Real Estate

Apache is functioning normally

It is no secret that housing inventory is low. As of June 2, there were 433,104 single family homes on the market nationwide, according to data from Altos Research.

And while this situation is certainly far from ideal, according to a report published Thursday by the National Association of Realtors and Realtor.com, even with the existing level of homes available for sale, the housing affordability and inventory shortage issues wouldn’t be so severe if there were enough homes for buyers at all income levels.

In April 2023, data from NAR and Realtor.com showed there were roughly 1.1 million homes listed for sale. Of those 1.1 million properties, 25% had a price lower than $256,000, which is the maximum price of a home that households earning the national median income of $75,000 can afford.

Over half (51%) of U.S. households earn $75,000 or less, meaning that in a balanced market, 51% of the homes for sale would be affordable to buyers in this income bracket.

Based on the report, the housing market needs an additional 319,460 listings priced under $256,000 in order for the market to be balanced. In other words, the U.S. needs to add at least two homes that are affordable for middle-income buyers (up to $256,000) for every home that is listed above $680,000.

As income levels increase, however, the disparity decreases between current inventory and the inventory needed for a balanced market. For example, buyers earning $250,000 can currently afford to buy 85% of listings compared to 93% in a balanced market.

This situation has only gotten worse over the past five years. In April 2018, there were about 810,000 listings that middle-income buyers were able to afford, just 150,000 listings shy of a balanced market.

El Paso, Texas; Boise City, Idaho; Spokane, Washington; Cape Coral, Florida; and Lakeland, Florida round out the top five metropolitan areas with the larges supply shortage of homes with a price lower than $260,000. In El Paso, buyers earning $75,000 can afford to buy 16% of listing, when in a balanced market they should be able to buy 66% of listings. In Boise City, they can afford just 2% of listings when a balanced market calls for them to be able to afford 50% of listings.

On the other side of the spectrum, in the Youngstown, Ohio-Pennsylvania market, buyers earning $75,000 can afford to buy 72% of listings, when a balanced market calls for this cohort to be able to afford 66% of listings.

Akron, Ohio (where 61% of listings are affordable and 58% are needed for balance); Toledo, Ohio (where 61% of listings are affordable and 60% are needed for balance); Cleveland, Ohio (where 59% of listings are affordable and 58% are needed for balance); and Syracuse, New York (where 54% of listings are affordable and 55% are needed for balance) round out the top five.

When parsed by race and ethnic groups, NAR and Realtor.com found that Black Americans are the group that is furthest away from equilibrium out of any cohort. Two-thirds of Black Americans earn $75,000 or less, and these buyers can only afford 22% of homes for sale.

Meanwhile, 48% of white Americans fall into the same income bracket, and they can also afford to buy 22% of listings. This means that Black Americans would need 20% more listings with a value of up to $256,000 than white Americans in order to be at equilibrium.

By comparison, Hispanic Americans need roughly 11% more homes listed for sale than what white Americans need to reach equilibrium. When broken out by metro area, McAllen and El Paso in Texas; Oxnard and Riverside in California; and Tucson, Arizona are the areas with the smallest housing affordability and availability inequalities among white and Black households earning less than $75,000. The report attributes this to these areas being expensive for all racial/ethnic groups

Source: housingwire.com

Apache is functioning normally

<img data-lazy-fallback="1" data-attachment-id="263090" data-permalink="https://www.housingwire.com/articles/more-proof-that-rent-is-getting-cheaper-across-the-u-s/the-concept-of-falling-real-estate-market-reduced-interest-in-the-mortgage-a-decline-in-property-prices-and-apartments-low-interest-rates-on-mortgage-loans-reduced-demand-for-home-purchase/" data-orig-file="https://www.housingwire.com/wp-content/uploads/2020/07/rent-falling.jpeg" data-orig-size="1200,675" data-comments-opened="1" data-image-meta=""aperture":"0","credit":"u0410u043du0434u0440u0435u0439 u042fu043bu0430u043du0441u043au0438u0439 – stock.adobe.com","camera":"","caption":"The concept of falling real estate market. Reduced interest in the mortgage. A decline in property prices and apartments. Low interest rates on mortgage loans. Reduced demand for home purchase.","created_timestamp":"1548806718","copyright":"u00a9u0410u043du0434u0440u0435u0439 u042fu043bu0430u043du0441u043au0438u0439 – stock.adobe.com","focal_length":"0","iso":"0","shutter_speed":"0","title":"The concept of falling real estate market. Reduced interest in the mortgage. A decline in property prices and apartments. Low interest rates on mortgage loans. Reduced demand for home purchase.","orientation":"0"" data-image-title="The concept of falling real estate market. Reduced interest in the mortgage. A decline in property prices and apartments. Low interest rates on mortgage loans. Reduced demand for home purchase." data-image-description data-image-caption="

The real estate market is cooling down, observers say.

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The real estate market is cooling down

Reports released this week by several respected market observers point to less good and increased bad and ugly ahead for the housing market.

For some of the good, a U.S. Census Bureau report released late last week spurred a bout of optimism when it revealed that new-home sales jumped by nearly 11% month-over-month in May on a seasonally adjusted basis, after declining by 12% in April. 

Moody’s Investors Service, in a housing-market report released this week, puts some ugly back into the home-sales figures for May, however.

“At 696,000 units, May new home sales were around 17% below the recent peak of 839,000 units in December last year,” the Moody’s report notes. “[On June 21], the National Association of Realtors said that existing-home sales declined for the fourth consecutive month. 

“Existing-home sales fell in May by 3.4% on a seasonally adjusted basis to 5.41 million, the lowest since June of 2020 and similar to pre-pandemic levels.”

Those figures, along with “sharp recent increases in mortgage rates” and other supporting data, lead Moody’s to conclude that the “U.S. home-price boom is over.” The firm, which rates securitization offerings and provides other capital-market services, predicts “material declines” in both new- and existing-home transactions this year, compared with 2021.

Supporting the ugly outlook for the housing market is the release today, June 29, of the quarterly CFO Survey, conducted jointly by Duke University’s Fuqua School of Business and the Federal Reserve Banks of Richmond and Atlanta. The survey of more than 300 U.S. financial executives conducted between May 25 and June 10, shows optimism about the broader U.S. economy continuing to decline.

The average index score for the current survey was 50.7, compared with 54.8 in the prior quarter and 60.3 two quarters ago.

“Price pressures have increased, real revenue growth has stalled and optimism about the overall economy has fallen sharply,” said John Graham, a Fuqua finance professor and the survey’s academic director. “Monetary tightening [by the Federal Reserve] is one of several factors dampening the economic outlook.” 

The CFO Survey’s findings are echoed by a revised first-quarter 2022 gross domestic product (GDP) estimate released Wednesday by the U.S. Department of Commerce’s Bureau of Economic Analysis (BEA). It shows that a drastic economic slowdown is already underway.

“Real gross domestic product [a measure of all goods and services produced in the economy] decreased at an annual rate of 1.6 percent in the first quarter of 2022 …,” the BEA report states. “In the fourth quarter of 2021, real GDP increased 6.9 percent.”

The BEA’s first-quarter GDP estimate, it’s third to date, was revised downward from -1.4% and -1.5% in the two prior estimates. The grim data led Mortgage Capital Trading (MCT), a San Diego-based capital market software and services firm, to broach the “R“ word in its daily market-overview report.

“Concern over a slowing economy and aggressive interest rate hikes from the Fed are beginning to dominate market sentiment,” the MCT report states. “This morning’s GDP release [on June 29] came with a downward revision for the last reading, further supporting views that a recession is either in progress or coming soon.”

What does all this mean for the housing market in the months ahead? The Moody’s report attempts to frame some of the expectations.

“We expect some increases in existing-house prices over the next 18 months, though for appreciation to be well below the general rate of inflation,” the Moody’s report states. “After that, we expect home appreciation to settle in at levels somewhat lower than the rate of overall U.S. inflation.”

The report even indicates that there “is risk that existing home prices will have a minor correction over the next two years, similar to housing markets in many other developed counties facing risks after recent booms.” 

The “moderation” in the U.S. housing market is ongoing and the full effects of recent rate increases have yet to be fully realized, the Moody’s report adds, especially with respect to housing prices.

Moody’s predicts that housing demand will “dampen significantly” in the months ahead due to the doubling of rates for 30-year fixed mortgages since the start of the year, which is fueling a huge jump in monthly mortgage costs. Freddie Mac’s most recent Primary Mortgage Market Survey shows the average 30-year fixed rate mortgage at 5.81% as of June 23. 

“The monthly costs of new mortgages on existing homes sold at median transaction prices [are] more than 60% higher than a year ago,” the Moody’s report states. “Although higher mortgage rates do not always drive home prices lower, they typically affect sales activity and drive down the rate of price appreciation. 

“We also expect higher rates to restrict for-sale supply because current homeowners will be reluctant to lose low-rate fixed borrowing costs.”

So, in effect, moderating or even declining home prices could be neutralized by rising borrowing costs, leading the housing market toward stagnation — the doldrums — in the worst-case scenario.

There is some good news mixed in with all this bad and ugly, however. Moody’s points out that some “fundamental housing strengths” will likely help to mitigate the degree of any market correction, at least over the next 12 to 18 months.

Those strengths include “favorable demographic trends, solid underwriting of outstanding mortgages and lingering housing supply constraints from a period of underbuilding,” according to the Moody’s report. Also on the bright side, according to Moody’s, is that a moderate decline in housing prices could be good for the market longer-term. That’s assuming the Federal Reserve wins the fight to tame inflation, now running at 8.6%,  without causing a major spike in unemployment, which was at 3.6% in May for the third month in a row, according to the Bureau of Labor Statistics.

In short, the housing market has reached a fork in the road, based on the Moody’s analysis — with one path leading to the doldrums, or even decline, and the other toward resurgence and a new normal.

“If U.S. home prices were to decline modestly, it would increase affordability for potential homebuyers and improve demand, including for individuals who were priced out of the market in the recent months because of rapidly rising interest rates,” Moody’s reasons in its report. “However, sustained large increases in mortgage rates or a material weakening in the labor market could lead to sharper declines in housing activity and prices.”

Source: housingwire.com

Apache is functioning normally

Homebuyers these days are facing much higher costs of ownership compared to a year ago, pushing most to the sidelines. Mortgage rates and home prices are high and inventory is paltry, resulting in a largely frozen housing market.

Nearly two-thirds of Americans say they are waiting for mortgage rates to drop before entering the market, according to a survey released this week by BMO Financial Group, the eight-largest bank in North America. Among those who plan to purchase a home soon, only 6% expect to do so this summer, which is supposed to be the high season for real estate agents. Refinancing plans are also on hold: among those planning to refinance, 81% said they are waiting until rates drop.

The survey also found that 68% of Americans plan on using loans from their financial institution and/or lines of credit to help finance their home purchase. BMO said that 46% of Americans plan on using some of their personal savings to help pay for their home purchase, such as a down payment. Nearly a quarter of people surveyed said they expect financial help from family or friends when they purchase a home.

Mortgage rates have remained stubbornly high for virtually all of 2023. On Thursday, rates were recorded at 6.94%, just below the recent high of 7.14% in late May. The Mortgage Bankers Association on Wednesday said that mortgage applications for the week ending June 2 were down about 30% from the year prior, a direct consequence of 10 consecutive rate hikes from the Federal Reserve. 

Still, there is optimism that the housing market is at the bottom and will gradually improve.

“If we can achieve a true soft landing [for the economy], which it looks like we might be able to pull off, then … rates will start to kind of slowly go down,” said John Toohig, the head of whole loan trading at Raymond James. “For the housing market, this is the bottom; we’ll get past this. But it’s not a slam dunk, don’t get me wrong. Nobody’s doing backflips here. Nobody’s doing high-fives. Nobody’s saying, “Hey, let’s break out the steaks and put away the hotdogs.” You know, it’s just incremental. … We need to see a 200 basis-points drop [in rates] before you see any meaningful refinance business.”

Source: housingwire.com

Apache is functioning normally

Purchase mortgage rates this week dropped 11 basis points to 5.70%, according to the latest Freddie Mac PMMS Index, ending a two-week climb following the Federal Reserve’s rate hike earlier this month.

A year ago at this time, 30-year fixed rate purchase rates were at 2.98%. The PMMS, a government-sponsored enterprise index, accounts solely for purchase mortgages reported by lenders during the past three days.

“The rapid rise in mortgage rates has finally paused, largely due to the countervailing forces of high inflation and the increasing possibility of an economic recession,” said Sam Khater, chief economist at Freddie Mac.

Another index showed the 30-year conforming rates also slid from last week.

Black Knight’s Optimal Blue OBMMI pricing engine, which includes some refinancing data — but excludes cash-out refis to avoid skewing averages – measured the 30-year conforming rate at 5.89% Wednesday, down slightly from last week’s 5.9%. The 30-year fixed-rate jumbo was at 5.42% Wednesday, up from 5.33% from the previous week, according to the Black Knight index.

Khater expects the dip in mortgage rates will also slow down home price growth.  

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“This pause in rate activity should help the housing market rebalance from the bottleneck growth of a seller’s market to a more normal pace of home appreciation,” Khater said. 

Mortgage application volume rose 0.7% last week led by refinancing applications and a slight uptick in conventional loans, according to the Mortgage Bankers Association. After increasing 65 basis points during the past three weeks, the 30-year fixed rate declined 14 basis points last week, the MBA said. 

Refi application rose 1.9% from the previous week and purchase application marginally increased 0.1% from a week earlier.

Mortgage rates tend to move in concert with the 10-year U.S. Treasury yield, which reached 3.10% Wednesday, down from 3.16% a week before. The federal funds rate doesn’t directly dictate mortgage rates, but it does steer market activity to create higher rates and reduce demand.

Following the Federal Reserve’s interest rate hike of 75 basis points on June 15, mortgage rates have been showing an upward trend for the past two weeks.

According to Freddie Mac, the 15-year fixed-rate purchase mortgage averaged 4.83% with an average of 0.9 point, down from last week’s 4.92%. The 15-year fixed-rate mortgage averaged 2.26% a year ago. 

The 5-year ARM averaged 4.50% up from 4.41% the previous week. The product averaged 2.54% a year ago. 

Economists expect the tightening monetary policy will reduce originations in 2022 and 2023. The MBA expects loan origination volume to drop about 40% to about $2.4 trillion this year, from last year’s $4 trillion. Meanwhile, the MBA expects 6.53 million existing and new home sales in 2022, compared to 6.9 million in 2021. 

Source: housingwire.com

Apache is functioning normally

All 12 Federal Reserve districts have seen issues with a lack of housing inventory, which is largely due to existing homeowners holding back on listing their homes after previously locking in low mortgage rates. 

Demand from the buyer side has remained steady or increased, however, and new home builders have responded to inventory shortages by increasing speculative inventory production, according to the Federal Reserve Beige Book, released Wednesday. 

The Beige Book is a compilation of data and interviews with bank and branch directors, community organizations and economists from on or before May 22.

“Residential real estate activity picked up in most Districts despite continued low inventories of homes for sale,” the report states. 

The Beige Book also notes that “home prices and rents rose slightly on balance in most Districts, after little growth in the prior period.”

In return, the lack of inventory of homes for sale pushed demand for rental properties in some areas — including New York, Chicago, St. Louis, Kansas City Federal Reserve districts.

Following are excerpts of statements on housing conditions from each of the 12 Federal Reserve districts. 

***

Boston – Contacts around the District attribute the still-low sales numbers to low inventories more than to weak demand, as slightly lower mortgage rates have helped bring more buyers to the market.

House price appreciation has slowed on average but remains slightly positive, with the exception that home prices in Massachusetts (not including Boston) have experienced modest declines from a year earlier. The modest price growth in the Boston area marks a trend reversal from the preceding few months. 

Contacts anticipate that, despite healthy buyer demand, home sales are likely to experience only a modest seasonal increase moving forward, owing to extremely low inventory levels.

New York – The residential sales market has been strong across the District. A New York City-area contact reports that the sales market in and around New York City has picked up strongly in recent weeks after a brief pause in early April, which was due to uncertainty in the banking sector.

After a slow start to the year, housing markets in upstate New York have also started to pick up, with bidding wars and multiple offers becoming more common. Inventory remains exceptionally low and is restraining sales activity in much of the District. A key factor suppressing new listings is the prevalence of homeowners with historically low interest rates on their existing mortgages, reducing the incentive to sell and move.

A strong economy and relatively high mortgage rates have pushed some movers to the rental market, boosting demand.

Philadelphia –  High interest rates have continued to dissuade existing homeowners from listing their house and losing their low interest rate. Existing home sales have fallen moderately in this district, and prices have continued to rise as the market heats up again. New home builders have benefited from the unseasonably modest sales of existing homes as the resale market has slowed. 

Cleveland – Demand for residential construction and real estate has stabilized in this District, and contacts attribute this stabilization to the arrival of spring and flattening interest rates.

Homebuilders have reported an increase in speculative construction projects in this District, as many buyers want to purchase and move into homes immediately, in part to avoid further rises in interest rates.

Richmond – Residential real estate respondents indicate in the report that the spring market is off to a good start, with sales prices continuing to appreciate, but not at the same pace as last year. For-sale inventory remains constrained due to fewer people putting their homes on the market, but buyer traffic has been steady while the days on market has increased slightly in the last month. 

However, fluctuations in mortgage rates have caused buyers to pull back, with pending sales and closed sales both down in this District. Builders have been offering strong incentives to close deals. 

Atlanta – Housing demand throughout the District has remained strong despite interest rate and home price volatility. Though home sales are down compared to a year ago, sales in many markets in this District have increased on a monthly basis, as buyer sentiment has modestly improved. 

The supply of existing homes for sale has remained low as homeowners have showed increased hesitancy to list homes for sale, especially if they financed at a low interest rate. Home prices remain down from peak levels but have recently shown month-to-month improvement.

New home builders have responded to inventory shortages by increasing speculative inventory production, and some have begun to reduce buyer incentives.

Chicago – Residential construction activity has been down modestly in this District. Contacts report that high-interest rates have led some projects to be postponed or canceled and that while construction costs had fallen, the decline isn’t enough to offset higher financing costs. 

Residential real estate activity has decreased modestly as well. Prices and rents have declined, and the low inventory of homes for sale has helped to prevent larger declines.

However, there have been reports of rising retail rents in some areas because of a lack of high-quality new construction.

St. Louis – Rental rates for residential real estate have increased slightly in this District. The number of new listings in residential real estate have dropped sharply in Louisville since our previous report, while new listings in the Memphis and Little Rock regions have remained unchanged. Seasonally adjusted home sales have remained unchanged since the previous report. 

Minneapolis – Residential construction has remained subdued. Single-family permitting in April was more than 40 percent lower year over year in the Minneapolis-St. Paul region; most other large markets in the District saw even bigger declines. Discounts have started to appear for some speculative developments.

Closed (residential real estate) sales in April fell notably year over year across the District, with many larger markets seeing declines of 30 to 50 percent. Median sale prices have declined in western and central Montana and have been flat in several other markets. 

Kansas City – Housing rental rate growth has remained elevated in several western District states, but the pace of increases has declined broadly and swiftly from the growth rate experienced during the past year. 

Dallas – Housing demand broadly has held up in the Dallas District, though sales have continued to be weaker than a year ago. Contacts have noted a decent spring selling season, with prices largely stable, and builders have been able to raise prices slightly in selected areas.

Outlooks have been cautious, however, with some voicing concern about whether demand would hold up beyond the spring selling season.

San Francisco – Activity in residential real estate has slowed further in this District. Contacts across the District have reported stable demand for single-family homes, although high mortgage rates have restrained prices. Existing single-family inventory has been low, and owners appeared hesitant to forego their existing low-rate mortgages by listing their homes.

Despite reported improvement in the availability and cost of materials, construction of new homes has been flat-to-down as developers responded to higher financing costs.

Source: housingwire.com

Apache is functioning normally

Last Updated: May 25, 2023 BY Michelle Schroeder-Gardner – 64 Comments

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Tips For When Buying a House

Tips For When Buying a HouseWhen we bought our first (and current) house, our whole process went by very quickly and smoothly. Our mortgage company and real estate agent both told us that our mortgage was the quickest process they’ve ever done. We got pre-approved and bought a house less than one month from start to finish.

It took around 2 weeks for us to find the perfect house, and we probably looked at over 20 houses in person. We also looked at hundreds online so the 20 that we looked at we thought were for sure buys. Our agent probably HATED us. Luckily she was a family friend so I hope she got over her hatred quickly 🙂

We are sort of in the home buying process again as you all know. We keep going back and forth with what type of house we want, where we want it located, and how much we want to spend.

Our current house is fine for now. There is definitely nothing wrong with it, I guess we just want something a little nicer that also has a little more room. So we could: a) stay in our current house and save a lot of money; or b) buy a house within the next year and finance the majority of it (probably with a 25% down payment).

If we did stay in our house for longer, we would spend some money on making it perfect. I definitely would want to change some things in our bathroom (such as adding a nice glass shower door), make our front and backyards perfect (possibly add a garden) and finish decorating everything to the way we want it. This is a whole ‘nother post in itself!

Anyways, when we bought our current house, we followed all of the steps below, except for the fact that we didn’t realize that the total monthly cost would be that much higher than what the mortgage company quoted us. That is something that we were naive about. Learn from our mistake!

1. Get pre-approved for a mortgage!

This is definitely one of the first steps you should take. Looking at houses without getting pre-approved can be disastrous because you might just be wasting your time. You might not get approved, get approved for less than you think, etc.

Wouldn’t it really stink if you spent a ton of time looking at houses that turned out to be way more than what you can be pre-approved for? That can be a major letdown.

2. Buy less than what you are approved for.

I think we were approved for around $200,000. We were 20 years old and this seemed like a ton since we made hardly any money then. We were shocked and we looked at one house that was around this price range, but then we realized that this was a bad idea as we wanted to be more comfortable with our bills.

Also, something that our real estate agent told us, is to not show the seller how much you are pre-approved for. We showed our real estate agent our real pre-approval amount of course, and our agent said that when this happens, it can not be good. She said that if some sellers can see what we can actually “afford,” that they know how flexible that you can be with your pricing and negotiating. You can get your mortgage lender to lower the amount on the piece of paper and this is what we did. We asked our lender to say that our pre-approved amount was $150,000 (everyone, please keep in mind that I live in the Midwest and housing is cheaper here).

3. Buy a house that’s a good size for you.

Also think about the future you are planning when you think about the size of the house you might buy. Remember my post on how we Bought Too Much House? Keep that in mind! While before our house seemed way too big for us, we now want something bigger. Eventually of course we would want kids, but it’s mainly that we want a bigger yard.

Do you plan on living in this house for awhile, or just a short amount of time such as 5 years? Do you want a house and neighborhood/city that is good for kids to grow up in? There are many questions to ask yourself.

4. Get a realtor!

This is something that I definitely recommend. Our realtor saved us a lot of money and was a great negotiator. We got the seller to pay all closing costs (which were around $5,000). And she also got them to fix a lot of little things around the house. Realtors do a lot of work and are skilled in buying/selling houses. They know where to begin, what to look for and have tons of tips.

5. Make sure you look around and don’t settle.

The market is great right now for people who are looking. There are a lot of houses out there and most have a great price (all of course depending on your city! Some cities are in a housing bubble). You will be living in this house most likely for a long amount of time, so you don’t want to regret your decision.

6. Hire an inspector.

This is something that is definitely needed as well. An inspector will be able to find things that might sway you from NOT buying the house. If you’re buying a house, then you can most likely shell out another $300 for an inspection. It is a good investment.

7. Figure out the WHOLE cost.

Not just want the mortgage would be. Figure out if there will be any PMI, what the homeowners insurance will be, and property taxes. This all can add up quickly, and it added around $300 to our mortgage.

8. Save!

Now that you know you want a house, try and save as much as you can before you move into your new home. Your new costs will most likely be higher than what you think, and any extra savings will be extremely helpful.

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What tips do you have for a potential homebuyer?

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Source: makingsenseofcents.com

Apache is functioning normally

California-based Pennymac launched a product that can freeze mortgage rates as many as 90 days, in a bid to attract more borrowers to the market amid volatile rates.

Dubbed “Lock & Shop,” the product, rolled out in mid-June, has three terms, all of which include a shopping period, plus a built-in, 30-day period in which to close on the contract. The terms vary based on how much time a borrower anticipates needing to find their dream home: The 60-day lock gives borrowers 30 days to find their new home; the 75-day lock gives borrowers 45 days to shop; and the 90-day lock gives customers 60 days to select a home. 

The product also allows a one-time “float down,” should rates decline. It’s available for all loan types, except for jumbo. 

“As we know, the Federal Reserve has indicated they’re going to continue to raise rates, so we can lock in the loan with today’s rate for up to 90 days,” said Scott Bridges, senior managing director of direct consumer lending. “That might prevent you from either not buying the house you wanted or having to buy a lower-priced house because your payment would be higher with a higher rate.”

Pennymac’s product allows borrowers to extend their lock-in period at an updated rate if they do not find a house during the term length selected. Bridges said there’s no upfront fee, but the lender requires pre-approval to ensure borrowers qualify for a mortgage loan – in this case, the lender gives 50 basis points on the closing costs.

“There’s no point doing a Lock & Shop if your purchase is going to be fairly imminent, but we are seeing it to be a very popular product for our borrowers,” Bridges said. Pennymac has locked more than 100 applications with the product since mid-June. 

Creating a path to success in today’s purchase market

Meeting the needs of a new generation of homebuyers while managing the ebbs and flows of a volatile housing market is a major endeavor for any mortgage lender. So, what should lenders be doing to thrive in the face of a post-pandemic housing market rife with new hurdles?

Presented by: Calyx

Pennymac is the latest mortgage lender to freeze rates for borrowers. In late June, fintech startup Tomo also announced a “Lock & Shop” product, allowing borrowers to lock in a mortgage rate for as many as 120 days, about twice as long as most lenders.

The product does not require a property address to guarantee a mortgage rate. Founded in 2020 by former Zillow executives Greg Schwartz and Carey Armstrong, the fintech startup focuses on the $1.6 trillion purchase mortgage sector.

“Consumers had seen so much news coverage on a threatened recession, inflation and interest rate increases that they got stuck,” Tomo’s co-founder and CEO Greg Schwartz said. “They are saying: ‘I’m afraid that if I start shopping now, by the time I find a place — because there’s still limited inventory, I still have to make multiple offers — and, by the time I find a home, I may have much less buying power.’”

Since January, mortgage rates have risen quickly due to high inflation and the Federal Reserve’s plan to tighten monetary policy. And that has put pressure on mortgage lenders with extended lock-in periods. 

When rates are surging, lenders’ capital markets teams have trouble selling loans locked at a lower rate because investors demand higher returns. That often forces lenders to sell at par or take a loss.

But Pennymac and Tomo said they can offer extended lock-in periods because their capital markets teams are hedging the transactions (so they can avoid losses when selling loans at the current mortgage rate in the secondary market in the future) and the companies have strong balance sheets.

Last summer, Tomo launched its platform after raising $70 million in seed capital and achieving “unicorn” status. In 2022, Tomo said it raised another $40 million in a Series A round led by SVB Capital, which more than doubled the company’s valuation to $640 million.

Tomo, however, is not immune to the volatility in the markets. The digital mortgage lender laid off nearly one-third of its workforce in late May. The company does not disclose its origination volume. 

Pennymac reported $490 million in cash as of March 31, according to Securities and Exchange Commission (SEC) filings.  

The company delivered a pretax net income of $234.5 million in the first quarter, essentially unchanged from the prior quarter. Pennymac expects to  lay off 207 employees in June and July following a workforce reduction filing of more than 230 employees in March.

Editor’s Note: This article was updated July 14 to indicate Pennymac offers three term options for its “Lock & Shop” product. After publication, a spokeswoman provided additional information about a 60-day lock term, which had not been initially disclosed.

Source: housingwire.com

Apache is functioning normally

Real estate investment management firm Pretium Partners is acquiring thousands of homes from home construction company D.R. Horton Inc. in a $1.5 billion deal, as Bloomberg first reported. 

The deal includes a combination of completed homes and homes that are not yet finished, according to the outlet, which cited people familiar with the transaction who asked not to be named. 

Neither company commented to Bloomberg about the deal. 

More than 4,000 homes are involved in the transaction, which are primarily located in high-demand markets in the Southeast and Southwest, the Wall Street Journal reported. The homes, planned as rentals, have already been leased.

The deal comes at a time when a lack of for-sale home inventory is boosting the appetite for homebuilders. 

The transaction could also signal investors’ re-entry into the housing market after institutional investors shed properties at the end of 2022 following a drop in housing prices nationwide.

Founded in 2012, the Pretium platform capitalizes on investment and lending opportunities and has more than $50 billion of assets with real estate investments across 30 markets in the U.S, according to the firm.

Source: housingwire.com

Apache is functioning normally

With rates around 6.9% and home prices still near record highs, homebuyers are demanding that their loan officers provide options to lower monthly mortgage payments as much as possible.

Michael J. Barnes, a branch manager at Mann Mortgage, recently had a client who planned to live in a new home for five years before selling it. The client requested a cost analysis to compare monthly payments on a mortgage at 7.5% versus a 6.5% mortgage rate with a permanent rate buydown.

His client would pay $4,000 to buy down the rate by one full percentage point (100 bps) and save $7,880 over the five-year period he planned to keep the home. 

“In that client’s case, it made sense to pay to do a permanent buy down,” Barnes said. “There were too many things going against the client to do a temporary buydown, knowing that he’s going to keep it for a maximum of five years.”

To get the best product for the borrower, Barnes, like many LOs these days, has had to run different scenarios based on the client’s preferences, including the mortgage term, down payment and whether the purchase would be a primary residence versus investment, as that would affect the pricing of LLPA fees. 

LOs across America are challenging clients to think about their financial situation several years down the line, asking about plans for kids, how much is being saved in IRAs/401Ks, and more. These days, there’s much more to the job than, “Here’s much you qualify for,” LOs said.

“What I’ve seen is that the really good mortgage advisors today are taking time to understand each borrower’s circumstance, short term goals, long term goals and put together a plan with them of how long are they going to be in the house, how much do we need to put down on that house, and understand not every loan is created equal for every person, depending on what their goals are,” said Brian Covey, executive vice president of Revolution Mortgage. 

Understanding the borrower

Randy Kaufman, a senior loan originator at Notre Dame Federal Credit Union, offered his client the option to float his rate for a transaction that is set to close at the end of June. 

When Kaufman’s client’s offer was accepted at the end of May, the client anticipated that the debt ceiling legislation would pass and that the Federal Reserve would pause hiking rates in the upcoming June FOMC meeting, which in turn would bring mortgage rates down. 

“They didn’t want to lock it yet, they wanted to let it flow. So they’re saving themselves some money by letting it flow,” Kaufman said.

Being conservative never hurts and being strategic about the market is important, Jared Sawyer, a sales manager at loanDepot, said.

loanDepot offers borrowers the option to float rates but Sawyer sees the majority of his clients want predictability when it comes to rates – opting to go with a permanent rate buydown.

“I would say about 95% of first-time homebuyers want to know what their payment is going to be out of the gate. They don’t have to worry about that changing on them,” Sawyer said.

Especially when the seller is willing to give concessions, the buyer is able to get a credit for closing and contribute to buying down points. 

Seller concessions are abundant in some of the markets that have cooled – including Oregon and Arizona – and his clients are able to take advantage of that, Sawyer noted. 

“I let them know their options. These are the options you can do and here are the pros and cons of this (…) About 90% of the conversation we’re having, [I’m hearing] we don’t want to look at something temporary. We want to make sure we know what our payments are going to be,” Sawyer said.

Every scenario is different and he finds some of his experienced buyers – those who bought their first homes already are open to the option of a temporary buydown, according to Sawyer, 

Temporary buydowns often make more sense for buyers planning to live in the home long term as they are more likely to have a refi opportunity during that time period, Barnes noted. Also, seller-funded temporary buydowns may not be available depending on how hot market conditions are.

A game of conversion for loan officers

“The knowledge of what the market is doing and knowing why it is happening is critical right now more than ever,” Jose Valenzuela, a loan officer at Motto Mortgage, said. “If you can paint a picture for the borrowers explaining potential scenarios both good and bad, it’s also critical.”

Valenzuela has been able to create a high pull-through closing after retaining pre-approved clients thanks in part due to weekly check-ins with his clients. Being a “trusted advisor” is important in an environment where buyers are trying to find their homes. It’s important to focus on what the buyer might be looking for, Valenzuela said.

For instance, having a nice yard for a borrower’s son could mean they can pass on to their child like their parents did for them, he noted. Some borrowers are focused on legacy to leave for their child’s future.

“Have a meaningful conversation about ways to focus on legacy like a living trust, a financial planner (…) This will keep you in the driver’s seat against almost any other loan officer,” he said. 

Many loan officers are hoping for the market to turn, which in turn would bring back some refi business among homebuyers who locked in rates at close to 7% levels at the latter half of 2022. 

“I would not hold my breath on that I would plan on this environment being consistent. You have to work three times as hard to make the same paycheck you did last year in this environment,” Sawyer said. 

Ultimately, it’s a game of conversion. Loan officers need to take more time with borrowers and ask better questions to secure loans, Covey said. 

“Even if you’re talking to fewer people, if you can convert at a higher percentage, you’re still getting the volume and velocity of applications and closings that you desire.” 

Source: housingwire.com

Apache is functioning normally

They say that right now is a seller’s market, but in my little neighborhood it was definitely a buyer’s market.

This made our home sale a little more difficult than what others may be experiencing in the United States but luckily we were still able to get a contract on our home 3.5 months after our home was put on the market. In fact, we actually received three contracts on our home that very week after not receiving any bites for 3.5 months (and over 30 home showings in that time period).

While I’m no expert at selling a home, I did recently go through the whole home selling process.

Selling a home can be a long and stressful process but hopefully with this guide I can help someone’s home sale go a little more smoothly than mine did.

Preparing your home to be put on the market and knowing the necessary steps and tips to selling a home can make a home sale go much more smoothly.

Plus, I don’t think anyone wants to experience any sort of surprise when selling their home since it is such a big expense.

Below are my steps and tips for selling your home. Enjoy and good luck with your home sale!

Find a real estate agent.

If you decide to sell your home by using a real estate agent, then you should look for one sooner rather than later. This way your real estate agent can give you an idea of what your home may sell for, what changes you may want to make, what the timeline for selling your house may be, and so on.

We used the same real estate agent from when we originally bought our home. If you need one in the St. Louis area, let me know and I can send you her contact information! She made the process a breeze.

Get a city home inspection.

I highly recommend looking into whether your city requires a city home inspection in order for your house to be put on the market.

We had to call our city office and schedule an appointment. I thought it would be easy and that they would just come over, but the wait time was actually quite long in order to fit my appointment in. Plus, we were calling during the slow season so I wouldn’t want to imagine what the wait would have been if we would have called during the spring or summer months when everyone else is trying to put their home on the market as well. The wait may have been months!

Also, keep in mind that these are only good for so many months. Ours was set to expire in the summer but thankfully we received a contract on our home and it sold in time. The city home inspection wasn’t expensive, but it did take a lot of time and there were some small changes that we were required to make before the house could be closed on.

Declutter.

We decluttered our home like crazy before we even showed it to our realtor. Home buyers do not want to see clutter as it can make a house look smaller, dirtier, and not as nice.

Decluttering is probably one of the easiest things you can do during a home sale, so why not do it?

Some of the things you may want to do include:

  • Clear out your basement and/or attic. Most have their basements and attics filled with things they do not need.
  • Put away any personal items. Sadly, you may have to tuck away your favorite photos during a home sale. Buyers like to imagine themselves in a home and if there are pictures of you everywhere then that may make it more difficult.
  • Sort through closets, cabinets, extra rooms, and so on.
  • Remove anything that may make a room seem smaller.

Clean.

Cleaning is something that everyone who is planning on selling a home should do. Sadly, this is a step that some skip!

Some of the cleaning tasks you may want to add to your to-do list include:

  • Clean and wax floors.
  • Power wash the driveway.
  • Dust everything.
  • Wash windows and mirrors.
  • Paint furniture, walls, trim, and so on if you are able to. It’s a relatively cheap change that can completely change a home. This is actually one of my TOP tips for selling your home. Paint can go a long way.
  • Clean your fridge. Yes, sometimes home buyers will peer in there.

Improve your curb appeal.

The first thing that a potential home buyer looks at is pictures of your home from the outside. The first thing they see in person is the outside of your home as well.

They say that everyone judges a home within the first 5 minutes. If that’s not enough to tell you that curb appeal is important, then I don’t know what will!

Potential home buyers don’t like to see a house that needs a lot of maintenance. Even though every house needs it, no one actually wants to think about it.

For curb appeal you will want to:

  • Keep your lawn cut and tidy.
  • Remove any trash from the front, back and side of your home.
  • Pick up any leaves and keep your gutters clean.
  • Plant flowers.

Decide if you will stage your home or not.

Homes that are staged usually sell quicker and for a higher amount of money than homes that are not.

If you are able to then look into staging your home or leaving some of your furniture in the home (if you are moving before the home sells).

Show your home.

When you’re house is on the market, you will have to allow for home showings. Potential home buyers may show up at the very last moment so your home should always be clean.

I’ve been asked by many if the home seller should be home during a home showing. I pretty much think that’s just a bad idea overall. You should clean your home and leave (take your pets with you) so that the potential home buyer can look at your home and be stress-free.

Since we didn’t live in our home while it was on the market, it made for selling our home much easier. Many times potential home buyers would come just 5 minutes to an hour before they wanted to see it, which would have been quite difficult if we would have been living there.

The house also would have been a disaster!

Accept an offer.

Eventually, you will hopefully receive an offer or two. You may do some negotiating on price and again after the homebuyer completes their own home inspection and appraisal as well.

Once you accept an offer though, you may be able to breathe a little easier. However, it’s not done just yet! You still need to actually close on the house and give the keys to the homebuyer.

Close on your home and move out!

The last of my tips for selling your home is finalizing everything on closing day. You will be told how much you owe or how much you will receive, what you need to do in order to close on the loan, and so on. Then, you will sign tons of papers and hand over the keys.

The last part may be the best or worst – you have to move out! Depending on when the home buyer’s closing date is, you generally want to have everything out of the home by then unless some sort of agreement has been made.

Hope you enjoyed my guide to selling your home. While my home sale didn’t go as smoothly as I would have liked, there were no surprises and the only thing that held us back was tanking neighborhood prices. Hopefully the tips for selling your home I gave above will make the process for you much easier!

Did anything go wrong with a past home sale of yours? What tips for selling a home would you give to someone?

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Source: makingsenseofcents.com