Black women are outpacing Black men when it comes homebuying.
Single female homebuyers are most common among Black women, representing 27% of Black homebuyers, according to the 2023 Snapshot of Race and Home Buying in America report by the National Association of Realtors. To compare, single women represent 24% of Asian homebuyers, 17% of white buyers and 7% of Hispanic buyers.
Female buyers represented 32.4% of all Black homebuyers between October 2017 and September 2018, according to a 2022 data analysis by Realtor.com. The share jumped to 35.4% from October 2020 to September 2021.
The share of Black female homebuyers grew at an average annual rate of 7.3% from October 2018 to January 2020. Black male buyers only grew at an annual rate of 3.4% during the same period, Realtor.com found.
But single Black women buyers still face plenty of challenges.
“There are instances where Black people are buying homes, Black women are buying homes. That doesn’t mean that it’s easy for them and that doesn’t mean that it’s not being made unnecessarily difficult by certain societal hurdles that stand in the way, that should not exist,” said Jacob Channel, a senior economist at LendingTree.
“I think it’s demonstrably true if you’re a Black woman in America, you’re probably going to have a harsh time buying a house in many circumstances,” he said.
1. Education debt: While Black women are becoming more educated, it also means they are more likely to have student loans. Compared to other female undergraduate borrowers, Black women carry the most undergraduate student loan debt, averaging $41,466.05 a year after graduation, according to Bankrate.Â
Higher student loan debt can make it harder to save for a down payment and qualify for mortgages. Lenders consider student loan payments when figuring out how much you can afford.
2. Mortgage access: Lending standards in the early 2000s were more relaxed than they are today, said Channel. Single Black women were less likely to be homeowners in 2021 compared to 2007, according to a report by the National Women’s Law Center.
That said, those who got mortgages before the Great Recession often didn’t fare well: Banks were more likely to offer Black women high-cost mortgages and when the housing market crashed, women of color were overrepresented in foreclosures, the report found.
During the Great Recession, Black women were 256% more likely to have a subprime mortgage compared to white male borrowers of similar economic circumstances, said Sarah Hassmer, director of housing justice at the National Women’s Law Center.Â
3. Low-wage jobs: Black women, as well as Latinas, are also disproportionately represented in low-wage jobs such as child care and hospitality work.
“These jobs are vastly undervalued but critical to our economy,” Hassmer said.
The median hourly wage of a child care worker in 2022 was $13.71 per hour, or $28,520 annually, according to the U.S. Bureau of Labor Statistics.Â
“That makes it very hard to afford a down payment, which is one of the biggest obstacles to afford a home,” Hassmer said.
for you. Start by identifying the lender you want to work with for
financing your home. Look for a lender with local knowledge and
decision-making capabilities that also offers the right mortgage options for
your situation, such as
first-time homebuyer programs.
It is also important to identify the right real estate agent to meet your
needs, one who has the right relationships and knows the area where you’re
house hunting.
Don’t: Liquidate Your Savings
Purchasing a home is one of the largest purchases many consumers will make
in their lives. Outside of obtaining a mortgage, you will also need to
ensure you have enough saved to cover your downpayment, closing costs, fees
as well as potential reserve funds, all of which are required to be verified
in advance of closing.
Making major purchases like buying a car can reduce your available funds for
closing. It is also important you don’t move large sums of money without
documentation, as lenders will review your financial statements to ensure
you can afford the payments, and deposits and transfers may be questioned as
part of the process.
Ensure your savings are in order and you have a paper trail for assets that
will be requested by your lender. If the funds for closing are coming from a
non-liquid source, such as gifts,
home equity lines of credit (HELOCs), or investment funds, the money must be moved in advance (typically a week)
of closing.
Do: Watch Your Credit Usage
Even after you’ve received pre-approval for your mortgage, it is important
to monitor your credit and spending carefully. Avoid taking out new loans or
opening credit cards before and during the mortgage process, as these
additional liabilities may have a negative impact on your qualifying
debt-to-income ratios.
For your existing credit lines, pay off your balances in full each month
whenever possible and don’t close lines of credit as this can impact your
credit score.
And while it may be tempting to buy new furniture or appliances for your
dream home while you wait to close, it is important to hold off on these
purchases until after closing to avoid potential negative impacts on your
mortgage process.
Do: Research Available Homebuying Programs
There are a variety of programs out there to help achieve the dream of
homeownership.
as well as affordable mortgage programs
designed to assist with upfront costs, help individuals and families of
varying income levels find an affordable home through down payment and
closing cost assistance, and more. Work closely with your lender to see what
programs they have available to meet your needs as well as what state,
local, and federal programs there may be that can help you.
Do: Limit Employment and/or Income Changes
As part of your mortgage process, your employment and income will be
reviewed. During this time, it is important to avoid changing jobs or
retiring, when possible, as any changes or removal of income may have a
negative impact on your qualifying debt-to-income ratios.
Do: Keep Good Records and Have Your Documentation Ready
The mortgage approval process requires your lender to verify documentation
related to income, employment, debt and other obligations. As documents are
provided to the loan team, additional supporting information may be
requested, which is why it is important to keep good records and have your
documentation ready to avoid delays in your formal loan approval, and
subsequent settlement date.
Do: Ask Questions
Your lending team is here to support you throughout the loan process and
answer any questions you may have. Don’t be afraid to ask plenty of
questions along the way to help you work together to secure your dream home.
About the Author– Jeffrey M. Ruben
Jeffrey M. Ruben is the President of WSFS Mortgage. He joined WSFS
through its acquisition of Array Financial, a full-service mortgage banking
organization, and Arrow Land Transfer in August 2013. Jeff formed Array and
Arrow in 2005, having previously held senior executive roles at financial
and legal institutions. Jeff is also a licensed real estate attorney.
Alessandro “Sandro” DiNello spoke Wednesday about the turnaround of Flagstar Bancorp. “It took 10 years to do that, but we got it there,” the former Flagstar CEO said. “And if you do it the right way, you do it gradually, and you don’t try to do things too quickly, and you keep safety and soundness in the forefront, it can be done.”
When Alessandro “Sandro” DiNello spoke to analysts early Wednesday morning, less than an hour after being announced as executive chairman of New York Community Bancorp, one of the first points he made was about his experience in navigating tricky regulatory matters.
DiNello served as CEO of Flagstar Bancorp from 2013 until its 2022 acquisition by New York Community. During that nine-year stretch, Flagstar contended with numerous regulatory issues that had emerged from the 2008-2009 mortgage crisis.
“We were a monoline mortgage company that had been decimated by the Great Recession,” DiNello said Wednesday, recalling his time at Michigan-based Flagstar. “That was a difficult time, but we made our way through it by building the right team, building a strong risk and compliance framework, and by building the right business model.”
Later in the call, DiNello, a 1975 graduate of Western Michigan University, noted that he started his career as a bank examiner.
On Jan. 31, the bank announced a net loss of $260 million in the fourth quarter, driven by a large reserve increase. It also cut its dividend by 70%, which executives said was necessary to build capital. The company’s stock price fell by 59% over the following week.
Industry observers believe that the bank’s regulators were likely responsible for the surprise bad news, though New York Community has been tight-lipped about what happened.
The same day the earnings report was released, Jefferies downgraded New York Community’s stock from “buy” to “hold,” citing an “unexpectedly faster regulatory mandate” to comply with regulations for larger banks.
It now falls largely to DiNello to navigate the choppy waters ahead. While Thomas Cangemi is still New York Community’s president and CEO, it was DiNello who answered most of the questions from stock analysts on Wednesday. He made the case that he has the right skills and experiences to engineer a turnaround of the $116.3 billion-asset bank.
Early in his career, DiNello worked at Jackson, Michigan-based Security Savings Bank, which was acquired in 1994 by a bank that later became Flagstar.
Over the following decades, DiNello’s roles included leading government affairs for the bank. He also served as head of branch banking, an experience that he suggested will be useful in his new role at New York Community.
“I built the Flagstar branch network. These people know how to take care of customers,” DiNello said Wednesday on the conference call, adding that New York Community’s front-line bankers have a similar rapport with their clients.
“And because of that, we have seen virtually no deposit outflow from our retail branches,” he said just hours after New York Community released an update on its deposits in an effort to convince investors that its funding was still solid.
When DiNello became Flagstar’s CEO in 2013, he took over from a predecessor who’d lasted only eight months in the job. Flagstar, which was largely a mortgage lender, was in a tough spot. Between 2007 and early 2012, the company had lost nearly $1.4 billion.
In 2010, Flagstar entered into a supervisory agreement with the Federal Reserve that required the bank to submit an annual capital plan and receive a written non-objection from the Fed before paying a dividend or repurchasing stock.
Then in October 2012, the lender entered into a consent order with the Office of the Comptroller of the Currency, which related to its regulatory capital, enterprise risk management and liquidity, among other matters.
There was more regulatory trouble ahead. In September 2014, the Consumer Financial Protection Bureau ordered Flagstar to pay $37.5 million in fines and restitution in connection with allegations that it blocked homeowners from receiving foreclosure relief.
But over time, Flagstar’s crisis-era regulatory headaches got resolved. The OCC consent order was lifted in December 2016. Nearly two years later, so was the Fed’s supervisory agreement.
Flagstar’s financial results also showed gradual improvement during DiNello’s time at the helm. Its net interest margin was under 2% when he became CEO, DiNello said Wednesday, but it rose to around 4% by the time the bank was acquired.
“It took 10 years to do that, but we got it there,” DiNello said. “And if you do it the right way, you do it gradually, and you don’t try to do things too quickly, and you keep safety and soundness in the forefront, it can be done.”
Between 2015 and 2020, Flagstar recorded net income of more than $1.3 billion, including $538 million during the first year of the COVID-19 pandemic, as the U.S. mortgage market boomed.
During Flagstar’s quarterly earnings call in January 2021, DiNello described 2020 as the most successful year in the company’s history. Three months later, New York Community announced plans to buy Flagstar in an all-stock deal valued at roughly $2.6 billion.
A month before the deal was announced, Flagstar resolved one last crisis-era regulatory matter. The bank settled its obligations under a 2012 settlement with the Department of Justice, which related to false certifications on government-backed loans that went bad. Flagstar agreed to pay $70 million, which was $48 million less than it had originally appeared to owe.
When the New York Community acquisition closed in December 2022, DiNello became the combined company’s nonexecutive chairman. The events of the last two weeks have pushed into more of a day-to-day leadership role.
Since New York Community’s tailspin began, DiNello and other executives have been buying shares in the company. The purchases are similar to those made by regional bank CEOs last spring, as they sought to reassure investors they thought their banks were sound.
On Friday, DiNello bought more than $200,000 of shares, according to a securities filing. The company’s stock rose 17% after the disclosure of the executives’ stock purchases.
While Friday’s insider stock purchases instilled some “calmness,” showing that deposits are stable or growing will be key, said Peter Winter, an analyst at D.A. Davidson.
“It’s all going to come down to deposits — it really is,” Winter said. “If they come out with a midquarter update, and deposits are down, the stock is going to sell off.”
Christopher McGratty of Keefe, Bruyette & Woods is among the analysts who have welcomed DiNello’s new role. He wrote in a research note that DiNello was “the architect” of Flagstar’s operation and regulatory restructuring.
“DiNello has a strong reputation of turning around Flagstar Bancorp,” McGratty wrote, adding that the executive’s direct communication during Wednesday’s conference call, which included owning up to the challenges facing New York Community, should help start to restore confidence.
“He is well known to the Street, and his experience working through these matters should help NYCB, in our view,” McGratty added.
Some of the challenges that New York Community faces revolve around meeting the expectations that regulators have for banks with more than $100 billion of assets — a threshold that the bank crossed when it bought parts of the failed Signature Bank last spring.
During Wednesday’s call, DiNello spoke about the company’s plans to reduce its commercial real estate concentration, sell nonstrategic assets and build capital. In other forums, he has spoken about his leadership traits.
“I am willing to take risks — calculated ones,” he said in a 2017 interview with the Detroit Free Press. “If you are smart about the risks you take and you do so in a disciplined fashion, it works out.”
Daniel Tamayo, an analyst at Raymond James, said that DiNello proved to be a capable leader at Flagstar during a challenging time for the bank.
“I remember thinking, when I picked up coverage of Flagstar, ‘Why would they have someone that was there when it almost went under to lead them out of it?’” Tamayo said. “DiNello ended up being the perfect guy for the job.”
This photo taken on Aug. 22, 2023 shows an advertisement in front of a real estate for sales in Millbrae, California, the United States. The sales of previously owned homes in the United States dropped 2.2 percent in July from June to a seasonally adjusted, annualized rate of 4.07 million units, the National Association of Realtors reported Tuesday. Sales were 16.6 percent lower compared with July of last year, while homes were sold at the slowest July pace since 2010. (Photo by Li Jianguo/Xinhua via Getty Images)
The average rate on the popular 30-year fixed mortgage crossed over 7% on Monday for the first time since December, hitting 7.04%, according to Mortgage News Daily.
It comes after the rate took the sharpest jump in more than a year Friday, after the January employment report came in much higher than expected. Rates then moved up even more Monday after a monthly manufacturing report came in high as well.
Mortgage rates have been on a wild ride since the summer, briefly crossing to a 20-year high of 8% in October. Rates then fell sharply, as investors saw more and more evidence that the Federal Reserve would end its latest phase of interest rate increases.
Mortgage rates do not follow the Fed directly, but they follow loosely the yield on the 10-year Treasury, which is heavily influenced by the central bank’s impression of the economy at any given time.
“The rapid increase in rates over the past two days is actually not too surprising given the fact that the market was widely seen as overly optimistic on the Fed rate cut outlook. The Fed has repeatedly pointed to economic data having the final say in that outlook and data has been shockingly unfriendly to rates as of Friday morning’s jobs report,” said Matthew Graham, chief operating officer at Mortgage News Daily.
As mortgage rates fell over the past two months, buyers seemed to be returning to the market. That coincided with a slight uptick in the number of homes for sale. Total inventory, however, is still historically low and is keeping competition high. It is also keeping home prices stubbornly hot.
“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,” said Michael Fratantoni, chief economist at the Mortgage Bankers Association.
Mortgage applications to purchase a home had been rising steadily, but fell back in the last few weeks, as mortgage rates edged higher. With the all-important spring housing market closing in, rates are more important than ever, given high and still-rising home prices.
The median price of an existing home sold in December (the most recent data) was $382,600, according to the National Association of Realtors, an increase of 4.4% from December 2022. That was the sixth consecutive month of year-over-year price gains. The median price for the full year was $389,800, a record high.
Given how high prices are, even small rate swings are having an outsized effect on monthly payments, which are the final determination of affordability. Just a half percentage point swing can cost or save a buyer more than $200 a month on the median-priced home. So what next?
“The future of rates in 2024 is all about ifs and thens,” said Graham. “If we see more data like last Friday’s jobs report, rates will have a hard time getting back below 7%. But inflation is even more important than the labor market. If inflation comes in cooler than expected, it could balance the outlook.”
The Federal Reserve announced Wednesday it will leave interest ratesunchanged, setting the stage for rate cuts to come and paving the way for relief from the combination of higher rates and inflation that have hit consumers particularly hard.
Although Fed officials indicated as many as three cuts coming this year, the pace that they trim interest rates is going to be much slower than the pace at which they hiked, according to Greg McBride, chief financial analyst at Bankrate.
“Interest rates took the elevator going up; they are going to take the stairs coming down,” he said.
Inflation has been a persistent problem since the Covid-19 pandemic, when price increases soared to their highest levels since the early 1980s. The Fed responded with a series of interest rate hikes that took its benchmark rate to its highest in more than 22 years.
The federal funds rate, which is set by the U.S. central bank, is the interest rate at which banks borrow and lend to one another overnight. Although that’s not the rate consumers pay, the Fed’s moves still affect the borrowing and savings rates they see every day.
The spike in interest rates caused most consumer borrowing costs to skyrocket, putting many households under pressure.
Below the surface, 60% of households are living paycheck to paycheck.
Greg McBride
chief financial analyst at Bankrate
“Below the surface, 60% of households are living paycheck to paycheck,” McBride said. Even as inflation eases, high prices continue to strain budgets and credit card debt continues to rise, he added.
Now, with rate cuts on the horizon, consumers will see some of their borrowing costs come down as well, although deposit rates will also follow suit.
From credit cards and mortgage rates to auto loans and savings accounts, here’s a look at where those rates could go in the year ahead.
Since most credit cards have a variable rate, there’s a direct connection to the Fed’s benchmark, and because of the central bank’s rate hike cycle, the average credit card rate rose from 16.34% in March 2022 to nearly 21% today — an all-time high.
Going forward, annual percentage rates will start to come down when the Fed cuts rates but even then, they will only ease off extremely high levels. With only a few potential quarter-point cuts on deck, APRs would still be around 20% by the end of 2024, McBride noted.
“The credit card rates are going to mimic what the Fed does,” he said, “and those interest rate decreases are going to be modest.”
Although 15- and 30-year mortgage rates are fixed, and tied to Treasury yields and the economy, anyone shopping for a new home has lost considerable purchasing power, partly because of inflation and the Fed’s policy moves.
But rates are already significantly lower since hitting 8% in October. Now, the average rate for a 30-year, fixed-rate mortgage is 6.9%, up from 4.4% when the Fed started raising rates in March 2022 and 3.27% at the end of 2021, according to Bankrate.
Doug Duncan, chief economist at Fannie Mae, expects mortgage rates will dip below 6%in 2024 but will not return to their pandemic-era lows, which is little consolation for would-be homebuyers.
“We don’t see the affordability problem solved until supply increases substantially, interest rates come down and real incomes rise,” he said. “The combination of those things need to move together over time. It’s not going to be sudden.”
The average rate on a five-year new car loan is now more than 7%, up from 4% when the Fed started raising rates, according to Edmunds. However, rate cuts from the Fed will take some of the edge off the rising cost of financing a car — possibly bringing rates below 7% — helped in part by competition between lenders and more incentives in the market.
“There are some very encouraging signs as we kick off 2024,” said Jessica Caldwell, Edmunds’ head of insights.
“Incentives are slowly coming back as inventory improves,” she said, and “most consumers are looking for low APRs with longer loan terms, so the growth in those loans is helpful to lure consumers who have been sitting out due to adverse financing and pricing conditions.”
While the central bank has no direct influence on deposit rates, the yields tend to be correlated to changes in the target federal funds rate.
As a result, top-yielding online savings account rates have made significant moves and are now paying more than 5% — the most savers have been able to earn in nearly two decades — up from around 1% in 2022, according to Bankrate.
Although those rates have likely maxed out, “it will be another good year for savers even if we do see rates come down,” McBride said. According to his forecast, the highest-yielding offers on the market will still be at 4.45% by year-end.
Now is the time to lock in certificates of deposit, especially maturities longer than one year, he advised. “CD yields have peaked and have begun to pull back so there is no advantage to waiting.”
Currently, one-year CDs are averaging 1.75% but top-yielding CD rates pay over 5%, as good or better than a high-yield savings account.
Prospective home buyers look from the balcony of a home for sale during an Open House in a neighborhood in Clarksburg, Maryland on September 3, 2023.
Roberto Schmidt | AFP | Getty Images
After rising for several weeks, mortgage demand fell last week as buyers faced increased competition for a limited supply of homes.
Total mortgage application volume dropped 7.2% compared with the previous week, according to the Mortgage Bankers Association’s seasonally adjusted index.
Buyer demand was behind the drop, offsetting a slight increase in refinance demand. The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($726,200 or less) remained unchanged at 6.78%, with points rising to 0.65 from 0.63 (including the origination fee) for loans with a 20% down payment.
Applications for a mortgage to purchase a home fell 11% last week from the previous week and were 20% lower than the same week a year ago.
“Low existing housing supply is limiting options for prospective buyers and is keeping home-price growth elevated, resulting in a one-two punch that continues to constrain home purchase activity,” said Joel Kan, an MBA economist.
The average loan size for purchase applications has risen for several weeks, hitting $444,100 last week, the largest since May 2022. Lower mortgage rates are putting more pressure on home prices, and are bringing more buyers into the market, increasing competition.
Applications to refinance a home loan increased 2% for the week and were 3% higher than the same week one year ago. There are still very few current homeowners who have loans with interest rates higher than today’s rates, but interest rates are a full percentage point lower than they were in October, so there are some who can benefit.
Mortgage rates have barely moved in the last two weeks, but that could soon change. The Federal Reserve meets Wednesday, and while it is not expected to announce any change to its benchmark interest rate now, there is always the opportunity for news.
“If the Fed is to have an impact on mortgage rates [Wednesday], it would only be due to the market’s interpretation of comments pertaining to the future,” noted Matthew Graham, chief operating officer at Mortgage News Daily.
Friday’s monthly employment report could also impact markets and swing mortgage rates in either direction depending on what it says about the broader economy.
The Federal Reserve is expected to announce it will leave rates unchanged at the end of its two-day meeting this week, after recent reports showed the economy grew at a much more rapid pace than expected and inflation eased.
“In many ways, we already have a soft landing,” said Columbia Business School economics professor Brett House. “The Fed has threaded the needle of the economy very artfully with a kind of ‘Goldilocks‘ scenario.”
Gross domestic product grew at a much faster-than-expected 3.3% pace in the fourth quarter, fueled by a solid job market and strong consumer spending. However, inflation is still above the central bank’s 2% target, and that also opens the door to a “no-landing scenario,” according to Alejandra Grindal, chief economist at Ned Davis Research.
“No landing means above-trend growth, and also above-trend inflation,” Grindal said, describing an economy that is “overheating.”
Inflation has been a persistent problem since the Covid pandemic, when price increases spiked to their highest levels since the early 1980s. The Fed responded with a series of interest rate hikes that took its benchmark rate to its highest in more than 22 years.
As of the latest reading, the current annual inflation rate is 3.4%, still above the 2% target that the central bank considers a healthy annual rate.
The combination of higher rates and inflation have hit consumers particularly hard. A “no landing” scenario also means more strain on household budgets and those with variable-rate debt, such as credit cards.
While still elevated, inflation is continuing to make progress lower, possibly giving the Fed a green light to start cutting interest rates later this year.
“That looks like the soft landing has been more or less achieved and is likely to be sustained,” House said.
For consumers, this means relief from high borrowing costs — particularly for mortgages, credit cards and auto loans — may finally be on the way as long as inflation data continues to cooperate.
“The real danger here is that the Fed loosens prematurely, which is exactly what they did in the late 1960s,” said Mark Higgins, senior vice president for Index Fund Advisors and author of the upcoming book “Investing in U.S. Financial History: Understanding the Past to Forecast the Future.”
“The risks of allowing inflation to persist still far outweighs the risk of triggering a recession,” he said. “Their failure to do this in the late 1960s is one of the major factors that allowed inflation to become entrenched in the 1970s.”
According to Higgins, history suggests there could likely still be a recession before this is over.
To that point, 76% of economists said they believe the chances of a recession in the next 12 months is 50% or less, according to a December survey from the National Association for Business Economics.
“It’s normal for an economy to go through periods of expansion and contractions,” Higgins said. “In the short term it will be painful, in the long term we are better off doing what is necessary to return to price stability.”
The top 10 hottest housing markets are expected to be spread across the South, Northeast and Midwest this year, according to an analysis by real estate marketplace Zillow. But a “hot” market isn’t always great for would-be buyers.
Buffalo, New York, made the top of the list, as the area is slated to see increased job growth compared with the number of approved construction permits for new homes.
“In markets where you’re going to have a ton more job creation than there is housing supply, you’re likely going to see homes move faster, stronger home value appreciation,” said Orphe Divounguy, a senior economist at Zillow.
The list is based on an analysis of home value appreciation, how long it takes to sell a home and job growth relative to housing supply. That’s important information that can help you decide where you may want to look for a home — and places you may want to avoid.
Market growth in some areas may not correlate to newly created jobs.
Florida, for instance, is attracting baby boomer residents who are seeking warmer, tax-friendly places to retire, said Jessica Lautz, deputy chief economist and vice president of research at the National Association of Realtors.
The claim that “the biggest share of homebuyers are baby boomers looking into warmer climates is a trope, but it’s a trope that’s true,” she said. “They’re looking into warmer areas, favorable tax conditions and better housing affordability.”
Baby boomers are also the generation that holds most of the wealth and some of them are going to be cash buyers as they can tap into their home equity.
Meanwhile, home values are expected to decline this year in the “coolest markets,” or places that will be less competitive. These places are New Orleans; San Antonio; Denver; Houston; and Minneapolis.
“It’s a matter of affordability as well; if a market has gotten less affordable … you’re likely not going to see that type of heat in the market,” Divounguy said.
Denver, for instance, was a popular attraction for homebuyers during the pandemic, but it has turned into an area where affordability was constrained.
“Denver had a massive population flow,” Lautz said. “Finding the new Denver will be important to buyers.”
Millennials will also be major buyers; most are in their prime homebuying age and some have reached their peak earning potential.
Unlike baby boomers who are looking for favorable areas to retire, this cohort may be seeking employment opportunities or the ability to work remotely in new areas.
A delivery man delivers packages in a Los Angeles neighborhood on January 17, 2024.
Frederic J. Brown | AFP | Getty Images
Sales of previously owned homes fell 1% in December compared with November to 3.78 million units on a seasonally adjusted annualized basis, according to the National Association of Realtors. Sales were 6.2% lower than in December 2022, marking the lowest level since August 2010.
Full-year sales for 2023 came in at 4.09 million units, the lowest tally since 1995.
Regionally, on a month-to-month basis, sales were unchanged in the Northeast and fell 4.3% in the Midwest. Sales were down 2.8% in the South but rebounded 7.8% in the West. On a year-over-year basis, sales were lower in all regions.
The count of home closings is based on contracts likely signed in late October and November, when mortgage rates were considerably higher than they are now. The average rate on the 30-year fixed loan rose to about 8% in October before falling to the 7% range in November. It is now at 6.89%, according to Mortgage News Daily.
“The latest month’s sales look to be the bottom before inevitably turning higher in the new year,” said Lawrence Yun, NAR’s chief economist, in a release. “Mortgage rates are meaningfully lower compared to just two months ago, and more inventory is expected to appear on the market in upcoming months.”
Inventory fell 11.5% from November to December, but it was up 4.2% from December 2022. There were 1 million homes for sale at the end of December, making for a 3.2-month supply at the current sales pace. A six-month supply is considered balanced between buyer and seller.
Tight supply continues to reheat home prices. The median price of a home sold in December was $382,600, an increase of 4.4% from December 2022. That is the sixth consecutive month of year-over-year price gains. The median price for the full year was $389,800, a record high.
Homes stayed on the market longer in December, at an average of 29 days, up from 25 days in November. The share of all-cash sales rose to 29% from 27% in November. Individual investors, who make up a large share of all-cash sales, bought 16% of homes, down from 18% in November.
That pullback in activity from investors may be one bright spot for buyers. Both higher home prices and higher financing costs resulted in fewer investor home purchases for the full year 2023, according to a recent Realtor.com study.
“With rents continuing to ease and more multi-family homes entering the market for rent, investors may continue to tread more cautiously in the housing market,” said Danielle Hale, chief economist at Realtor.com. “This would mean one less source of competition for potential first-time home buyers who are approaching the 2024 market with optimism despite the challenge of trying to buy a home at a below-median price point, one that investors also often target.”
First-time buyers are still struggling, making up just 29% of December sales, down from 31% the year before. Historically they make up 40% of the market.
A home is constructed at a housing development on June 21, 2023 in Lemont, Illinois.
Scott Olson | Getty Images
Homebuilder sentiment improved in January, jumping 7 points to 44 on the National Association of Home Builders monthly index. Anything below 50 is still considered negative, but the index has now moved 10 points higher in the last two months.
Sentiment is now at the highest level since September.
The increase coincides with a big drop in mortgage interest rates from around 8% in mid-October to the 6% range in December. Builders point squarely to that, and the effect on affordability, for growing confidence.
“Lower interest rates improved housing affordability conditions this past month, bringing some buyers back into the market after being sidelined in the fall by higher borrowing costs,” said Alicia Huey, NAHB chairman and a custom home builder and developer from Birmingham, Alabama. “Single-family starts are expected to grow in 2024, adding much needed inventory to the market. However, builders will face growing challenges with building material cost and availability, as well as lot supply.”
Of the index’s three components, current sales conditions increased 7 points to 48, sales expectations in the next six months jumped 12 points to 57 and buyer traffic rose 5 points to 29.
Regionally, on a three-month moving average, builder confidence increased the most in the Northeast, the only area now in positive territory at 55. Sentiment was flat in the Midwest and rose slightly in the South and West.
When most people think of Laguna Beach, California, they think of its scenic coves and beaches.
But the small coastal city — with a population of around 22,600 — is also pioneering a new model for elder care.
About 77% of adults ages 50 and up hope to stay in their homes long term, according to AARP. In Laguna Beach, the rate is even higher, with about 90% of residents, according to Rickie Redman, director of the city’s aging-in-place services, dubbed Lifelong Laguna.
The program, which provides services through a hometown nonprofit, was piloted in 2017. Lifelong Laguna is based on the Village movement, where aging in place is encouraged with community support.
The Laguna Beach program aims to fulfill a specific need for a city where approximately 28% of residents are age 65 and over, while local assisted living and memory care services are scarce.
Many of the older residents have lived in the city since they were in their 20s and 30s, and now find themselves in their 70s and 80s, according to Redman. Many of them trace back to the city’s artistic roots, she said.
“They make this city unique,” Redman said. “They’re the placeholders for the Laguna that we now know.”
Notably, there is no cost for the city’s older adults to participate in most of the services.
The program, which currently has around 200 participants, relies on grants and local fundraising, according to Redman. Its services address a wide range of needs, including a home repair program the city operates in collaboration with Habitat for Humanity, nutrition counseling and end-of-life planning.
Other cities have also adopted community support models for residents who age in place through the Village movement. That includes tens of thousands of older adults in 26 states and Washington, D.C., according to Manuel Acevedo, founder and CEO of Helpful Village, which provides technology support to seniors and participating communities.
The high costs of aging in place are one of the biggest obstacles that prevents older adults from fulfilling their desire to stay put, experts say.
About 10,000 baby boomers are expected to turn age 65 every day until 2030. An estimated 70% of those individuals will need long-term care services at some point, according to Genworth Financial.
In 2021, the highest year-over-year increase in cost was in home-care services, Genworth’s research found. The median annual cost for in-home care was $61,776 for a home health aide to provide hands-on personal care and $59,488 for homemaker services to help with household tasks.
Those costs have been influenced by supply and demand, according to Genworth.
As more people age and require care, the Covid pandemic led to an insufficient supply of professionals to meet care needs, as well as a high turnover rate.
Preferences for aging in place are also showing up in the real estate market.
Baby boomers currently represent the biggest portion of home buyers, according to Jessica Lautz, deputy chief economist and vice president of research at the National Association of Realtors. More than half of boomers are saying that the property they are purchasing now is where they plan on living for the rest of their lives, a sentiment that has increased since the Covid pandemic.
“There definitely is a mindset change, where people are saying, ‘I do want to stay put, I don’t necessarily want to move into a nursing home or into assisted care,’” Lautz said.
Sylvia Bradshaw, an 84-year-old Laguna Beach resident who moved to the city in 1983, describes it as “paradise.”
She has lived there since that time, apart from a stint when she and her husband relocated to Ireland. Still, the couple held on to their home, the city’s third-oldest house, which was built in 1897.
“My husband had ideas about selling our home,” Bradshaw said. “But I would never sell it, because I said ‘Once it’s gone, it’s gone forever.’”
Bradshaw’s husband was a teacher in the city’s high school and later became a lawyer. More recently, he had health struggles that made it difficult for the couple to keep up with yard work, Bradshaw said.
As members of the Laguna aging-in-place community, they had access to help.
Redman helped arrange for a team of workers to come to clean up the yard, which included removing 17 bags of scraps and trimming a roughly 30-year-old fig tree.
“Now people can see that there’s a house there; they just couldn’t see it [before],” said Bradshaw, who said she is “forever grateful” for the gesture.
The support of the community also was especially helpful in sorting through the hospice care issues prior to her husband’s recent death.
“Anything that I’ve needed, I’ve gotten help,” Bradshaw said.
That has included help sorting through insurance choices, legal advice, transportation assistance and classes and social events, said John Bradshaw, Sylvia’s son.
Having the elder community support his parents is a “big comfort,” John said, particularly as he no longer lives in Laguna Beach.
“It is just such a wonderful relief,” John said. “It’s like having a second family, this team of people really supporting my parents, and others like them, to be able to stay and enjoy this part of the country.”
If you want to age in place, it helps to start planning early to make sure it’s feasible, said Carolyn McClanahan, a physician and certified financial planner who isthe founder of Life Planning Partners in Jacksonville, Florida.
“We actually start bringing it up with clients in their 50s and 60s: Where do you want to live out the end of your life?” McClanahan said. “Of course, most people do say, ‘I want to live in my home.’”
It’s important to be realistic about those plans.
Ask yourself whether the decision to age in place is just “rationalized inertia,” or giving yourself an out when it comes to confronting other important aging decisions, said Tom West, senior partner at Signature Estate and Investment Advisors in Tysons Corner, Virginia.
If you do decide staying in your home is the best option, be prepared to make changes to your home, he said. That may include wider doorways to accommodate wheelchairs or walkers, as well as grab bars to help prevent falls.
Like the aging-in-place models established in Laguna Beach and elsewhere, it helps to have community support. McClanahan recommends developing strong relationships with your neighbors where you agree to look out for each other.
It also helps to set certain boundaries for when staying at home no longer makes sense.
For example, it may cost $240,000 a year to stay home if you need 24-hour care, McClanahan said.
“Even if you’re super rich, a lot of families hate seeing that much money go out the window, when you would pay half the cost to actually go into a facility,” McClanahan said.
Further, be sure to outline your wishes in all potential circumstances. While you may want your children to promise not to put you in a nursing home, it may come to a point where it is more cost effective and safer to go to a care unit, McClanahan said.
LOS ANGELES — The average long-term U.S. mortgage rate rose for the second time in as many weeks, climbing to its highest level in four weeks.
The average rate on a 30-year mortgage rose to 6.66% from 6.62% last week, mortgage buyer Freddie Mac said Thursday. A year ago, the rate averaged 6.33%.
Borrowing costs on 15-year fixed-rate mortgages, popular with homeowners refinancing their home loans, eased this week, bringing the average rate to 5.87% from 5.89% last week. A year ago, it averaged 5.52%, Freddie Mac said.
The latest increase in the average rate on a 30-year home loan follows a nine-week string of declines at the end of last year that lowered the average rate after it surged in late October to 7.79%, the highest level since late 2000.
Still, the average rate on a 30-year home loan remains sharply higher than just two years ago, when it was 3.45%. That large gap between rates now and then has helped limit the number of previously occupied homes on the market by discouraging homeowners who locked in rock-bottom rates from selling. It has also crushed homebuyers’ purchasing power at a time when home prices have kept rising even as sales of previously occupied U.S. homes slumped more than 19% through the first 11 months of last year.
“Mortgage rates have not moved materially over the last three weeks and remain in the mid-6% range, which has marginally increased homebuyer demand,” said Sam Khater, Freddie Mac’s chief economist. “Even this slight uptick in demand, combined with inventory that remains tight, continues to cause prices to rise faster than incomes, meaning affordability remains a major headwind for buyers.”
The overall decline in mortgage rates since late October has loosely followed a pullback in the 10-year Treasury yield, which lenders use as a guide to pricing loans. The yield, which in mid October surged to its highest level since 2007, has largely fallen on hopes that inflation has cooled enough for the Federal Reserve, which has opted to not move rates at its last three meetings, to shift to cutting interest rates this year.
Housing economists expect that the average rate on a 30-year mortgage will decline further this year, though forecasts generally see it moving no lower than 6%.
But for young adults just starting out, soaring home prices and sky-high rents have become one of the greatest obstacles to making it on their own.
Nearly one-third, or 31%, of Generation Z adults live at home with parents because they can’t afford to buy or rent their own space, according to a recent report by Intuit Credit Karma that polled 1,249 people age 18 and older.Gen Z is generally defined as those born between 1996 and 2012, including a cohort of teens and tweens.
“The current housing market has many Americans making adjustments to their living situations, including relocating to less-expensive cities and even moving back in with their families,” said Courtney Alev, Intuit Credit Karma’s consumer financial advocate.
Overall, the number of households with two or more adult generations has been on the rise for years, according to a Pew Research Center report. Now, 25% of young adults live in a multigenerational household, up from just 9% five decades ago.
Finances are the No. 1 reason families are doubling up, Pew also found, due in part to ballooning student debt and housing costs.
Now, the average rate for a 30-year, fixed-rate mortgage is hovering near 6.6%, down from recent highs but still twice what it was three years ago.
“Given the expectation of rate cuts this year from the Federal Reserve, as well as receding inflationary pressures, we expect mortgage rates will continue to drift downward as the year unfolds,” said Sam Khater, Freddie Mac’s chief economist.
“While lower mortgage rates are welcome news, potential homebuyers are still dealing with the dual challenges of low inventory and high home prices that continue to rise.”
Of course, housing isn’t the only issue. Millennials and Gen Z face financial challenges their parents did not as young adults. On top of carrying larger student loan balances, their wages are lower than their parents’ earnings when they were in their 20s and 30s.
“At the end of all that, you are not left with a whole lot of money to spend on a down payment,” said Laurence Kotlikoff, economics professor at Boston University and president of MaxiFi, which offers financial planning software.
Even if they don’t live at home, more than half of Gen Z adults and millennials are financially dependent on their parents, according to a separate survey by Experian.
For parents, however, supporting grown children can be a substantial drain at a time when their own financial security is in jeopardy.
Not surprisingly, parents are more likely to pay for most of the expenses when two or more generations share a home. The typical 25- to 34-year-old in a multigenerational household contributes 22% of the total household income, Pew found.
From buying groceries to paying for cellphone plans or covering health and auto insurance, parents are spending more than $1,400 a month, on average, helping their adult children make ends meet, another report by Savings.com found.
“It has to go both ways,” Kotlikoff said.
Overall, there can be an economic benefit to these living arrangements, Pew found, and Americans living in multigenerational households are less likely to be financially vulnerable. “If you are in financial union, make the best of it,” Kotlikoff said.
A “For Sale” outside a house in Hercules, California, US, on Tuesday, May 31, 2022. Homebuyers are facing a worsening affordability situation with mortgage rates hovering around the highest levels in more than a decade.
David Paul Morris | Bloomberg | Getty Images
Mortgage rates moved a little bit higher last week, for the second week in a row, but are still in a range that consumers appear to like.
Total mortgage application volume rose 9.9% last week compared with the previous week, according to the Mortgage Bankers Association’s seasonally adjusted index. An additional adjustment was made for the New Year’s holiday.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($726,200 or less) increased to 6.81% from 6.76%, with points remaining unchanged at 0.61 (including the origination fee) for loans with a 20% down payment. That rate peaked at around 8% in October and was in the 7% range for much of last year.
Applications to refinance a home loan jumped 19% from the previous week and were 30% higher than the same week one year ago. The 30-year fixed rate was 39 basis points higher than it was a year ago, but 26 basis points lower than it was four weeks ago. While there aren’t a lot of borrowers who can benefit from a refinance, given how low rates were just two years ago, those who can are rushing back into the market.
Applications for a mortgage to purchase a home rose 6% for the week but were still 16% lower than the same week one year ago. Buyers continue to contend with limited supply and overheated home prices.
“The increase in purchase and refinance applications for both conventional and government loans is promising to start the year but was likely due to some catch-up in activity after the holiday season and year-end rate declines,” said Joel Kan, an MBA economist, in a release. “Mortgage rates and applications have been volatile in recent weeks and overall activity remains low.”
Mortgage rates increased again slightly to start this week, but remain in the 6% range. The next big economic indicator comes Thursday with the release of the monthly consumer price index. If it is higher than expected, signaling there is more to do to curb inflation, mortgage rates could move up even more.
A “For Sale” sign hangs outside a home on the west side of Detroit, Michigan.
Fabrizio Costantini | Bloomberg | Getty Images
Home prices are rising faster and faster each month, fueled by a decline in mortgage rates.
On a national level, home prices jumped 5.2% in November compared to the same month a year earlier, according to a new report from analytics firm CoreLogic. That’s up from a 4.7% annual gain in October.
States in the Northeast led the gains, with Rhode Island (11.6%), Connecticut (10.6%) and New Jersey (10.5%) seeing the strongest growth. Areas seeing year-over-year price declines in November were Idaho (-1.3%); Utah (-0.4%); and Washington, D.C. (-0.2%).
“This continued strength remains remarkable amid the nation’s affordability crunch but speaks to the pent-up demand that is driving home prices higher,” Selma Hepp, chief economist for CoreLogic, said in a release. “Markets where the prolonged inventory shortage has been exacerbated by the lack of new homes for sale recorded notable price gains over the course of 2023,” she added.
The lower the mortgage rate, the greater the buying power for consumers. While prices are expected to soften slightly later next year, much of that will depend on supply. At current low supply levels and demand increasing due to lower mortgage rates, for now at least, prices have nowhere to go but up.
After hitting more than a dozen record lows in the first two years of the Covid-19 pandemic, mortgage rates began rising sharply in 2022 and hit a more than 20-year high in October last year. The average rate on the 30-year fixed loan briefly crossed over 8%. It has since fallen back and is now in the high 6% range.
On the city level, Detroit saw the largest annual price gain at 8.7%, surpassing Miami, which came in at 8.3%, according to CoreLogic. Miami had held the top spot for 16 months.
“Detroit lagged appreciation during the pandemic so some of this was a catch up,” said Hepp. “Other Mid-west areas [are] seeing stronger appreciation because they’re more affordable.”
While the median price of a home in Detroit is still among the most affordable in the nation, the market is considered overvalued due to local income levels.
Roughly 82% of the nation’s 397 metropolitan housing markets surveyed by CoreLogic were considered overvalued. That means Detroit’s home prices are overly high compared with local household incomes. Notably, large cities considered “normal” in valuation were Boston; Chicago; Los Angeles; and Washington, D.C.
“It really depends on who is buying in the area, and we’ve seen more higher income folks buying in those areas,” Hepp said.
A sharp drop in mortgage interest rates in December may have kickstarted this year’s spring housing market early. Rates are about a full percentage point lower than they were in October, and consumers expect they will fall even more.
Optimism about mortgage rates increased sharply in December, according to a monthly consumer survey by Fannie Mae. For the first time since the survey was launched in 2010, more homeowners on net believe rates will go down rather than up, according to Mark Palim, deputy chief economist at Fannie Mae.
“This significant shift in consumer expectations comes on the heels of the recent bond market rally,” said Palim. “Notably, homeowners and higher-income groups reported greater rate optimism than renters.”
The average rate on the 30-year fixed has been on a wild ride since the start of the Covid pandemic. It hit more than a dozen record lows in 2020 and 2021, below 3%, causing a historic run on homebuying and a sharp rise in prices, only to then more than double in 2022. Rates hit a more than 20-year high in October 2023, hovering around 8% before falling back below 7% in December. Rates, however, are still twice what they were three years ago.
Ryan Paredes (R) and Ariadna Paredes look at a home being shown to them by Ryan Ratliff, a Real Estate Sales Associate with Re/Max Advance Realty, on April 20, 2023 in Cutler Bay, Florida.
Joe Raedle | Getty Images News | Getty Images
Buyers are coming back. Washington, D.C.-area real estate agent Paul Legere hosted two open houses over the weekend — homes in the $1.1 million to $1.2 million price range — and said they were the busiest he’s experienced in the last year.
“Similar report from my co-worker,” he added. “Even on Saturday, during torrential rain, we both had over 10 groups of active shoppers. These were people that had been in the market and had slowed or put their search on hold and are coming back, earnestly looking for a new property.”
Legere said he expects to see “an infusion” of inventory in the next week or two. Tight inventory has helped keep prices higher, another hurdle for potential homebuyers.
“Homeowners have told us repeatedly of late that high mortgage rates are the top reason why it’s both a bad time to buy and sell a home, and so a more positive mortgage rate outlook may [incentivize] some to list their homes for sale, helping increase the supply of existing homes in the new year,” said Palim.
A recent report from Redfin, a national real estate brokerage, found demand starting to pick up in December as rates fell. Redfin’s Homebuyer Demand Index — a seasonally adjusted measure of requests for tours and other homebuying services from Redfin agents — was up 10% from a month ago to its highest level since August, according to the report. Pending sales, which measure signed contracts on existing homes, were down 3% from December 2022, but that was the smallest decline in two years.
Much will depend on both interest rates and home prices in the months to come. Prices continue to rise, due to lack of supply, and if rates continue to drop, price gains could accelerate. The lower the rate, the more potential homebuyers can afford.
While mortgage rates are expected to drop further, that will depend on the strength of the economy and inflation.
“The rate momentum is as good as the trajectory of economic data. So if the data continues to do what it has been doing, there’s no reason rates couldn’t go down into the 5’s, possibly even the high 4’s if some of the talking heads are right about recession in 2024,” Matthew Graham, chief operating officer of Mortgage News Daily, said on CNBC’s “The Exchange.”
The average rate on the 30-year fixed mortgage hit a recent low of 6.61% at the end of December, but is up slightly this month to 6.76%, according to Mortgage News Daily.
The Federal Reserve‘s effort to bring down inflation has so far been successful, a rare feat in economic history.
The central bank signaled in its latest economic projections that it will cut interest rates in 2024 even with the economy still growing, which would be the sought-after path to a “soft landing,” where inflation returns to the Fed’s 2% target without causing a significant rise in unemployment.
“Rates are headed lower,” said Tim Quinlan, senior economist at Wells Fargo. “For consumers, borrowing costs would fall accordingly.”
Most Americans can expect to see their financing expenses ease in the year ahead, but not by much, cautioned Greg McBride, chief financial analyst at Bankrate.
“We are in a high interest rate environment, and we’re going to be in a high interest rate environment a year from now,” he said. “Any Fed cuts are going to be modest relative to the significant increase in rates since early 2022.”
Although Fed officials indicated as many as three cuts coming this year, McBride expects only two potential quarter-point decreases toward the second half of 2024. Still, that will make it cheaper to borrow.
From mortgage rates and credit cards to auto loans and savings accounts, here are his predictions for where rates are headed in the year ahead:
Prediction: Credit card rates fall just below 20%
Because of the central bank’s rate hike cycle, the average credit card rate rose from 16.34% in March 2022 to nearly 21% today — an all-time high.
Going forward, annual percentage rates aren’t likely to improve much. Credit card rates won’t come down until the Fed starts cutting and even then, they will only ease off extremely high levels, according to McBride.
“The average rate will remain above the 20% threshold for most of the year,” he said, “and eventually dip to 19.9% by the end of 2024 as the Fed cuts rates.”
But rates are already significantly lower since hitting 8% in October. Now, the average rate for a 30-year, fixed-rate mortgage is 6.9%, up from 4.4% when the Fed started raising rates in March of 2022 and 3.27% at the end of 2021, according to Bankrate.
McBride also expects mortgage rates to continue to ease in 2024 but not return to their pandemic-era lows. “Mortgage rates will spend the bulk of the year in the 6% range,” he said, “with movement below 6% confined to the second half of the year.”
Prediction: Auto loan rates edge down to 7%
When it comes to their cars, more consumers are facing monthly payments that they can barely afford, thanks to higher vehicle prices and elevated interest rates on new loans.
The average rate on a five-year new car loan is now 7.71%, up from 4% when the Fed started raising rates, according to Bankrate. However, rate cuts from the Fed will take some of the edge off of the rising cost of financing a car, McBride said, helped in part by competition between lenders.
McBride expects five-year new car loans to drop to 7% by the end of the year.
Prediction: High-yield savings rates stay over 4%
Top-yielding online savings account rates have made significant moves along with changes in the target federal funds rate and are now paying more than 5% — the most savers have been able to earn in nearly two decades — up from around 1% in 2022, according to Bankrate.
Even though those rates have likely peaked, “yields are expected to remain at the highest levels in over a decade despite two rate cuts from the Fed,” McBride said.
According to his forecast, the highest-yielding offers on the market will still be at 4.45% in the year ahead. “It will still be a banner year for savers when those returns are measured against a lower inflation rate,” McBride said.
JER Investors Trust Inc., a mortgage REIT, filed for bankruptcy in the latest sign of distress in commercial real estate.
The real estate investment trust — which counts the private equity firm C-III Capital Partners among its top shareholders — owes more than $100 million to creditors but has less than $50 million of assets, according to a Chapter 11 petition filed in Wilmington, Delaware, on Friday. Companies use Chapter 11 of the U.S. Bankruptcy Code to temporarily halt most debt payments while they try to work out a plan to stay in business.
JER Investors manages a portfolio of mortgage-backed securities and other types of debt tied to the commercial real estate market, according to the company’s website. As interest rates climbed this year, commercial properties came under pressure, especially firms that lost tenants during the pandemic as office-tower workers stayed home.
Earlier this month, mall owner Pennsylvania Real Estate Investment Trust filed for bankruptcy for the second time in three years. In November, the coworking behemoth WeWork Inc. filed for bankruptcy with plans to cut back a sprawling real estate portfolio that spanned 39 countries.
C-III Capital owns at least 8.4% of JER Investors, according to court papers. JER also owes C-III nearly $20 million, the bankruptcy filing shows. The Bank of New York Mellon Trust is owed $93.9 million, according to the Chapter 11 petition.
The case is JER Investors Trust Inc., 23-12109, US Bankruptcy Court, District of Delaware (Wilmington)
The average long-term U.S. mortgage rate retreated for the ninth straight week to reach its lowest level since May.
The average rate on a 30-year mortgage dipped to 6.61% from 6.67% last week, mortgage buyer Freddie Mac said Thursday. A year ago, the rate averaged 6.42%.
Borrowing costs on 15-year fixed-rate mortgages, popular with homeowners refinancing their home loans, also inched down this week, with the average rate falling to 5.93% from 5.95% last week. A year ago, it averaged 5.68%, Freddie Mac said.
“Heading into the new year, the economy remains on firm ground with solid growth, a tight labor market, decelerating inflation, and a nascent rebound in the housing market,” Sam Khater, Freddie Mac’s chief economist.
Mortgage rates have been easing since late October, when the average rate on a 30-year home loan reached 7.79%, the highest level since late 2000.
The decline has tracked the trajectory of the 10-year Treasury yield, which lenders use as a guide to pricing loans. The yield, which in mid October surged to its highest level since 2007, has been falling on hopes that inflation has cooled enough for the Federal Reserve to shift to cutting interest rates after yanking them dramatically higher since March of 2022.
The Fed has opted to not move rates at its last three meetings, which has also given financial markets a boost.
Investors’ expectations for future inflation, global demand for U.S. Treasurys and what the Fed does with its benchmark federal funds rate can influence rates on home loans.
The sharp runup in mortgage rates that began early last year has pushed up borrowing costs on home loans, reducing how much would-be homebuyers can afford even as home prices have kept climbing due to a stubbornly low supply of properties on the market. That’s weighed on sales of previously occupied U.S. homes, which are down 19.3% through the first 11 months 2023.
Despite the recent decline, the average rate on a 30-year home loan remains sharply higher than just two years ago, when it was 3.11%. The large gap between rates now and then is contributing to the low inventory of homes for sale by discouraging homeowners who locked in rock-bottom rates two years ago from selling.
Some housing economists are forecasting that home sales will increase next year, on the assumption that mortgage rates ease further.
Pending home sales in November were unchanged compared with October and 5.2% lower than November of last year, according to the National Association of Realtors.
The reading, which is based on signed contracts during the month, is a forward-looking indicator of closed sales as well as the most current look at what potential homebuyers are thinking.
Mortgage rates are key in this report, with the average rate on the 30-year fixed mortgage soaring over 8% in mid-October before dropping sharply to 7.5% in the first week of November, according to Mortgage News Daily. It ended the month around 7.25%.
Analysts had expected the drop to cause a slight gain in pending sales, but apparently it wasn’t enough, given steep home prices and tight supply.
“Although declining mortgage rates did not induce more homebuyers to submit formal contracts in November, it has sparked a surge in interest, as evidenced by a higher number of lockbox openings,” said Lawrence Yun, NAR’s chief economist.
Regionally, pending sales rose 0.8% month over month in the Northeast and 0.5% in the Midwest. Sales made a stronger 4.2% gain in the West — where prices are highest and a drop in mortgage rates would have the largest impact — and fell 2.3% in the South. Pending sales were lower in all regions in November compared with same month in 2022.
Mortgage rates are now solidly in the mid-6% range, but the supply of homes for sale is still very low. Builders are ramping up production, but new homes come at a price premium. Prices for existing homes continue to rise.
“With mortgage rates falling further in December – leading to savings of around $300 per month from the recent cyclical peak in rates – home sales will improve in 2024,” Yun added.
