The 30-year fixed-rate mortgage continued to hover near historical lows this week, lowering borrowing costs for home buyers and refinancing homeowners. Freddie Mac reported that the 30-year fixed-rate mortgage averaged 3.60% this week, unchanged from last week’s average.
“The sound and fury of the financial markets continue to warn of an impending recession; however, the silver lining is mortgage demand reached a three-year high this week,” says Sam Khater, Freddie Mac’s chief economist. “The decline in mortgage rates over the last month is causing a spike in refinancing activity—as homeowners currently have $2 trillion in conventional mortgage loans that are in the money—which will help support consumer balance sheets and increase household cash flow. On top of that, purchase demand is up 7% from a year ago.”
Freddie Mac reports the following national averages with mortgage rates for the week ending Aug. 15:
30-year fixed-rate mortgages: averaged 3.60%, with an average 0.5 point, unchanged from last week’s average. Last year at this time, 30-year rates averaged 4.53%.
15-year fixed-rate mortgages: averaged 3.07%, with an average 0.5 point, rising from last week’s 3.05% average. A year ago, 15-year rates averaged 4.01%.
5-year hybrid adjustable-rate mortgages: averaged 3.35%, with an average 0.3 point, falling from last week’s 3.36% average. A year ago, 5-year ARMs averaged 3.87%.
Real estate has surpassed stocks as Americans’ favorite long-term investment, according to a nationwide Bankrate survey of about 1,000 respondents. Thirty-one percent of survey respondents named real estate as their favorite investment for building wealth that they don’t need access to for a decade or more. That is the best that real estate has performed on Bankrate’s annual survey in the last seven years. In 2018, stocks were the most popular investment.
Millennials, at 36%, were the most likely age group to call real estate their top long-term investment choice, according to the survey. Other generations also favored real estate, including generation X (31%), baby boomers (30%), and the silent generation (23%). “Millennials are higher on real estate than any other age group, have cooled a bit on cash, and still aren’t keen on the stock market when investing for more than ten years,” says Greg McBride, Bankrate’s chief financial analyst.
Mortgage rates are hovering near three-year lows, and more homeowners may want to start taking advantage. Up to 20 million homeowners could “theoretically” see a 75-point drop in mortgage rates by refinancing, according to a recent analysis from Black Knight.
For homeowners with a credit score of at least 720 and with 20% of equity in their property, they could see savings of nearly $270 per month from lower rates.
“Millions of homeowners could save money by refinancing,” Holden Lewis, home expert for NerdWallet, told Forbes.com. “That includes most people who bought homes in 2018. Seriously, even if you bought your home last year, you could save money by refinancing right now.”
Homeowners are starting to respond to lower rates. Refinances are at the highest point since mid-2016 and have doubled since late July. Refinances are up 37% over the past week alone, according to the Mortgage Bankers Association.
The 30-year fixed-rate mortgage averaged 3.6% last week, according to Freddie Mac.
The way the furniture is positioned in a room can have a big impact on how prospective buyers perceive the space. Apartment Guide recently highlighted some of the most common layout mistakes that designers see in a space. Here are four mistakes to avoid.
Placing furniture against the walls.“Not all furniture pieces need to go against a wall,” says Tammy Price, an interior designer and owner of Fragments Identity in Los Angeles. “Actually, you can create a very cozy space by building it out into the center of the room.” Designers recommend moving anchor pieces, such as sofas and chairs, away from the walls.
The rug is too small. “Make sure at least the two front feet (if not all four) of your pieces of furniture are on the area rug,” says Liz Toombs, owner of PDR Interiors. Too small a rug can ruin the rest of the layout of the room.
The dining room table is too big. Remove a table leaf if you can to get the proportions of the table to work better in a space, or “if you have a dining or eating table that is scaled too large for a space and gives you little room or not enough space for dining chairs, consider using benches for seating,” Price recommends. The bench can slide underneath the table so it doesn’t take up too much floor space.
Covering up the windows. Try to find a way to position pieces so they don’t cover up the windows. The more natural light that can flow into the space, the more open it’ll feel, designers say. “Look at sofas with low arms or no arms at all,” Toombs told Apartment Therapy. “It will help to make your room look bigger.”
Home sellers who choose to sell directly to an iBuyer often end up paying higher fees than if they sold the traditional way with a real estate agent, according to a new study by Collateral Analytics, a real estate analytics firm.
iBuyers provide instant cash offers and quick closings, perks that are hard for sellers to ignore. Transactions involving iBuyers have been growing at a clip of more than 25% annually in recent years. But how profitable is it for sellers who choose this expedited route to a sale? The answer hasn’t been clear since iBuyers first surfaced in 2014 with the launch of Opendoor.
Collateral Analytics, in a white paper, looks to quantify the costs to sellers of working with iBuyers versus taking the traditional route of working with a real estate professional. Researchers estimate that sellers end up paying between 13% to 15% more when working with iBuyers. The percentage reflects differences in traditional real estate agency fees, as well as an allowance iBuyers often request for repairs and an additional 3% to 5% to cover the iBuyer’s liquidity risks and carrying costs. “Most iBuyers will inspect the home, assess a generous home repair allowance, and negotiate (an additional) credit to handle such repairs,” the Collateral Analytics report notes.
However, some iBuyers take on other costs that most traditional buyers wouldn’t. For example, companies such as OfferPad offer to pay the costs of a seller’s move up to 50 miles away. iBuyers may also allow a grace period after closing for the seller to vacate the property.
The chart below from Collateral Analytics shows quarterly median purchase prices on a per-square-foot basis for single-family homes in Phoenix bought by iBuyers and traditional buyers. The lion’s share of iBuyer transactions nationwide occur in Phoenix.
The report also notes that the iBuying model could make properties vulnerable to several financial risks, such as the use of automated valuation models that could inflate property values. Also, properties remain empty while in the possession of iBuyers, which could make the homes vulnerable to theft and other criminal activity.
Wall Street has been betting big on iBuyers in recent years. Opendoor has reportedly raised at least $1.3 billion and purchased more than 10,000 homes in 2018—three times that of its closest competitor, OfferPad. More real estate brokerages are launching their own iBuying models, including Keller Williams, Coldwell Banker, and Redfin. “For some sellers needing to move or requiring quick extraction of equity, this is certainly worthwhile,” according to the research paper. “But what percentage of the market will want this service remains to be seen.”
Bidding wars are growing a lot less common, real estate pros report. By one measure, only 11.2% of offers written by Redfin real estate agents for their clients faced a bidding war in July—down more than 45% from a year earlier. That is also the lowest rate since at least 2011.
Bidding wars have been gradually lessening in the housing market since peaking in March 2018, where 59% of real estate professionals reported competition in offers. Since November 2018, the bidding war rate has not surpassed 15%, Redfin reports.
“Mortgage rates have been mostly flat for the last month, and so has the home buyer competition, which was beginning a fast descent this time last year as mortgage rates were inching toward 5 percent,” says Daryl Fairweather, Redfin’s chief economist. “On a local level, it’s noteworthy that some of 2018’s fiercely competitive markets—San Jose, Seattle, Los Angeles—have seen their bidding war rates plummet the most year over year. Home prices in these expensive markets have also been falling annually.”
Overall, Fairweather predicts homebuying demand to strengthen in the second half of the year and the housing market to continue to stabilize. “But we may not see a big pop in bidding wars until early next year,” she adds.
While the numbers are down from a year ago, the following markets saw the highest number of bidding wars in July, according to Redfin’s index:
San Francisco: 35% (down from 72.4% a year ago)
San Diego: 21.3% (down from 61.5% a year ago)
Boston: 16.4% (down from 63.6% a year ago)
Los Angeles: 16% (down from 64.6% a year ago)
Philadelphia: 14.3% (down from 36.7% a year ago)
Denver: 14% (down from 48.8% a year ago)
Phoenix: 13.6% (down from 47.6% a year ago)
San Jose: 13.3% (down from 80% a year ago)
Sacramento, Calif.: 9.4% (down from 39.2% a year ago)
Washington, D.C.: 9.1% (down from 40.1% a year ago)
Fannie Mae’s Home Purchase Sentiment Index surged to a new high as consumers became more upbeat about buying and selling, mortgage rates, and their jobs. Five of the six components measured by the index rose month over month.
“Consumer job confidence and favorable mortgage rate expectations lifted the HPSI to a new survey high in July, despite ongoing housing supply and affordability challenges,” says Doug Duncan, Fannie Mae’s senior vice president and chief economist. “Consumers appear to have shaken off a winter slump in sentiment amid strong income gains. Therefore, sentiment is positioned to take advantage of any supply that comes to market, particularly in the affordable category. However, recent financial market events following when the survey data were collected could weigh on consumer views looking ahead.”
Overall, the HPSI, based on a survey of 1,000 Americans, rose 7.2 points compared to a year ago to a record-high reading of 93.7 in July. Here are some highlights from the index’s latest readings:
Buying: The net share of Americans who said now is a good time to buy a home rose 3 percentage points from June to 26%, up 2 percentage points from a year ago.
Selling: The net share of consumers who say it’s a good time to sell rose 1 percentage point to 44%, up 3 percentage points from a year ago.
Home prices: The share of Americans who say home prices will go up over the next 12 months fell 1 percentage point to 37%, down 2 percentage points from a year ago.
Mortgage rates: The share of consumers who believe mortgage rates will drop over the next year rose 1 percentage point and is up 24 percentage points from a year ago.
Job stability: Americans are more confident about their job situation, with the share who say they’re not concerned about losing their job over the next year rising 8 percentage points to 81%. This is up 16 percentage points from a year ago.
Household incomes: The share of Americans who say their household income is significantly higher than 12 months ago rose by 1 percentage point to 21%, essentially unchanged from a year ago.
Overall, the majority of contracts continue to be settled on time. Seventy-six percent of contracts made it to closing as scheduled from April to June, according to the REALTORS® Confidence Survey, based on responses from more than 4,000 members. Twenty percent of contracts saw a delay, while only 4% were canceled altogether.
The top contract problems causing a delay of settlements in June included:
Issues related to obtaining financing: 35%
Appraisal issues: 25%
Home inspection or environmental issues: 16%
Titling and deed issues: 9%
The majority of contracts—78%–faced a contingency in making it to closing, according to the survey. The most common contract contingencies were for home inspections (60%), obtaining financing (48%), and an acceptable appraisal (47%).
Twenty percent of home sellers offered incentives to buyers to close the transaction. The top incentives offered were paying for closing costs (11%) and providing a warranty (8%).
The 30-year fixed-rate mortgage averaged 3.60% this week, the lowest average since November 2016, Freddie Mac reports.
“There is a tug of war in the financial markets between weaker business sentiment and consumer sentiment,” says Sam Khater, Freddie Mac’s chief economist. “Business sentiment is declining on negative trade and manufacturing headlines, but consumer sentiment remains buoyed by a strong labor market and low rates that will continue to drive home sales into the fall.”
Freddie Mac reports the following national averages with mortgage rates for the week ending Aug. 8:
30-year fixed-rate mortgages: averaged 3.60%, with an average 0.6 point, falling from last week’s 3.75% average. Last year at this time, 30-year rates averaged 4.59%.
15-year fixed-rate mortgages: averaged 3.05%, with an average 0.5 point, falling from last week’s 3.20% average. A year ago, 15-year rates averaged 4.05%.
5-year hybrid adjustable-rate mortgages: averaged 3.36%, with an average 0.3 point, down from last week’s 3.46% average. A year ago, 5-year ARMs averaged 3.90%.
Home prices in the second quarter continued to rise in the majority of housing markets across the country. Ninety-one percent of 178 metros tracked saw home price gains in the second quarter, according to the latest report from the National Association of REALTORS®, released Wednesday.
5 Priciest Markets in Q2
San Jose-Sunnyvale-Santa Clara, Calif., metro area: $1,330,000 (median existing single-family price)
San Francisco-Oakland-Hayward, Calif.: $1,050,000
Anaheim-Santa Ana-Irvine, Calif.: $835,000
Urban Honolulu, Hawaii: $785,500
San Diego-Carlsbad, Calif.: $655,000.
5 Lowest Cost Markets in Q2
The five least expensive metro areas in housing in the second quarter were:
Decatur, Ill.: $97,500
Youngstown-Warren-Boardman, Ohio: $107,400
Cumberland, Md.: $117,800
Binghamton, N.Y.: $119,300
Elmira, N.Y.: $119,400.
The national median existing single-family home price was $279,600 in the second quarter, up 4.3% from a year ago. Ninety-three of the 178 metros tracked saw price growth of 5% or more. Ten metro areas posted double-digit increases, mostly in more modestly priced markets like Boise City-Nampa, Idaho; Abilene, Texas; Columbia, Mo.; Burlington-South Burlington, Vt.; and Atlantic City-Hammonton, N.J.
Tight inventory conditions, particularly at lower price points, are prompting home prices to accelerate in several markets, notes Lawrence Yun, NAR’s chief economist.
“Housing unaffordability will hinder sales irrespective of the local job market conditions,” Yun says. “This is evident in the very expensive markets as home prices are either topping off or slightly falling.”
In high-priced metro areas where the median home prices were $500,000 and higher, the single-family median prices fell when compared to a year ago, according to NAR. For example, the most costly area, San Jose-Sunnyvale-Santa Clara, Calif., posted a 5.3% drop. San Francisco-Oakland-Hayward, Calif., saw a 1.9% decrease in prices.
Home Sales Should Improve But …
Yun says home sales should be higher, but he is cautioning that greater economic uncertainty could hinder business.
“The exceptionally low mortgage rates will help with housing affordability over the short run,” Yun says. “But if the low interest rates are due to weakening economic confidence, as reflected from a correction in the stock market, then the low rates will not help with job growth and will eventually hinder home buying and home construction.”
Housing affordability is declining, despite recent progress in wages, NAR’s report notes. National family median incomes rose to $78,366 in the second quarter. However, greater home price growth contributed to an overall decrease in affordability compared to the last quarter. For instance, a home buyer making a 5% down payment would need an income of $62,192 to purchase a single-family home at the national median price, while a 10% down payment would require an income of $58,918, and $52,372 would be required for a 20% down payment.
