Dip in Rates Provides ‘Stability’ for Home Sales

Borrowers saw a little relief from recent increases. Mortgage rates dropped slightly this week, with the 30-year fixed-rate mortgage averaging 4.59 percent, Freddie Mac reports. “This stability is much needed for home sales, which have crested because of the multiyear run up in prices, tight affordable inventory, and this year’s higher rates,” says Sam Khater, Freddie Mac’s chief economist.

Home prices are still climbing and rates are up from 3.90 percent a year ago. “Some prospective buyers are definitely feeling an affordability crunch,” Khater says.

Freddie Mac reports the following national averages for the week ending Aug. 9:

  • 30-year fixed-rate mortgages: averaged 4.59 percent, with an average 0.5 point, dropping from last week’s 4.60 percent average. Last year at this time, 30-year rates averaged 3.90 percent.
  • 15-year fixed-rate mortgages: averaged 4.05 percent, with an average 0.5 point, falling from last week’s 4.08 percent average. A year ago, 15-year rates averaged 3.18 percent.
Source: “Mortgage Rates Inch Backward,” Freddie Mac (Aug. 9, 2018)

New Program Aims to Cap Rent Hikes

Similar to the concept of rent control, Freddie Mac announced a new program to incentivize rental property owners to ease their continuous rent hikes. The mortgage giant is offering discounted financing to owners who agree to cap rent increases for the life of their loans. Owners who take part in the program must limit rent increases on 80 percent of their units. Owners also must agree to make at least 50 percent of their units affordable to those earning the local median income or less.

The program, now available across the country, is voluntary. Freddie Mac officials say they will check rents on an annual basis to make sure participating property owners are complying with the program’s rules. Those who are in violation will be assessed a penalty fee until they return rents to a level that Freddie deems compliant.

Source: “Freddie Mac to Lower Financing Costs for Landlords who Cap Rent Rises,” The Wall Street Journal (Aug. 7, 2018)

Federal Reserve Leaves Interest Rates Alone

The Federal Reserve decided Wednesday to hold off on raising its short-term interest rates. But it hinted that it likely will deliver its third interest rate increase of the year at its next meeting in late September. The Fed’s key rate does not have a direct impact on mortgage rates.

“Economic activity has been rising at a strong rate,” the Fed’s statement read. Economic output rose at a 4.1 percent annual rate in the second quarter, which is the highest three-month increase since 2014.

The economy, the Fed, and inflation all have an influence on long-term fixed-rate mortgages. Rates are rising, the 30-year fixed-rate mortgage averaging about 4.71 percent, up from 4.09 percent in 2015, CNBC reports.

Source: “The Fed Didn’t Raise Rates. How to Prepare for the Next Hike,” CNBC (Aug. 1, 2018) and “Federal Reserve Holds Rates Steady, Says Economy Is Strong,” The Wall Street Journal (Aug. 1, 2018) [Log-in required.]

The Kitchen New-Home Buyers Want

New-home buyers now rank all-white kitchens—once the most in-demand aesthetic—as their second choice, below natural wood cabinetry, according to a new survey from homebuilder Ashton Woods. Respondents to the survey, who are prospective buyers planning to purchase in the next 10 years, picked distressed wood cabinetry as their third most popular choice.

They also said living space is more important to them than bedroom size. Sixty-one percent say they would trade a larger bedroom in order to get a larger living area. Hobby rooms and home offices are also on their priority list, with 67 percent of respondents saying they want an office in their next home.

Source: “Here’s What Buyers of Newly Constructed Homes Want,” The Washington Post (July 26, 2018)

‘Extra Time to Find the Right Home’ for Buyers

Mixed economic data this week prompted mortgage rates to remain in mostly a holding pattern, says Sam Khater, Freddie Mac’s chief economist. “Manufacturing output and consumer spending showed improvements, but construction activity was a disappointment,” Khater says. “This meant there was no driving force to move mortgage rates in any meaningful way, which has been the theme in the last two months. That’s good news for price-sensitive home shoppers, given that this stability in borrowing costs allows them a little extra time to find the right home.”

Freddie Mac reports the following national averages for the week ending July 19:

  • 30-year fixed-rate mortgages: averaged 4.52 percent this week, with an average 0.5 point, dropping slightly from last week’s 4.53 percent average. Last year at this time, 30-year rates averaged 3.96 percent.
  • 15-year fixed-rate mortgages: averaged 4 percent this week, with an average 0.4 point, falling from last week’s 4.02 percent average. A year ago, 15-year rates averaged 3.23 percent.
Source: Freddie Mac

The Cost of Selling Without a Real Estate Agent

You’ve heard of buyer’s remorse; but without your market expertise and sales skills to back them up, sellers who choose to sell their home on their own just may experience “seller’s regret” when they see how much less they get for their properties. FSBOs earn an average of $60,000 to $90,000 less on the sale of their home than sellers who work with a real estate agent, according to the National Association of REALTORS®. Here’s the breakdown:

  • All agent-assisted homes: $250,000 (median selling price)
  • All FSBO homes: $190,000
  • FSBO homes when buyer knew seller: $160,300

Homeowners seem to be hearing the message: Only 8 percent of sellers last year—an all-time low—chose to sell their home themselves, according to NAR’s 2017 Profile of Home Buyers and Sellers. That figure has been falling since 2004, when 14 percent of homeowners sold their own homes.

Source: “Selling Your Home Solo to Save Money? You’ll Actually Make Less Than You Think,” National Association of REALTORS® Economists’ Outlook blog (July 9, 2018)

Delayed Ownership and Wealth Disparities

Millennials aren’t purchasing homes on the same timelines as previous generations, and that has some economists worried. The homeownership rate for millennials was 37 percent in 2015, which is about eight percentage points lower than Generation X and baby boomers when they were at the same age between 25 to 34, according to a new report released by the Urban Institute.

Economists point to several factors for millennials’ delay into homeownership, including their delays to get married (being married increases probability of owning a home by 18 percentage points), rising student debt, delayed child bearing, and increasing rents that are making it more difficult to save for a down payment.

But the Urban Institute’s report notes that such delays into ownership are sparking concern. Less educated young adults are falling further behind in homeownership, the report notes. The gap in homeownership rates between the more educated versus the less educated population has grown significantly, increasing from 3.3 percent to 9.7 percent between 1990 and 2015. “Less educated millennials could be falling behind homeownership because of their unstable incomes and rising rents,” the report notes.

Source: “Millennial Homeownership,” Urban Institute (July 11, 2018)

Falling Mortgage Rates Offer Affordability Relief

Mortgage rates declined this week, marking the fourth drop in the past five weeks, Freddie Mac reports.

“The decrease in borrowing costs is a nice slice of relief for prospective buyers looking to get into the market this summer,” says Sam Khater, Freddie Mac’s chief economist. “Some are undoubtedly feeling the affordability hit from swift price appreciation and mortgage rates that are still 67 basis points higher than this week a year ago.”

Freddie Mac reports the following national averages for the week ending June 28:

  • 30-year fixed-rate mortgages: averaged 4.55 percent, with an average 0.5 point, falling from last week’s 4.57 percent average. Last year at this time, 30-year rates averaged 3.88 percent.
  • 15-year fixed-rate mortgages: averaged 4.04 percent, with an average 0.5 point, which is unchanged from a week ago. Last year at this time, 15-year rates averaged 3.17 percent.
  • 5-year hybrid adjustable-rate mortgages: averaged 3.87 percent, with an average 0.3 point, rising from last week’s 3.83 percent average. A year ago, 5-year ARMs averaged 3.17 percent.
Source: Freddie Mac

Will Driverless Cars Change Home Values?

The era of autonomous vehicles is coming, but what influence could that have on your home? Autonomous vehicles could usher in greater car sharing among families and neighbors. The car drops off a passenger and then goes to pick up another. Since the vehicles are self-driving and will come when called upon, they may not even need to be parked at home and could be parked in a remote lot. Ride sharing services may grow to become a normal option for homeowners.

“A decrease in car ownership/leasing will likely translate to a decrease in the need for garage space,” says Justin Thompson, a columnist at Forbes.com . “Two-car homes could become one-car homes, rendering the two-car garage obsolete.” “The impact of an increase of this magnitude on home values would certainly have far-reaching economic effects,” Thompson notes. “Increased living area square footage, a rise in home value, additional property tax revenue, and more revenue from permitting fees is an impressive list of benefits.”

Mortgage Rates Near Highest Averages of Year

Mortgage rates were back on the rise, increasing to their second highest level this year. The move follows the Federal Reserve’s vote on Wednesday to raise its federal fund rate by 25 basis points.

“The good news is that the impact on consumer budgets will be smaller than past rate hike cycles,” says Freddie Mac’s Chief Economist Sam Khater. “That is because a much smaller segment of mortgage loans in today’s market are pegged to short-term rate movements. The adjustable rate mortgage share of outstanding loans is a lot smaller now—8 percent versus 31 percent—than during the Fed’s last round of tightening between 2004 and 2006.”

Freddie Mac reports the following national averages with mortgage rates for the week ending June 14:

  • 30-year fixed-rate mortgages: averaged 4.62 percent, with an average 0.4 point, up from last week’s 4.54 percent average. Last year at this time, 30-year rates averaged 3.91 percent.
  • 15-year fixed-rate mortgages: averaged 4.07 percent, with an average 0.4 point, rising from last week’s 4.01 percent average. A year ago, 15-year rates averaged 3.18 percent.

Source: Freddie Mac