Homeowners Cash in on Equity in Droves

Homeowners may be reluctant to sell, but they still want to see a piece of that equity in their homes now. They’re cashing out in levels that have not been seen since the financial crisis. Nearly half of borrowers who refinanced their homes during the first quarter did a cash-out option, the highest level since the fourth quarter of 2008, according to Freddie Mac.

While the number of cash-out refis grows, Len Kiefer, Freddie Mac’s deputy chief economist, does not see this as playing out similarly to the run-up to the financial crisis when borrowers were using their homes like ATMs. Borrowers must follower stricter underwriting standards now when they refinance a mortgage or get a loan. Also, there is less money at stake than a decade ago, Kiefer notes.

Source: “Homeowners Are Again Pocketing Cash as They Refinance Properties,” The Wall Street Journal (May 27, 2017)

Renters Admit They Favor Home Ownership

Seventy-two percent of renters “prefer” or “strongly prefer” to own a home rather than rent one, according to the latest SCE Housing Survey conducted by the Federal Reserve Bank of New York.

Nearly 56 percent of renters view homeownership as a “good investment,” the survey finds.

The majority of renters favor homeownership, despite expressing concerns about their ability to one day afford a home. However, they do believe it’s getting easier to qualify for a mortgage. Sixty-five percent of renters say qualifying for a mortgage is “somewhat difficult” or “very difficult,” but that is gradually declining. Twenty percent of renters view qualifying for a mortgage as “somewhat easy” or “very easy,” which is up from 15 percent in 2015.

Source: “Home Price Growth Expectations to Increase: Renters Perceive Easier Access to Mortgage Credit,” Federal Reserve Bank of New York (May 11, 2017)

Mortgage Rates Stuck in Holding Pattern

The 30-year fixed-rate mortgage continues to hover around 4 percent for the fourth week.

Freddie Mac reports the following national averages for the week ending May 11:

  • 30-year fixed-rate mortgages: averaged 4.05 percent, with an average 0.5 point, rising from last week’s 4.02 percent average. Last year at this time, 30-year rates averaged 3.57 percent.
  • 15-year fixed-rate mortgages: averaged 3.29 percent, with an average 0.5 point, rising from last week’s 3.27 percent. A year ago, 15-year rates averaged 2.81 percent.
  • 5-year hybrid adjustable-rate mortgages: averaged 3.14 percent, with an average 0.5 point, rising from last week’s 3.13 percent average. Last year at this time, 5-year ARMs averaged 2.78 percent.

Source: Freddie Mac

Home Loan Interest Rates are Barely Moving?

Mortgage rates were mostly in a holding pattern last week, which may have been welcome news to borrowers after the previous week’s uptick.

Freddie Mac reports the following national averages for the week ending May 4:

  • 30-year fixed-rate mortgages averaged 4.02 percent, with an average 0.5 point, falling slightly from last week’s 4.03 percent average. Last year at this time, 30-year rates averaged 3.61 percent.
  • 15-year fixed-rate mortgages averaged 3.27 percent, with an average 0.5 point, the same average as last week. A year ago, 15-year rates averaged 2.86 percent, ARMs averaged 2.80 percent.

Source: Freddie Mac

The Housing Market Is Outperforming Forecast

The housing market has been off to a roar this spring. In fact, the market is performing so strongly that the National Association of REALTORS® has upgraded its forecast for the year.

At the start of the year, home sales were expected to match last year’s pace due to higher mortgage rates and diminishing affordability. But the market is hardly slowing down, notes Lawrence Yun, NAR’s chief economist. He now predicts existing-home sales to rise by 3.5 percent, and home prices likely will increase 5 percent this year.

“With no imminent threat of a recession, the housing market’s strong first quarter sets the foundation for continued gains the rest of the year,” Yun writes.

Source: “First Quarter GDP May Be Cool, But Housing Market Downright Balmy,” The Hill (May 1, 2017)

Poll: More Expect Home Prices to Keep Rising

Sixty-one percent of U.S. adults believe home prices in their local area will rise over the next 12 months, the highest percentage since Gallup began collecting such data in 2005. Marking a difference between 2008 and 2012, when one-third of Americans believed home prices would increase.

Residents in the western region of the U.S. are the most optimistic, with nearly three-quarters of residents saying they expect price increases compared to slightly more than half of Midwestern and Eastern residents, according to the Gallup poll. With mortgage rates sitting below 4 percent, consumers may have more incentive to act now before home prices rise even more.

Sixty-seven percent of U.S. adults say now is a good time to purchase a home, which is down slightly from the 2012-to-2014 period when at least 70 percent said so. Unsurprisingly, homeowners (74 percent) are more likely than renters (56 percent) to say it’s a good time to purchase a home, according to the poll. Higher home prices and declining views of homeownership may be behind the dip in those who say it’s a good time to buy, Gallup researchers note.

Source: “More in U.S. Expect Local Home Values to Rise,” Gallup.com (April 24, 2017)

Home Loan Interest Rates Drop Below 4%

The 30-year fixed-rate mortgage has fallen to its lowest average since November 2016, Freddie Mac reports in its weekly mortgage market survey.

“Weak economic data and growing international tensions are driving investors out of riskier sectors and into Treasury securities. This shift in investment sentiment has propelled rates lower,” says Sean Becketti, Freddie Mac’s chief economist.

Freddie Mac reports the following national averages for the week ending April 20:

  • 30-year fixed-rate mortgages: averaged 3.97 percent, with an average 0.5 point, falling from last week’s 4.08 percent average. Last year at this time, 30-year rates averaged 3.59 percent.
  • 15-year fixed-rate mortgages: averaged 3.23 percent, with an average 0.5 point, falling from last week’s 3.34 percent average. A year ago, 15-year rates averaged 2.85 percent.

Source: Freddie Mac

Mortgage Rates Set a New 2017 Low This Week

The 30-year fixed-rate mortgage continues to drop this week, setting a new low for 2017, Freddie Mac reports in its weekly mortgage market survey. For the fourth consecutive week rates have fallen.

Freddie Mac reports the following national averages for the week ending April 13, 2017:

  • 30-year fixed-rate mortgages averaged 4.08 percent, with an average 0.5 point, falling from last week’s 4.10 percent average. A year ago, 30-year rates averaged 3.58 percent.
  • 15-year fixed-rate mortgages averaged 3.34 percent, with an average 0.5 point, falling slightly from last week’s 3.36 percent average. Last year at this time, 15-year rates averaged 2.86 percent.
  • 5-year hybrid adjustable-rate mortgages averaged 3.18 percent, with an average 0.4 point, falling from last week’s 3.19 percent average. A year ago, 5-year ARMs averaged 2.84 percent.

Source: Freddie Mac

Study: Millennials Hold Off on Big Life Choices

Baby boomers and millennials have different attitudes when it comes to marriage, children, and home ownership. Researchers with the National Center for Family and Marriage Research at Bowling Green State University compared adults who were 25 to 34 years old in the 1980’s with those who are in that age group today. One difference they found is that millennials are getting married later in life. In 1980, two-thirds of 25- to 34-year-old’s were married; in 2015, just two in five were married.

Because baby boomers were more likely to get married younger, they generally left their parents’ home much earlier than millennials. Americans in their late 20s and early 30s who live with their parents or grandparents have more than doubled since 1980, notes researcher Lydia Anderson. In 1980, only 9 percent of 25- to 34-year-olds were living with parents or grandparents compared to 22 percent in 2015.

Millennials are also putting off having children and buying a home. Plus, lag behind baby boomers when it comes to marriage, children, and home ownership, they are more likely to obtain a college degree, the study notes.

Source: “Young Americans Are Killing Marriage,” Bloomberg (April 4, 2017)

Home Prices Blamed for Student Loan Defaults

The housing crisis may also have sparked the increase in student loan default rates, according to a working paper by the National Bureau of Economic Research.

The study says the drop in home prices during the Great Recession also coincided with a 24 to 32 percent rise in student loan default rates. Researchers looked at administrative student loan data along with ZIP code home price data for about 300,000 student loan borrowers in repayment.

Last year, more than 1 million federal student loan borrowers defaulted on their debt.

“The huge rise in student loan defaults is on everybody’s minds and the question is what’s the cause of this rise?” says Holger Mueller, one of the authors of the paper and a professor of finance at New York University’s Stern School of Business. “What we want to do is point to another very important source of default risk and that’s just the labor market.”

Source: “Why Lower Prices Lead to Higher Student Loan Default Rates,” MarketWatch (April 1, 2017)