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Mortgage Rates Continue Slow Climb Over 3% | Realtor Magazine

The 30-year fixed-rate mortgage continued to move higher this week, now averaging 3.05%, Freddie Mac reports.

“It looks like rates in the 2% range are over while current mortgage rates will likely be the lowest,” Nadia Evangelou, senior economist and director of forecasting at the National Association of REALTORS®, writes on the association’s Economists’ Outlook blog. “Since the pandemic struck our country one year earlier, year-over-year comparisons for most of the economic indicators are going to be much higher for the next several months.” Many of these higher readings will put upward pressure on the 10-year Treasury yield, which mortgage rates tend to follow.

Still, mortgage rates remain historically low, if in the 3% range. The all-time low for the 30-year fixed-rate mortgage was set in January, averaging 2.65%.

“As the economy improves given labor market optimism, continued vaccination roll-out, and additional stimulus pending, mortgage interest rates increased this week,” says Sam Khater, Freddie Mac’s chief economist. “But even as rates rise modestly, the housing market remains healthy on the cusp of spring home buying season. Home buyer demand is strong and, for homeowners who have not refinanced but are looking to do so, they have not yet lost the opportunity.”

Freddie Mac reports the following national averages with mortgage rates for the week ending March 11:

• 30-year fixed-rate mortgages: averaged 3.05%, with an average 0.6 point, rising from last week’s 3.02% average. Last year at this time, 30-year rates averaged 3.36%.
• 15-year fixed-rate mortgages: averaged 2.38%, with an average 0.6 point, increasing from last week’s 2.34% average. A year ago, 15-year rates averaged 2.77%.
• 5-year hybrid adjustable-rate mortgages: averaged 2.77%, with an average 0.3 point, increasing from last week’s 2.73% average. A year ago, 5-year ARMs averaged 3.01%.

Freddie Mac reports average commitment rates along with average points to better reflect the total upfront cost of obtaining a mortgage.

Down Payments, Mortgage Loan Amounts Reach New Highs | Realtor Magazine

Home prices have surged to double-digit percentage gains over the past year, which means home buyers are having to either bring more to the closing table or borrow more. They’re doing both.

Down payments are at record highs, according to ATTOM Data Solutions’ fourth quarter 2020 U.S. Residential Property Mortgage Origination Report. The median down payment on a single-family home and condo purchased with financing in the fourth quarter of 2020 was $24,500, up 82% compared to the fourth quarter of 2019 ($13,441), according to the report, with records dating back to at least 2000.

The median down payment represents 7.7% of the median sales price for homes purchased with financing during the fourth quarter of 2020, up from 5.2% a year prior.

Home buyers are borrowing more to afford the higher home prices. The median loan amount was $280,000—another record high, according to ATTOM Data Solutions’ report. The amount buyers are borrowing for their mortgage jumped nearly 25% compared to the fourth quarter of 2019.

The National Association of REALTORS®’ latest existing-home sales report, reflecting January housing data, showed the median existing-home price for all housing types was $303,900, a 14% increase compared to a year prior.

Homeowners Are Taking on Bigger Remodeling Plans | Realtor Magazine

Home remodeling has surged since the pandemic began, but many of the projects initially were smaller in scope. That is reversing as homeowners decide to go bigger with their renovation plans and beyond the DIY projects that dominated during the early stages of the COVID-19 outbreak.

Homeowners are increasingly undertaking larger remodeling projects, including expanding and rearranging floor plans as they look to create dedicated home offices or increase a home’s functionality, according to the Q4 2020 Kitchen & Bath Market Index, released by the National Kitchen & Bath Association and John Burns Real Estate Consulting. The NKBA projects a 10.7% sales growth for the remodeling industry in 2021.

The rising desire for large-scale projects is prompting homeowners to move away from DIY jobs and hiring professionals to do more robust renovations.

“We’re seeing an incomparable surge in homeowners looking to rearrange floor plans, tear out complete kitchens, baths, and other rooms to make space for increased activity within the home, and generally create a space that better suits their evolving needs,” says Bill Darcy, the NKBA’s CEO. “Our industry’s greatest challenge will be operational, as our members aim to meet growing demand from homeowners with an unmatched appetite for remodeling.”

Indeed, remodeling contractors report a surge in business, but have faced the rising cost of materials and supply-chain disruptions as high demand for cabinetry and appliances has prompted shortages and delays. Contractors also report a shortage in the availability of skilled labor. More than 56% of remodeling contractors surveyed by the NKBA say that COVID-19 has worsened the already tight labor shortage due to the uptick in consumer demand. Consequently, homeowners may have longer to wait for professionals to take on their remodeling projects.

While homeowners are leaning on professionals more as of late for their remodeling projects, they still want to keep their projects’ prices lower. Demand for lower-priced products and finishes remains high, the NKBA reports.

Where Homeownership Is Leading to the Largest Wealth Gains | Realtor Magazine

A home often represents about 90% of the total wealth of a household. Homeownership often has long been pointed to as a way to build wealth over the long run. It also could help narrow racial income and wealth inequity gaps, writes Gay Cororaton, senior economist for the National Association of REALTORS®, at the association’s Economists’ Outlook blog.

But how much wealth potential can you gain over time? Cororaton offers the following scenario: Take a homeowner who purchased a single-family existing home 10 years ago at the median sales price of $170,567, with a 10% down payment. Then, they sold the home at the median sales price of $315,700 in the fourth quarter of 2020. They would have built up a home equity gain of $176,123. Over a 30-year period, that would jump to $307,979, Cororaton notes.

“Wealth accumulation takes time, so the earlier households start owning homes, the greater the wealth accumulation,” Cororaton writes.

In some metros, homeowners are accumulating equity over a decade faster than others. For example, the areas that saw the greatest wealth gains from homeownership between the fourth quarter of 2010 and the fourth quarter of 2020 were:

• San Jose-Sunnyvale-St. Clara, Calif.: $929,471
• San Francisco-Oakland-Hayward, Calif.: $761,204
• Anaheim-Sta. Ana-Irvine, Calif.: $509,806
• Los Angeles-Long Beach-Glendale, Calif: $430,196
• San Diego-Carlsbad, Calif.: $427,896
• Urban Honolulu: $412,986
• Naples-Immokalee-Marco Island, Fla.: $379,243

Real Estate Pros to Homeowners: Don’t Wait to Sell | Realtor Magazine

“A lot of people are missing the best market now by waiting,” Kris Lindahl, CEO and founder of Kris Lindahl Real Estate in the Minneapolis area, told MarketWatch.

Homeowners are finding themselves with more negotiating power as buyer demand remains high and housing inventories are slim. The supply of homes for sale is at a record low of 1.9 months. A six-month supply is considered a healthy balance between sellers and buyers.

The high demand is sparking home prices to surge. The median home price was $303,900 for an existing home in January—a 14% jump from the year prior, according to the National Association of REALTORS®.

Homeowner equity has grown. Thirty percent—nearly one in three—of homes with a mortgage in the U.S. are now considered “equity-rich,” according to ATTOM Data Solutions, a real estate research firm. A home being equity rich means that the combined estimated amount of loans secured by the property is 50% or less of the estimated market value.

Homes are selling fast, too. “At this point, I’m telling my sellers, ‘Pick a Saturday,’ ” Marc J. Jenkins, a real estate professional with Prime Property Partners in the Atlanta area, told MarketWatch. “‘Give me four or six hours, and I’ll sell your house.’”

So what’s holding sellers back? They often have to buy as well and are struggling to find a home to move to. Potential sellers fear they’ll pay more for a comparable home, even if they’re downsizing. This may leave sellers unsure of what to do, but there are ways around the stress.

“I would say buy first because this way they can take their time,” Sonia Figueroa, a real estate pro with EXP Realty in Chicago, told MarketWatch. “They’re not feeling rushed, and they’re not just going to jump into any house just because they need to hurry up and move out.” However, a seller would need to get preapproved for a mortgage to buy their next home while paying the mortgage on their current home. For some homeowners, that is not a financial option for them.

Others can list their homes and then accept an offer from a buyer who is willing to wait while they find a place to buy. Sellers have more negotiating power and often are able to ask for this extra time. Sellers also may be able to negotiate a rent-back agreement to allow them more time to shop for a home.

Buyers Are Increasingly Shopping for Multigen Homes | Realtor Magazine

The number of home shoppers buying a multigenerational home since the pandemic has risen to a nine-year high of 15%, according to data from the National Association of REALTORS® dating back to 2012. That means home shoppers are looking for larger homes that can accommodate more family members living under one roof.

The top reason to buy a multigenerational home is for aging parents to move in and for younger family members to take care of that aging parent or to spend more time with them.

“While the concern of COVID-19, loneliness, or child care needs may have driven the change, the new paradigm may be here to stay,” writes Jessica Lautz, NAR’s vice president of demographics and behavioral insights at the association’s Economists’ Outlook blog.

Another reason driving the increase: cost savings. “Family members are pooling incomes to purchase a larger home,” Lautz notes. “This reason has accelerated in the last two years as people are relying on others due to the loss of income or potential loss of income, and marriage rates have continued to drop. This factor has likely seen an increase during the pandemic as many Americans face a cut in wages and lost income.”

Adult children are moving back home, also driving an increase in multigenerational homes. More young adults are living at home with their families than since the Great Depression. Fifty-two percent of adults aged 18 to 29 are living at home, according to an analysis from Pew Research Center of U.S. Census Bureau data. Many of these young adults are college students who have moved home in the pandemic, may have faced job losses, or were tired of living independently and paying rent.

For these young adults who are still employed, they may be able to save up by moving back home. “In the pandemic, student debt on federal loans went to 0% interest rate and payments went automatically into forbearance,” Lautz notes. “If a young adult is employed, they could really tackle student debt and pay it down. This would help first-time buyers move out of their parents’ house and into homeownership. Student debt is one of the biggest hurdles for first-time buyers.”

Many first-time buyers purchase a home directly after living in a family member’s home. Lautz says this share likely will increase next year with more than half of young adults living at home. “This allows first-time buyers to continue saving for a down payment and closing costs as they find the perfect home,” she notes.

FHFA Extends Mortgage Forbearance for Multifamily Owners | Realtor Magazine

The Federal Housing Finance Agency announced Thursday that it will grant more time in forbearance to qualifying multifamily property owners. The program was set to expire at the end of the month but has now been extended until June 30.

Property owners with Fannie Mae and Freddie Mac–backed multifamily mortgages can enter new or modified forbearance if they are experiencing financial hardship due to the COVID-19 pandemic. “COVID-19 continues to financially impact Americans across the country, thereby hindering many tenants’ ability to pay their rent,” says FHFA Director Mark Calabria. “To help tenants in financial distress and property owners, FHFA is extending the multifamily COVID-19 forbearance and tenant protections.”

Property owners who take part in the relief program are required to inform tenants in writing about tenant protections available during their forbearance as well as during the repayment period. They also must agree not to evict tenants for not paying rent while the property is in forbearance.

Fannie Mae and Freddie Mac outline tenant protections to their multifamily properties on a lookup tool at their websites. The property lookup tools are to make it easier for tenants to find out if their multifamily property has a Fannie or Freddie-backed mortgage. The lookup tools can be accessed atFannie Mae’s website andFreddie Mac’s website.

The Consumer Financial Protection Bureau also has awebsite devoted to helping homeowners and renters find aidduring the pandemic.

Mortgage Rates Top 3% as Would-be Buyers Pull Back | Realtor Magazine

Home buyers may not be happy: The 30-year fixed-rate mortgage topped the 3% threshold, averaging 3.02% this week, Freddie Mac reports. Despite the uptick, economists note that mortgage rates remain near historical lows.

Since reaching an all-time low in January, mortgage rates have risen by more than 30 basis points, “and the impact on purchase demand has been noticeable,” says Sam Khater, Freddie Mac’s chief economist. “While purchase activity remains high, it has cooled off over the last few weeks and is currently on par with early March, prior to the pandemic.”

Still, Khater predicts that the rise in mortgage rates over the next couple of months will likely be more muted in comparison to the last few weeks. The National Association of REALTORS® agrees, forecasting the 30-year fixed-rate mortgage to average 3% for the first half of this year.

Job gains also may help lift buyer demand regardless of mortgage rate movement. The Commerce Department reported Friday that the country added 379,000 jobs in February, which could counterbalance rising mortgage rates, says NAR Chief Economist Lawrence Yun. “The [real estate] market will experience countervailing forces of the higher push from more jobs but also the pullback of higher mortgage rates,” Yun says. “We will have to wait to see which force will be stronger. Back in 2018, the economy roared with 2.3 million job creations, but home sales modestly declined because mortgage rates rose from 4% at the beginning of the year to 4.6% by the year’s end. This time, rate increases will be occurring but will be well below 4%.”

Freddie Mac reports the following national averages with mortgage rates for the week ending March 4:

• 30-year fixed-rate mortgages: averaged 3.02%, with an average 0.6 point, increasing from last week’s 2.97% average. Last year at this time, 30-year rates averaged 3.29%.
• 15-year fixed-rate mortgages: averaged 2.34%, with an average 0.7 point, unchanged from last week. A year ago, 15-year rates averaged 2.79%.
• 5-year hybrid adjustable-rate mortgages: averaged 2.73%, with an average 0.3 point, falling from last week’s 2.99% average. A year ago, 5-year ARMs averaged 3.18%.

Freddie Mac reports commitment rates along with average points to better reflect the total cost of obtaining a mortgage.

 

Report: 50% Fewer Homes for Sale This Year | Realtor Magazine

In Denver, real estate pros are reporting that some listings are seeing more than 100 showings in one weekend and are then receiving more than 20 offers. Buyers are being told to expect going 20% above the list price if they want a home. Markets across the country are reporting the same.

The spring homebuying season is expected to be fierce for house hunters.

Here’s the reason: More than 200,000 new listings have been absent from the U.S. housing market during the first two months of 2021 compared to levels seen over the last four years. Buyer demand is surging and there aren’t enough homes for sale. Inventory woes were common in markets even prior to the pandemic, but they’ve worsened since.

There are nearly 50% fewer homes for sale this year than last year, according to realtor.com®’s newly released Monthly Housing Trends Report.

Extreme winter weather nationwide pushed new listings to a record low in February, and realtor.com® warns it will be difficult to dig out from the low number of sales this spring.

What’s more, home buyers are seeing prices quickly rise. The median listing price in February increased nearly 14% over last year to $353,000.

“Last month’s record cold and snowstorms likely caused sellers to hit pause, even if only temporarily,” says realtor.com®’s Chief Economist Danielle Hale. “However, in today’s inventory-starved market, any setback is significant. Unless we see some big improvements in the new listings trends over the coming months, buyers can expect stiff competition. And unlike last spring, buyers may also face affordability challenges as home prices and mortgage rates increase. Market dynamics continue to favor sellers.”

Housing inventories were down annually by the most in metros like Oklahoma City, Okla. (new listings falling 47% annually); Kansas City, Mo.-Kan. (down 45%); Milwaukee-Waukesha-West Allis, Wis. (down 40%).

The following is a chart of the metros with the largest declines in newly listed homes.

Buyers May Want to Ask Lenders: How Long to Close? | Realtor Magazine

House hunters may want to ask their lenders how long it will take them to close on a loan while shopping for a mortgage. In a housing market where multiple offer situations have become commonplace, the ability for a buyer to close quickly can stand out to home sellers.

Buyers should ask lenders: How long are your turn times? That reflects the length of time the mortgage lender takes to underwrite your mortgage.

Many lenders are experiencing a high volume of loan applications, as mortgage rates hover at record lows and home buyers and refinancers look to lock in low rates. Lenders do tend to give home buyers—with their more pressing deadlines—the priority in the underwriting queue, according to The Mortgage Reports.

In general, the full mortgage loan process often takes between 30 and 45 days from underwriting to closing. The average turn time for home purchases—from underwriting to closing—is about 30 days. But those can stretch longer, depending on the lender’s staffing, loan application volume, and the complexity of the loan profile.

During the mortgage underwriting process, lenders will scrutinize credit; income and employment; debt ratios; and the appraisal to determine if the new home is fair market value. Lenders may require extra information for approval, such as documentation to support any large deposits made in a bank account; additional details from the appraiser to support the value of the home; or extra bank statements to show proof of making certain payments. For self-employed individuals, they may require a year-to-date profit and loss statement.

To speed up the underwriting process, the buyer should be responsive and provide documentation in a timely manner as soon as a lender makes any requests. “Issues as simple as a missed signature can stretch out underwriting and cause closing delays,” The Mortgage Reports notes in its article. “So be thorough when signing and reviewing your paperwork. And keep your communication lines open. If underwriting is taking longer than expected, reach out to your loan officer to see what’s causing the delay and whether anything is needed from you to move the process along.”

Getting preapproved for a loan could help buyers speed up the process for final underwriting. But keep in mind, a mortgage can still be denied after preapproval for final underwriting if their financial situation changes or credit score falls during that time. The borrower then may have to reapply for a different type of loan or delay as they improve their financial situation to apply again.