Home values are on the upswing, and home owners who are becoming equity-rich are taking advantage of their property’s increasing worth. Cash-out refinances surged 68 percent in the second quarter compared to a year ago and have reached the highest volume in five years, according to Black Knight Financial Services.
“People realize that refinancing these funds is extremely inexpensive and that rates will eventually rise, so they’re capitalizing on the strength of home-price appreciation,” says Ben Graboske, senior vice president at Black Knight Data & Analytics.
Borrowers today are also using more restraint. The average loan-to-value ratio of today’s cash-out refinancers is 68 percent, which means borrowers have leveraged 68 percent of the home’s current value. That marks the lowest level in a decade.
Source: “Homes as ATMs: It’s Starting Again,” CNBC (Oct. 5, 2015)
Low mortgage rates, declining home prices, and homes that are lingering on the market longer are three main reasons why the next three months could be the best time to buy so far this year, says Jonathan Smoke, realtor.com®’s chief economist.
“The spring and summer home-buying seasons were especially tough on potential buyers this year with increasing prices and limited supply,” Smoke says. “Buyers who are open to a fall or winter purchase should find some relief with lower prices and less competition from other buyers.”
The biggest challenge buyers will likely face buying in the next three months is the limited number of choices. There are fewer homes for-sale this fall than last year plus the housing inventory has already peaked for 2015, Smoke says and we agree.
Source: “Mortgage Rates: Three Reasons to Buy in the Next Three Months,” Nerdwallet (Oct. 2, 2015)
Results of its Primary Mortgage Market Survey® (PMMS®), showing average fixed mortgage rates declining following the Federal Reserve’s decision to defer a hike in the Federal funds rate.
‘News Facts’ on rates for the past week:
- 30-year fixed-rate mortgage (FRM) averaged 3.86 percent with an average 0.7 point for the week ending September 24, 2015, down from last week when it averaged 3.91 percent. A year ago at this time, the 30-year FRM averaged 4.20 percent.
- 15-year FRM this week averaged 3.08 percent with an average 0.6 point, down from last week when it averaged 3.11 percent. A year ago at this time, the 15-year FRM averaged 3.36 percent.
- 5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 2.91 percent this week with an average 0.5 point, down from last week when it averaged 2.92 percent. A year ago, the 5-year ARM averaged 3.08 percent.
The residential real estate market has “clearly shifted in favor of buyers,” says Jonathan Smoke, realtor.com®’s chief economist, in his latest analysis of housing data from the first three weeks of September.
“Would-be buyers have struggled to find a home all year, but now inventory is nearly as high as it has been all throughout 2015, and it isn’t moving as quickly,” Smoke says. “Likewise, price appreciation remains above normal levels but has declined from the higher pace of the spring and summer.”
Homes have been selling more slowly in September, which might make sellers more willing to negotiate on the price or other concessions, realtor.com®’s report notes.
“Sellers should have reasonable expectations for prices and be more patient during the fall,” Smoke says in his latest report. “But both buyers and sellers should be encouraged by a market that continues to see healthy gains in transactions over last year.”
Source: “The 20 Hottest Markets in September 2015,” realtor.com® (Sept. 29, 2015)
Baby boomers are the “driving force” of household formation, which is critical for real estate demand, according to a new blog post at the National Association of REALTORS® Economists’ Outlook blog.
The highest gains in household formation have been by 65- to 74-year-olds, who accounted for 860,000 new households alone from the first half of 2014 to first half of 2015, according to Census Bureau data. The 55 to 64 age group comprised the second highest at 391,000, followed by people over 75 years of age who formed 264,000 new households during that time period.
Meanwhile, younger age groups had less. The 20 to 24 age group had negative net household formation numbers of 85,000. The 25- to 34-year-old age group, however, had 159,000 new households during that time.
Young professionals have been slow to form their own households. The share of the population living with parents has risen dramatically over the last few years. For the 25- to 29-year-old age group, the percentage has risen from 10 percent in 1980 to 25 percent by 2013. Also, the share of 25-to 29-year-olds who have never been married has dropped from 70 percent in 1980 to less than 40 percent in 2013.
Source: “Baby Boomers Lead Recent Household Formation,” National Association of REALTORS® Economists’ Outlook blog (Sept. 25, 2015)
The 30-year fixed-rate mortgage averaged 3.86 percent this week, dropping lower after the Federal Reserve’s decision last week to hold off on raising the Federal funds rate.
“Global growth concerns and lackluster inflation convinced the Fed to defer a hike in the Federal funds rate,” says Sean Becketti, Freddie Mac’s chief economist. “In response, Treasury yields fell about nine basis points over the week, with some larger day-to-day swings along the way.”
However, on Thursday, Federal Reserve Chair Janet Yellen said the U.S. central bank was on track to raise interest rates this year for the first time in nearly a decade. The Fed’s benchmark short-term rate has stayed near zero since December 2008, which has also helped to keep mortgage rates low ever since.
Freddie Mac reports the following national averages for the week ending Sept. 24:
- 30-year fixed-rate mortgages: averaged 3.86 percent, with an average 0.7 point, dropping from last week’s 3.91 percent average. Last year at this time, 30-year rates averaged 4.20 percent.
- 15-year fixed-rate mortgages: averaged 3.08 percent, with an average 0.6 point, dropping from last week’s 3.11 percent average. A year ago, 15-year rates averaged 3.36 percent.
Source: Freddie Mac and “Fed’s Yellen Gets Medical Attention After Struggling With Speech,” Reuters (Sept. 24, 2015)
Twenty-one percent of more than 2,100 home buyers recently surveyed by real estate brokerage Redfin say they made an offer on a house without seeing it in person.
“That’s a testament to the proliferation of online listings, mobile real estate apps, and cool things like 3D scans that take you inside and through every room of a home for sale online,” according to a blog on SurveyMonkey, a surveying firm that conducted the survey on behalf of Redfin.
Millennials were the age group to be most likely to make an offer without seeing the house in person first at 30 percent. What’s more, 53 percent of buyers who paid more than $750,000 for their home made offers without seeing the house first.
Source: Redfin and “4 Real Estate Trends That Show a Changing Industry,” SurveyMonkey Blog (Sept. 15, 2015)
Average fixed mortgage rates mostly stayed calm this week, ahead of the Federal Reserve’s vote on an interest-rate hike for the first time in more than nine years, Freddie Mac reports in its weekly mortgage market survey.
“The Treasury market was relatively quiet this week, and as a result the 30-year mortgage rate barely budged,” says Sean Becketti, Freddie Mac’s chief economist. “Low mortgage rates help to support housing markets, which continue to bring good news.”
Freddie Mac reports the following national averages for the week ending Sept. 17:
- 30-year fixed-rate mortgages: averaged 3.91 percent, with an average 0.6 point, rising from last week’s 3.90 percent average. A year ago, 30-year rates averaged 4.23 percent.
- 15-year fixed-rate mortgages: averaged 3.11 percent, with an average 0.6 point, inching up slightly from last week’s 3.10 percent average. Last year at this time, 15-year rates averaged 3.37 percent.
- 5-year hybrid adjustable-rate mortgages: averaged 2.92 percent, with an average 0.5 point, increasing from last week’s 2.91 percent average. A year ago, 5-year ARMs averaged 3.06 percent.
Source: Freddie Mac
The Federal Reserve’s decision today could potentially bring a close to a seven-year streak of very low mortgage rates. Here’s what an increase in rates could mean for the housing market.
“The potential move away from zero interest rate policy, for short-term rates, is a harbinger of higher mortgage rates ahead and the beginning of the end of this seven-year era of incredibly low mortgage rates and corresponding high affordability,” says Jonathan Smoke, realtor.com®’s chief economist.
Smoke says that mortgage rates that rise to 6 percent could have a big impact to what borrowers pay on their monthly mortgage. For example, in May, the average loan with a 30-year fixed-rate mortgage was $231,000 at a 4.03 percent average rate, which carried a monthly payment (principal and interest) of $1,107. However, that same loan amount at a 4.53 percent interest rate would jump the monthly payment to $1,175 – a 6 percent increase, according to realtor.com®’s analysis.
First-time home buyers may be particularly hard-hit, as well as high-cost areas.
Source: “Fed Decision Could Raise Mortgage Payments 6 Percent; and Out Price Potential First-Time Home Buyers in Certain Markets,” RISMedia (Sept. 16, 2015)
About 759,000 properties regained equity in the second quarter, bringing the total number of residential mortgages that are lower than their property’s value to about 45.9 million. That equates to about 91 percent of all mortgaged properties. Borrower equity has risen year-over-year by $691 billion, according to CoreLogic’s recent equity report.
“For much of the country, the negative equity epidemic is lifting,” says Anand Nallathambi, CoreLogic’s CEO and president. “The biggest reason for this improvement has been the relentless rise in home prices over the past three years which reflects increasing money flows into housing and a lack of housing stock in many markets.”
CoreLogic predicts home prices to rise an additional 4.7 percent over the next year, if that prediction holds true, 800,000 home owners could regain positive equity by July 2016.