Home Loan Interest Rates Just Got Higher

“Optimistic testimony on Capitol Hill from Federal Reserve Chairman Jerome Powell sent Treasury yields higher as Powell stated his outlook for the economy has strengthened since December,” says Len Kiefer, Freddie Mac’s deputy chief economist.

“We think strength in the economy and pent-up housing demand should allow U.S. housing markets to post modest growth this year even with higher mortgage rates,” Kiefer says.

Freddie Mac reports the following national averages for the week ending March 1:

  • 30-year fixed-rate mortgages: averaged 4.43 percent, with an average 0.5 point, rising from last week’s 4.40 percent average. Last year at this time, 30-year rates averaged 4.10 percent.
  • 15-year fixed-rate mortgages: averaged 3.90 percent, with an average 0.5 point, rising from last week’s 3.85 percent average. A year ago, 15-year rates averaged 3.32 percent.

Source: Freddie Mac

Hispanics: ‘Helping Home Ownership Rates’

For the third consecutive year, the Hispanic population is driving growth in homeownership, according to the latest State of Hispanic Homeownership Report. Hispanics’ rising populations and household formation, as well as their increased workforce participation, is behind the uptick, according to the report by the Hispanic Wealth Project and National Association of Hispanic Real Estate Professionals.

The Hispanic population in the United States increased by 1 million last year and accounted for 51 percent of U.S. population growth. Hispanics increased their homeownership rate slightly from 46 percent to 46.2 percent, or a net increase of 167,000 new-owner households in 2017. Hispanics boasted the highest workforce participation rate among any other ethnic or racial demographic at 66.1 percent, according to the report.

The three biggest obstacles facing Hispanic homeownership: Lack of inventory, recent natural disasters, and the nation’s immigration policy, according to the report.

Source: National Association of Hispanic Real Estate Professionals

More Buyers Gamble With Sight-Unseen Offers

Thirty-five percent of home buyers who purchased a home in November and December said they made an offer on the home without seeing it first in person, according to a newly released survey of more than 1,500 home purchasers conducted by the real estate brokerage Redfin. That is up from 33 percent in May 2017 and from 19 percent in June 2016.

By age group, millennial home buyers are the most likely to make an offer on a home without visiting it first, at 45 percent, researchers found. Younger adults may be more comfortable with relying on information they find online about properties for sale and the neighborhoods, researchers note.

For buyers who can’t see the property in person first, some real estate professionals are relying on FaceTime video call tours or 3-D virtual tour programs to give them a better idea of the interiors.

Source: “Sight-Unseen in 2017: 35% of Homebuyers Bid on a Home Before Seeing it in Person,” Redfin (Feb. 26, 2018)

Mortgage Rates Still Climbing, Not Fading!

The 30-year fixed-rate mortgage shows little signs of stopping its gradual move upwards week to week. This marks the seventh consecutive week for higher mortgage rates, the highest since April of 2014, and rates continue to be at a four-year high.

“Mortgage rates have followed U.S. Treasury’s higher in anticipation of higher rates of inflation and further monetary tightening by the Federal Reserve. Following the close of our survey, the release of the [Federal Open Market Committee] minutes for February 21, 2018, sent the 10-year Treasury above 2.9 percent. If those increases stick, we will likely see mortgage rates continue to trend higher.” says Len Kiefer, Freddie Mac’s chief economist.

Freddie Mac reports the following national averages for the week ending Feb. 22:

  • 30-year fixed-rate mortgages: averaged 4.40 percent, with an average 0.5 point, rising from last week’s 4.38 percent average. Last year at this time, 30-year rates averaged 4.16 percent.
  • 15-year fixed-rate mortgages: averaged 3.85 percent, with an average 0.5 point, increasing from last week’s 3.84 percent average. A year ago, 15-year rates averaged 3.37 percent.

Source: Freddie Mac

Higher Rates Could Raise Housing Costs 15%

If mortgage rate forecasts pan out, home buyers might see their mortgage payments grow by 15 percent this year, according to a new analysis by CoreLogic, a real estate data firm.

CoreLogic economists predict that mortgage rates will increase by about 0.85 percentage points between November 2017 and November 2018. The median sales price of a home is projected to increase 2.6 percent in real terms over that same period.

Based on that, CoreLogic researchers predict that the inflation-adjusted typical mortgage payment will increase from $804 in November 2017 to $910 by November 2018, a 13.3 percent year-over-year gain. In nominal terms, CoreLogic researchers say the typical mortgage payment’s year-over-year increase would be 15.5 percent.

Source: “Forecast Suggests Homeowners’ ‘Typical Mortgage Payment’ Could Rise Over 15 Percent this Year,” CoreLogic Insights Blog (Feb. 15, 2018)

‘Tiny Homes’ May Have a Wider Buyer Pool

A new survey confirms that consumers are definitely intrigued by smaller homes, often described as less than 600 square feet. More than half of adults recently surveyed–or 53 percent—said “yes” or “maybe” when asked if they would ever consider the possibility of buying such a small home, according to a recent study by the National Association of Home Builders. That means a majority of adults would consider moving into a tiny home at some point in the future, the NAHB notes.

Younger generations tend to find tiny homes more appealing than older age groups. More than half of millennials and Generation X members said they were open to the idea of a tiny home. However, only 45 percent of baby boomers and 29 percent of seniors said they’d be willing to entertain the idea.

But local zoning laws may curtail the prevalence of just how big the tiny-home movement gets. However, there has been a recent momentum among some local jurisdictions to relax some of those restrictions.

Source: “Tiny Homes Have Potential Buyers,” National Association of Home Builders’ Eye on Housing blog (Feb. 7, 2018)

Is Market Volatility Giving Buyers Cold Feet?

It seems a 1,000-plus point drop in the stock market last week mixed with rising interest rates may have been enough to give homeowners and buyers the jitters. Overall mortgage applications last week dipped 4.1 percent week over week on a seasonally adjusted basis, the Mortgage Bankers Association reported Wednesday.

Broken out, mortgage applications for home purchases plunged 6 percent last week. However, that number is still 4 percent higher than last year. Home buyers complain of weakened affordability and lengthier home searches in research released this week by the National Association of Home Builders. Refinance applications dipped 2 percent last week, but they remain 2.8 percent higher than the same week a year ago.

Mortgage rates continue to move upwards. Last week the 30-year fixed-rate mortgage rose to its highest rate since January 2014, averaging 4.57 percent, the MBA reported.

Source: “Stock Jitters and Higher Interest Rates Drive Weekly Mortgage Applications Down 4.1%,” CNBC (Feb. 14, 2018)

Don’t Panic Over Stock Market Mayhem

The housing market likely won’t be deeply affected by the sharp decline in stocks over the last two days because underlying economic fundamentals remain strong, says Lawrence Yun, chief economist for the National Association of REALTORS®. Jobs are being created, workers are seeing wage gains, and there’s no recession on the horizon.

The Standard & Poor’s 500 stock index fell by more than 4 percent Monday, and the Dow Jones Industrial Average declined nearly 5 percent. As of late Tuesday, the S&P was down by almost 1.2 percent since the first of the year, although that comes after a year of double-digit gains.

One metric to watch is long-term bond rates, which historically have gone up as stocks go down. That link, however, hasn’t been as strong in the past few years. Investors tend to increase demand in bonds as an alternative to stocks, driving up yields, which can lead to higher mortgage rates. Since the start of the year, the average rate on a 30-year mortgage has risen, from 3.95 percent to 4.22 percent, according to Freddie Mac. That’s still low by historical standards.

—REALTOR® Magazine

Fed Move Doesn’t Suppress Mortgage Rates

The Federal Reserve may have voted to leave its short-term interest rates unchanged this week, but that didn’t stop lenders from moving up mortgage rates. Average mortgage rates are continuing an upward trend in 2018.

“The Federal Reserve did not hike rates this week, but the market views future hikes as a near certainty,” says Len Kiefer, deputy chief economist at Freddie Mac. “The expectation of future Fed rate hikes and increased borrowing by the U.S. Treasury is putting upward pressure on interest rates.”

Freddie Mac reports the following national averages for the week ending Feb. 1:

  • 30-year fixed-rate mortgages: averaged 4.22 percent, with an average 0.5 point, rising from last week’s 4.15 percent average. Last year at this time, 30-year rates averaged 4.19 percent.
  • 15-year fixed-rate mortgages: averaged 3.68 percent, with an average 0.5 point, increasing from last week’s 3.62 percent average. A year ago, 15-year rates averaged 3.41 percent.

Source: Freddie Mac

Cash Sales Soar to Post-Recession High

Cash sales accounted for 8 percent of new-home sales in the fourth quarter of 2017, matching a high that has not been seen since 2014, the National Association of Home Builders reports on its Eye on Housing blog. Cash sales make up an even larger share of existing-home sales—about 20 percent in December, according to the National Association of REALTORS®.

Cash hardly makes up the bulk of financing options for buyers, however. The share of new homes financed with conventional mortgages has dropped slightly from 73.2 percent to 72.7 percent. In the fourth quarter of 2017, 12.9 percent of new-home buyers used FHA loans. The share of sales financed with FHA-backed mortgages has dropped 4 percentage points since reaching a peak in the second quarter of 2015.

Source: “Cash Sales Tie Post-Recession High,” National Association of Home Builders’ Eye on Housing blog (Jan. 26, 2018)