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)

Ideal Age for First-Time Home Buyers

Apparently the magic number for first-time home buyers is 28. That’s the average age that most Americans think a person should be when they buy their own home, according to a new Bankrate.com report conducted  last month among a sample of 1,001 respondents.

This may be a bit optimistic in practice, at least for buyers in today’s market. The National Association of REALTORS®’ 2017 Profile of Home Buyers and Sellers found the median age of first-time buyers was 32 years old for the second year in a row.

The Bankrate study did find some differences in opinion between genders and regions of the country. While a quarter of men think people should strive to buy their first home by age 25, just 12 percent of women say the same.

Source: “Americans reveal ideal ages for financial milestones,” (July 18, 2018) Bankrate.com

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)

Is Break in Rate Hikes Significant to Buyers?

For the second consecutive week, mortgage rates decreased as the 30-year fixed-rate mortgage fell two basis points to average 4.54 percent, Freddie Mac reports. Rates had been on a steady incline for weeks before breaking trend.

Freddie Mac reports the following national averages for the week ending June 7:

  • 30-year fixed-rate mortgages: averaged 4.54 percent, with an average 0.5 point, dropping from last week’s 4.56 percent average. Last year at this time, 30-year rates averaged 3.89 percent.
  • 15-year fixed-rate mortgages: averaged 4.01 percent, with an average 0.4 point, falling from last week’s 4.06 percent average. A year ago, 15-year rates averaged 3.16 percent.
  • 5-year hybrid adjustable-rate mortgages: averaged 3.74 percent, with an average 0.4 point, falling from last week’s 3.80 percent average. A year ago, 5-year ARMs averaged 3.11 percent.

Source: Freddie Mac

Mortgage Rates Retreat From 7-Year High

After climbing to their highest level in more than seven years, mortgage rates eased a bit this week. It was the first time they declined in four weeks, says Sam Khater, Freddie Mac’s chief economist. The 30-year fixed-rate mortgage fell 10 basis points to a 4.56 percent average this week.

“Extremely low inventory conditions in most markets are preventing sales from breaking out while also keeping price growth elevated,” Khater says. “Even if rates climb closer to 5 percent, sales have room to grow more—but only if current supply levels start increasing more meaningfully.”

Freddie Mac reports the following national averages for the week ending May 31:

  • 30-year fixed-rate mortgages: averaged 4.56 percent, with an average 0.4 point, down from last week’s 4.66 percent average. Last year at this time, 30-year rates averaged 3.94 percent.
  • 15-year fixed-rate mortgages: averaged 4.06 percent, with an average 0.4 point, dropping from last week’s 4.15 percent average. A year ago, 15-year rates averaged 3.19 percent.

Source: Freddie Mac

Best Tip to First-Time Buyers: Act Fast!

A shortage of homes for sale and rising home prices are making it challenging for first-time buyers, in particular, this spring. For those who want to land a home, urge them to move fast and be less picky.

The price of an existing home in March was about $250,000, up nearly 6 percent from a year ago, according to the National Association of REALTORS®. Homes are selling in about a month.

Home buyers needn’t wait for a 20 percent down payment. More than half of first-time buyers make down payments of 6 percent or less, according to NAR data from 2017. Both Freddie Mac and Fannie Mae support home loans to eligible buyers who put down as little as 3 percent on a home purchase, as does the FHA.

Source: “First-Time Home Buyers Learn to Move Quickly in Tight Markets,” The New York Times (May 11, 2018)

Remodelers Worry Over Labor Shortages

Remodelers report that growing labor shortages are delaying projects and increasing the amount they have to charge homeowners, according to the National Association of Home Builder’s Remodeling Market Index survey for the third quarter of 2017. Those needing a carpenter may find the most trouble; 91 percent of remodelers reported shortages of labor in carpentry work.

More than half of remodelers surveyed reported shortages in 12 of the 15 remodeling jobs analyzed. The most difficult building professionals to find were carpenters, bricklayers, masons, drywall installers, and concrete workers. Overall, labor shortages have been growing in recent years, particularly in the homebuilding sector.

Source: “For Remodelers, Labor Shortages Resume Aggravating Trend,” National Association of Home Builders’ Eye on Housing blog (May 8, 2018)

FHA Borrowers Get Help Funding Solar Panels

A growing number of lending programs are helping homeowners pay the upfront costs of solar panels. One lender, Guild Mortgage, an independent lender, recently announced a program that allows home buyers to lump the costs of solar panels into an FHA loan. California residents will be the first to have access to the program.

Guild Mortgage’s FHA Solar program follows Federal Housing Administration loan requirements and offers down payment options as low as 3.5 percent. The down payment is based on the purchase of the home before the panels are added into the cost of the mortgage. “This program will give more options to home buyers looking for solar because it gives them the flexibility to purchase panels and add them to any home they choose,” says Guild Mortgage President and CEO Mary Ann McGarry.

Other programs are also available for financing solar, such as PACE loans. Also, some homeowners fund the purchase of solar panels through a second trust deed.

Source: Guild Mortgage