July Marked a Big Month for Housing

The housing market heated up in July, with several factors favoring buyers this summer.

Jonathan Smoke, realtor.com®’s chief economist, says this summer one of the best in a decade: we’re seeing the highest consumer confidence for a July since 2007, we’ve also had the highest nominal home prices for a July on record, and we’ve had the lowest July mortgage rates on record.

“The good news for would-be buyers who have struggled to find a home or have been outbid in prior attempts is that the balance of power shifts a bit more in your favor in late summer and fall,” Smoke writes in his column at realtor.com®. “This is the time of the year when sales slow down, but inventory is at its peak. That means there are more homes for sale per buyer now, and yet mortgage rates remain close to their all-time lows. The window to enjoy the best summer in a decade for real estate remains open for the well-qualified and those ready to act.”

Source: “Finally, a July to Remember – and to Buy a Home,” realtor.com® (Aug. 4, 2016)

Home Loan Interest Rates Near All-Time Low

Fixed-rate mortgages this week dropped to their lowest averages of the year, which analysts attribute to the fallout from last week’s “Brexit” vote. The 30-year fixed-rate mortgage averaged 3.48 percent this week, near its all-time record low of 3.31 percent in November 2012, Freddie Mac reports.

Freddie Mac reports the following national averages for the week ending June 30:

  • 30-year fixed-rate mortgages: averaged 3.48 percent, with an average 0.5 point, falling from last week’s 3.56 percent average. Last year at this time, 30-year rates averaged 4.08 percent.
  • 15-year fixed-rate mortgages: averaged 2.78 percent, with an average 0.4 point, dropping from last week’s 2.83 percent average. Last year at this time, 15-year rates averaged 3.24 percent.

Source: Freddie Mac

Why a Weaker Economy Shouldn’t Scare You

A disappointing jobs report last week revealed that new jobs hit a five-year low in May. While that’s no reason for celebration, there is a silver-lining for the housing market.

It’s likely that the Federal Reserve will not raise interest rates later this month. In fact, the Fed may not raise rates for a while now, which could be a boon for home shoppers looking to lock in historically low mortgage rates.

“The real beneficiaries are people who are in the process of buying a home this spring or summer,” says Jonathan Smoke, realtor.com®’s chief economist. “They can buy more of a home with the same amount of payment, or they have an easier time qualifying” for a loan.

Source: “Why a Weaker Economy Could Be Good for Home Buyers and Owners,” realtor.com® (June 3, 2016)

Home Asking Prices Zoom to Record Highs

A robust spring market is causing sellers to up their asking prices, according to a preliminary analysis of May data from realtor.com®. Great news, California has dominated the hot list for some months.

“This spring real estate market is coming in strong, just as we expected,”says Jonathan Smoke, realtor.com®’s chief economist. “Pent-up demand and low mortgage rates are driving consumers into the market with urgency. However, the recurring issue of limited supply is leading to higher prices.”

Source: “America’s 20 Hottest Real Estate Markets for May 2016,” realtor.com® (May 26, 2016)

Are Low Mortgage Rates Losing Their Pull?

Mortgage rates are hovering at the lowest averages in years, but home buyers aren’t rushing to take advantage. Mortgage applications dropped 1.6 percent last week compared to the previous week on a seasonally adjusted basis, the Mortgage Bankers Association reports.

“Purchase applications jumped up during the first full week of April and had effectively remained at that level, on an unadjusted basis, before falling this week,” says Joel Kan, the MBA’s associate vice president of industry surveys and forecasting. “The seasonally adjusted purchase index decreased to the lowest level since February, led by declines in applications for larger home purchase amounts” (such as declines in the jumbo loan market, loan values higher than $417,000).

The MBA reports the average on a 30-year fixed-rate mortgage held steady at 3.82 percent last week.

Source: “Lowest Rates in a Year No Enticement: Mortgage Applications Down 1.6%,” CNBC (May 18, 2016)

Factors Boosting Housing Market This Month

Four current housing market factors that will likely translate into greater sales this April:

1. Low mortgage rates: Mortgage rates have moved lower this month and are hovering near the lowest averages in the past three years. Lower mortgage rates help boost home buyers’ purchasing power as well as buyers’ ability to qualify for a mortgage.

2. More urgency: Many buyers were frustrated last year with their inability to buy. This spring, they’re heading to the housing market more determined. Loan applications for purchases are up 20 percent.

3. More searching: Realtor.com® reports a record number of people searching and looking at its website for homes. Nevertheless, there are 2 percent fewer homes for sale that they’ll find when compared to last year.

4. Faster sales: The time that listings spend on the market has dropped dramatically. Nationwide, the median days on the market dropped 14 days in the first two weeks of April compared to the first two weeks of March.

Source: “Mid-April Forecast: Warm Weather Will Bring Out Home Buyers,” realtor.com® (April 15, 2016)

The Next Three Months: ‘Best Time to Buy’

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)

More Proof Home-Buyer Demand Is Rising

Mortgage applications for home purchases rose last week for the third consecutive week, a fresh sign that home-buyer demand is increasing. Applications, which are viewed as a leading gauge of home-buying activity, were up 7 percent and are now 12 percent higher than the same week one year ago, according to the Mortgage Bankers Association.

“Purchase mortgage application volume last week increased to its highest level since July 2013, spurred on by still-low mortgage rates and strengthening housing markets,” says Mike Fratantoni, MBA’s chief economist.

MBA reports that the 30-year fixed-rate mortgage averaged 3.86 percent last week, dropping from 3.89 percent the previous week.

Source: “Mortgage Applications Rise Points to More Homebuyers,” CNBC.com (April 8, 2015)

Buying a Home? 3% Down Payments Start Next Week

Freddie Mac will begin offering mortgages with down payments of only 3 percent — the first time they’ve been this low on the GSE’s loans in nearly five years — starting March 23. The move is expected to make more credit available to entry-level borrowers.

“By launching our 3 percent down payment mortgage now, at the start of the spring homebuying season, lenders will be ready to serve qualified working families who are ready to buy and keep the recovery going,” Dave Lowman, executive vice president for Freddie Mac’s single-family business, writes on its Executive Perspectives blog.

Besides 3 percent down payments, Freddie Mac’s Our Home Possible Advantage Program, which is aimed at supporting first-time buyers as well as low- and moderate-income borrowers, is allowing no minimum from borrowers in contributions. That means parents or relatives now can cover 100 percent of the down payment through gifts.

Source: “Advantage: Home Buyers,” Freddie Mac (March 9, 2015)

4 Indicators Show Rising of Millennial Home Buyers

The millennial generation is inching their way into home ownership. Millennials, born from the early 1980s through the late 1990s, have largely delayed their entrance into home ownership, saddled by debt and high unemployment in the recession aftermath.

But economists are getting optimistic that the millennials are emerging into home ownership. Jonathan Smoke, realtor.com®’s chief economist, said earlier this year that 2015 will mark an opportunity for younger buyers to enter the housing market, which will fuel a stronger housing recovery.

Here are some indicators that are making economists the most optimistic:

  1. Rising employment: The improvement in employment for this generation will bring rising incomes that may push more toward home ownership.
  2. Moving out: More millennials are moving out of their parents’ homes. New household formation is back up to pre-recession levels.
  3. Low mortgage rates, greater credit availability: Millennials have said that one of the biggest challenges to home ownership is saving for a down payment. Mortgage rates are still near historical lows, which is opening the doors for some. Also, several government programs are helping to increase mortgage availability for first-time home buyers.
  4. They desire to be home owners: Young adults say they want to buy. Thirty-two percent of millennials recently surveyed said they were saving for a house, according to a Bank of America/USA Today survey. A new Goldman Sachs’ infographic shows that 93 percent of millennials say they want to own a home.

Source: “Millennials on the Home Ownership Path,” The New York Times (March 6, 2015)