Mortgage rates have hovered around yearly lows for weeks. But with rate-hike forecasts looming, can buyers count on borrowing costs to stay low?
Many economists are predicting the average 30-year fixed-rate mortgage to reach 5% by the middle of the next year, The New York Times reports. Freddie Mac reported the 30-year fixed-rate mortgage averaging 4.20 percent. The hike in rates is partially due to the Federal Reserve’s plan to withdraw from buying mortgage-backed securities.
Economists note that while a 5 percent mortgage rate is low by historical standards, such an increase still has the potential of reducing buying power in a home purchase. According to some estimates, a 1 percent increase in interest rates can raise a monthly mortgage payment on a typical home by more than $700 in pricier parts of the country. The increase would likely be much more modest in other, less expensive markets.
Source: “When Mortgage Rates Rise,” The New York Times (Sept. 25, 2014)
Nearly 950,000 homes returned to positive equity in the second quarter, now bringing the total number of residential homes with equity nationwide to more than 44 million, according to CoreLogic’s Equity Report.
“The increase in borrower equity of $1 trillion from a year earlier is evidence that things are moving solidly in the right direction,” says Sam Khater, deputy chief economist for CoreLogic. “Borrower equity is important because home equity constitutes borrowers’ largest investment segment and, as a result, is driving forward the rise in wealth for the typical home owner.”
Still, home price rises are needed to help more home owners feel more confident in their equity position. Of the 44 million properties with positive equity, about 9 million – or 19 percent – have less than 20 percent equity (labeled “under-equitied”), and 1.3 million have less than 5 percent (considered “near-negative equity”), according to CoreLogic.
“Many home owners across the country are seeing the equity value in their homes grow, which lifts the economy as a whole,” says Anand Nallathambi, president of CoreLogic. “With more and more borrowers regaining equity, we expect home ownership to become an increasingly attractive option for many who have remained on the sidelines in the aftermath of the Great Recession. This should provide more opportunities for people to sell their homes, purchase a different home or refinance an existing mortgage.”
Fixed-rate mortgages dropped slightly from the previous week, holding near yearly lows, Freddie Mac reports in its weekly mortgage report.
Freddie Mac released the following mortgage rates for the week ending Sept. 25:
- 30-year fixed-rate mortgages: averaged 4.20 percent, with an average 0.5 point, dropping from last week’s 4.23 percent average. Last year at this time, 30-year rates averaged 4.32 percent.
- 15-year fixed-rate mortgages: averaged 3.36 percent, with an average 0.5 point, dropping from last week’s 3.37 percent average. A year ago, 15-year rates averaged 3.37 percent.
- 5-year hybrid adjustable-rate mortgages: averaged 3.08 percent, with an average 0.4 point, rising from last week’s 3.06 percent average. Last year at this time, 5-year ARMs averaged 3.07 percent.
Source: Freddie Mac
The share of home sales in the $200,000-and-below price range is down 9 percent from a year ago, while those above $200,000 have increased 10 percent in the same time period, according to the latest housing report from RealtyTrac, which reflects August housing data.
Broken down further, the share of sales between $500,000 and $1 million rose 18 percent from year-ago levels, and the share of sales higher than $1 million jumped 38 percent year-over-year.
Overall, RealtyTrac’s report shows that the share of sales above $500,000 rose 23 percent from a year ago.
“Higher-end properties are taking up a bigger share of a smaller home-sales pie, boosting the median home price nationwide higher, even as home-price appreciation slows to single digits in many of last year’s red-hot local housing markets,” says Daren Blomquist, vice president at RealtyTrac. “On the other hand, markets where large institutional investors and other buyers have not picked clean lower-priced inventory are continuing to see strong, double-digit increases in median home prices.”
Rising student-loan debt is putting a dent in the housing market. A new report from John Burns Consulting estimates that 414,000 home sales — or 8 percent of all sales — won’t happen this year because more buyers are strapped with too much student-loan debt. That will cost the housing industry an estimated $83 billion a year, per the study.
About 5.9 million households under the age of 40 owe $250 or more per month in student loans, a number has nearly tripled since 2005. Every $250 in monthly student-loan payments lessens borrowing and purchasing power by $44,000, the study finds.
Rick Palacios, director of research at John Burns Consulting, says the research firm believes those estimates are “pretty conservative.”
“We’re only looking at people ages 20 to 40,” he says. “We know there’s a big chunk of households over age 40 who have student debt, too.”
Home sales have been dwindling among young adults in recent years. A study by the Federal Reserve Bank of New York now finds that young people with student debt are less likely to have a mortgage and own a house than those who never attended college. That’s a reversal of the traditional trend, where those with higher education and higher earnings tended to own.
Source: “Student Loan Debt Curbs Housing Market by $83 Billion, Study Says,” Los Angeles Times (Sept. 22, 2014)
A booming Hispanic population will be the key to the nation’s future residential real estate market, Julian Castro, the newly confirmed secretary of the Housing and Urban Development, told The Associated Press.
“The prosperity of the United States and the prosperity of the Hispanic community, as the fastest-growing community, are one and the same,” Castro told the Associated Press. “The destinies are one and the same.”
Nearly half of first-time homebuyers nationwide will be Hispanic in six years, according to a 2013 study from the National Association of Hispanic Real Estate Professionals. What’s more, Hispanics are forecasted to account for 40 percent of the estimated 12 million net new households nationwide within the next decade.
Castro says that an overhaul of federal immigration laws could further aid the U.S. housing market. Federal immigration law changes could add about 3 million home owners and generate more than $500 billion in sales, income, and spending into the housing economy, estimates the National Association of Hispanic Real Estate Professionals study.
Source: “Castro: Hispanics Key to U.S. Housing Sector Future,” Associated Press (Sept. 20, 2014)
Mortgage rates were on the rise this week, with fixed-rates making the biggest one-week leap so far this year, Freddie Mac reports in its weekly mortgage market survey. Fixed-rate mortgages are now at the highest level since the week ending May 1.
Freddie Mac reports the following national averages for the week ending Sept. 18:
- 30-year fixed-rate mortgages: averaged 4.23 percent, with an average 0.5 point, rising from last week’s 4.12 percent average. Last year at this time, 30-year rates averaged 4.50 percent.
- 15-year fixed-rate mortgages: averaged 3.37 percent, with an average 0.5 point, rising from last week’s 3.26 percent average. A year ago, 15-year rates averaged 3.54 percent.
- 5-year hybrid adjustable-rate mortgages: averaged 3.06 percent, with an average 0.5 point, increasing from last week’s 2.99 percent average. Last year at this time, 5-year ARMs averaged 3.11 percent.
Source: Freddie Mac
The majority of millennials’ housing preferences may not be as different from previous generations as once believed, according to a new report released this week from The Demand Institute, Millennials and Their Homes: Still Seeking the American Dream.The report finds that the majority of millennials want to own a house in the suburbs as they look to raise families and they want more space, a veer from other studies that have shown twenty somethings will likely choose walkable urban neighborhoods when it comes time to buy.
“A fundamental question about millennials is whether their coming of age in the Great Recession has shaped their goals and aspirations to be different from those of previous generations,” said Louise Keely, president of the Demand Institute and senior vice president at Nielsen. “We found that, while this generation has many unique characteristics when it comes to their housing choices, they share many of the same intentions as young adults in previous decades.”
Like previous generations, they still have a big thirst for home ownership. Twenty-four percent of 1,000 households aged 18 to 29 surveyed say they already own their home while 60 percent say they plan to buy a home in the future. Seventy-five percent described home ownership as an “important long-term goal.”
What they want in their home isn’t that different, either. Sixty-two percent said their next home would be a single-family house, while 38 percent said they plan to have their next home be in the city.
Source: “Millenials’ ‘American Dream’ Not So Different From Anyone Else’s,” The Los Angeles Times (Sept. 16, 2014); “Millennials and Their Homes: Still Seeking the American Dream,” Demand Institute (September 2014); and “Millennials and the American Dream,” National Association of REALTORS® Economists’ Outlook Blog (Sept. 16, 2014)
American’s thirst for smart home technology is growing, with more home owners seeking greater control of their home’s appliances, lighting, and systems. More than 70 percent of about 2,000 adults recently surveyed wish they could control something in their home from their mobile device, according to Lowe’s 2014 Smart Home Survey.
What do they most want to do? The survey showed respondents wanted to be able to adjust the thermostat, turn on the lights, or start the coffee pot before they get out of bed.
Besides added convenience, 40 percent of adults surveyed say a smarter home would help them trim costs and save money on their utility bills. Sixty-two percent said they find smart home systems are most beneficial for monitoring safety and security.
So with the technology pool in the smart home arena ever-expanding, what’s holding back adoption rates? The top considerations holding back respondents from purchasing such products were cost or fees (56 percent); ease of use (13 percent), and security (11 percent). Americans are more than twice as likely to prefer a do-it-yourself solution, without a monthly fee, over a professionally installed/monitored system with a monthly service fee, according to the survey.
“In general, Americans feel positively toward products that will make their homes safer, more energy efficient, and easier to manage,” says Kevin Meagher, Lowe’s vice president and general manager of Smart Home. Lowe’s offers Iris, a single user interface that allows home owners to control several aspects of their home from connected devices. “People want DIY solutions that are simple and affordable.”
Ordinarily under Proposition 13, the value of a home for property tax purposes is re-assessed to market level whenever achange in ownership takes place. This usually results in higher property taxes for the homebuyer.
In November 1988, the state‘s voters approved Proposition 90, which is designed to induce greater turnover of homes owned by senior citizens. The measure provides anyone over the age of 55 with relief from Proposition 13 by allowing them to move from one county to another without undergoing a change in their basic property taxes.
Proposition 90 is a “local-option” law; each county has the option of participating. If a county has adopted a Proposition 90 ordinance, it accepts transfers of property tax base assessments from other California counties. If the county that the homeowner is moving from does not have a Proposition 90 ordinance, this does not affect the eligibility of the homeowner.
El Dorado County is one of only a handful of counties participating in this tax saving program. However, Prop 90 is due to expire in February of 2015.