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Summary
CAVA Group, Inc., founded in 2006, owns and operates a chain of Mediterranean restaurants. The company has 8,100 employees.
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The Income Tax Act does not specifically define a bare trust, Chander. The Canada Revenue Agency (CRA) says: “A bare trust for income tax purposes is a trust arrangement under which the trustee can reasonably be considered to act as agent for all the beneficiaries under the trust with respect to all dealings with all of the trust’s property.”
Essentially, a bare trust may exist when someone holds legal title to an asset, but some or all of the asset technically belongs—meaning it beneficially belongs—to someone else. Unlike formal trusts that are generally established with a lawyer, a bare trust is informal and can result simply from adding someone’s name to an account or to the ownership of a real estate property.
Some common examples of bare trusts are:
The trustees of the trust need to file a tax return for it. The trustees are the people who own the assets on behalf of others. So, in the case of a parent co-signing a mortgage, it is the parent who needs to file. In the case of an account for a minor child or grandchild, it is the parent or grandparent who owns the account. In the case of an adult child who holds assets jointly with their elderly parent, it is the child who needs to file.
Only trusts with assets of $50,000 or more are required to file.
Bare trusts are required to file T3 Trust Income Tax and Information Returns for the 2023 tax year. A bare trust may not need to submit as much information as other trusts. The CRA has provided this guidance (see section 3.3) to Canadians:
Step 1: Identification and other information
- When using our online services, identify the type of trust as Bare Trust by selecting “code 307, Bare Trust” and provide the trust creation date in the appropriate field.
- If this is the first year of filing a trust return, send us a copy of the trust document, unless such information or document has been previously submitted. See 5.3 for more information on what documents may be required.
- Where applicable, provide a response and information related to whether the trust is filing its final return (and if so, provide the date on which the trust has been terminated or wound up in the year). Provide a response and information related to applicable questions on page two.
Step 5: Summary of tax and credits
- Complete the last page including the parts “Name and address of person or company who prepared this return” and “Certification.”
For bare trusts, the remaining parts of the T3 Return can be left blank. All income from the trust property for a taxation year should be reported on the beneficial owner’s return of income.
Complete all parts of Schedule 15.
A trust must have a name so it can be identified by the CRA. The CRA gives this example: For a bare trust for which “Ms. Andrews” is the beneficiary, a name like “Ms. Andrews trust” may be appropriate. If there are multiple beneficiaries, the CRA suggests putting the names in alphabetical order based on last name, with the word “trust” at the end.
A trust also needs a trust number. This number is similar to a social insurance number in that it helps the CRA identify the taxpayer—which in this case is the trust.
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Jason Heath, CFP
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As a result of the latest rate hold, the prime rate in Canada will remain at 7.2%. This might not seem like big news, but this is what lenders, from the Big Five Banks to other financial institutions, use to underpin their variable borrowing product pricing.
That the BoC would stick to the status quo was widely expected by market analysts and economists. A lower-than-expected January 2024 inflation reading of 2.9% took further pressure off the central bank, allowing it to continue its wait-and-see approach on rates. And, while the year-end gross domestic product (GDP) report came in hot, with a 1% uptick in the fourth quarter of 2023, overall lacklustre economic performance has made a firm case for ending the rate hike cycle.
However, the Bank provided no hints as to how long this holding pattern will last. In its announcement, while acknowledging that inflation has solidly declined from its June 2022 peak of 8.1%, the consumer price index (CPI) remains stubbornly above its 2% average with the core measures in the 3% to 3.5% range. (The core measures strip out the most volatile items, like housing and food costs.)
In its announcement accompanying the rate decision, the BoC’s Governing Council—the panel of economists who set the nation’s monetary policy—made it clear that until sustainable progress is made with the CPI, the Bank of Canada interest rate won’t be going anywhere.
“The Council is still concerned about risks to the outlook for inflation, particularly the persistence in underlying inflation,” states the Bank’s rate announcement release. “[The] Governing Council wants to see further and sustained easing in core inflation and continues to focus on the balance between demand and supply in the economy, inflation expectations, wage growth and corporate pricing behaviour.”
This fifth consecutive hold means key interest rates haven’t changed since September 2023. While that’s led to welcome stability for some, others are feeling the stagnancy. Here’s what the latest rate direction means for Canadians, depending on their financial interests.
Canadians with variable-rate mortgage terms are the most impacted group affected by the Bank of Canada interest rate hold. Their mortgage payments are based on the prime rate in Canada, as an extension of the overnight lending rate.
How the Bank of Canada’s interest rate affects you
These borrowers in Canada have been walloped by the rate hiking cycle that took place between March 2022 and July 2023. Those with adjustable-rate variable mortgages—which have payments that fluctuate alongside the Bank’s rate moves—had payments soar by as much as 70%, according to the Bank’s own research. Those Canadians with fixed payment schedules, meanwhile, have seen the portion of their payment that goes toward their principal whittle smaller with every rate increase, with some Canadian borrowers even entering negative amortization on their mortgages.
For all variable-rate borrowers, today’s rate stability offers some welcome relief, though they’re likely disappointed that the BoC didn’t offer a timeline as to when the rate will eventually decrease. And, Canadians shopping for the best mortgage rate, including those looking to renew, are also likely frustrated by the lack of movement. While variable rates remain frozen at last summer’s levels, fixed mortgage rates have seen some slight easing in recent months due to lowering bond yields.
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Penelope Graham
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Why are mortgage rates still so high?
After a year of mortgage rates near 8%, home buyers are eager for good news. Some forecasters have buoyed their hopes, estimating that the rate on the 30-year mortgage will drop to 6% or lower this year.
But rates have not fallen by much thus far. The 30-year rate is currently averaging 6.64%, according to Freddie Mac. That’s despite the fact that the U.S. Federal Reserve hasn’t raised its benchmark interest rate since July 2023 and signaled in December that it would cut that rate in 2024. Meanwhile, economists in the real-estate sector have been anticipating a drop in mortgage rates since last fall.
“Homebuyers may be feeling like the lower mortgage rates they’ve been promised in 2024 are not materializing,” Lisa Sturtevant, chief economist at Bright MLS, said in a statement. In a recent survey of Americans’ feelings about the housing market, 36% of respondents said they expect mortgage rates to fall in the next 12 months.
While the Fed doesn’t set mortgage rates, it can influence them, just as it influences the overall U.S. economy through monetary policy. But even though the central bank has hit the brakes on tightening monetary policy, with the economy giving off mixed signals of strength and weakness, the timing of anticipated cuts to the benchmark rate remains unclear.
That in turn creates uncertainty about when mortgage rates will drop enough to “unfreeze” the housing market. Home buyers are probably going to have to wait until the Fed acts definitively before they see those lower rates.
The strength of the U.S. economy is one reason mortgage rates have not yet fallen much, economists say. The job market is still hot, and inflation remains higher than the Fed’s goal, which is why the latest read on inflation, out Feb. 13, will be so closely watched. The fact that rates haven’t fallen this year is “a result of uncertainty about the economy and the timing of the Fed’s rate cuts,” Sturtevant said.
“The strong job market is good news for the spring buying season, as higher household incomes are a necessary component, but it also means that mortgage rates are not likely to drop much further at this point,” Mike Fratantoni, chief economist at the Mortgage Bankers Association, told MarketWatch.
Another reason mortgage rates are still high is that lenders are trying to protect themselves against lower rates in the future, Cris deRitis, deputy chief economist at Moody’s Analytics, told MarketWatch. If rates fall, lenders run the risk that a borrower will pay off a loan early by refinancing. That would limit how much in interest that lender could expect to make.
“In an odd sort of way, then, the expectation that mortgage rates will be lower in the future can lead lenders to increase rates today to compensate for the prepayment risk,” deRitis said.
So when can prospective buyers expect mortgage rates to fall significantly?
“Homebuyers should expect mortgage rates to move lower as we head through 2024,” Sturtevant said. While Fannie Mae expects rates to fall below 6% by the end of the year, other economists, like Fratantoni, expect the 30-year rate to finish the last quarter of 2024 at 6.1%.
But even if rates do fall, that won’t necessarily mean buyers will be better able to afford a home, because a drop in rates could heat up competition for homes even as it boosts buyers’ purchasing power.
“There is still very low inventory in the market, and buyers need to act quickly when they find the right home for them,” Sturtevant said.
For the many homeowners who currently have a mortgage rate below 4%, rates stuck in the 6% range may be leading them to put off plans to sell their home and buy a new one.
But it’s worth noting that since 2000, rates on 30-year mortgages have ranged from a high of about 8.62% to a low of 2.81%, averaging about 5% over that span. And compared with the historical average of the 1970s, which was 7.7%, the current rates in the 6% rage are not that high, deRitis noted.
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Sometimes, the state just can’t give it away.
As part of the American Rescue Plan Act of 2021, the federal government awarded California $1 billion to help homeowners who fell behind on their mortgage payments during the pandemic. The state has used the money to offer up to $80,000 to low- and moderate-income homeowners with mortgage debt, overdue property taxes and deferred monthly payments.
These are not loans that must be repaid. Instead, they’re payments the state makes on the borrowers’ behalf to clear their mortgage or property-tax debt.
The thing is, homeowners haven’t exactly beaten down the state’s doors for the free help — not because they don’t need it, but because they may not know about it or know how to get it. So the California Mortgage Relief program has repeatedly extended the aid to more homeowners, and is now offering help to borrowers whose troubles began long after the COVID-19 restrictions were lifted.
In the latest extension, assistance is available to qualified homeowners who’ve missed at least two mortgage payments by Feb. 1 and are still in arrears, or who’ve missed at least one property tax payment by Feb. 1. Various restrictions apply, but the main ones are that aid is available only for owner-occupied homes and that an applicant’s total household income must be no more than 150% of the area median income. In Los Angeles County, that’s $132,450 for an individual and $189,150 for a family of four.
State officials have said the program will keep operating until all $1 billion has been awarded. According to the program’s data dashboard, a little less than a quarter of the money remains. Nearly 30,700 households statewide have seen their debts reduced by an average of $25,000.
James An, president of the Korean American Federation of Los Angeles, said the lingering effects of the pandemic are still causing problems for homeowners, especially elderly ones. Many of them had modest businesses that didn’t survive the pandemic, or they got sick, or their marriages crumbled under the stress, An said.
“A lot of horrible things happened during the pandemic that were either directly or indirectly related to COVID,” he said. “It caused long-lasting damage that a lot of people are never going to recover from.”
An said his organization has helped more than 400 people, many of whom didn’t have the tech savvy required to participate in the program. Elderly homeowners in particular can have trouble finding, scanning and submitting online the documents required to qualify for aid, he said.
The Korean American Federation continues to help applicants across Southern California on a voluntary basis, An said. The mortgage relief program’s website also offers support via phone and email, or through referrals to federally certified housing counselors.
Here are more details on who’s eligible, how to apply and what’s covered.
Under federal law, households earning up to 150% of the median income in their county who suffered a pandemic-related financial hardship are eligible for up to $80,000 in relief. The limit rises as the number of people in your household increases; to find the limit for your household, consult the calculator on the program’s website.
The program defines a financial hardship as either reduced income or increased living expenses stemming from the COVID-19 pandemic. According to its website, qualifying expenses include “medical expenses, more people living in the household or costs for utility services.”
There are a few more limitations, however:
The program isn’t limited to helping people with mortgage and property tax debt. Funds also can be used for:
A second shot of relief. The mortgage relief program was originally seen as one-time-only assistance. Now, however, California homeowners who’ve already received help can apply for more if they have missed more payments and remain eligible. No household may collect more than $80,000 over the course of the program.
Reverse mortgages. Homeowners with reverse mortgages can apply for help with missed property tax or home insurance payments.
Partial claim second mortgages and deferrals. This applies to certain borrowers who fell behind on loans backed by the Federal Housing Administration, the U.S. Department of Agriculture or the Department of Veterans Affairs. Rather than demanding larger payments to cover the past-due amount, the agencies encouraged lenders to split off the past-due portion into a second, interest-free mortgage called a partial claim. That way, a borrower could stay current by paying just their usual monthly payment.
The partial claim second mortgage could be ignored until the house was sold, the mortgage was refinanced or the first mortgage was paid off, at which point the partial claim would have to be paid in full. In the meantime, it’s a real debt that affects the borrower’s ability to obtain credit.
Similarly, some lenders offered deferrals that bundled the missed payments into a sum that was tacked on to the end of the loan. Borrowers wouldn’t face higher monthly payments, but they would have to pay off the deferred amount (a “balloon payment”) when they refinanced, sold their house or reached the end of their loan.
The mortgage relief program offers up to $80,000 to pay all or part of a COVID-related partial claim or deferral received during or after January 2020.
Applications are available only online at camortgagerelief.org. For help filling one out, you can call the program’s contact center at (888) 840-2594, where assistance is available in English and Spanish.
If you don’t have access to the internet or a computer, you can ask a housing counselor to assist you. For help finding a counselor certified by the federal Department of Housing and Urban Development, call (800) 569-4287. You may also get help from the company servicing your mortgage.
The online application process starts with questions to determine your eligibility. If you meet the state’s criteria, you can then complete an application for funds. Here’s where you will need some paperwork to establish how much you earn and how much you owe.
According to the program’s website, among the documents you will need to provide are a mortgage statement, bank statements, utility bills and records that show the income earned by every adult in your household, such as pay stubs, tax returns or a statement of unemployment benefits. If you don’t have access to a digital scanner, you can take pictures of your documents with your phone and upload the images.
You’ll also need to provide a California ID or a Social Security number.
The site provides links to the application in English, Spanish, Chinese, Korean, Vietnamese and Tagalog.
According to statistics kept by the program, about two-thirds of the money has gone to households at or below the area median income. In fact, half of the funding has gone to families whose incomes are no more than 30% of the area median, which in L.A. County would be about $26,500 for a single person or $37,830 for a family of four.
About 52% of the aid has gone to Latino and Black Californians, who together make up about 29% of the state’s homeowners.
The money will be awarded on a first-come, first-served basis, with two important caveats: According to the California Housing Finance Agency, 60% of the aid must go to households making no more than the area median income, and 40% must go to “socially disadvantaged homeowners.” Those are residents of the neighborhoods most at risk of foreclosure, based on the Owner Vulnerability Index developed by UCLA’s Center for Neighborhood Knowledge.
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Jon Healey
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Hopefully the 2008 mortgage crisis does not come again, but there are reasons to worry.
This time, the worry isn’t so much about residential real estate, but the growing amount of empty commercial real estate.
The New York Community Bank, as just one example, has been given its third credit downgrade in just a week.
Commercial real estate is getting hit with a triple-edged sword.
First, high interest rates make already-expensive units that much more costly. Second, and maybe worse, too many office buildings and commercial buildings are empty – thanks to remote work. And remote work is also on the rise in places like Oakland because it’s just simply too dangerous to go to work.
Yahoo Finance reports, “Almost a year after the failure of three midsized U.S. banks sparked an industry crisis, investors and regulators are once again bracing for turmoil among regional lenders, this time due to rising defaults in commercial mortgages.”
The story continues:
NYCB was initially a benefactor of those failures, scooping up Signature Bank last year after it was shut down by regulators following a run on deposits.
The culprit now is commercial real-estate debt, which is souring quickly as landlords face higher interest rates than they can afford and tenants, after nearly four years of half-full offices, are cutting their leases.
And while the U.S. banking system is increasingly dominated by a handful of national giants, commercial mortgages are still the province of regional lenders.”
REPORT: After Visit With Trump, RNC Chair Ronna McDaniel Will Resign: Report
“Commercial mortgages account for, on average, 3% of the assets at the 10 biggest banks in the country. At the next 150 banks, it’s almost 20%. Local banks routinely have half of their customers’ deposits tied up in mortgages for office buildings, hotels, and malls,” Yahoo notes.
How this plays out is anyone’s guess but analysts are right to be concerned. It wasn’t too long ago that regional banks in California collapsed completely, which sparked similar concerns.
As if inflation isn’t bad enough, is another mortgage crisis on the horizon too?
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John Hanson
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Although the transition will be largely managed internally by RBC, current HSBC customers might have questions about what’s coming up in the next two months. In this article, we’ll walk you through what to expect.
During the transition, most changes will be automatic, so HSBC customers can continue to bank as they normally would. Customers should look in the mail for a product and services guide, called Welcome to RBC, and keep it around during the transition as it contains reference information and links. Below we’ve outlined what is expected to happen with HSBC accounts, loans and investments.
What’s happening: RBC will identify suitable bank accounts for HSBC customers based on the features of their current accounts and will send new RBC debit cards in the mail. Customers without an HSBC chequing or savings account will receive an RBC client card number. Expect to receive your cards or client card number by the end of February 2024.
What to do: Continue to use your HSBC card until the transition to RBC is complete. In the meantime, use your new RBC card or client number to enroll in RBC online banking or the RBC app. You can activate your debit card online. This will ensure that you have access to your RBC accounts once the transition is complete.
Note: Your historical account information will migrate to RBC but you can also download it from HSBC to have it on hand. For more information, refer to Section 2 of your welcome package.
What’s happening: As with your personal bank accounts, RBC will identify which RBC credit cards to offer you based on the features of your current HSBC credit cards, and the bank will mail them to you by the end of March 2024. Your personal credit limits and balances will be the same as they were with HSBC. Any insurance coverages and services you had through HSBC, however, will come to an end and be replaced with those offered by RBC, if applicable.
What to do: Activate your credit cards online right away, but also carry your HSBC cards until your RBC cards are ready to use. Find out more about credit cards in Section 5 of the welcome guide or by visiting RBC’s website.
What’s happening: All HSBC lending products, including lines of credit, loans and mortgages will migrate to RBC at the end of March 2024. The terms of your mortgage agreement, including the interest rate, term, payment amount and frequency, amortization, portability and pre-payment privileges will remain the same until your current term ends.
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Keph Senett
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Summary
Illinois Tool Works is a global manufacturer of engineered industrial products and equipment. The company’s operations are divided into seven segments: Test & Measurement and Electronics, Automotive OEM, Polymers & Fluids, Food Equipment, Welding, Construction Products, and Specialty Products. The shares are a component of the S&P 500. The company has 46,000 employees.
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What are your options if you find yourself in this situation? Let’s look at the intricacies of buying a pre-construction home in Canada, why some buyers are having difficulty closing on their purchases, and steps you can take to avoid losing a large deposit.
Generally, pre-construction homes offer several key benefits. For one, the property is brand new. Unlike with a resale home, you can customize a new home right down to the finishes and countertops. And because the home is new, you can expect to spend a lot less on repairs and maintenance.
New homes also give you more time to save. With resale homes, you typically must pay the deposit and down payment within a 30-to-90-day timespan. With new homes, the deposit can often be spread over several months or years.
In case you’re new to buying pre-construction homes in Canada or you’d like a refresher, here are some important details to be aware of.
Unlike a resale home when you usually pay the deposit within 24 hours of your offer being accepted, with a pre-construction home there’s typically a deposit payment schedule.
With a pre-construction home, you’re usually expected to have a down payment of between 20% and 25%. This may sound like a lot at first, but the amounts are spread over several months and years. For example, you may be asked to make a deposit of $3,000 at the time of making an offer, followed by 5% within 30 days of the offer, 5% within 90 days, 5% within 180 days and a final 5% at the time of occupancy.
Oftentimes, the deposit structure is up for negotiation. If the builder’s payment schedule doesn’t work for you, you should try to negotiate one that does.
In Canada, mortgage rules are the same for a new home as a resale home. For example, you’re required to pass the mortgage stress test in both cases. However, a key difference is timing. With a new home, you don’t know what mortgage rates will be when the property closes. Mortgage rates could be the same, or they could be higher or lower. This adds uncertainty. Without knowing what mortgage rates will be, you actually don’t know if you’ll be able to afford the property in the future.
There’s also the issue of the property value for mortgage lending purposes. Lenders don’t sign off on the mortgage for a pre-construction home until the time of closing. You make an offer without financing, then hope to get financing at the time of closing.
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Sean Cooper
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When Ann Shea, 44, was finalizing a divorce last year, she knew she wanted to keep the suburban Chicago home where she was raising her school-age kids. But it was equally important for her to hold onto her relatively low mortgage rate.
She had purchased the home in the summer of 2012, and had refinanced to a rate of 2.8% during the pandemic. She wanted to keep the house to provide stability for her kids, who were still young and attending school nearby.
But to get the mortgage and the title of the home in her name only would have required refinancing, which would have bumped up her mortgage rate to the 6% range, where rates were averaging in mid-April when her divorce was finalized. A back-of-the-envelope math estimate would suggest that her monthly mortgage payment could have ballooned by 33%.
“The divorce was so expensive, and to think about adding on that cost would have been terrible,” Shea, a compliance attorney, told MarketWatch.
Moving to such a comparatively high mortgage rate after 11 years of paying off the 2.8% loan would have felt to Shea like she had “lost all that ground,” she added.
Shea’s plight is becoming more common. As mortgage rates soared from historic lows during the pandemic to two-decade highs at the end of 2023, homeowners with rates under 3% became the envy of their friends and family. But when a marriage splits up, the question of who walks away with the lower mortgage rate sparks far more than casual jealousy.
It’s increasingly a source of tension at the divorce negotiating table, Alla Roytberg, a New York City-based family and matrimonial law attorney and a mediator, told MarketWatch.
“In the past, when rates were low, it was an easy answer, because somebody could refinance and get a 3.5% rate,” Royberg, who has been in matrimonial law for the last three decades, said. “And now, they have this 3% rate, and if they refinance, they’re going to get 7% or 6% — and that makes it unaffordable.”
Historically, a couple who is going through a divorce will either work out an arrangement to refinance the home and put it in one spouse’s name, or if the divorce is acrimonious, they can be forced by a court to sell the home and divide the proceeds, Erin Levine, co-founder of Hello Divorce, a company based in Alameda, Calif., that sells online divorce services, told MarketWatch.
Levine is a family law attorney licensed in California, and has helped more than 5,000 individuals through the legal process of divorce. Hello Divorce recently beefed up its real-estate arm, because it’s seen a surge in interest in home-owning couples interested in divorce.
Those traditional methods are still an option separating partners pursue today. But the large gap between prevailing mortgage rates and the rates on divorcing couples’ homes, coupled with a more expensive housing market, has prompted some to turn to unconventional strategies to divide real-estate assets. They can include deciding to co-own a property together or agreeing to stay in the same house for a certain number of years.
“People are trying to figure out ways to work things out of court,” Levine said.
The financial motivation is strong, too. “We have to come up with creative options over how to handle those kinds of cases,” added Roytberg. “Some of them are barely able to find the budget that they were living with. How do you add another three, four thousand dollars in rent, when the money isn’t there?”
Some couples are finding innovative solutions — from sale leasebacks to mortgage assumptions — to hang on to their prized ultra-low rate. Others are resorting to less sustainable stopgap measures.
Here are some of the scenarios couples are turning to:
One strategy is to “buy time,” Levine said.
In this scenario, the couple finalizes their divorce, but continues to co-own the home while waiting for rates to fall. Either they stay together in the house, or one spouse moves out, but they both continue to own the home together to avoid refinancing.
About a tenth of the divorcees on Levine’s platform are saying, “‘I really want to stay in the house, I can’t afford these mortgage rates, and I don’t know what the market’s gonna look like, so give me two years,’” Levine said. “And with you staying on the mortgage, in exchange, I’ll pay you some money.”
Some arrangements include a higher-earning spouse paying the mortgage in place of spousal support, and then deducting it from their taxes, Roytberg explained. “It helps both sides,” she said, “because they don’t need to refinance at a higher rate for the other, and [the higher-income spouse] could directly pay the mortgage instead of spousal support.”
The so-called lock-in effect — which refers to high mortgage rates forcing homeowners to stay put in homes with lower rates — has most homeowners frozen in place for the time being. Few are willing to give up their home and their low mortgage rate and move to a house that costs more, and requires a mortgage with significantly higher borrowing costs. That’s also led to a squeeze on resale inventory, which is hurting aspiring homeowners.
But with rates staying below 7% since mid-December, there are some early signs that the housing market is coming back to life.
“Buyers and sellers are learning to live with uncertainty,” Shay Stein, a Las Vegas-based real-estate agent with Redfin
RDFN,
said in a recent report. “They’ve realized no one has a crystal ball that can predict exactly when mortgage rates will fall back to 5%, so they’re making moves now,” she added, “because they can only wait so long to be near their grandkids, live in an RV like they’ve always dreamt of, or finalize their divorce.”
But some divorcees are not as keen, opting to wait and see.
“I had one [divorcee] that had decided that he was just gonna live in the basement, so good luck with that,” Jae Tolliver, an Ohio-based mortgage broker with Union Home Mortgage, told MarketWatch, referring to someone who wanted to continue to live in their existing house, even though they had split from their spouse. “People are definitely trying to get more creative.”
Tolliver recently quipped on social media that couples are staying together not for the kids’ sake these days, but rather for their low mortgage rate.
He also described another client who decided to stay in the house with their ex-spouse after the divorce, and continue to pay the mortgage payments like before just to keep the low rate.
But “it wasn’t working out so great,” Tolliver said. “Because at the end of the day, you have a divorced couple that’s living under the same roof, and that just isn’t going to work.”
Some splitting couples decide to continue to own their home together until a certain milestone, such as their youngest child graduating from high school.
“It’s almost always tied to kids,” Levine said, because couples often want to provide stability. For example, a child who is involved in a very competitive sport may require more consistency in their schedule, so the parents may opt to stay put until the child gets to college.
Some couples are turning to sale lease-backs, a strategy which Levine says is something she hadn’t encountered recently.
Similar to the concept of buying time, a sale leaseback between a splitting couple can mean an arrangement where one individual sells the home to the other, and then rents it back from them with the option to repurchase their share later.
“Some of our customers like it, because in divorce, a lot of people’s credit is screwed, as they’ve been separated for a while and in different households, so they haven’t been paying bills,” Levine said. Those financial setbacks could make it difficult to rent or buy a place on their own.
By selling their share to their ex and leasing it back, they can secure a place to live without having to worry about the debt-to-income requirements, or their low credit score, which can be obstacles to finding housing, she added.
Other divorcing couples, anticipating the struggles ahead should they fight to keep their low rate, have decided to bite the bullet and refinance.
Take one recent divorcee’s case in San Mateo, Calif.
After a mother of two split with her husband in December 2021, they had gone through the process of formalizing their divorce. That meant that she would have to give up the 3.25% mortgage rate that she got in 2020.
She spoke on the condition of anonymity because she did not want her story to affect her child support payments.
“I had to refinance while rates were insanely high,” the homeowner told MarketWatch.
She refinanced in October 2023 to get her ex-husband off the mortgage and the title of the home, as well as to buy him out of his equity in the home. She ended up with a 30-year mortgage rate of 8.25%.
“I have an awful rate right now, I mean, it’s ridiculous. My mortgage has more than doubled,” she added. Her monthly payment went from $1,450 to $2,975.
She considered the possibility of selling the home and using her share of the proceeds to buy another one, or even renting a cheaper home.
But both options were unappealing because she would still be stuck with a higher rate, and would lose her home, which she has lived in since December 2013. She hopes to refinance in the future when rates fall.
“I’m just looking at it as if it’s temporary,” she added. She also got a raise recently which could help offset some of those expenses.
Shea, the suburban Chicago divorcee who didn’t want to give up her 2.8% rate, managed to land a mortgage assumption, meaning that she essentially took over the existing mortgage that had been in both her and her husband’s name, at the same rate.
Assumable mortgages have become an incentive offered by some sellers, but they are rare and only available in certain circumstances.
Shea worked with Tami Wollensak, a mortgage broker who is also a Certified Divorce Lending Professional with specialized training on divorce-related real-estate transactions.
It was Wollensak who recommended that Shea ask her lender if she could assume the loan in her own name. She guided Shea on how to ask for the right department and how to request an assumption, rather than a regular refinance.
“It’s very unusual,” Wollensak, who is also based in Chicago, told MarketWatch. “Every lender looks at it differently.”
Fannie Mae
FNMA,
guidelines give lenders some discretion to grant assumptions to people who are going through life transitions. But borrowers have to qualify for the mortgage and must be able to afford it on their own. The timing of the divorce must also allow for the assumption process to complete.
When Shea first asked her lender, Iowa-based Green State Credit Union, about an assumption, she was turned away. But the duo kept digging and asking for different people to talk to.
The lender eventually allowed Shea to assume the mortgage at 2.8%, and have only her name appear on it. Wollensak says the lender may have allowed Shea to take over the payment alone without her spouse based on her strong credit profile. Green State Credit Union did not respond to a request for comment.
“It depends from servicer to servicer. It’s very much like the Wild, Wild West,” Wollensak said. Shea did not pay any expenses associated with the assumption of the loan, such as closing costs or other fees.
“It was a lot of back and forth trying to find the right person,” Shea said. “I’m so grateful.”
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About 16.6 million LoanDepot customers had their “sensitive personal” information” stolen in a cyberattack earlier this month, which the loan and mortgage giant has described as ransomware.
The loan company said in a filing with federal regulators on Monday that it would notify the affected customers of the data breach.
LoanDepot did not say what kind of sensitive and personal customer data was stolen. When reached by email, LoanDepot spokesperson Jonathan Fine declined to tell TechCrunch what specific types of customer data was taken.
While LoanDepot says on its cyber incident updates page that it has brought some customer portals back online, many of its online services remain inaccessible into their second week. LoanDepot chief executive Frank Martell said in the filing that the company is making progress in “quickly bringing our systems back online and restoring normal business operations.”
Customers have said they have been unable to make payments or access their online accounts since the incident, which began around January 8.
LoanDepot said it has “not yet determined” whether the cybersecurity incident will materially impact the company’s financial condition.
Do you work at LoanDepot and know more about the incident? You can contact Zack Whittaker on Signal and WhatsApp at +1 646-755-8849, or by email. You also can contact us via SecureDrop.
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Zack Whittaker
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It’s been a tough time for home owners (and first-time home buyers), but the Bank of Canada (BoC) has held interest rates steady since July 2023, and the latest economic data is leading experts to suggest that interest rate cuts may be on the horizon. So, what can Canadians expect from interest rates in the months and years ahead, and what does that mean for fixed mortgage rates and variable mortgage rates? We spoke to an economist and a mortgage broker to get a better sense of what’s ahead, and whether a fixed or variable rate is your best option in 2024.
Rates went up significantly over the past two years, and a lot of it had to do with post-pandemic inflation.
“Central banks had to react very aggressively to the spike in inflation, and they jacked up interest rates significantly—475 basis points since March 2022,” says Robert Hogue, assistant chief economist at RBC Economics. (One basis point is equal to one hundredth of a percentage point. And 475 BPS means 4.75%.) “This is easily the most aggressive monetary policy we’ve seen in at least a generation.”
John-Andrew Newman, a mortgage broker in Oakville, Ont., notes that this aggression was essentially a side-effect of the economic impacts of the COVID-19 pandemic. “The COVID environment brought all rates down because the government influenced the interest rate marketplace in a way that was intended to help Canadians manage the effects of various lockdowns,” Newman explains. “They went extreme in one way, which led to inflationary factors peaking after [COVID], and then interest rates started to go up.”
Rates climbed quickly to help tame decades-high inflation. “There was almost a whiplash effect [after COVID] as rates went up to the other extreme—and that’s where we are today,” Newman says.
Many mortgage holders with fixed-rate mortgages secured before the pandemic now face steep payment increases at renewal. Canadian mortgage holders with variable rates are also dealing with higher costs, though the impact has not been the same for everyone—some have seen their payments increase with every hike in the prime rate, while others haven’t.
With a variable mortgage with adjustable payments (sometimes referred to as an adjustable-rate mortgage), the mortgage payments fluctuate in response to changes in the lender’s prime rate. Borrowers with this type of mortgage watched their payments increase as interest rates began to rise.
However, many variable-rate holders have a mortgage with fixed payments. As interest rates rose, their mortgage payment stayed the same, but the amount of principal paid each month decreased as the amount of interest paid went up. Some of these borrowers have seen their amortizations stretched to point that their payments are almost interest only, Newman says. Some have reached their trigger rate—the point at which the mortgage payment no longer covers the mortgage interest costs.
This is one of the reasons it’s important to know what type of variable mortgage you have—the former can have a far bigger impact on your budget and cash flow in the short term, and the latter can result in a sudden spike when renewing your mortgage. That increase may be challenging for many mortgage holders to navigate, particularly if they’ve gone into negative amortization (when the monthly mortgage payments aren’t high enough to cover the interest owed on the loan).
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Erin Pepler
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2023 was a difficult year for the housing market. It started with a continuation of negative trends from the end of 2022 and turned into the least affordable year for home buying on record.
Seasonal trends buckled. The spring homebuying season never happened, housing inventory remained historically low throughout the year, and sales plummeted.
The market was so difficult that more than half of recent homebuyers believed buying a home was more stressful than dating, and nearly 40% of homebuyers under 30 received money from their family to afford a down payment.
So what happened? In short: Record mortgage rates, high inflation, and persistently high housing and rental prices. But there was a lot more to it as well.
Below are trends, data points, and visuals that defined the 2023 housing market.
All data is aggregated from January through November 2023, and does not include December unless otherwise stated. December data is through the 15th of the month. All data is from Redfin, FRED, NAR, and/or public records. For questions about metrics, read our metrics definitions page.
The U.S. median sale price peaked at $425,000 in June, just below last year’s record high of $433,000. However, when averaging over the entire year, 2023’s average median sale price was higher than any previous year in history, rising from $407,000 in 2022 to $409,000.
“The unusual combination of low supply and low demand caused home prices to remain elevated throughout the year, which was bad news for pretty much everyone,” laments Daryl Fairweather, Redfin Senior Chief Economist. “The market was extraordinary; it felt hot, even though very few homes changed hands.”
Still the most expensive metropolitan area (metro) in the country, the median sale price of a home in San Francisco was $1,446,000 in 2023, down 4.2% year over year.
| Metro | Median sale price | Year-over-year change |
| San Francisco, CA | $1,446,000 | -3.4% |
| San Jose, CA | $1,431,250 | +0.5% |
| Anaheim, CA | $1,029,000 | +3.9% |
| Oakland, CA | $903,000 | -4.8% |
| Los Angeles, CA | $846,000 | -0.7% |
| San Diego, CA | $845,000 | +3.5% |
| Seattle, WA | $766,000 | -1.3% |
| New York, NY | $684,500 | +0.4% |
| Boston, MA | $677,500 | +4.4% |
| Nassau County, NY | $617,400 | +1.8% |
Data includes the yearly median sale prices out of all homes sold in each of the 50 largest metropolitan areas. Data does not take into account local median incomes and home affordability.
The median sale price for a home in Detroit was $173,450 in 2023, down 2.7% year over year. Even though prices fell in 2023, homes in Detroit are more expensive than they were before the pandemic, as an influx of people searching for affordability have pushed up prices.
“Home prices remained fairly stable in Detroit and even rose in some areas,” says Anne Loehr, a Detroit Redfin agent. “However, across the city, recently updated homes went for the most money.”
| Metro | Median sale price | Year-over-year change |
| Detroit, MI | $173,450 | -2.7% |
| Cleveland, OH | $204,800 | +2.3% |
| Pittsburgh, PA | $218,400 | +1.1% |
| St. Louis, MO | $246,700 | +3.6% |
| Philadelphia, PA | $264,150 | -1.9% |
| Cincinnati, OH | $270,400 | +7.5% |
| Warren, MI | $285,600 | +4.1% |
| Indianapolis, IN | $290,350 | +5.2% |
| Milwaukee, WI | $299,250 | +8.8% |
| Kansas City, MO | $310,200 | +3.9% |
Data includes the yearly median sale prices out of all homes sold in each of the 50 largest metropolitan areas. Data does not take into account local median incomes and home affordability.
The median U.S. rent price hit $2,050 in August 2023, matching the record price of $2,050 set in August 2022. Year-over-year price changes were flat until November when they dropped significantly, as an increase in inventory and vacancies forced landlords to hold rents steady or drop them. Other contributors to the quieter rental market: Strong new construction in the apartment industry, and fewer new households forming (two or more people living together).
“November provided the most relief for renters,” says Maggie McCombs, managing editor of Rent., a Redfin company. “Prices dropped by 2.1%, marking the first time in more than three and half years that prices fell by more than a single percent. We expect decreases to continue into 2024.”
This was in stark contrast to the past two years, which went from sudden growth during the pandemic to a free-fall in the second half of 2022.
“One of the biggest changes compared to 2022 was the slowdown in the rental market,” adds Fairweather. “Last year, rent prices skyrocketed in the first half of the year due to low supply and high demand. However, in 2023, supply began to catch up, causing many landlords to keep prices flat amid higher vacancy rates.”
Even though growth slowed, the average rent price for all months through November in 2023 rose $10 to $1,992, the highest in history. This only worsened the affordability crisis across the country, especially for lower income families. Rent growth has outpaced wages for decades, but the most recent data states that the average renter now spends 30% of their income or more on rent.
The U.S. currently has a shortage of 7.3 million affordable housing units for those who need them, and no state has an adequate supply.
Data includes the 2023 average aggregated median rent prices for each of the 50 largest core-based statistical areas (CBSAs) compared to 2022 data from the same period.
The prices of goods and services rose 6.6% year over year in February, just below 2022’s high and the second-highest inflation level since August 1982. Inflation then fell steadily throughout the year, albeit still above healthy levels.
As interest rates hovered around 0.5% for the entirety of the pandemic, inflation took off due to supply crunches and increased consumer demand. The Fed raised its benchmark rate in 2022 to combat inflation and cool the economy – that began working this year, but higher interest rates led to higher mortgage rates, which slowed the housing market. Interest remains high as we end 2023, but economists expect them to start coming down next year.
Data courtesy of FRED. Data measures CPI (less food and energy) through November 2023.
“Mortgage rates were the name of the game this year as record inflation helped push daily average 30-year fixed rates past 8% for the first time since 2000, pricing many buyers and sellers out of the market,” says Fairweather. “Home buyers didn’t want to pay twice as much for a home than they would have three to four years ago, and home sellers didn’t want to give up their pre-pandemic rates.”
Higher mortgage rates impacted affordability across the market, straining already sapped budgets. In July, the average monthly mortgage payment reached $2,637 and grew more than twice as fast as wages (12.6% compared to 5.2%). Both were record highs. Affordability (or lack thereof) also directly affects housing inequality, which is wider now than it was in the 1960s.
Importantly, mortgage rates fell noticeably before the end of the year due to inflation easing up, the Fed holding rates steady, and the labor market growing slower than expected. While interest rates aren’t predicted to fall until midway through next year (three rate drops are predicted in 2024), mortgage rates could continue to fall sooner.
“Looking ahead, whether interest rates will fall depends on two things: the strength and resiliency of the economy, and consumer behavior,” notes Matt Birdseye, Executive Vice President at Bay Equity, a Redfin company. “Until unemployment rises and the economy slows, rates are unlikely to fall.”
Graph shows aggregated average mortgage rates, not daily rates, which is why the graph does not depict the 8% high. Daily rates are more variable.
A record 26% of homebuyers looked to move to a different metro area in the three months ending August 2023, up from 24% during the same three months in 2022 and 25% at the beginning of this year.
“Generally speaking, the proportion of buyers looking to relocate was higher in 2023 than in 2022,” notes Chen Zhao, Redfin Senior Economist. “Despite buyer demand falling overall, those who looked to buy sought more affordable locations to get more for their money.”
Surprisingly, the risk of natural disasters didn’t push home prices down in many at-risk metros. “We expect this to change in the near future, though,” continues Zhao.
Many of the top migration hotspots were sunny, more affordable metros which grapple with severe climate risks such as heat, drought, and flooding. This is not new; in fact, from 2021-2022, migration into the most flood-prone areas doubled compared to the prior two years. This comes as 2023 set a new record for billion-dollar weather disasters.
“It’s human nature to focus on current benefits over costs that could rack up in the long run,” admits Daryl Fairweather. “In short, the consequences of climate change haven’t fully sunk in. This is partly because most homeowners don’t foot the bill when disaster strikes. But as insurers continue to pull out of disaster-prone areas, people may feel a greater sense of urgency to mitigate climate dangers – especially if their home’s value is at risk of falling.”
| Metro | Number of people looking to move to the area |
| Las Vegas, NV | 5,565 |
| Miami, FL | 5,240 |
| Sacramento, CA | 5,125 |
| Phoenix, AZ | 4,770 |
| Orlando, FL | 4,595 |
| Metro | Number of people looking to leave the area |
| San Francisco, CA | 28,365 |
| New York, NY | 23,710 |
| Los Angeles, CA | 20,640 |
| Washington, D.C. | 15,590 |
| Louisville, KY | 5,195 |
Data is the percent of Redfin.com users searching for homes outside their metro. Data is the annual median aggregate of multiple three-month rolling aggregates. Keep up with the latest migration news here.
There was an average of 1.015 million homes listed for sale every month in 2023, down 0.1% from last year. Monthly inventory peaked at 1.1 million homes, below 2022’s 1.26 million and far below historical normals.
Cincinnati (-41.9%), Newark (-24.3%), and New Brunswick (-21.9%) saw the biggest inventory declines, with Chicago coming in fourth.
Mortgage rates were the primary reason why inventory was so sluggish. Nearly a quarter of all homeowners had an interest rate below 3%, and around 90% of homeowners had rates below 6%, leading many would-be sellers to stay put to avoid taking on a higher rate.
Inventory is calculated in rolling 90-day periods, e.g., January 2023 data is the three-month period from November 1, 2022, through January 31, 2023. Redfin inventory records date back to 2012.
There were just 5.4 million new listings in 2023, the lowest level on record and a massive 16.4% drop from 2022. Average monthly new listings also posted sharp declines, falling from 585,000 in 2022 to 520,000 this year.
New listings are one factor that make up total housing inventory. The dramatic drop in new listings was primarily due to skyrocketing mortgage rates, keeping buyers and sellers on the sidelines.
Year over year, new listings fell every month in 2023 until November, when they began to rise for just the second time since July 2022. That same month, they also posted their biggest increase since 2021 as mortgage rates fell to under 7.4%, well below the high of 8%. Listings continued to rise into December.
This year, new listings were also a major factor in determining local market trends. For example, new listings dropped a massive 24% across New York State in 2023, causing a ripple effect. “The drop in new listings created a surge in competition among buyers looking for affordable homes,” says Kimberly Hogue, a Rochester Redfin agent. “Sellers were able to benefit massively in many Upstate markets as buyers competed over the few homes left, leading to a spike in prices.”
Joey Keeler, a Redfin Premier agent in Seattle, agrees, but says that favorability depends on the property. “Generally, our market favors sellers, but it depends on the listing,” he says. “Some well-priced homes can see multiple bidding wars, while others may sit on the market for weeks.”
New listings are calculated in rolling 90-day periods, e.g., January 2023 data is the three-month period from November 1, 2022, through January 31, 2023. Redfin listings records date back to 2012.
While inventory measures the number of homes currently available for sale, months of supply measures the amount of time it would take those homes to sell. Six months of housing supply is considered a healthy benchmark, with fewer than six indicating a seller’s market and more than six indicating a buyer’s market.
The average stock of housing supply across every month in 2023 was 2.4 months, up from 2.1 months in 2022.
Even though months of supply rose in 2023, it was still a very tight market; through the first six months of the year, just 1.4% (14 out of 1000) of the nation’s homes changed hands, the lowest share in at least a decade. The pandemic homebuying boom depleted supply, which has only barely started to recover.
“Months of supply gained some ground this year compared to last, reaching above 3 months in January, but still remained far below a balanced market,” adds Fairweather. “However, local market trends determined whether or not buyers or sellers had an advantage.”
Supply is calculated in rolling 90-day periods, e.g., January 2023 data is the three-month period from November 1, 2022, through January 31, 2023. Redfin supply records date back to 2012.
There were 1.41 million privately-owned new homes built in the U.S. through November 2023, down from 1.55 million in 2022.
Many home builders who snatched up land during the pandemic to capitalize on the supply crunch were left stuck with homes they couldn’t sell this year. This is a stark difference from 2022, when new construction blossomed following the pandemic supply crunch.
“If you’re a buyer, consider new construction homes,” advises Kim Stearns, a Northern Idaho Redfin agent. “Because of an inventory buildup, many builders have one to four homes they would love to close on and will often offer incentives.”
New construction slowed before rising later in the year, as inflation cooled and more homebuyers entered the market. Experts predict new construction will continue rising into next year.
Just 4.59 million U.S. homes sold through November, an incredible 18.3% drop from the 5.62 million sold in 2022 during the same period.
Year-over-year home sales were negative every month in 2023. However, the declines shrunk from a low of -37.5% in January to just -4.8% in November, showing a promising upward trend leading into 2024.
Unfortunately, existing home sales, a measure of how many homes that have sold at least once are expected to sell in a year, have fared much worse. In general, between four and seven million existing homes sell per year, with the historical average sitting at just over 5 million. In 2023, experts predict just 3.82 million existing home sales, a 7.3% drop from 2022 and the lowest annualized amount since August 2010.
In 2023, homes spent an average of 37 days on the market, a full ten days more than 2022.
Supply started dropping dramatically during the pandemic due to supply chain issues, rising demand, and a chronic lack of homebuilding. However, supply began inching upwards part way through 2022, as mortgage rates rose and fewer people entered the market.
In 2023, slowly rising supply paired with high home prices and mortgage rates led to an increase in time on market in most metros. However, more affordable areas saw the opposite effect; midway through 2023, houses in Buffalo and Rochester sold over six times faster than homes in Austin.
“Inventory for Austin is currently sitting at an 8-year high, which corresponds with an increase in time on market,” observes Chris Daniels, a Redfin Sales Manager in Austin. “Inventory has climbed gradually throughout 2023, but many indicators are pointing towards this being the peak due to lower mortgage rates luring people back to the market.”
15.3% of listings experienced price drops in 2023, up from 13.9% in 2022.
As affordability worsened and fewer buyers entered the market, more sellers were forced to lower prices. In some markets, sellers also had to offer additional concessions due to very limited demand. In fact, by November, more than one-third of all home sellers gave concessions – down from the record 45.6% in February but up from 27.6% two years prior.
“A great way buyers can lower the cost of a home is through seller concessions and buydowns,” advises Mike S. Rafii, a Regional Sales Manager at Bay Equity. “A common way to do this is by negotiating seller concessions to include money toward the buyer’s closing costs. The buyer can then use this money to buy down their interest rate – either permanently (for the entire mortgage term), or temporarily (for up to 3 years).”
In many markets, sellers need to do everything they can to secure a buyer. “To make a property more appealing, sellers need to have their homes in pristine condition to attract buyers,” suggests the Redfin Premier agents in Las Vegas. “In Las Vegas, sellers had to do everything under the sun, from paying closing costs to offering repairs, to get a luxury buyer this year.”
Data includes the aggregated average percentage of price drops out of all active listings in each of the 50 largest metropolitan areas.
32.7% of homes were purchased with all cash in 2023, up from 30.7% last year and the highest share in a decade. However, while the share of all-cash purchases continued rising, the number of cash sales fell year over year alongside all other sales metrics.
Affluent home buyers who can afford to pay cash are more apt to buy when mortgage rates are high. By paying all cash, they avoid interest rates altogether and secure a better deal. While these are helpful benefits, they also exacerbate inequality between people who own homes and people who don’t.
Cash purchases were especially common at higher price points. “The luxury market experienced a large influx of cash buyers this year, due to higher mortgage rates,” notes Jonathan Huffer, a Redfin Premier agent in Palm Beach.
Data is from a Redfin analysis of county records across 39 of the most populous U.S. metropolitan areas, dating back through 2011.
In 2023, there were 549,750 luxury homes sold, down 23.8% year over year.
In January, luxury home sales fell a record 45% to their second-lowest level ever, continuing a rapid decline from 2022. Year-over-year sales remained negative every month, but slowly rose as the year went on. An average of 53,200 luxury homes sold per month in 2023, down 10.5% year over year.
Even as sales fell, luxury house prices continued to grow this year, topping $1.15 million in September, a new record and higher than any point in 2022. Nationwide, luxury home prices grew nearly three times faster than non-luxury prices but dropped in expensive metros as people migrated to more affordable areas.
Higher prices also meant less competition. “Higher prices weeded out many buyers in the luxury market and dropped competition nationwide,” notes Sam Chute, a Redfin Premier agent in Miami. “However, homes that did sell often sold quickly.”
Luxury homes are defined as the top 5% of listings by price in a given market. Values are three-month rolling aggregates ending on the date shown, e.g. November 2023 spans September, October, and November 2023. Data does not include the three months ending December 31.
51.6% of homes had a bidding war in 2023, down from 54% in 2022. In general, bidding wars have been dropping as mortgage rates have increased. This has been especially pronounced in pandemic boomtowns.
In many markets, bidding wars were virtually nonexistent. “Due to high mortgage rates and low competition, buyers didn’t feel as much pressure to compete,” notes Desiree Bourgeois, a Detroit Redfin agent. “Sellers need to know that buyers are less tolerant of an overpriced home.”
Redfin defines a bidding war as when a home faces at least one competing bid.
Investor purchases plummeted by a record 48.6% year over year in the first three months of 2023, which followed a 46.2% fall at the end of 2022. Both drops exceeded the previous 45.1% record fall during the 2008 subprime mortgage crisis. (Investor purchase records date back to 2000.) However, investor market share remained relatively stable throughout the year, hovering around 17%, below last year’s 19%.
The drop in purchases continued until the last quarter of 2023 but eased slightly as mortgage rates began to stabilize. Investor activity isn’t expected to rebound in the near future.
These sharp drops came just months after the record surge in investor activity that happened in the aftermath of the pandemic. In fact, all of the most dramatic falls occurred in the Sun Belt, where investor activity jumped the most post-pandemic.
Atlanta, one of the top metros for investors last year, saw a 60% decrease in investor purchases, the largest fall in the country – but things are starting to look up. “Following a decline for most of these past two years, investor activity has ticked up in Atlanta,” says Angie Lawson, a Redfin agent in Atlanta. “They’re now focusing more on buying land, flipping homes, and acquiring properties for rental income.”
Investors generally buy homes either to sell or lease and capitalize on low construction costs and high demand. However, when costs are high and demand is low, investors usually slow down purchases. That’s what happened this year; high mortgage rates, a lackluster rental market, and rising home prices left many investors with homes they couldn’t sell or rent.
Data is analyzed on a quarterly basis and includes all property types unless otherwise stated. Data is through September (Q3).
The 2023 housing market was hard for many homeowners and renters, but what does Redfin predict for 2024? Read our 2024 Housing Market Predictions to learn more.
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Jamie Forbes
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In 2020, interest rates took a sharp dive as the Federal Reserve sought to stave off economic collapse amid the pandemic. The resulting low rates sparked a surge in real estate transactions, with numerous homebuyers securing 30-year fixed-rate mortgages below 3%. Fast forward to today, the Fed’s efforts to combat inflation have led to a substantial increase in interest rates, affecting many sectors that influence our economy, including mortgages. These rate adjustments helped propel the 30-year fixed mortgage rate from its lowest recorded point of 2.65% in January 2021 to its current range, currently hovering between 7% and 8%.
(See more about how inflation impacts house prices.)
Fortunately, if our economy shows clear signs of slowing down, there is a possibility the Federal Reserve may cut interest rates in 2024. If you’re a homeowner who locked in at a record-low mortgage rate, refinancing your mortgage now would be an impractical choice. However, recent homebuyers who made their purchase around the peak rates may discover potential advantages in considering a rate and term refinance in 2024. According to experts, refinancing makes sense if you can reduce your current interest rate by at least 0.75 percentage points. While this might sound like a small difference, it can translate into substantial savings over time including lower monthly payments, paying off the mortgage quicker, and even allowing homeowners to tap into their home equity for other expenses.
So, if you’re fairly new to homeownership, perhaps you recently bought a townhouse in Alexandria, VA, or a home in Seattle, WA, with mortgage rates beginning to trend downward, you may soon have truly viable options to refinance your high-interest loan for a lower interest rate, keeping more money in your pocket.
The phrase “refinancing” refers to a mortgage transaction in which your bank or lender pays off your old mortgage in exchange for a new one.
Most borrowers decide to refinance to reduce their interest rate and shorten their repayment period or to benefit from converting part of the equity they have built in their homes into cash.
In general, refinancing is a smart choice if it will save you money, help build home equity, or help pay off your mortgage quicker. Some common reasons why you might consider refinancing your mortgage are:
Let’s dive into each of these scenarios.
You may be able to get a better interest rate if rates recently dropped or your credit score increased. The rule of thumb is to refinance your mortgage when interest rates are at least 1% lower than your current rate. However, this is only sometimes the case. Based on your specific situation, it may be worth it to refinance when interest rates are only 0.5% lower, or it might be better to wait until interest rates are more than 1% lower than your current rate.
Not only does lowering your interest rate enable you to save money, but it also increases the rate at which you build equity in your home and can reduce your monthly mortgage payment.
Let’s say you take out a 30-year, $300,000 mortgage with a fixed rate of 6.2% on a home in Tampa, FL, your monthly interest, and principal payment will be $1,812. But let’s say you get a lower interest rate at 5.2%. Your new monthly payment will be reduced to only $1,660, which means you’ll save $152 per month, equalling $1,824 per year and $54,720 over 30 years. Depending on your financial situation and how much it costs to refinance, those savings may or may not make it worth it for you to refinance. A mortgage calculator is a helpful resource for budgeting some of the costs.
Make sure to keep an eye on current mortgage rates when you’re thinking about refinancing.
When you refinance for a shorter term length, such as going from a 30 year loan to a 15 year loan, you’ll usually end up paying more every month. For instance, if you start with a 30-year, $100,000 mortgage at a rate of 6.2%, you can expect to pay around $612 per month, and a total of $220,320 over 30 years. If you shorten your loan term to 15 years, your mortgage payment would increase to $855 per month, which sounds like a big jump. However, you’ll end up paying only $153,900 over the course of the loan, saving you $66,420.
So, while a 30-year mortgage may offer a reduced monthly payment, you will pay more in interest over the life of the loan. Though not everyone can afford the price jump in monthly payments of a 15-year loan, but if you can, then expect to save a significant amount of money in mortgage interest payments.
A fixed-rate mortgage is a loan with a fixed interest rate for the duration of the loan, regardless of whether rates rise or fall. In contrast, an adjustable-rate mortgage (ARM) can increase or decrease at specific intervals throughout the life of the loan.
Refinancing to a fixed-rate mortgage from an adjustable-rate mortgage is common and can save you money in the long run. An ARM may initially have lower rates than a fixed-rate mortgage. However, adjustments can result in higher rates down the road. For example, you might be interested in converting to a fixed-rate mortgage if your ARM’s interest rate rises to 6.5%, when fixed-rate mortgages are just 5.5%. Switching to a fixed-rate loan results in a lower interest rate and eliminates concern over future interest rate hikes.
However, switching from a fixed-rate loan to an adjustable-rate mortgage, which frequently has a lower monthly payment in the first few years of the loan than a fixed-term mortgage, can be a wise financial move if interest rates are falling. This scenario is particularly effective for homeowners who do not plan to stay in their homes for more than a few years. But you’d also want to make sure that your monthly cost savings would eventually offset the cost to refinance the loan.
Another great time to refinance your mortgage is when your credit score increases, which may allow you to get a lower interest rate on your mortgage. Why? A mortgage is a type of debt, and lenders check your credit score to determine how reliable you are as a borrower to repay that debt. If you currently have a higher interest rate, lenders may offer you a lower interest rate because a higher credit score tells them that they are taking on less risk when lending you money. So if you’ve managed to pay off your high-interest credit card debt, and you’ve seen a good bump in your credit score, now may be an excellent time to refinance.
(See what the four Cs of credit are and how to improve your score)
You can also refinance your mortgage to get rid of loans backed by the Federal Housing Administration (FHA), Veterans Affairs (VA), or United States Department of Agriculture (USDA) too. While these loans are helpful for many people, they often come with higher interest and mortgage insurance rates. So if you’ve recently increased your credit score and grown equity in your home, it might be a good choice to refinance to a conventional mortgage for possibly a better interest rate.
You most likely have equity in your property if you’ve been making mortgage payments. Typically, the longer you’ve lived in your home, the more equity you have. Home equity is the amount of your home that you actually own, or the difference between what your home is worth and what you owe your lender. As you pay off your mortgage, you lower your principal, or the outstanding loan balance, and you build equity over time.
A cash-out refinance allows you to take out more money than you owe on your home. For instance, if you have $300,000 left to pay on your home and do a cash-out refinance for $350,000, you’ll receive the extra $50,000 in cash and pay it off with your mortgage. This is typically done to consolidate debt, make a large purchase, improve your home, and more. But it’s crucial to weigh the pros and cons beforehand, since you’ll be paying off your first loan with another loan with different terms.
Refinancing to access your home’s equity can also help by removing mortgage insurance premiums. For example, if you made a down payment of less than 20% on your home, you probably have to pay a yearly mortgage insurance premium. But, if you’ve now paid off at least 20% of your home’s value, refinancing can help you shake off the mortgage insurance. However, if you get your bank to appraise your home and the value comes in at 20% or higher, the PMI can also be dropped without refinancing. This may be a viable options since homes typically grow in value over time.
While there are many great reasons to refinance your mortgage, it can be surprisingly expensive. Below are the average costs when you refinance your mortgage.
| Item | Average Cost | What You Need to Know |
|---|---|---|
| Appraisal | $300-650 | An appraisal determines the current value of your house so that your lender can decide on the mortgage amount. |
| Closing costs | 2-6% of the loan’s value | Closing costs usually include an appraisal, attorney fees, a credit check, origination fees, title search, and other costs associated with taking out a new loan. |
| Credit check | $10-60 | Credit bureaus such as Equifax, Experian, and TransUnion offer credit checks, as well as third-party businesses. |
| Mortgage insurance | 0.58-1.86% of the loan amount per year | Usually, if you have paid off less than 20% of your home’s value, you will have to pay mortgage insurance. |
| Origination fees | 0-1% of the loan amount | An origination fee is a fee that lenders charge customers to take out a loan. Origination fees vary depending on the lender you use and the loan you take out. |
| Prepayment penalty | Varies | You may have to pay a fee for paying off your previous mortgage early. Lenders charge prepayment penalties to incentivize borrowers to pay off their loan slowly over time, so the lender can collect more interest. Read the terms and conditions or contact your lender to determine if this applies to you. |
| Title search | Up to $250 | Mortgage lenders require a title search when you refinance, similar to when you buy a new home. |
Before signing the new loan, here are a few questions to consider:
To start, you should evaluate your current financial situation, your long- and short-term financial goals, and the cost of refinancing your mortgage. Refinancing generally costs 2-6% of the loan amount in closing costs, so things can add up quickly. It’s essential to calculate how long it will take for monthly savings to recoup these costs, often called the break-even point.
As mentioned earlier, your break-even point is when you will recoup all the closing costs that come with refinancing your loan. For example, assuming the lender and title fees are $5,000 and your monthly savings from refinancing is $200 per month.
| Closing Costs | $5,000 |
| Monthly Savings | $200 |
| Breakeven | 25 months ($5,000/$200 = 25 months) |
In general, staying in your current house is best until you reach your break-even point to make sure that refinancing is worth it.
When you’re refinancing your mortgage, one of the first things to consider is how much longer you want to stay in your home. Think about whether your current home will fit your lifestyle in the future. If you’re close to starting a family or having an empty nest, and you refinance now, there’s a chance you will only stay in your home for a short time to break even on the costs.
Similarly, if you’re close to paying off your current mortgage, refinancing may not be worth it, either.
Prepayment penalties are different depending on your lender. Some lenders charge a flat fee, while others charge a percentage of your loan amount. Read the terms and conditions for your loan, or contact your lender to find out if you have a prepayment penalty and how much it costs.
If you recently took out another loan or made a late payment, your credit score may have gone down, which means it may not be the best time to refinance. Generally, the higher your credit score, the lower your interest. Most lenders require that borrowers have a minimum credit score of 620-670. Before you refinance, ensure your credit score has increased or stayed the same, and that you meet your lender’s minimum requirements.
Deciding when to refinance your mortgage is complicated and depends on your unique situation. Common reasons to refinance include getting a lower interest rate, shortening your loan’s terms, switching to a fixed-rate or adjustable-rate mortgage, and tapping your home’s equity. Removing mortgage insurance or loans backed by the FHA, USDA, or VA are other common reasons to refinance.
Wherever you’re at, do the math and work with a trusted mortgage lender to make sure that refinancing makes sense for you.
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Julia Weaver
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In an effort to subdue runaway inflation, the Bank of Canada (BoC) has raised the benchmark interest rate several times over the last 24 months. This rate affects the interest rates of other financial products. The interest offered on guaranteed investment certificates (GICs) is far higher than usual, for example. This is because the benchmark rate is higher.
Unfortunately for home owners in Canada, the benchmark rate also affects mortgage interest rates. Home owners with variable-rate mortgages, whose interest rates fluctuate with the benchmark rate, have grappled with sharp increases to their mortgage payments over the past few years. But even those with fixed-rate mortgages must contend with higher interest rates when their mortgages come up for renewal.
“In the face of a rapid global increase in interest rates, many Canadians are feeling the squeeze, particularly when it comes to affording a home to rent or own,” Deputy Prime Minister and Minister of Finance Chrystia Freeland said in a press release. The Canadian Mortgage Charter is one measure intended to provide relief.
The Canadian Mortgage Charter is a document that lays out expectations for banks and other lending institutions about how they will behave in their relationships with “vulnerable borrowers.” The guidelines stem from a document published by the Financial Consumer Agency of Canada (FCAC) in July 2023, but the charter is a concise and public-facing document. It outlines six things Canadian borrowers can expect of their banks:
Of these guidelines, numbers three and four are actually new. The charter is the first time lending institutions have been asked not to require mortgage holders to requalify if switching lenders, and the first time they’ve been asked to reach out to borrowers in the months leading up to mortgage renewal.
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The Canadian Mortgage Charter is intended to encourage banks to identify at-risk borrowers and offer them mortgage relief measures so that fewer people experience extreme financial hardship or lose their homes.
The Canadian Mortgage Charter is not a law. Rather, it’s a set of expectations, much like the changes to mortgages, bank account fees, junk fees and dispute resolution proposed by the government earlier this year. And just like with those measures, the only recourse for borrowers if a lender doesn’t heed the government’s request is to make a complaint on the FCAC website. It’s unclear what, if any, consequence there is for non-compliance.
In additional to the new charter, the Fall Economic Statement announced billions of dollars in financing to accelerate housing construction, plus plans to crack down on short-term rentals “so that homes can be used for Canadians to live in.”
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Keph Senett
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The U.S. Census Bureau released the 2022 American Community Survey this week. The survey, which looks at demographic data in five-year increments, introduced several new detailed tables and demographic breakdowns. We looked at some trends in the data.
Nearly 6 million people 65 and older live in California, a figure that is slowly growing. In the last five years, 716,000 people became senior citizens in the state. That number will nearly double by 2030. Los Angeles County is home to roughly a quarter of the senior citizens in the state.
As the cost of living increases, the number of Golden State senior citizens in poverty is also rising, with nearly 14% of Los Angeles County senior citizens living below the poverty line. The national poverty rate declined significantly to 12.5% during the five-year period from 2018-22.
Across the country, housing costs continue to rise. Financial planners advise that no more than 30% of household income be spent on housing costs. The latest data show that is far from the reality for 41% of homeowners with a mortgage in Los Angeles County. For homeowners without a mortgage, roughly 16% are house burdened. It’s also not easy for renters. More than half of renters spend more than 30% of their household income on housing costs.
The data also point to how the pandemic changed the way people work. In Los Angeles County, the number of people working from home tripled from more than 270,000 to 810,000 in just five years. That number tracks with the rest of the state’s pool of people working from home, which tripled from 1 million to more than 3.2 million. For those having to commute into the office daily, the mean travel time to work has stayed the same with most L.A. County residents getting to work in 30 minutes (although most L.A. city residents would laugh at this figure.) The number of unemployed people in the county has gone down by 4% since 2017 with roughly 300,000 without work.
The new American Community Survey includes updated race data. They show the county has grown in its Asian and Latino population. Roughly 1.4 million people identified as Asian in Los Angeles County, up 2.4% from a decade ago. Those who identify as Latino and Hispanic account for nearly half of the population of the county. The county lost 80,000 Black people over the last decade.
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Sandhya Kambhampati
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“Potential buyers may not have the cash they require to pay for an asset like a second home in part or in full,” says Maxine Crawford, a mortgage broker with Premiere Mortgage Centre in Toronto. “They may have their money tied up in investments that they cannot or do not want to cash in. By using home equity, however, a buyer can leverage an existing asset in order to purchase in part or in full another significant asset, such as a cottage.”
Home equity is the difference between the current value of your home and the balance on your mortgage. It refers to the portion of your home’s value that you actually own.
You can calculate the equity you have in your home by subtracting what you still owe on your mortgage from the property’s current market value. For example, if your home has an appraised value of $800,000 and you have $300,000 remaining on your mortgage, you have $500,000 in home equity. If you’ve already paid off your mortgage in full, then your home equity is equal to the current market value of the home.
A home equity loan (sometimes called a second mortgage) is when a home owner borrows money using the equity they’ve built up in their home as collateral for the new loan. Equity is the difference between the current market value of the property and the balance owing on the mortgage. Typically, home owners can borrow up to 80% of their property’s value, including any balance remaining on the first mortgage.
To buy a second property using home equity, you borrow money from a lender against the equity—meaning you use the equity as leverage or collateral. There are a variety of ways a home owner can do this.
Mortgage refinance: When you refinance your mortgage, you replace your existing mortgage with a new one on different terms, either with your current lender or with a different one (when switching lenders, you may have to pay a prepayment fee, unless your mortgage was up for renewal). When refinancing, you can get a mortgage for up to 80% of your home’s value. Refinancing your mortgage allows you to access the capital needed to buy a second home.
Home Equity Line of Credit (HELOC): A HELOC works like a traditional line of credit, except your home is used as collateral. You can access up to 65% of your home’s value. Interest rates on HELOCs tend to be higher than those on mortgages. However, you only withdraw money when you need it, and you only pay interest on the amount you withdraw, unlike with a second mortgage or reverse mortgage.
Second mortgage: This is when you take out an additional loan on your property. Typically, you can access up to 80% of your home’s appraised value, minus the balance remaining on your first mortgage. Second mortgages can be harder to get, because if you default on your payments and your home is sold, the second mortgage provider only receives funds after the first mortgage lender has been repaid. To compensate for this added risk to the second lender, interest rates on second mortgages tend to be higher than for first mortgages.
Reverse mortgage: Only available to home owners who are 55 or older, a reverse mortgage allows you to borrow up to 55% of your home’s equity, depending on your age and the property’s value. Interest rates may be higher than with a traditional mortgage, and the loan must be paid back if you move or die. You don’t need to make any regular payments on a reverse mortgage, but interest continues to accrue until the loan is repaid.
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Sandra MacGregor
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If the second property is for personal use, such as a vacation property or cottage, you will likely have to meet the same down payment requirements as with your first home. For example, a second home purchased for $800,000 requires a down payment of 5% on the first $500,000, plus 10% on the portion above $500,000.
Rentals that are owner-occupied—maybe a home in which the owner lives on the main floor, and a tenant lives in the basement suite—generally are subject to the same rules, says Elan Weintraub, co-founder and mortgage broker with mortgageoutlet.ca.
However, if the property will not be occupied by the owner, meaning the entire property will be rented out, Weintraub says you should have a down payment of at least 20%, no matter the price of the home. He adds that certain lenders have different requirements.
Lenders take the question of owner occupancy seriously, so always be honest about your plans, advises Weintraub. “If you say you will live in the property, then that’s the expectation, and depending on your lender and the mortgage type, you could be in default if you do not live there.”
Managing two mortgages is a big financial commitment, so it’s important to plan ahead and consider seeking expert advice if you’re unsure if you can afford it.
Weintraub says there are several key factors to consider before deciding to take on a second property mortgage. These include:
Whether you go with the same lender or a different one for your second mortgage, the interest rate will likely be higher than for your first mortgage. That’s because your second mortgage takes second priority: If you foreclose on the home, the debt owed to your first lender must be repaid first. Therefore, your second mortgage provider takes on a greater risk and is compensated for this risk by charging you a higher mortgage rate.
Keep in mind that you’ll also have to pay the same administrative costs as with your first mortgage, including things like appraisal and legal fees. Furthermore, Weintraub emphasizes that cash flow should be another consideration. “You would need a strong income to acquire a second property, as you would have significant debt—a mortgage on your primary and secondary residence. A few years ago, rates were 1% to 3%, so it was much easier to borrow money. Today, the mortgage stress test essentially requires the mortgage to be tested at 8% or higher.”
Getting a mortgage on a second property can help you purchase the perfect cottage hideaway, support your adult children’s housing needs, or become a landlord for the first time. However, second property mortgages aren’t for everyone. Before committing to a second property, understand your financial position and consider speaking to a financial advisor or mortgage broker.
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Sandra MacGregor
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I don’t expect real estate prices to rise at the same 6.75% rate we have seen over the past 10 years, so instead, let’s say prices rise at 4% per year. Some people may think that number is high, while others may think it is low. But if you look back at U.S. residential real estate appreciation since 1890, which looks to be similar here in Canada, prices have only risen by a bit more than the rate of inflation, so even 4% may be generous. Nevertheless, assuming 4% growth is correct, the condo would be worth $740,122 after 10 years. Home equity, representing the condo’s value minus the mortgage balance, would be $471,613.
What if someone could rent the same $500,000 condo for $2,000 per month (a number that might seem high or low depending on where you live)? Compared to making monthly mortgage payments on that same property, the renter would be saving $559 per month. Their rent would rise over time, say, at 2% per year, so the $599 per month of savings would decrease over time.
Now, let’s say they invested their initial $100,000 (the amount that would have been used on a down payment) and $559 a month (a number that would decrease as rent increased) into a tax-free savings account (TFSA). If they earned 4% per year on their investment, they would have $204,396 after 10 years. The buyer, with $471,613 of home equity, is clearly better off than the renter, right?
The problem here is you cannot just compare the mortgage payment to the monthly rent. Owning has other incremental costs that might include:
Property tax: $200 monthly (not ap
Condo insurance: $10 or more per month, compared to tenant insurance
Condo fees or repairs: $500 more per month, compared to renting
Property tax rates can vary significantly depending on where you live. And condo fees and repairs can vary, depending on the age and amenities in the building. But if we added another $710 per month from the categories above to the renter’s monthly investment deposits, the renter would have $319,117 accumulated after 10 years. The same tax-free TFSA return of 4% is assumed, perhaps in their spouse’s TFSA.
The owner would still have 471,613 in home equity. So, owning is still better than renting, right?
Let’s not forget there are costs to buy and sell real estate. It could cost $10,000 in land transfer tax, legal fees and other costs to buy, and another $40,000 to sell after 10 years. If the renter added these amounts to their investments, they would be at $373,919. The buyer is still ahead of the renter with $471,613, but as you can see, the gap is closer.
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Jason Heath, CFP
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