Economics

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To paraphrase Julie Andrews and the Muppets: The springtime cometh for the housing market. This is traditionally the time when home sales bloom. But 2023’s deep freeze begs the question of whether the warming will emerge from under an ice cube or an iceberg. This season, the economists say, will be no picnic. 

Take the typical home value of $349,216, which is more than 40% higher than before the pandemic. Home prices increased on a monthly basis in 45 of the 50 largest metropolitan areas in February, and they’re up in 47 of the 50 largest metropolitan areas on an annual basis, per Zillow. (By Redfin’s count, prices increased in all 50 of the most populous metropolitan areas, which is the first time that’s occurred since the summer of 2022.) 

The typical mortgage payment more than doubled during the pandemic, rising by roughly 106%, and is still up 9% from last year, according to Zillow. Mortgage rates have fallen from their recent peak at slightly above 8%, but they’re still high compared to previous historic lows. While the average 30-year fixed mortgage rate is sitting at 7.02%, as of the latest reading, the expectation is that it’ll come down further if the Federal Reserve cuts interest rates this year.

So it’s not an easy market by any means, as Wells Fargo’s economics team recently concluded: “The housing market continues to navigate tumultuous waters.” But more inventory is coming on the market, with the easing of the so-called lock-in effect, which refers to homeowners holding onto their homes for fear of losing their low mortgage rates. The lock-in effect was a major factor last year in pushing existing home sales to their lowest point in almost 30 years. 

“A substantial infusion of new inventory to the market is welcome news for buyers on the hunt for their next home this spring—and more evidence that the effects of ‘rate lock’ are starting to weaken,” Zillow’s chief economist wrote recently in a market report.

New listings of existing homes on Zillow are up 21% in February compared to last year and 20% from the prior month; on a local level, more sellers are coming back to the market in Dallas, Minneapolis, and Austin, where new listings are the highest. And according to Redfin, new listings are up 13%, which is the biggest annual increase in almost three years. The total number of homes for sale is up 3%, and that’s the biggest increase in nine months, Redfin’s data journalist, Dana Anderson, recently wrote in a market update. (Zillow’s analysis shows there are 12% more total active listings than last year.)

So maybe this year’s crucial spring selling season is shaping up more like a shopping window, if not a mini-spring season. 

Pending sales are down 6% from the prior year, according to Redfin, which means high housing costs are continuing to price out some would-be homebuyers. There’s also competition even as the market has cooled down, particularly among “attractively-priced and well-marketed homes,” as Zillow put it. That doesn’t seem like it’ll ever completely change given the housing market is missing anywhere between 2 million and 7 million homes, despite an increase in listings. 

So what’ll happen to existing home sales this year? They rose 3.1% in January from the previous month, but declined 1.7% from a year earlier. Better economic conditions, and a more stabilized housing market, might not solve all.

“Although lower financing costs, rising supply and brightening economic growth prospects may help home sales turn around from the sharp contraction experienced over the past two years, the recovery will likely be limited by adverse affordability conditions stemming from home price appreciation far outpacing income growth over the past several years,” Wells Fargo senior economist Charlie Dougherty and economic analyst Patrick Barley wrote in a newly shared note titled: “Housing Market 2024: An Early Spring or Longer Winter.”

We know lower mortgage rates will not only somewhat improve affordability, and therefore help bring back demand, but also bring more sellers onto the market and increase supply. It’s why Dougherty and Barley said existing home sales started off on a “positive note,” and expect them to improve modestly this year.

But it really comes down to the fact that “home price appreciation has far outpaced household income growth in recent years,” as the Wells Fargo economics team put it. “Home values are now roughly five times higher than median household incomes, a stark change from the 3.5 ratio averaged historically,” they wrote. 

Not to mention, the Wells Fargo team expects home prices to increase another 3.1% in 2024 and 4.3% the year after. “If these forecasts come to fruition, then affordability is not likely to meaningfully improve,” Dougherty and Barley wrote. 

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Source: fortune.com

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Fannie Mae publishes quarterly forecasts for the economy at large and housing specifically each month. Its outlook for 2024 got more conservative in February, with the anticipation of faster gross domestic product (GDP) growth, stickier core inflation, stronger employment retention and further delays in cuts to the federal funds rate than it forecast in prior months.

Persistent inflation in February worsens the outlook for imminent rate cuts, as does continued job growth. We’ll have to see if this makes Fannie Mae more conservative in its March estimates.

GDP growth, core inflation and unemployment were stumbling blocks for Fannie Mae in 2023 as forecasters and economists alike wrestled with the likelihood of a recession and various hypothetical timelines for getting inflation under control.

Ultimately, in its outlooks last year, Fannie Mae underestimated the economy’s ability to keep growing and keep people employed.

The economy’s strength was overshadowed in fourth-quarter 2023 by the fact that core inflation’s year-over-year growth came in lower than expected, putting inflation within reach of the Fed’s target of 2% annual growth. This pleasant surprise sparked enthusiasm that rate cuts could be imminent, but that enthusiasm has mellowed, and most experts do not expect rate cuts from this month’s meeting of the FOMC.

Thus far in 2024, economic strength and persistent inflation seem to be surprising experts again.

Housing forecasts

Despite the economic headwinds that Fannie Mae now foresees through 2024, its outlook for the housing market remains rosier than its late 2023 forecasts.

February’s outlook is slightly worse than January’s across most indicators, but forecasts released in the opening months of this year were more optimistic than those in the final three months of 2023.

Because Fannie Mae’s assumptions last year were based on a slowing economy and moderating rates, its housing outlook for most indicators was too optimistic for the majority of 2023.

Most of Fannie Mae’s housing projections are based largely on the movements of mortgage rates, which have an outsized impact on everything else in the housing market. In its February forecast, the government-sponsored enterprise still foresees mortgage rates falling below 6% — an important milestone for many housing experts — by the fourth quarter of this year.

Rates, however, are still hovering above 7% at the moment, according to HousingWire’s Mortgage Rates Center.

Fed predictions

When the FOMC meets March 19-20, its members will again be asked to make their own forecasts of the best policy path for rates to follow. It will give us a dot plot, like the one below from December’s FOMC meeting, that summarizes each member’s thoughts on the federal funds rate.

Few expect any rate cuts to result from this meeting, but it will give housing and mortgage professionals a fresh indication of how imminent or delayed the eagerly awaited rate cuts may be.

Source: housingwire.com

Mortgage rates eased slightly this week, enough to reheat the homebuying momentum as the market heads into a traditionally busy season of the year, according to Freddie Mac. 

The average 30-year fixed-rate mortgage was 6.88% for the week ending March 7, according to Freddie Mac’s latest Primary Mortgage Market Survey. That’s a drop from the previous week when it averaged 6.94%. A year ago, the 30-year fixed-rate mortgage averaged 6.73%. 

The average rate for a 15-year mortgage was 6.22%, down from 6.26% last week and up from 5.95% last year.

The slight drop in borrowing costs led to a nearly 10% jump in mortgage applications, indicating that buyer interest is strong as the market heads into the spring homebuying season, according to the latest Mortgage Bankers Association Weekly Applications survey.

 “Evidence that purchase demand remains sensitive to interest rate changes was on display this week, as applications rose for the first time in six weeks in response to lower rates,” Freddie Mac Chief Economist Sam Khater said. “Mortgage rates continue to be one of the biggest hurdles for potential homebuyers looking to enter the market. It’s important to remember that rates can vary widely between mortgage lenders, so shopping around is essential.”

If you are looking to take advantage of the current mortgage rates by refinancing your mortgage loan or are ready to shop for the best rate on a new mortgage, consider visiting an online marketplace like Credible to compare rates and get preapproved with multiple lenders at once.

SOCIAL SECURITY: COLA INCREASING BUT MEDICARE COSTS RISING TOO IN 2024

Market waits for rates to drop 

While the Federal Reserve has said that the plan to reverse interest rate hikes is still in the works, the timeline for when those cuts will begin has been unclear. A reversal in interest rates is crucial in creating more affordability for buyers also dealing with record home price gains. 

However, housing supply is improving, according to a recent Redfin report. New listings rose 13% from a year earlier nationwide during the four weeks ending March 3, the most significant increase in nearly three years. And home prices have also lost some momentum. Roughly 5.5% of home sellers dropped their asking price, the highest share of any February since at least 2015, while the share of affordable homes on the market has increased, according to Realtor.com.

“Mortgage rates remain stubbornly high, and since there is no indication that the Fed will set interest rates meaningfully lower in the short term, it is unlikely that mortgage rates will fall much this year,” Voxtur Analytics Senior Vice President David Sober said in a statement. “If a potential homebuyer is waiting for a lower rate, with house prices still rising overall, they probably won’t get the deal they want anytime soon.”

If you’re looking to become a homeowner, you could still find the best mortgage rates by shopping around. Visit Credible to compare your options without affecting your credit score.

AMERICANS LIVING PAYCHECK TO PAYCHECK OWN 60% OF CREDIT CARD DEBT: SURVEY

Buyers should shop for the best rate

Despite the continued increase in rates, homebuyers could save on borrowing costs by shopping for the best rate with the right lender.

When mortgage rates are high, borrowers can save more by shopping around. Mortgage rate variability more than doubled in 2022 when rates exceeded 7%, according to Freddie Mac research. Borrowers who shopped for five different rate quotes could have saved more than $6,000 over the life of the loan, assuming the loan remains active for at least five years.

“The increase in rate dispersion means that consumers with similar borrower profiles are being offered a wide range of mortgage rates,” Genaro Villa, a macro and housing economics professional for Freddie Mac, said in the research brief. “In the context of today’s rate environment, although mortgage rates are averaging around 6%, many consumers that fit the same borrower profile could have received a better deal on one day and locked in a 5.5% rate, and on another day locked in a rate closer to 6.5%.”

If you are ready to shop for a mortgage loan or are looking to refinance an existing one, you can use the Credible marketplace to compare rates and lenders and get a mortgage preapproval letter in minutes.

SECURE 2.0: OPTIONAL PROVISIONS KICK IN TO HELP RETIREMENT SAVERS WITH EMERGENCIES AND STUDENT LOAN DEBT

Have a finance-related question, but don’t know who to ask? Email The Credible Money Expert at [email protected] and your question might be answered by Credible in our Money Expert column.

Source: foxbusiness.com

Apache is functioning normally

The volume of CRE loans coming up for repayment shows no sign of dipping after 2025, either. Analysis by TD Economics suggests that around $2.2 trillion in CRE loans are scheduled for maturity through 2027, with a slowing economic cycle potentially contributing to further pain in the medium term. That said, while interest rates are … [Read more…]

Apache is functioning normally

“Homebuyer affordability conditions declined in January, with higher home prices pushing loan amounts upward and ultimately offsetting a monthly decline in mortgage rates,” said Edward Seiler, associate vice president of housing economics at MBA. “Mortgage rates have risen throughout February and will likely continue to hamper affordability and prospective homebuyers’ ability to buy heading into … [Read more…]

Apache is functioning normally

“America’s homeowners are sitting pretty,” said Chen Zhao, economics research lead at Redfin. “They’re holding a massive amount of housing wealth, despite lackluster demand from buyers, because home values skyrocketed during the pandemic, and now a supply shortage is preventing those values from falling.” Several factors contribute to this growth, and topping that list is … [Read more…]

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Automation, Pre-Approval, QC Products; Rent vs. Buy; More Proposed Paperwork for Lenders

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Automation, Pre-Approval, QC Products; Rent vs. Buy; More Proposed Paperwork for Lenders

By:
Rob Chrisman

7 Hours, 10 Min ago

Saturday was George Thorogood’s 74th birthday, and fans know that he wrote the classic tale of rent collection, land ladies, and payment avoidance. Time flies, but that may change. We’re faced with an actual five-day workweek this week, with no Federal holidays until Memorial Day, May 27th, two months away! Yikes. Here in Houston at the TMBA’s Southern Secondary Conference, the attendees are already making use of what time they have, discussing best execution procedures, warehouse tactics, management strategies, economic trends, the market for servicing, and operational efficiencies. I’m a capital markets guy, so arguably learned math good. But I didn’t learn math like this! MBS versus cash sales pick-ups is always a favorite topic, although last year the market was deluged by excess servicing trades. Flow and bulk purchasers of HELOCs and 2nds is search being undertaken by some, as well as climate change and insurance cost increases. (Found here, this week’s podcast is brought to you by nCino, makers of the nCino Mortgage Suite for the modern mortgage lender. nCino Mortgage Suite’s three core products – nCino Mortgage, nCino Incentive Compensation, and nCino Mortgage Analytics – unite the people, systems, and stages of the mortgage process. Today’s has an interview with Yardsworth’s Matt Lucido on creative ways that homeowners can leverage their tappable equity, and how we can see more supply hit the market.)

Lender and Broker Services, Products, and Software

Promising Updated MBA Forecast: The MBA released their recent forecasted predictions on mortgage originations (1 to 4 family). A welcome sight is that they predict a 25+ percent increase in 2Q over 1Q 2024 and a 13 percent increase in 3Q over 2Q 2024. In addition, the 3Q 2024 prediction is nearly 22 percent higher than the same quarter in 2023’s actual originations. As volumes continue to rise quickly, having a solid quality control program is as important as ever in order to continue to produce quality loans while mitigating risk. Quest Advisors has nearly 30 years of experience in assisting mortgage lenders with their quality control needs. Examples of services Quest Advisors provides, are Post-Closing and Prefunding loan QC reviews, along with Servicing, HMDA, and MERS audits. To find out more information on how Quest Advisors can help, please reach out to Matthew Reich at (336) 404-1409.

Tired of paying costly Agency LLPAs for non-owner occupied (NOO) and second home loans? More than 150+ originators have signed up to receive daily mandatory bids and MAXEX is currently winning more than 10 percent of loans bid! Get competitive pricing from five leading non-agency buyers and underwrite to Agency guidelines while avoiding Agency LLPAs. It all seamlessly integrates with your existing bulk trading process. Visit maxex.com/conforming to learn more.

Get a Sweetheart Deal with Loan Stream’s February Specials on FHA/VA and Non-QM price improvements! Get 37.5 BPS Price Improvement on all FHA and VA, Low Balance, and High Balance >=680 FICO, excludes DPA and 25 BPS Price Improvement on FHA Streamlines/IRRRLS. Plus, a Non-QM Price Improvement of 50 BPS on all Non-QM, not including Closed End Seconds and Select Programs. Valid for loans locked 2/1/2024 through 2/29/2024. Terms/Conditions apply see our site and talk with your Account Executive.

“Everyone wants to make their borrowers sticky and we’ve got the Krazy Glue. I’m talking ‘gotta get to the emergency room to get your fingers unstuck’ kind of glue. It’s called QuickQual, it integrates with Encompass® by ICE Mortgage Technology™ and once you pre-approve your borrower, they’re coming back.

Just as Morpheus offered Neo the ultimate choice between reality and illusion in The Matrix, Dark Matter Technologies invites you to choose between the past and the future of mortgage lending in its “Choose Your LOS Experience” ad campaign. Take the blue pill and stay the course with old-school thinking and technology. Or take the red pill and join DMT to revolutionize your business with cutting-edge technology, unparalleled automation, and relentless innovation, as evidenced by the Empower® LOS and the AIVA® artificial intelligence solution. When it comes to your future, “choose wisely.” Schedule a demo with the Dark Matter team today to explore how the Empower LOS can transform your business.

Is More Paperwork Heading Our Way?

Do we need more rules and regulations and paperwork, or better rules and regulation and paperwork? The federal bank regulatory agencies announced their first of a series of requests for comment to reduce regulatory burden. The Economic Growth and Regulatory Paperwork Reduction Act of 1996 requires the Federal Financial Institutions Examination Council and federal bank regulatory agencies to review their regulations every 10 years to identify any outdated or otherwise unnecessary regulatory requirements for their supervised institutions.

To facilitate this review, the agencies divided their regulations into 12 categories and are first soliciting comments on their regulations in three categories: Applications and Reporting, Powers and Activities, and International Operations. Comments on the relevant regulations will be accepted for 90 days after publication in the Federal Register.

But Ballard Spahr reports that on February 16, the Financial Crimes Enforcement Center (“FinCEN”) published a Notice of Proposed Rulemaking (“NPRM”) regarding residential real estate. The final version of the NPRM published in the Federal Register is 47 pages long. We have created a separate document which more clearly sets forth the proposed regulations themselves, at 31 C.F.R. § 1031.320, here.

“FinCEN also has published a Fact Sheet regarding the NPRM, here. The Fact Sheet, slightly over four pages long, is helpful and walks through the basics of many of the proposed requirements. The NPRM proposes to impose a nation-wide reporting requirement for the details of residential real estate transactions, subject to some exceptions, in which the buyer is a covered entity or trust. Title agencies, escrow companies, settlement agents, and lawyers need to pay particular attention to the NPRM because, based on FinCEN’s “cascade” approach to who should be responsible for complying with the reporting requirements, these parties are the most likely to be responsible.

”Rent Versus Own” Economics

If you’re still paying off your mortgage, renting is likely cheaper than owning in each of the nation’s 50 largest metros. Median rent costs are lower than median homeowner costs for those with mortgages but higher than costs for homeowners without mortgages. LendingTree analyzed housing data to compare monthly rental and housing payments for homes with and without mortgages in the 50 largest metros in the U.S.

The difference between median housing costs for homes with a mortgage and median gross rent is $563 a month. The spread in costs between renting and owning a home with a mortgage is widest in the San Jose, Calif., San Francisco, and New York metros. The difference between the median monthly housing costs for homes with a mortgage and the median monthly gross rent in these metros is $1,341, $1,303, and $1,289, respectively. Phoenix, Orlando, Fla., Jacksonville, Fla., and Atlanta have the narrowest gaps between renting and owning a home with a mortgage. In Phoenix and Orlando, median gross rent costs are $87 and $145 less than median monthly housing costs for homes with a mortgage. In both Jacksonville and Atlanta, the difference is $216.

That said, Barron’s reports that, “Prospective buyers spent the President’s Day holiday last week window shopping, early data suggest. ‘Showing activity was strong,’ says Orphe Divounguy, a senior economist at Zillow, citing data from home tour software company Showingtime. Home touring activity was up 19.4% from the start of the year, pointing to a strong seasonal ramp-up.”

Capital Markets

Markets are known for “getting ahead of themselves,” and the latest example may be the “insatiable demand” for Nvidia’s artificial intelligence chips. The stock has shot up, resulting in the company briefly surpassing a $2 trillion valuation. But other equity prices have tagged along, boosting the general stock market.

That said, investors have been walking back expectations for Federal Reserve rate cuts. Goldman Sachs, for example, has pushed back expectations for a Fed rate cut to June. If you like rates where they are, fine. If you’re hoping for lower rates to jump start your business in the near future, well…

The dominating market narrative recently has been that while interest rate cuts may be appropriate at some point this year, it is not likely to be anytime soon. Resilient economic growth and optimism that inflation will continue to fall in the face of high interest rates has fostered household demand, bolstered expectations the U.S. will avoid a downturn in the near term and forced investors to ratchet back bets on early rate cuts. Philadelphia Fed President Harker warned against betting on early rate cuts late last week, saying “I will signal my belief that we’re ready for a rate decrease when all the data, both the hard and the soft, give me that signal.” Pricing in fed funds futures has all but erased the chance of a March rate cut, and the chance of a cut in June is currently a coin-toss. Economists now see a 40 percent chance of recession in the next year, the lowest reading since mid-2022.

Last week was fairly quiet in terms of economic releases and the few that came out did nothing to change the current narrative of U.S. economic conditions. The Leading Economic Index declined 0.4 percent versus a -0.3 percent forecast and is now just two points above its April 2020 low. Historically, the prolonged decline observed in this data set predates a recession, but at the moment, it appears this recession signal is out of step with current economic conditions. Elsewhere, existing home sales rose 3.1 percent in January thanks in part to declining mortgage rates in December.

Since then, rates have moved back up towards 7 percent. The FOMC has repeatedly indicated it is in no hurry to begin reducing the fed funds rate until they are fully confident inflation is sustainably moving towards their 2 percent goal.

This week opens with $169 billion in month-end supply over the first two days along with the usual $309 billion in Treasury bills. There are several important economic releases with the highlight being the Fed-favorite PCE price index for January is on Thursday. We will also receive durable goods for January, home price indexes for December, consumer confidence for February, the second reading on Q4 GDP, Chicago PMI for February, January construction spending, and final February consumer sentiment.

The deadline for Congress to avert a partial government shutdown is Friday. Today starts quietly with new home sales for January, expected to register 680k versus 664k in December, Dallas Fed manufacturing business index for February, and remarks from the new Kansas City Fed President Schmid. The Treasury will auction $63 billion 2-year notes, $70 billion 6-month bills, $63 billion 5-year notes, and $79 billion 3-month bills. We begin the week with Agency MBS prices roughly unchanged from Friday’s close and the 10-year yielding 4.24 after closing last week at 4.26 percent. Helping ARM rates, the 2-year is down to 4.68 percent.

Jobs and Transitions

Logan Finance is hiring! Non-QM Account Executives are in high demand at Logan Finance, especially those of you in Florida. Contact us today to learn more. Speaking of hiring, Logan is happy to announce that Ryan Rathert and Sarah Gonzalez have joined the executive team as Chief of Staff and Chief Operating Officer, respectively. Ryan is a proven mortgage finance wizard and Sarah a renowned industry maven, so put your sunglasses on, because the future at Logan is bright! And the spotlight will be on Logan’s SVP Business Development, Paul Jones, as he presents “Discover the DSCR Difference with Logan Finance”, session #2 in the monthly series, “The Modern Non-QM Experience”. Join Paul on March 6 at 2pm ET. Register here. If you’re looking for a Non-QM career boost, send your resume or check out LoganWholesale.com and LoganCorrespondent.com for more information. Join Logan and become a #LoganLeader today.

“Don’t just close loans, close the gap on your potential. Kind Lending is seeking mortgage professionals with an entrepreneurial spirit and KIND mindset. We will provide a comprehensive catalog of loan products to serve your clients, along with advanced marketing and tech tools to grow your brand and exponentially expand your reach. You will be empowered to rewrite your success by leveraging the powerful tools available at your fingertips. It’s your business. We are here to fuel it. If you are ready to build win-win relationships with a company that values you and your growth, contact Traci Miller, National Talent Acquisition Manager.”

Click n’ Close, a multi-state mortgage lender serving consumers and mortgage originators through its wholesale and correspondent channels and formerly known as Mid America Mortgage, announced Polly Cracchiolo has joined the organization’s third-party originator (TPO) sales team as an account executive.

 Download our mobile app to get alerts for Rob Chrisman’s Commentary.

Source: mortgagenewsdaily.com

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Our experts answer readers’ home-buying questions and write unbiased product reviews (here’s how we assess mortgages). In some cases, we receive a commission from our partners; however, our opinions are our own.

Mortgage rates jumped up last week following the release of some hotter-than-expected inflation data. Because the economy is still so strong, it’s possible that the Federal Reserve could keep the federal funds rate higher for longer, which would likely keep mortgage rates elevated as well. 

Currently, average 30-year mortgage rates are around 30 basis points up from January’s average, according to Zillow data.

Mortgage rates are expected to go down this year, but they likely won’t start falling until we get more data showing that inflation is continuing to slow. Once it looks clearer that inflation is coming down to the Fed’s 2% target, mortgage rates should ease.

Mortgage rates don’t directly follow the federal funds rate, but they’re often pushed up or down based on how investors expect Fed moves to impact the broader economy. 

In a speech given at the National Association for Business Economics last Friday, San Francisco Fed President Mary Daly said that while the Fed has made a lot of progress in bringing inflation down, it needs “more time and data” to be sure that price growth will continue to slow. 

“We will need to resist the temptation to act quickly when patience is needed and be prepared to respond agilely as the economy evolves,” Daly said.

Last week, the Consumer Price Index and the Producer Price Index, two popular measures of inflation, both came in hotter than forecasts expected. Markets took this as a sign that we may need to wait longer for the Fed to start cutting rates, and mortgage rates trended up as a result. 

At the moment, investors believe the Fed might start cutting rates at its June meeting, according to the CME FedWatch Tool. But whether this happens depends on the path inflation takes over the next few months.

Mortgage Rates Today

Mortgage type Average rate today
This information has been provided by Zillow. See more mortgage rates on Zillow Real Estate on Zillow

Mortgage Refinance Rates Today

Mortgage type Average rate today
This information has been provided by Zillow. See more mortgage rates on Zillow Real Estate on Zillow

Mortgage Calculator

Use our free mortgage calculator to see how today’s interest rates will affect your monthly payments.

Mortgage Calculator

$1,161 Your estimated monthly payment

Total paid$418,177
Principal paid$275,520
Interest paid$42,657
  • Paying a 25% higher down payment would save you $8,916.08 on interest charges
  • Lowering the interest rate by 1% would save you $51,562.03
  • Paying an additional $500 each month would reduce the loan length by 146 months

By clicking on “More details,” you’ll also see how much you’ll pay over the entire length of your mortgage, including how much goes toward the principal vs. interest.

30-Year Fixed Mortgage Rates

This week’s average 30-year fixed mortgage rate is 6.77%, according to Freddie Mac. This is a 13-basis-point increase from the previous week.

The 30-year fixed-rate mortgage is the most common type of home loan. With this type of mortgage, you’ll pay back what you borrowed over 30 years, and your interest rate won’t change for the life of the loan.

The lengthy 30-year term allows you to spread out your payments over a long period of time, meaning you can keep your monthly payments lower and more manageable. The trade-off is that you’ll have a higher rate than you would with shorter terms or adjustable rates. 

15-Year Fixed Mortgage Rates

Average 15-year mortgage rates inched down to 6.12% last week, according to Freddie Mac data. This is a 22-point increase since the week before.

If you want the predictability that comes with a fixed rate but are looking to spend less on interest over the life of your loan, a 15-year fixed-rate mortgage might be a good fit for you. Because these terms are shorter and have lower rates than 30-year fixed-rate mortgages, you could potentially save tens of thousands of dollars in interest. However, you’ll have a higher monthly payment than you would with a longer term.

How Do Fed Rate Hikes Affect Mortgages?

The Federal Reserve has increased the federal funds rate dramatically to try to slow economic growth and get inflation under control. So far, inflation has slowed significantly, but it’s still a bit above the Fed’s 2% target rate.

Mortgage rates aren’t directly impacted by changes to the federal funds rate, but they often trend up or down ahead of Fed policy moves. This is because mortgage rates change based on investor demand for mortgage-backed securities, and this demand is often impacted by how investors expect Fed hikes to affect the broader economy. 

The Fed has indicated that it’s likely done hiking rates and that it could start cutting soon. This will likely allow mortgage rates to trend down later this year.

When Will Mortgage Rates Go Down?

Mortgage rates increased dramatically over the last two years, but they’ve been falling in recent months, and are expected to drop further this year.

In January 2024, the Consumer Price Index rose 3.1% year-over-year. Inflation has slowed significantly since it peaked last year, which is good news for mortgage rates.

For homeowners looking to leverage their home’s value to cover a big purchase — such as a home renovation — a home equity line of credit (HELOC) may be a good option while we wait for mortgage rates to ease. Check out some of our best HELOC lenders to start your search for the right loan for you.

A HELOC is a line of credit that lets you borrow against the equity in your home. It works similarly to a credit card in that you borrow what you need rather than getting the full amount you’re borrowing in a lump sum. It also lets you tap into the money you have in your home without replacing your entire mortgage, like you’d do with a cash-out refinance.

Current HELOC rates are relatively low compared to other loan options, including credit cards and personal loans. 

Molly Grace

Mortgage Reporter

Source: businessinsider.com

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Hong Kong
CNN
 — 

China’s central bank has cut its key mortgage reference rate by a record amount, as it ramps up efforts to stem a prolonged property crisis.

The People’s Bank of China (PBOC) announced Tuesday that it would cut its five-year loan prime rate (LPR) from 4.2% to 3.95%, while keeping the one-year LPR unchanged at 3.45%.

The 25 basis point cut to the five-year LPR is the biggest reduction the central bank has made since it revamped its LPR system in 2019. That August, the central bank announced that the LPR would become the new reference rates for lending by Chinese banks.

The latest cut was also the first reduction to the five-year LPR since June 2023.

The LPR is the rate at which commercial banks lend to their best customers. The five-year rate usually serves as a reference for mortgages.

“Today’s 25 (basis point) cut to the five-year LPR is clearly aimed at supporting the housing market,” analysts from Capital Economics said in a note on Tuesday.

“On its own, it will not revive new home sales. But coupled with efforts to provide increased credit support to developers, today’s cut should help to reduce pressure on the property sector somewhat,” they said.

China’s economy has been hobbled by a real estate downturn since 2021, when a government crackdown on developers’ borrowing triggered a liquidity crisis in the sector.

The property market has since entered a prolonged slump, marked by an ongoing decline in both investment in and sales of property. Dozens of major developers have defaulted on their debt, with Evergrande, once the country’s second largest homebuilder, ordered to liquidate last month.

The crisis has triggered widespread protests by unpaid construction workers, buyers of unfinished homes and frustrated investors facing financial losses. It has also spilled over to the country’s massive shadow banking industry, with Zhongrong Trust declaring itself severely insolvent last year after failing to repay its debt.

Beijing has scrambled to revive the property sector, which accounts for as much as 30% of China’s gross domestic product.

Measures unveiled include slashing interest rates, reducing the size of down payments, encouraging banks to extend maturing loans to developers and loosening restrictions on home purchases in Chinese cities.

Capital flight

China’s economy faces a litany of other problems, including deflation, low confidence and accelerated capital flight.

The country’s direct investment liabilities, a measure of foreign direct investment, reached $33 billion in 2023, according to data released by the State Administration of Foreign Exchange on Sunday.

The gauge, which measures direct investments by foreign-owned entities in China, was down 82% from 2022 and stands at its lowest level since 1993.

While an uncertain economic outlook and rising geopolitical tensions are partly to blame for the exodus, foreign companies and investors have also grown wary of increasing political risks in China, including the possibility of raids and detentions.

The country’s stock markets have suffered a prolonged slump since their recent peaks in 2021, with more than $6 trillion in market value having been wiped out from the Shanghai, Shenzhen and Hong Kong markets.

Source: cnn.com

Apache is functioning normally

Mortgage servicers, regulators and economists are closely watching the delinquency rates for Federal Housing Administration (FHA) loans following a spike in the fourth quarter of 2023.

Industry experts say that although there’s a correlation between unemployment and delinquency rates, some homeownership costs — including insurance — have increased significantly over the past two or three years, which has had a strong financial impact on homeowners. But experts also say the situation is not as bad as the one experienced during the COVID-19 pandemic.

The sources spoke about these issues during this week’s Mortgage Bankers Association (MBA) Servicing Solutions Conference & Expo in Orlando.

The latest MBA data shows that the delinquency rate for one- to four-unit properties rose to 3.88% at the end of 2023, compared to 3.62% in the third quarter, but still below the historic average of 5.25%. Meanwhile, the FHA-insured loan delinquency rate recorded a larger jump during the same period to 10.81%, up from 9.5%, the highest level since Q3 2021.

“We are seeing a bit of a pickup for two quarters in a row, but it’s very important to keep in mind that we were at the absolute lowest point in delinquencies in the third quarter of 2023,” Marina Walsh, MBA vice president of industry analysis, research and economics, said in a market outlook session.

According to Walsh, the delinquency rate for FHA loans increased by 130 basis points from the third to fourth quarters, but the current level is “certainly not nearly where it was at the height of COVID-19.” 

In addition, she said that foreclosures are not picking up, so borrowers are either paying off their loans before entering the severe delinquency stage, or if they are in the serious delinquency stage, they are entering a workout. 

“The question I posed to all of you is, ‘Is this a blip or a bigger trend?’” Walsh said, adding that based on data MBA has received from the industry, she believes the delinquency rate could come down a bit in first-quarter 2024 following the end of the busy holiday shopping season.

“All these increases in costs impact people’s ability to pay, without question,” Steven R. Bailey, senior managing director and chief servicing officer at PennyMac Financial Services, said in an executives’ perspective session. “But we still see the strongest correlation is between unemployment and delinquency.”

Bailey said that although increases in delinquencies are not a trend that servicers want to see, “I don’t look at it with the same fear that I used to look like.” 

Homeowners insurance

According to industry experts, one of the costs affecting homeowners is their insurance, which can lead to increases in delinquencies. California and Florida are among the states where the situation is more evident. 

Seven of the 12 largest insurers in California have either paused or restricted new policies over the past 18 months, including State Farm and Allstate. In September, the state’s top insurance regulator announced that new rules are in the works to persuade insurers to remain.

In Florida, the departure of many insurers and reinsurers has resulted in homeowners paying an average of nearly $4,000 a year, almost three times the U.S. average, according to estimates from the Insurance Information Institute. In some instances, homeowners have seen their insurance costs more than triple, but a new bill seeks to help them.

“That’s a combination of both rates from a carrier perspective, as well as just the increase in home values,” Patrick A. Sullivan, vice president of industry relations and compliance at Assurant, said in a session about homeowners insurance. 

Sullivan said reinsurance is another factor weighing on homeowners insurance costs, a function of the global capital markets. He added that reinsurance costs have more than tripled over the past three years.

“Homeowners insurance is certainly a problem we need to tackle together,” John Bell, executive director of loan guaranty service at the U.S. Department of Veteran Affairs (VA), said during a regulatory session. 

“I hope that there are others on this panel and others out there that want to work together to try to solve some of those rising prices that our homeowners just can’t absorb, and at some point in time, it’s going to hurt the market.”

Bell said that if a home costs $800 per month more than last year, the industry needs to figure out how to solve it. Bell and the VA are working to move forward with options to help veterans avoid foreclosure, including a partial claim solution.

FHA Commissioner Julia Gordon, who announced the agency’s new payment supplement partial claim during the conference, added that the issue of homeowners insurance will take a village to tackle. 

“And that’s going to take real work in the states also, which is hard, and we just have to do it if we want people to be protected,” Gordon said.

Source: housingwire.com