Posts Tagged ‘historically low interest rates’

Why are owners not listing homes?

November 8, 2022

Last week I mentioned inventory levels are higher now than they were a year ago. This is true, yet numbers can be deceiving. The Jacksonville Jaguars tripled their win total from 2020 to 2021. Sounds good, but if you only win one game in 2020, it is still a tough year with just three total wins the next season!

Our inventory story is similar. Yes, inventory levels were up 27% compared to a year ago. The reason they were up so much is that inventory levels were so incredibly low a year ago. In addition to the fear of not finding their next home, now there is another reason current home owners are reluctant to list their homes.

With mortgage interest rates going as high as 7 percent this year, a growing number of homeowners are reluctant to sell because they have a lower rate on their current mortgage. The historically low interest rates we saw in 2020 and 2021 is keeping many homes on the sidelines.

There are some stories out there about home values dropping. As with most things, what does the local Georgia picture look like?

Sure, prices have fallen in some markets. In Georgia, values thus far have remained stable. In a time where the number of purchases is slowing, the low supply of homes is keeping home prices relatively high – simple supply and demand.

For those who already own a home, this is good news. You are likely to have seen the home noticeably appreciate while enjoying a low interest rate. For individuals who do not already own a home, homeownership is moving further out of reach for some as rising rates, elevated home prices and the persisting housing shortage make buying a house more expensive.

Eventually this trend will change. The number of homes sold in 2014 was also low, yet the housing market saw a boom in 2015-2016 in terms of a jump in sales. After years of not buying a home, the market went into overdrive. A similar thing will happen in the current environment too. Homeowners may be reluctant to sell with higher rates, but they will need a new home for changing needs… have a lot of equity in their current home… and jump into the market to use their equity on a new home purchase.

The question is “when” will this happen? The housing market was booming until about June 2022, and then it shut off – seemingly overnight! The ramp up will also be quick – when it happens. This is why buy a home now will be easier due to less competition out looking for homes. I’ve said it often lately, and I’ll say it again… finding the right home is hard. Refinancing to a lower rate later is easy. The experience of buying a home now in a higher interest rate market should be more “enjoyable” than when everyone decides it is time to move.

Ready to own a home in Georgia? If yes, contact me today (see my banner above for contact info). We can get started in just a few minutes and get you pre-approved for the offer on your new home!

Will higher rates slow the housing market?

April 19, 2022

We’ve all seen articles/heard stories about mortgage rates going up this year. While the Federal Reserve rate increase is only 0.250 this year (so far!), mortgage rates are up significantly more than 0.250 on the year. Will this slow down the housing market?

In a word – no. In two words – not really. In a sentence – even with higher mortgage rates, the housing market is expected to remain strong and even see another year of double digit appreciation in home values.

I know….

…. but the lack of inventory is driving the housing frenzy. Higher rates will do a couple of things.

  1. Anyone not 100% serious about buying a home will probably walk away. If the idea was ” I want to buy a home while rates are at historic lows, but I do not really need to move,” those potential buyers are probably getting out as historically low rates are gone.
  2. First time home buyers are being squeezed out. Many first time home buyers do not have the assets for bidding wars. They were also stretching their budgets thin to compete with higher home prices. With rates higher, many are just now priced out of the market. It is incredibly frustrating for first time home buyers.

How does this trickle down to the market? I think higher mortgage rates will simply take a seller receiving 20+ offers, perhaps the seller receives 10-15 offers. There are so many buyers who put off buying a home in 2020 due to Covid… then in 2021 due to the housing market being so tough… there are plenty of buyers still out there to buy homes. Inventory levels must improve for the situation to improve.

More people staying put

February 15, 2022

Last year I discussed seniors holding onto their homes longer than previous generations. It seems this trend moved into Generation X too.

According to AARP’s newly released Home and Community Preferences Survey, seventy-seven percent of adults 50 and older say they want to remain in their current homes over the long term. Some respondents said they already live in a home that allows them to age in place, such as with a bathroom on the main level or a room on the first floor that could be used as a bedroom. Then a third of participants said they would need to modify their current home so they or a loved one could live there.

Those who do not want to remain in their home are looking for something that is better to age into and requires less maintenance.

Meaning, a majority of people already feel they are in a home they can age into over the coming years (decades) and have no plans to sell their home. This lack of downsizing is hurting the market in terms of the number of homes listed. Those 50 and over are making plans to stay in place more than moving into retirement communities, assisted living, or downsizing to a condo… fewer single family homes are coming back on the market for resale.

Let’s go builders! We need some new homes on the market to help with the inventory crunch!

As I conclude this February series on preparing for the Spring market, obviously, it is still a competitive market. Now is a good time to get ready to purchase a home. If you are buying in the state of Georgia, contact me today. In a few minutes, I can have you prequalified and working toward getting your loan pre-underwritten approved.

2022 Housing Market

February 1, 2022

It’s a new year…. we so looked forward to 2021 being better than 2020 (it didn’t seem to be in a lot of ways), so here is hoping 2022 will be better!

For the month of February, I am starting a series for the Spring Market so buyers and sellers have a general idea of what they are getting into this year. Home sales and home prices likely will moderate from recent highs in the new year, and buyers may have better opportunities in 2022, but the fact remains the housing market will be competitive.

“Americans are poised for a whirlwind year of home buying in 2022,” says Danielle Hale,®’s chief economist. “With more sellers expected to enter the market as buyer competition remains fierce, we anticipate strong home sales growth. Affordability will increasingly be a challenge as interest rates and prices rise.”® released its 2022 housing forecast, including noting some of the following trends expected for the new year:

  1. Suburbs are still the place to be: The pandemic continues to modify what Americans look for in a home. One in five homeowners looking to sell and move no longer need to live near their office.
  2. Millennials are eager to finally move: Forty-five million millennials are in a “homebuyer sweet spot,”® says. That many of them will fall within the prime first-time homebuying age range of 26 to 35 in 2022.
  3. Affordability challenges remain: Home prices, rents, and mortgage rates are all expected to be on the rise in 2022. The 30-year fixed-rate mortgage is expected to average between 3.5% to 3.6% by the end of 2022. Home prices likely will increase at a “gentler pace” over the next several months as mortgage rates increase.
  4. More homes come on the market:® predicts a 6.6% increase in housing inventory in 2022, a welcome sign to buyers who have complained of few listings over the past year. An increasing share of homeowners this fall reported planning to sell a home over the next 12 months,® says.
  5. More supply will also come from new housing construction, which is already underway, as well as the conclusion of the mortgage forbearance program that will likely cause a number of homeowners to sell.

Here is hoping with more homes hitting the market, buyers will begin to see an easing to the fierce competition.

The best way to make an offer more competitive is to have a pre-underwritten loan file when making the offer. I talk about this ad nauseam on The Mortgage Blog and for good reason. When I can tell a listing agent not only have I reviewed my clients pay stubs, bank statements, tax returns, etc., so has an underwriter and they are approved pending an acceptable appraisal, clear title, and proof of home insurance. It really does help.

If you are buying in the state of Georgia, contact me today. In a few minutes, I can have you prequalified and working toward getting your loan pre-underwritten approved.

Many can still benefit from a refinance

November 9, 2021

Mortgages rates are higher now than their all time lows. This doesn’t mean everyone has missed the window of opportunity. Sure, rates are higher, but they are still very low.

Overall, about 20% of homeowners with pre-pandemic mortgages, have refinanced per a recent study by What about the rest?

  • Close to half have yet to consider refinancing
  • About a quarter have considered, but have yet to actually refinance.

What are the reasons why people do not refinance?

  • some say they would not save enough money. Makes sense. To me, one needs to begin saving over $100 a month to make a difference. With the rise in costs of just about everything, an extra $100 per month can be valuable.
  • just about a quarter of the respondents saying it is too much of a hassle with all the paperwork. Sadly, I agree and can’t do much about the paperwork portion of the transaction.
  • unsure of how long they will remain in the home

This last point wasn’t in the survey, yet to me, it is the most important one to consider. If the plan is to move out in two years, and the monthly savings is $400 or more, a refinance would make sense. The homeowner would break even* on the cost of the refinance well inside of the two year period. Let’s say the savings was just over $100 a month, but the plan was to stay in the current home for at least 10 years. Again, the numbers show this would also make sense.

*Break even means the number of month it takes to recoup the cost of the refinance. Take the closing costs of the loan, divide it by the monthly savings to get the number of months for a break even point.

How long do you plan to remain in the home? If you answer this question, you’ll answer many more including whether or not to refinance.

Yes, rates are still low. While it probably makes sense for many homeowners, it may not for everyone. Want to find out if a refinance makes sense for you? If the property is in Georgia, contact me today, and we’ll sort out if a refinance makes sense for your situation.

Know Your Competition….

September 28, 2021

A key concept in sports and business is, “Know your competition.” That concept also applies to home buyers in this very competitive market. So who are you competing with when offering on a home? There are many other people just like you who want to own and live in a primary residence. But increasingly, you are competing with investors, individuals and corporations buying homes which they will then rent. Here are some statistics on recent investor purchases from a second quarter 2021 Redfin study:

  • Nationwide, investors bought 67,943 homes in Q2 – $48.5 billion.
  • This is a 15.1% / $9.6 billion increase over Q1.
  • This is a 106.7% / $27.6 billion increase over last year – 2020 Q2.
  • Investors bought 15.9% of homes sold – about one in every six homes sold.
  • Investor purchases of single family homes and condos increased in Q2.
  • Investors purchased 21.2% of low-priced American homes. But due to Atlanta’s relatively low home prices, investors purchased 23.6% of Atlanta homes.
  • 74% of Q2 investor purchases were all-cash purchases.
OK, “enemy” may be too strong a term, but this tune rocks, and when was the last time you saw a music video in the Mortgage Blog, so let’s use it!

So how do you compete with investors making all cash offers? According to another study by Redfin, noted in this prior Mortgage Blog post, all cash offers deliver the greatest competitive advantage to the home buyer. The second most powerful offer detail is a zero-day finance contingency. By using a zero-day finance contingency, the home buyer is basically waiving her right to an earnest money refund if underwriting denies the loan application. Why would someone take that risk and offer a zero-day finance contingency? Because they have already been fully approved by underwriting prior to making the offer. We call this obtaining underwriting approval on a “to be determined (TBD)” property.

In August 2020, we used this approach with one of my clients. Jim wanted to buy a home in a very competitive market, and he wanted every competitive advantage he could get. So we obtained his TBD approval before he started making offers. When Jim’s Realtor saw the approval letter, he replied, “This is as good as a cash offer!” Now I don’t know that I would totally agree with that, but I would say it’s the next best thing to a cash offer. Then Jim actually beat a cash offer and has been living in his dream home for the last year now. Many more of my clients have successfully used TBD approvals to win their own homes this year.

Not every lender can obtain underwriting approvals for a TBD address. Dunwoody Mortgage can do it. Do you want to buy your own piece of the American Dream in Atlanta before prices rise more and mortgage interest rates increase? Then call me today and let’s get to work on your TBD approval so you can defeat your competition, whom you now know a little better.

Mortgage Interest Rate Factors

September 14, 2021

Here is a quick summary of how national policy priorities can impact conventional mortgage interest rate calculations. Conventional mortgage giants Fannie Mae and Freddie Mac charge what are called “guarantee fees” in their interest rate pricing models. These “g-fees” cover losses from borrower defaults, administrative costs and provide a return on capital. In 2019, g-fees amounted to 58 basis points on average for a 30-year fixed rate loan. Lenders typically pass these g-fees along to borrowers in the form of higher interest rates.

Congress and the mortgage giants can modify mortgage interest rate fee structures to generate additional revenue to cover national policy priorities. For example, in 2020, Fannie and Freddie implemented a 50 basis point fee specific to mortgage refinances (dubbed the “Adverse Market Fee”). The fee only applied to refinances, not purchases. This fee caused rates on refinances to be slightly higher than rates on similar home purchase mortgages. The refinance fee was eliminated earlier in 2021.

Congress sometimes mandates fees to pay for specific legislative priorities. For example, in 2011, Congress applied an extra 10 basis points to the g-fees charged by Fannie and Freddie. Congress passed this extra fee to cover a three-month payroll tax cut. The fee was set to expire in September 2021. Recently, some Senate members have proposed moving the expiration date from 2021 to 2032. They estimate the extra g-fee will generate $21 billion in revenue to help fund the estimated $579 billion designated to pay for roads, power grid modernization, and rural broadband expansion. Mortgage industry and housing advocacy groups – often in opposition on other policy proposals – are now united in opposition to this use of g-fees. The infrastructure package does not have a housing component. So this proposal will tax home mortgage holders without benefitting national housing concerns. People who pay cash for their homes will not pay this fee.

How will this impact you? If the fee is extended, there’s no change to what people have experienced since 2011 in terms of applying for a home loan or changes for doing a home loan. If the fee is allowed to expire, it won’t cause a significant change in interest rates as the fee is minimal. Ultimately there will be a minimal impact to consumers. I just find this topic interesting.

All of this said, if you (or someone you know) want to buy a home in Georgia, now is still a great time to buy as interest rates are near historic lows. These current low rates increase your buying power. And Dunwoody Mortgage offers tools to help home buyers win the contract in this competitive market. Contact me to get started.

Is the housing market cooling?

September 7, 2021

For the second month in a row, home sales declined in two ways. First, the number of homes sales dropped from May to June and then from June to July (although a slight drop from June to July). Second, the year over year sales dropped again. This time around an 8% reduction in the number of sales compared to July 2020.

This brings us to the question – is the housing market cooling? Maybe…

It is no secret the number of buyers out there looking has reduced. Do not interpret this as the number of people who want to purchase a home has decreased. That number is still very high. No, the number of people still looking has dropped off. It can be attributed to several things (summer vacation, back to school planning, Delta variant), but to me the biggest reason is people are tired of sky high home values:

  • being one of 20 offers on a home
  • offering 10% or more above list price and still not winning
  • having to forgo all contingencies and safety nets when purchasing a home

A good number of potential buyers have simply punched pause on their home search. Will this trend continue?

On one hand, the demographics tell us that we have a shortage of homes. The National Association of Realtors has indicated that the supply gap is as much as 6 million units. This means the supply and demand issue fueling the the rise in home values will continue.

On the other hand, we know that home prices can’t continue to rise at double digit percentages every year. Thus, expect the market to continue to cool somewhat, but demand should support the market and prices for some time in the future.

One thing still going for buyers is record low interest rates. Rates were supposed to rise this year, but instead rates have stayed near these historic lows recently. These low rates have kept homes affordable despite sharply rising prices.

Still wanting to buy a home this year? Looking now means you may be one of five offers versus one of 20 offers on a home. While still frustrating, it doesn’t seem as daunting as it was in the spring. If you are looking to purchase in the state of Georgia, contact me today! In a few minutes I can have you prequalified, we can easily turn that into a pre-approval, and also start the process of having your loan file pre-underwritten to make the strongest possible offer on a home.

Home appreciation to continue

August 10, 2021

Home values should continue to rise as they are for the next 12 months. Veros Real Estate Solutions data-driven approach indicates many of the top-performing cities are trending upwards at a double-digit rate. By Q2 2022, the average forecast is up 7% nationwide.

“The VeroFORECAST data continues to exhibit upward price pressure in nearly all markets throughout 2021 and into 2022,” said Darius Bozorgi, CEO of Veros Real Estate Solutions. “Buyer demand is strong in nearly every market in the country.”

This is still a seller’s market, and buyers are forced to make their absolute best offer – often making offers above asking price. The seller’s market will continue to be driven by pent up demand (many people put off purchasing a home in 2020 due to the emergence of Covid), low interest rates, and historically low inventory levels.

With the seller’s market expected to last for another year, buyers will need to continue to do extra steps to make their offers stand out – getting pre-approved, pre-underwritten, make non-contingent offers, shorten financing contingency windows, and using appraisal waivers (if the transaction allows it).

Wondering what some of those things mean? If you are buying in Georgia, contact me today. We’ll go through your file and see what we can do to make your offer stand out in this strong seller’s market.

RefiNow is here

June 7, 2021

Great news if you have a loan backed by Fannie Mae… RefiNow is here!

This is the refinance program I mentioned last month. Fannie Mae is up and running with Freddie Mac looking to start their version in late August. While there are some slight differences between the two, the main tenets are the same.

The programs are designed to encourage eligible low-income borrowers to refinance and lower their interest rates and monthly mortgage payments.

  • The loan must be held by Fannie Mae (use Fannie Mae’s lookup tool) or Freddie Mac (here is Freddie’s lookup tool)
  • This is a rate/term refinance (no cash out)
  • The property must be a single-unit home with no late mortgage payments in the past 6 months (no more than 1 in the past 12 months)
  • The loan must be seasoned for 12 months prior to loan application for the refinance
  • The Borrower’s qualifying annual income cannot exceed 80 percent of the local area median income (AMI). As of this post, there is not an official lookup tool for RefiNow regarding AMI. That said, Fannie Mae does have an AMI lookup tool for another loan program they offer. Go here for an AMI lookup tool.
  • Debt to income ratio can be as high as 65% (this is way higher than normal)
  • The new loan to value cannot exceed 97 percent

In the metro Atlanta area, most areas have AMI at/around $65,000. Depending on other debt held by a home owner, a potential loan amount that would qualify for this could be in the $400s.

Thinking about refinancing but still haven’t? Why wait? Contact me today. Whether one qualifies for RefiNow or just a normal refinance, rates are still very low. In just a few minutes, we can do an analysis of your current loan versus a new one and see what makes sense for your situation.