee, but that’s terrible financial advice, experts say.

First off, people with higher credit scores are still paying lower fees, so it doesn’t make sense to damage your credit score. Second, that can ruin your prospects of getting better rates for other loans, such as auto loans or credit card rates.

“The bottom line is if you have a higher credit score, you will pay less than someone with allow credit score,” Divounguy said.

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April 28, 2023
Rent or buy? Here’s how to make that decision in the current real estate market

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Choosing whether to rent or buy has never been a simple decision — and this ever-changing housing market isn’t making it any easier. With surging mortgage rates, record rents and home prices, a potential economic downturn and other lifestyle considerations, there’s so much to factor in.

“This is an extraordinarily unique market because of the pandemic and because there was such a run on housing so you have home prices very high, you also have rent prices very high,” said Diana Olick, senior climate and real estate correspondent for CNBC.

By the numbers, renting is often cheaper. On average across the 50 largest metro areas in the U.S., a typical renter pays about 40% less per month than a first-time homeowner, based on asking rents and monthly mortgage payments, according to Realtor.com.

In December 2022, it was more cost-effective to rent than buy in 45 of those metros, the real estate site found. That’s up from 30 markets the prior year.

How does that work out in terms of monthly costs? In the top 10 metro regions that favored renting, monthly starter homeownership costs were an average of $1,920 higher than rents.

But that has not proven to be the case for everyone.

Leland and Stephanie Jernigan recently purchased their first home in Cleveland for $285,000 — or about $100 per square foot. The family of seven will also have Leland’s mother, who has been fighting breast cancer, moving in with them.

By their calculations, this move — which expands their space threefold and allowing them to take care of Leland’s mother — will be saving them more than $700 per month.

‘You don’t buy a house based on the price of the house’

“You don’t buy a house based on the price of the house,” Olick said. “You buy it based on the monthly payment that’s going to be principal and interest and insurance and property taxes. If that calculation works for you and it’s not that much of your income, perhaps a third of your income, then it’s probably a good bet for you, especially if you expect to stay in that home for more than 10 years. You will build equity in the home over the long term, and renting a house is really just throwing money out.”

Mortgage rates dropped slightly in early March, due to the stress on the banking system from the recent bank failures. They are moving up again, although they are currently not as high as they were last fall. The average rate on a 30-year fixed-rate mortgage is 6.59% as of April — up from 3.3% around the same time in 2021.

But that hasn’t significantly dampened demand.

“As the markets kind of bubbled in certain parts of the country and other parts of the country priced out, we’ve seen a lot of investors coming in looking for affordable homes that they can buy and rent,” said Michael Azzam, a real estate agent and founder of The Azzam Group in Cleveland.

“We’re still seeing relatively high demand” he added. “Prices have still continued to appreciate even with interest rates where they’re at. And so we’re still seeing a pretty active market here.”

Buying a home is part of the American Dream

The Jernigans are achieving a big part of the American Dream. Buying a home is a life event that 74% of respondents in a 2022 Bankrate survey ranked as the highest gauge of prosperity — eclipsing even having a career, children or a college degree.

The purchase is also a full-circle moment for Leland, who grew up in East Cleveland, where his family was on government assistance.

“I came from a single-mother home who struggled to put food on the table and always wanted better for her children … it was more criminals than there were police … It is not the type of neighborhood that I wanted my children to grow up in,” said Jernigan.

The new homeowner also has his eye on building a brighter future for more children than just his own. Jernigan plans to purchase homes in his old neighborhood, renovate them and create a safe space for those growing up like he did.

“I’m here because someone saw me and saw the potential in me and gave me advice that helped me. … and I just want to pay it forward to someone else” Jernigan said.

Watch the video above to learn more.

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April 26, 2023
Mortgage rates rise: 30-year climbs to 6.39% | Long Island Business News

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U.S. mortgage rates rose this week for the first time in more than a month

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April 20, 2023
Falling Mortgage Rates Set To Boost Home Sales By More Than 200,0000

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U.S. mortgage rates continue to fall as buyers gear up for the spring market.

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The decline in mortgage rates over the last month likely will boost U.S. home sales by more than 200,000 as cheaper financing results in more people qualifying for loans, according to Lawerence Yun, chief economist of the National Association of Realtors.

“Each half a percentage point drop in mortgage rates results is an additional 200,000 home sales, and likely even more,” said Yun. “Since more people will qualify for mortgages, it leads to more sales.”

The average U.S. rate for a 30-year fixed home loan dropped to 6.28% last week from 6.73% in March’s first week, according to Freddie Mac. That decline in the cost of financing reduces monthly payments, meaning more buyers will pass the debt-to-income test lenders use to qualify applications.

“Lower mortgage rates open the gate – not for everyone, but for people who were on the margins,” Yun said.

Mortgage rates likely will remain near
near
the current level in the short term and decline further in the coming months, Yun said. The average U.S. rate for a 30-year fixed mortgage probably will be 6.3% in the second quarter and 5.9% in the third quarter, he said.

About 40% of U.S. home sales go under contract in the April to June period, according to data from NAR. Those sales typically close about two months later, with the buyers moving in the summer months.

“We’re smack dab in the peak of the spring home-buying season right now,” said Bill Banfield, executive vice president of capital markets for Rocket Mortgage. “People want to get into a home and settle their families before the new school year starts.”

Mortgage rates hit 20-year highs at the end of October and again in early November, according to Freddie Mac data, after inflation spooked investors and the Federal Reserve ended a bond-buying program aimed at supporting the economy during the worst of the pandemic.

Rates remained near those peaks until last month’s failure of Silicon Valley Bank, the 16th-largest U.S. commercial bank by assets, and Signature Bank, a smaller bank based in New York that catered to cryptocurrency investors.

That financial instability sent Wall Street investors scurrying for the perceived safety of the bonds markets. The increase in competition for fixed assets sent the average yield on 10-year Treasuries, a benchmark for mortgage rates, to a seven-month low last week, according to data from Intercontinental Exchange.

“Whenever there is unrest in the markets, mortgage rates tend to drop – especially with the Federal Reserve committed to fighting inflation,” said John Hardesty, general manager of the mortgage division at Argyle, a payroll data verification platform used by lenders. “We’re seeing some settling in mortgage rates, and it’s the perfect time for that.”

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Kathleen Howley, Senior Contributor

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April 11, 2023
Average 30-year mortgage rate dips as spring season opens | Long Island Business News

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The average long-term U.S. mortgage rate dipped for the fourth straight week, a good sign for potential home buyers and a real estate market that’s been mostly cold since the Federal Reserve began raising interest rates more than a year ago.

Mortgage buyer Freddie Mac reported Thursday that the average on the benchmark 30-year rate dipped to 6.28% from 6.32% the previous week. The average rate last year at this time was 4.72%.

The average long-term mortgage rate hit 7.08% in the fall — a two-decade high.

The recent decline in mortgage rates is good news for prospective homebuyers, many of whom were pushed to the sidelines during the past year as the Federal Reserve cranked up its main borrowing rate nine straight times in a bid to tamp down persistent, four-decade high inflation.

Though supply remains low, home prices appear to be leveling off, another development that could lure buyers back into the market. The national median home price slipped 0.2% from February last year to $363,000, marking the first annual decline in 13 years, according to the National Association of Realtors.

Rising borrowing costs can add hundreds of dollars a month in costs for homebuyers and put the brakes on the housing market. Before surging 14.5% in February, sales of existing homes had fallen for 12 straight months to the slowest pace in more than a dozen years.

In 2022, existing U.S. home sales fell 17.8% from 2021, the weakest year for home sales since 2014 and the biggest annual decline since the housing crisis began in 2008, the National Association of Realtors reported earlier this year.

In their latest quarterly economic projections, Fed policymakers forecast that they expect to raise that key rate just once more — from its new level of about 4.9% to 5.1%, the same peak they had projected in December.

While the Fed’s rate hikes do impact borrowing rates across the board for businesses and families, rates on 30-year mortgages usually track the moves in the 10-year Treasury yield, which lenders use as a guide to pricing loans. Investor expectations for future inflation, global demand for U.S. Treasurys and what the Federal Reserve does with interest rates can also influence the cost of borrowing for a home.

Treasury yields have fluctuated wildly since the collapse of two mid-size U.S. banks last month. The yield on the 10-year Treasury, which helps set rates for mortgages and other important loans, was at 3.29% early Thursday but had been above 4% early in March.

The rate for a 15-year mortgage, popular with those refinancing their homes, rose this week to 5.64% from 5.56% last week. It was 3.91% one year ago.

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April 7, 2023
These features may ‘set you ahead of the competition’ when selling your home, research finds

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A prospective home buyer is shown a home by a real estate agent in Coral Gables, Florida.

Joe Raedle | Getty Images

Today’s home sellers may be able to command higher prices due to recent increases.

Certain luxury features may help sell your home for more money or faster than expected, according to new research from Zillow.

“If you have these features in your home already, you should definitely flaunt them in your listing description,” said Amanda Pendleton, Zillow’s home trends expert. “That is going to set you ahead of the competition.”

The real estate website evaluated 271 design terms and features included in almost 2 million home sales in 2022. Those that came out on top may add up to about $17,400 on a typical U.S. home.

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Two chef-friendly features topped the list of those that helped sell homes for more — steam ovens, which helped push prices up 5.3% over similar homes without them, and pizza ovens, which increased prices by 3.7%.

Other features that rounded out the top 10 included professional appliances, which had price premiums of 3.6%; terrazzo, 2.6%; “she sheds,” 2.5%; soapstone, 2.5%; quartz, 2.4%; a modern farmhouse, 2.4%; hurricane or storm shutters, 2.3%; and mid-century design, 2.3%,

Zillow also looked at which features helped sell homes faster than expected.

Doorbell cameras topped that list, helping to sell homes 5.1 days faster. That was followed by soapstone, with a 3.8 day advantage; open shelving, 3.5; heat pumps, 3; fenced yards , 2.9; mid-century, 2.8; hardwood, 2.4; walkability, 2.4; shiplap walling or siding, 2.3; and gas furnaces, 2.3.

To be sure, homeowners should not necessarily add these features with the idea they will see sale premiums, Pendleton said.

Moreover, some more unique features — like she sheds, spaces dedicated specifically to female home dwellers and their hobbies — may make it so it takes a bit longer to find a buyer who appreciates the amenities.

However, the features are signals of perceived qualify a buyer associates with a nice home right now.

“These personalized features kind of add that wow factor to a home,” Pendleton said.

Emphasis on improvements that spark joy

The current housing market is “anything but traditional,” Pendleton notes.

For buyers, there’s not as many listings to choose from as homeowners do not want to give up their ultra-low interest rates, she noted.

“Homes that are well priced and well marketed are going to find a buyer very quickly today,” Pendleton said.

Existing homeowners are now more likely to be thinking of different ways to re-envision their space, according to Jessica Lautz, deputy chief economist at the National Association of Realtors.

Personalized features kind of add that wow factor to a home.

Amanda Pendleton

home trends expert at Zillow

“There are a lot of people who want to remodel because they are locked into low interest rates and have no intention of leaving their property,” Lautz said.

At the top of homeowners’ wish lists are ways to maximize the square footage of their home, Lautz said, such as basement remodels or attic or closet conversions. Adding home offices is also very popular as people continue to live hybrid lifestyles.

Some improvements also stand to provide a 100% or more return when a home is put on the market.

The top of that list includes hardwood floor refinishing, according to Lautz, which not only makes a home look more beautiful but also makes it more marketable.

“It brings a lot of joy, and it has a lot of bang for the buck when you go to sell your home,” Lautz said.

Putting in new wood flooring or upgrading the home’s insulation also tend to provide returns of 100% or more, she said.

Zillow’s research found certain features may actually hurt a home’s resale value. That includes tile countertops or laminate flooring or countertops. Walk-in closets may also negatively impact a home’s value, as buyers may prefer to use the space for other purposes.

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April 6, 2023
What the banking crisis means for mortgage rates | CNN Business

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Washington
CNN
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Mortgage rates have taken would-be buyers on a ride this year — and it’s only March.

Generally, home buyers can anticipate mortgage rates to move down through the rest of this year as the banking crisis drags on, which could cool down inflation.

But there are bound to be some bumps along the way. Here’s why rates have been bouncing around and where they could end up.

After steadily rising last year as a result of the Federal Reserve’s historic campaign to rein in inflation, the average rate for a 30-year fixed-rate mortgage topped out at 7.08% in November, according to Freddie Mac. Then, with economic data suggesting inflation was retreating, the average rate drifted down through January.

But a raft of robust economic reports in February brought concerns that inflation was not cooling as quickly or as much as many had hoped. As a result, after falling to 6.09%, average mortgage rates climbed back up, rising half a percentage point over the month.

Then in March banks began collapsing. That sent rates falling again.

Neither the actions of the Federal Reserve nor the bank failures directly impact mortgage rates. But rates are indirectly impacted by actions that the Fed takes or is expected to take, as well as the health of the broader financial system and any uncertainty that may be percolating.

On Wednesday, the Federal Reserve announced it would raise interest rates by a quarter point as it attempts to fight stubbornly high inflation while taking into account recent risks to financial stability.

While the bank failures made the Fed’s work more complicated, analysts have said that, if contained, the banking meltdown may have actually done some work for the Fed, by bringing down prices without raising interest rates. To that point, the Fed suggested on Wednesday that it may be at the end of its rate hike cycle.

Mortgage rates tend to track the yield on 10-year US Treasury bonds, which move based on a combination of anticipation about the Fed’s actions, what the Fed actually does and investors’ reactions. When Treasury yields go up, so do mortgage rates; when they go down, mortgage rates tend to follow.

Following the Fed’s announcement on Wednesday, bond yields — and the mortgage rates that usually follow them — fell.

But the relationship between mortgage rates and Treasurys has weakened slightly in recent weeks, said Orphe Divounguy, senior economist at Zillow.

“The secondary mortgage market may react to speculation that more financial entities may need to sell their long-term investments, like mortgage backed securities, to get more liquidity today,” he said.

Even as Treasurys decline, he said, tighter credit conditions as a result of bank failures will likely limit any dramatic plunging of mortgage rates.

“This could restrict mortgage lenders’ access to funding sources, resulting in higher rates than Treasuries would otherwise indicate,” Divounguy said. “For borrowers, lending standards were already quite strict, and tighter conditions may make it more difficult for some home shoppers to secure funding. In turn, for home sellers, the time it takes to sell could increase as buyers hesitate.”

Inflation is still quite high, but it is slowing and analysts are anticipating a much slower economy over the next few quarters — which should further bring down inflation. This is good for mortgage borrowers, who can expect to see rates retreating through this year, said Mike Fratantoni, Mortgage Bankers Association senior vice president and chief economist.

“Homebuyers in 2023 have shown themselves to be quite sensitive to any changes in mortgage rates,” Fratantoni said.

The MBA forecasts that mortgage rates are likely to trend down over the course of this year, with the 30-year fixed rate falling to around 5.3% by the end of the year.

“The housing market was the first sector to slow as the result of tighter monetary policy and should be the first to benefit as policymakers slow — and ultimately stop — hiking rates,” said Fratantoni.

In second half of the year, the inflation picture is expected to improve, leading to mortgage rates that are more stable.

“Expectations for slower economic growth or even a recession should bring inflation down and help mortgage rates decline,” said Divounguy.

That’s good news for home buyers since it improves affordability, bringing down the cost to finance a home. It also benefits sellers, since it reduces the intensity of an interest-rate lock-in.

Lower rates could also convince more homeowners to list their home for sale. With the inventory of homes for sale near historic lows, this would add badly needed inventory to an extremely limited pool.

“Mortgage rates are steering both supply and demand in today’s costly environment,” said Divounguy. “Home sales picked up in January when rates were relatively low, then slacked off as they ramped back up.”

But with cooling inflation comes a higher risk of job losses, which is typically bad for the housing market.

“Of course, much uncertainty surrounding the state of inflation and this still-evolving banking turmoil remains,” said Divounguy.

In his remarks on Wednesday, Fed Chair Jerome Powell said estimates of how much the recent banking developments could slow the economy amounted to “guesswork, almost, at this point.”

But regardless of the tack the economy and banking concerns take, their impact will quickly be seen in mortgage rates.

“Evidence — in either direction — of spillovers into the broader economy or accelerating inflation would likely cause another policy shift, which would materialize in mortgage rates,” said Divounguy.

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March 24, 2023
Average long-term US mortgage rates come back down to 6.6% | Long Island Business News

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The average long-term U.S. mortgage inched back down this week after five straight weeks of increases, good news for homebuyers as the housing market’s all-important spring buying season gets underway.

Mortgage buyer Freddie Mac reported Thursday that the average on the benchmark 30-year rate slid back to 6.60% from 6.73% last week. The average rate a year ago was 4.16%.

The average long-term rate hit 7.08% in the fall — a two-decade high — as the Federal Reserve continued to raise its key lending rate in a bid to cool the economy and quash persistent, four-decade high inflation.

At its first meeting of 2023 in February, the Fed raised its benchmark lending rate by another 25 basis points, its eighth increase in less than a year. That pushed the central bank’s key rate to a range of 4.5% to 4.75%, its highest level in 15 years. Many economists expect at least three more increases before the end of the year, though some have dialed those expectations back due to the recently developing banking crisis.

While the Fed’s rate hikes do impact borrowing rates across the board for businesses and families, rates on 30-year mortgages usually track the moves in the 10-year Treasury yield, which lenders use as a guide to pricing loans. Investors’ expectations for future inflation, global demand for U.S. Treasurys and what the Federal Reserve does with interest rates can also influence the cost of borrowing for a home.

Treasury yields have tumbled since the collapse of two mid-size U.S. banks, with the 10-year faling to 3.44% Thursday. The 10-year yield reached 5.07% last week, its highest level since 2007.

The big rise in mortgage rates during the past year has roughed up the housing market, with sales of existing homes falling for 12 straight months to the slowest pace in more than a dozen years. January’s sales cratered by nearly 37% from a year earlier, the National Association of Realtors reported last month.

For all of 2022, NAR reported last month that existing U.S. home sales fell 17.8% from 2021, the weakest year for home sales since 2014 and the biggest annual decline since the housing crisis began in 2008.

Higher rates can add hundreds of a dollars a month in costs for homebuyers, on top of already high home prices.

The rate for a 15-year mortgage, popular with those refinancing their homes, also edged back down this week to 5.9% from 5.95% last week. It was 3.39% one year ago.

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March 16, 2023
Report: Housing Affordability Is at an All-Time Low | Entrepreneur

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Although the housing market has shown signs of cooling in certain areas after all-time highs throughout 2022, new data has found that housing affordability is still a widespread issue for Americans.

According to the Atlanta Fed’s Housing Affordability Monitor, housing affordability is worse today than it was more than a decade ago during the housing bubble of 2008. As of December 2022, the average American household would need to spend 42.9% of its income to afford a median-priced home. This marks a new high since August 2006, when it was 41.1%. The data also found that affordability declined 24% year-over-year.

Related: In the ’80s, Mortgage Rates Were Almost Three Times As High — But It’s Still Harder To Buy a Home Now

The steep decline in housing affordability could be the result of ongoing high prices for housing coupled with rising mortgage rates. When the housing market boomed during the pandemic into 2021 and much of 2022, home prices reached record highs across the country.

Over the past year, as prices began to box out millions of would-be buyers and the Fed raised interest rates, demand finally began to slow. Still, despite the decline in home prices, housing affordability is at an all-time low, and the total value of American homes is still up 6.5% from the same period a year ago, according to the data. Although mortgage rates are high, they’re not as high as they were at the peak of November 2022 at 7.08%, so the slight decline sparked a minor uptick in homebuyers at the beginning of 2023, demonstrating just how competitive the housing market still is.

Related: Declining Mortgage Rates Spark Uptick in Interest from Would-Be Homebuyers

For those looking to buy a home, it might be wise to wait it out for a few more months.

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Madeline Garfinkle

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March 7, 2023
Vast majority of U.S. homes are unaffordable to the average buyer

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The cost of buying a home is drifting further out of financial reach for the average American, according to a report from Redfin.

The real estate website analyzed homes that went on sale last year and found that only 21% of them were affordable, meaning that nearly 80% of homes were outside the typical buyer’s budget. By comparison, about 60% of homes were considered affordable in 2021, the report released Friday found.

Redfin Deputy Chief Economist Taylor Marr said those stats boil down to one truth: housing affordability is at its lowest point in history.

“Many millennials were able to buy their first home before or during the pandemic homebuying boom, but many others were priced out of homeownership and forced to keep renting,” he said in the report. “That means a lot of young adults missed out on a major wealth-building opportunity: the value of homes owned by millennials has risen nearly 30% in the past year.”

MoneyWatch: How to maneuver the housing market slowdown

03:47

Redfin defined an “affordable” home as one whose mortgage payment would equal 30% or less of the average monthly income of residents in the county where the home sits. Redfin found that the highest percentage of affordable homes were in Akron, Cleveland and Dayton in Ohio, Pittsburgh and St. Louis, Missouri. Five California cities — Anaheim, Los Angeles, Oxnard, San Diego and San Francisco — had the lowest percentage of affordable homes.

The Redfin report dovetails with a recent Bloomberg analysis that shows Americans will need a higher income to land their first home. First-time buyers in 2022 had a typical household income of as much as $90,000 compared to just $70,000 in 2019, Bloomberg reported Friday.

The housing market is expected to pick up steam in the coming weeks as the historically hectic spring buying season kicks into gear. House hunters today face mortgage rates of around 6.6%, up from 3.75% a year ago. The median home price hit $415,000 last month, up from $406,000 in January, according to National Association of Realtors data.

Why are prices rising?

Home prices are climbing for a couple of reasons, Redfin said. The Federal Reserve’s monthslong battle with soaring inflation has helped push mortgage rates skyward, thus increasing borrowing costs for buyers. Also, demand for homes soared in 2022 and builders couldn’t keep up with the pace, driving prices for existing homes even higher.

The next few months will be tough sledding for buyers and sellers alike. Many homeowners are leery of selling because they might have to buy another house at a much higher mortgage rate, while buyers are still seeing far elevated prices, Daryl Fairweather, chief economist at Redfin, told CBS News on Thursday.

“The one silver lining is that if you manage to be able to afford a home, if you can get that mortgage, you’re going to face a lot less competition,” Fairweather said.

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Khristopher J. Brooks

Khristopher J. Brooks is a reporter for CBS MoneyWatch covering business, consumer and financial stories that range from economic inequality and housing issues to bankruptcies and the business of sports.

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March 3, 2023
Here Are 20 Major Cities Where Home Prices Are Dropping The Most
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Topline

Data released by the S&P Corelogic Case-Shiller index, a leading measure of U.S. home prices, shows home prices continued to drop across the U.S. through December, with major cities like Seattle and San Francisco among those showing the biggest declines.

A For Sale sign displayed in front of a home in Miami, Florida.

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Key Facts

On Tuesday, S&P Dow Jones Indices reported home prices have ticked down about 0.8% on a monthly basis, but have fallen harder in 20 of the nation’s largest cities, and S&P’s Craig Lazzara says home prices “may well continue to weaken” given the prospects for ongoing economic weakness.

Top 20 Major Cities With Monthly Home Price Declines
- Phoenix (-1.9%)
- Portland (-1.9%)
- Las Vegas (-1.8%)
- Seattle (-1.8%)
- San Francisco (-1.8%)
- Denver (-1.3%)
- San Diego (-1.3%)
- Minneapolis (-1.2%)
- Chicago (-1.2%)
- Dallas (-1.1%)
- Detroit (-1.1%)
- Charlotte (-1.0%)
- Boston (-0.9%)
- Tampa (-0.9%)
- Cleveland (-0.8%)
- Los Angeles (-0.8%)
- Atlanta (-0.7%)
- Washington (-0.4%)
- Miami (-0.3%)
- New York (-0.2%)
Tangent

In February, the median U.S. home-sale price fell 0.6% year over year, according to a report from real estate brokerage Redfin, marking the first annual drop since 2012 at a time when daily average mortgage rates hit 7.1%, pricing out buyers and forcing sellers to lower their asking prices to adjust to high mortgage rates. Home prices were likely to come down since mortgage rates rose, pushing borrowing costs to 16-year highs and crushing home-buyer demand, according to Redfin.

Contra

The average monthly mortgage payment for homebuyers today is at a record high of $2,520 due in part to high mortgage rates, according to Redfin.
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Anthony Tellez, Forbes Staff

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March 3, 2023
UK house prices post sharpest fall since 2012 as high mortgage rates hurt | CNN Business

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London
CNN
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UK house prices last month saw their biggest annual decline since November 2012, in the latest indication of the lasting pain that former Prime Minister Liz Truss’s ill-fated “mini” budget inflicted on Britain’s property market.

The average price of a house fell 1.1% to £257,406 ($310,000) in February compared with a year earlier, taking UK house price growth into negative territory for the first time since June 2020, lender Nationwide said Wednesday.

House prices have now declined for six months in a row and are 3.7% below their August 2022 peak, according to Nationwide’s index based on purchases involving a mortgage.

“The recent run of weak house price data began with the financial market turbulence in response to the mini budget at the end of September last year,” Nationwide’s chief economist Robert Gardner said in a statement.

“While financial market conditions normalized some time ago, housing market activity has remained subdued,” reflecting “the lingering impact on confidence, as well as the cumulative impact of the financial pressures that have been weighing on households for some time,” he added.

The “mini” budget unveiled in September by Truss and then-finance minister Kwasi Kwarteng collapsed UK bond prices, sent borrowing costs soaring and sparked chaos in the mortgage market, as lenders withdrew hundreds of products, and deals fell through.

“The economy has largely moved on from the mini budget, but the hangover for the UK housing market is more prolonged. We’re still seeing the effects of higher mortgage rates in the last three months of last year,” said Tom Bill, head of UK residential research at broker Knight Frank.

Surging food and energy costs alongside feeble pay growth have also taken a bite out of household budgets, weighing on consumer confidence and housing market activity.

“Inflation has continued to outpace wage growth, and mortgage rates remain significantly higher than the lows recorded in 2021,” said Gardner at Nationwide. “Even though consumer sentiment has improved in recent months, it is still languishing at levels prevailing during the depths of the financial crisis.”

According to Bill, activity since Christmas has been “solid” but prices still have further to fall. He expects a decline of 5% this year.

“House prices are 20% higher than they were before the pandemic and we expect around half of this to unwind over the next two years as buyers revise down their budgets,” Bill said.

Mortgage rates have started to fall but recent stronger-than-expected UK economic data could lead the Bank of England to keep interest rates higher for longer, causing the downward drift in mortgage rates to “stall,” he told CNN. “That’s something we’re keeping an eye on.”

— This is a developing story and will be updated.

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March 1, 2023
Pending home sales blew past expectations last month as buyers pounced on lower rates | CNN Business

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Washington, DC
CNN
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Pending home sales crushed expectations in January, when mortgage rates dropped from recent highs of more than 7% and home buyers jumped at the opportunity.

According to data released Monday from the National Association of Realtors, it was the largest monthly sales increase since June 2020.

The pending sales index, based on signed contracts to buy a home rather than the final sales that are accounted for in existing home sales, rose by 8.1% from December to January, beating economists’ predictions for a rise of 1%. January’s jump followed a downwardly revised 1.1% rise in December.

“Buyers responded to better affordability from falling mortgage rates in December and January,” said Lawrence Yun, chief economist at NAR.

But since then, mortgage rates have risen again, climbing almost half a percentage point since the beginning of February, according to Freddie Mac.

“Mortgage rates took a breath in December and January before resuming their climb in February, reaching 6.5%, the highest level of the new year,” said Hannah Jones, an economic data analyst at Realtor.com.

At the current mortgage rate, the monthly payment on a median-priced home is about 45% higher — or $630 more — than it was at the same time last year, she said. “Many buyers are still holding off, waiting to see if prices or rates give a bit before getting into the market.”

Last year’s persistent increase in both mortgage rates and home prices pushed many would-be home purchasers out of the market, said Jones. This resulted in a slowing of new homes in the building pipeline and fewer sellers listing their homes, which limited options for buyers still in the market.

“New listings were at the lowest level in the last six years in January as sellers stayed on the sidelines, waiting to see buyers return, before placing their homes for sale,” said Jones. “However, the first month of the year brought glimmers of hope as year-over-year declines in both existing and new home sales slowed, and buyer sentiment improved slightly.”

While home sales were down by 24.1% from the still-hot market of a year ago, activity appears to be bottoming out in the first quarter of this year, before incremental improvements will occur, Yun said.

“An annual gain in home sales will not occur until 2024,” said Yun. “Meanwhile, home prices will be steady in most parts of the country with a minor change in the national median home price.”

All regions saw a month-to-month increase in pending home sales, with the Northeast up 6%, the Midwest up 7.9%, the South up 8.3% and the West up 10.1%.

“An extra bump occurred in the West region because of lower home prices, while gains in the South were due to stronger job growth in that region,” Yun said.

Home prices are dropping fastest in areas where prices ran up the most in the frenzied market of the past few years.

But overall, the number of home sales are expected to drop this year, according to NAR’s forecast.

NAR anticipates the economy will continue to add jobs throughout this year and next, with the 30-year fixed mortgage rate steadily dropping to an average of 6.1% in 2023 and 5.4% in 2024.

Even with an improving interest rate environment and job gains, Yun still expects annual existing-home sales to drop about 11% this year from last year, before jumping up about 18% in 2024. NAR projects new-home sales will fall about 4% this year compared with last year before surging nearly 20% in 2024.

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February 27, 2023
The mortgage rate you get depends partly on your credit score. Here’s what to expect

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Phiromya Intawongpan | Istock | Getty Images

Anyone who’s exploring homeownership may know that rising interest rates and elevated home prices are making that goal challenging.

The average rate on a typical 30-year, fixed-rate mortgage has been zigzagging between 6% and 7% for the last several months — down from above 7% in early November but roughly double the 3.3% average rate heading into 2022, according to Mortgage News Daily.

Yet the interest rate that any particular buyer is able to qualify for depends at least partly on their credit score — meaning you have some control over whether you’re able to get the best available rate, experts say. And the difference that a good or excellent score makes in terms of monthly payments — and total interest paid while you hold the mortgage — can be significant.

“The score impacts practically everything: loan approval, interest rate, monthly mortgage insurance premiums … and ultimately their payment,” said Al Bingham, a credit expert and mortgage loan officer with Momentum Loans.

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The median home price in January was about $383,000, according to Redfin. Although prices have been sliding since mid-2022, that amount is still 1.5% higher than a year earlier. In January 2020, the median was below $300,000.

While you may be able to negotiate on the price of the house to bring the overall cost of homeownership down, it’s also worth making sure you go into the process with as high a credit score as possible.

Lenders check three scores but use one number

Although things like steady income, length of employment, stable housing and other aspects of your financial life are important to lenders, your credit score gives them additional information.

The three-digit number — which ranges from 300 to 850 — feeds into a lender’s calculation of how risky a borrower you may be. For example, if you’ve always made your debt payments on time and you have a low credit utilization (how much you owe relative to your available credit), your score will benefit.

And the higher the number, the less of a risk you are to lenders — and therefore the better terms you can get on a loan.

Lenders check a homebuyer’s credit report and score at each of the three large credit-reporting firms: Equifax, Experian and TransUnion. For mortgages, the score provided by those companies is typically a specific one developed by FICO, because it is the score currently relied on by Fannie Mae and Freddie Mac, the largest purchasers of home mortgages on the secondary market. (In the coming years, this reliance on one score is poised to change.)

However, because that particular FICO score can differ among the three credit-reporting firms due to differences in what is reported to them and the timing, mortgage lenders use the middle number to inform their decision.

The higher your score, the lower the interest rate you’ll be charged. For illustration only: On a $300,000, fixed-rate 30-year mortgage, the average rate is 6.41% (as of Thursday) if your credit score is in the 760-to-850 range, according to FICO.

This would make your monthly principal and interest payment $1,878. On top of this amount typically would be property taxes, homeowners insurance and, if your down payment is less than 20% of the home’s sale price, private mortgage insurance.

In contrast, if your score were to fall between 620 and 639, the average rate available is 7.99%. That would mean a payment of $2,201 (again, for principal and interest only).

Most of your monthly payment goes to interest at first

Because of how loans are structured, most of your monthly payment would go to interest at the beginning of the loan instead of toward the principal.

For example, if you started paying on that $300,000 mortgage next month with a rate of 6.41%, in two years you would have paid $39,600 in interest and just $7,438 toward the principal, according to Bankrate’s mortgage calculator.

In comparison, a rate of 7.99% would mean that in two years, you would have paid $49,570 in interest and $5,455 toward the principal, according to the Bankrate calculator.

There are ways to boost your credit score

If you want to get your score up before applying for a mortgage, there are some key things you can do.

“Improving your credit score really comes down to the fundamentals,” said Ted Rossman, senior industry analyst for Bankrate. “You should aim to pay your bills on time, keep your debts low and show that you can successfully manage a variety of types of credit over the long haul.”

And, he said, there are some things you can do to improve your score fairly quickly.

“My favorite is to lower your credit utilization ratio,” Rossman said, referring to credit card balances. “This resets every month and it typically reflects statement balances, so you might have a high utilization ratio even if you pay your credit cards in full to avoid interest.”

You may want to consider making an extra mid-month payment or asking for a higher credit limit to bring the ratio down, he said.

“It’s often recommended to keep [the ratio] below 30%, although below 10% is even better, and your credit score should improve as long as you bring it down,” Rossman said.

He also recommends checking your credit report — which you can do for free at annualcreditreport.com — before applying for a mortgage. “Look for any errors and correct them as soon as possible,” he said.

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February 25, 2023
Here are the US cities where home prices are actually falling | CNN Business

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Washington, DC
CNN
—

Home prices are going up across the country — in aggregate. Looking at individual markets, however, some are showing prices have fallen from a year ago.

Single-family median home prices increased 4% in the fourth quarter from a year ago to $378,700. Prices were strongest in the Northeast in the last quarter, up 5.3%; followed by the South, up 4.9%; the Midwest, up 4% and the West, up 2.6%, according to the National Association of Realtors.

But drill down to the market level and it’s clear that prices in some areas are declining from the prior year. The positive regional numbers mask that about 11% of individual housing markets tracked by NAR — 20 of 186 cities — experienced home price declines in the fourth quarter of last year.

“A few markets may see double-digit price drops, especially some of the more expensive parts of the country, which have also seen weaker employment and higher instances of residents moving to other areas,” said Lawrence Yun, NAR’s chief economist.

Nearly all of the most expensive places to buy are in the West and half of the 10 most expensive cities are in California. Several of those places are seeing prices fall the most.

San Jose, California, was the most expensive place to purchase a home in the United States in the fourth quarter. But that median price of $1,577,500 is actually down 5.8% from a year ago — and prices there have already dropped 17% from the peak $1,900,000 median price in the second quarter of last year, according to NAR.

San Francisco had the biggest price drop in the country, year over year, last quarter, with the median price of $1,230,000 — down 6.1% from a year ago. Prices for San Francisco homes are already down 21% in the fourth quarter from the peak median price of $1,550,000 in the second quarter.

Among the most expensive cities that saw prices falling are Anaheim, California, with the median price of $1,132,000, down 1.6% from a year ago; Los Angeles, with the median price of $829,100, down 1.3%; and Boulder, Colorado, with the median price of $759,500, down 2.0%.

Other places with falling prices saw the big price increases during the frenzied home buying market of the past few years. They also tend to be appealing lifestyle destinations where people moved to as remote work provided more flexibility. These include Boise, Idaho, where prices fell 3.4% from a year ago and Austin, Texas, where prices are down 1.3%.

The good news for buyers looking for price relief is that the 4% median price hike in the fourth quarter is less than the 8.6% increase in the third quarter. In addition, the price increases are smaller, with far fewer markets experiencing double-digit price gains in the fourth quarter.

“A slowdown in home prices is underway and welcomed, particularly as the typical home price has risen 42% in the past three years,” said Yun, noting these cost increases have far surpassed wage increases and consumer price inflation since 2019.

Throughout much of the pandemic, home prices across the country moved in a single direction: up. Some hotspots like Austin and Boise saw prices skyrocket. Other areas — particularly in the Midwest — saw prices go up more moderately. Yet, because mortgage rates were near historic lows, buyers came out in droves.

That story changed last year, when mortgage rates spiked as a result of the Federal Reserve’s historic campaign to rein in inflation. Homebuying fell off a cliff. By the end of 2022, sales of existing homes were down nearly 18% from 2021 as would-be homebuyers left the market, according to NAR.

Typically, a drop in demand to buy would mean excess supply and ultimately lead to prices coming down. But that’s not happening, broadly speaking, in the housing market.

Instead, prices for single-family homes climbed in nearly 90% of metro areas tracked by NAR in the fourth quarter: 166 markets out of 186 saw prices still going up. The national median price of a single-family home increased 4% last quarter from one year ago to $378,700.

How can this be?

One main driver of this phenomenon is that there is a shortage of inventory due to chronic underbuilding of affordable homes in the United States, along with homeowners who don’t want to part with the ultra-low mortgage rate they secured over the past few years.

“Even with a projected reduction in home sales this year, prices are expected to remain stable in the vast majority of the markets due to extremely limited supply,” said Yun.

There are still places where home prices continue to climb at double-digit rates. The top 10 cities with the largest year-over-year price increases all recorded gains of at least 14.5%, with seven of those markets in Florida and the Carolinas, according to NAR.

Farmington, New Mexico, saw the biggest price increase in the fourth quarter, up 20.3% from a year ago. It was followed by Sarasota, Florida, up 19.5%; Naples, Florida, up 17.2%; Greensboro, North Carolina, up 17.0%; Myrtle Beach, South Carolina, up 16.2%; Oshkosh, Wisconsin, up 16.0%; Winston-Salem, North Carolina, up 15.7%; El Paso, Texas, up 15.2%; Punta Gorda, Florida, up 15.2%; and Daytona Beach, Florida, up 14.5%.

In the last quarter of 2022 a family needed a qualifying income of at least $100,000 to afford a 10% down payment mortgage in 71 markets, up from 59 in the prior quarter, according to NAR.

Yet there were 16 markets where a family needed a qualifying income of less than $50,000 to afford a home, although that was down from 17 the previous quarter. Some of those included Peoria, Illinois, where a family can qualify for a loan with an income of $33,660; Waterloo, Iowa, with an income of $40,639; and Montgomery, Alabama, with an income of $48,172.

Nationally, the monthly mortgage payment on a typical existing single-family home with a 20% down payment was $1,969 in the fourth quarter according to NAR. That’s a 7% increase from the third quarter of last year, when the monthly payment was $1,838, but a major surge of 58% — or a $720 monthly increase — from one year ago.

This made the affordability picture even harder for many home buyers. Families typically spent 26.2% of their income on mortgage payments, which was up from 25% in the prior quarter and 17.5% one year ago.

First-time buyers were evidently pushed to a breaking point on affordability. They typically spent 39.5% of their family income on mortgage payments, up from 37.8% in the previous quarter. A mortgage is considered unaffordable if the monthly payment, including principal and interest, amounts to more than 25% of the family’s income. Generally, a common financial rule of thumb is to not spend more than 30% of your income on housing costs.

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February 19, 2023
Average long-term US mortgage rate jumps to 6.32% this week | Long Island Business News

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The average long-term U.S. mortgage rate jumped this week to its highest level in five weeks, bad news for home shoppers heading into the spring buying season.

Mortgage buyer Freddie Mac reported Thursday that the average on the benchmark 30-year rate rose to 6.32% from 6.12% last week. The average rate a year ago was 3.92%.

The average long-term rate reached a two-decade high of 7.08% in the fall as the Federal Reserve continued to raise its key lending rate in a bid to cool the economy and and bring down stubborn, four-decade high inflation.

At its first meeting of 2023 earlier this month, the Fed raised its benchmark lending rate by another 25 basis points, its eighth increase in less than a year. That pushed the central bank’s key rate to a range of 4.5% to 4.75%, its highest level in 15 years.

Fed Chair Jerome Powell noted that some measures of inflation have eased, but he appeared to suggest that he foresees two additional quarter-point rate hikes this year.

Though those rate hikes do impact borrowing rates across the board for businesses and families, rates on 30-year mortgages usually track the moves in the 10-year Treasury yield, which lenders use as a guide to pricing loans. Investors’ expectations for future inflation, global demand for U.S. Treasurys and what the Federal Reserve does with interest rates can also influence the cost of borrowing for a home.

The big rise in mortgage rates during the past year has clobbered the housing market, with sales of existing homes falling for 11 straight months to the lowest level in more than a decade. Higher rates can add hundreds of a dollars a month in costs for homebuyers, on top of already high home prices.

The National Association of Realtors reported earlier this month that existing U.S. home sales totaled 5.03 million last year, a 17.8% decline from 2021. That is the weakest year for home sales since 2014 and the biggest annual decline since 2008, during the housing crisis of the late 2000s.

The rate for a 15-year mortgage, popular with those refinancing their homes, climbed this week to 5.51%, from 5.25% last week. It was 3.15% one year ago.

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February 16, 2023
Inflation pushes up mortgage rates for second week in a row | CNN Business

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Washington, DC
CNN
—

Mortgage rates climbed higher for the second consecutive week, following four weeks of declines. Inflation is running hotter, making rates more volatile, with the expectation that they will move in the 6% to 7% range over the next few weeks.

The 30-year fixed-rate mortgage averaged 6.32% in the week ending February 16, up from 6.12% the week before, according to data from Freddie Mac released Thursday. A year ago, the 30-year fixed-rate was 3.92%.

After climbing for most of 2022, mortgage rates had been trending downward since November, as various economic indicators indicated inflation may have peaked. But a stronger-than-expected jobs report and a Consumer Price Index report that showed inflation is only moderately easing suggest the Federal Reserve could continue hiking its benchmark lending rate in its battle against inflation.

Inflation is keeping mortgage rates volatile, said Sam Khater, Freddie Mac’s chief economist.

“The economy is showing signs of resilience, mainly due to consumer spending, and rates are increasing,” said Khater. “Overall housing costs are also increasing and therefore impacting inflation, which continues to persist.”

The average mortgage rate is based on mortgage applications that Freddie Mac receives from thousands of lenders across the country. The survey includes only borrowers who put 20% down and have excellent credit. Many buyers who put down less money upfront or have less than ideal credit will pay more than the average rate.

Investors are digesting the latest economic data, said George Ratiu, Realtor.com manager of economic research.

The Fed does not set the interest rates that borrowers pay on mortgages directly, but its actions influence them. Mortgage rates tend to track the yield on 10-year US Treasury bonds, which move based on a combination of anticipation about the Fed’s actions, what the Fed actually does and investors’ reactions. When Treasury yields go up, so do mortgage rates; when they go down, mortgage rates tend to follow.

“While the Fed signaled that it will continue to raise rates this year, the moves are expected to come in 25 basis point increments, a less aggressive tightening than what we saw in 2022,” said Ratiu. “The central bank is acknowledging that it sees its monetary actions having a tangible effect on inflation. The CPI data out this week seems to confirm the bank’s views.”

At the same time, he said, many companies expect the economy will enter a recession as a result of the Fed’s rate hikes, even in the face of data pointing to continued resilience.

“This expectation is becoming more visible in the growing number of companies resorting to layoffs as a hedge against a potential economic slowdown,” he said. “People who are laid off pull back on spending, and even those who are still employed may begin to do the same due to worries about losing their job, thus potentially sending consumer spending into a downward spiral.”

For home buyers, the cost of financing a home is expected to go up.

Already, rates have been climbing in recent weeks, leading to a drop in mortgage applications. Last week, applications fell 7.7% from one week earlier, according to the Mortgage Bankers Association.

Buyers are proving to be interest rate sensitive, according to MBA.

“Purchase applications dropped to their lowest level since the beginning of this year and were more than 40% lower than a year ago,” said Joel Kan, MBA’s vice president and deputy chief economist. “Potential buyers remain quite sensitive to the current level of mortgage rates, which are more than two percentage points above last year’s levels and have significantly reduced buyers’ purchasing power.”

Mortgage rates are expected to move in the 6% to 7% range over the next few weeks, said Ratiu.

For housing markets, he said, “the rebound in rates translates into higher mortgage payments, adding pressure on homebuyers.”

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February 16, 2023