Home prices continued rising at a restrained pace nationwide, both monthly and annually, but regional breakouts indicate some trouble spots, according to May’s Federal Housing Finance Agency House Price Index report.
For the second consecutive month, values rose by a seasonally adjusted 0.7% compared to the month before, while on a year-over-year basis, they were up by 2.8%.
“U.S. house prices increased moderately in May, continuing the trend of the last few months,” said Nataliya Polkovnichenko, supervisory economist in FHFA’s Division of Research and Statistics, in a press release. “However, house prices in some regions of the country remained below the levels seen one year ago.”
In the Pacific region, prices declined 1.7% from a year ago, although when compared with April, they were 1.7% higher. That was the largest month-to-month growth among the nine regions.
Meanwhile, the Mountain states reported a 2.7% value drop compared with May 2022, although they rose 0.3% over April.
The only region where prices fell in May from April was the New England states, down 0.5%.
The FHFA uses seasonally adjusted purchase data from Fannie Mae and Freddie Mac. Prices rose 1.9% annually for the second quarter, Fannie Mae reported on July 17.
Meanwhile, the CoreLogic S&P Case-Shiller Index for May was down 0.5% compared with May 2022, the second month where nationwide prices were down versus the prior year. But month-to-month, the index was 1.2% higher unadjusted for seasonality; adjusted the gain was 0.7%.
The 20-city composite index was down 1.7% annually in May but up by 1.5% compared with April.
“While the annual decline reflects price drops that occurred in 2022, recent above-average price gains indicate an inflection ahead,” said Selma Hepp, CoreLogic’s chief economist.
“While home sales activity still continues to tell a tale of two markets: one of the West, which is constrained by a lack of existing inventory, and the other of the Southeast and South, where the availability of new homes for sale is creating sales opportunities; home prices are not necessarily following the trend anymore,” she said.
CoreLogic’s own Home Price Index rose 1.4% annually and 0.9% month-to-month in May. It is predicting 4.5% growth in prices through May 2024.
On an unadjusted basis, prices rose in all 20 markets, but there are regional differences, said Craig Lazzara, managing director at S&P Dow Jones Indices.
This month’s league table shows the Revenge of the Rust Belt, as Chicago (+4.6%), Cleveland (+3.9%), and New York (+3.5%) were the top performers,” Lazzara said in a press release. “If this seems like an unusual occurrence to you, it seems that way to me too. It’s been five years to the month since a cold-weather city held the top spot (and that was Seattle, which isn’t all that cold).”
The worst performers were Seattle, down 11.3% and San Francisco, down 11%.
The rise in mortgage rates in early July, with Freddie Mac’s survey coming within 4 basis points of 7% for the 30-year fixed, is likely to plateau any gains in home prices going forward, the CoreLogic S&P Case-Shiller release said. But that will be countered by the inventory shortage.
“Heating of competition among buyers is also reflected in an increasing share of home selling over the asking price again, 39%, compared to an average of 25% pre-pandemic,” Hepp said. “As a result, the median price premium (ratio of sale price to list price) is back to positive, at 1%, after declining since last September.”
While the housing outlook has certainly improved significantly, some 5.1 million homeowners remain underwater on their mortgages.
This means they are unable to sell their homes because they owe more than their properties are worth, and possibly barred from a mortgage refinance unless they can take advantage of a program like HARP.
While 5.1 million is a lot less than it used to be, it still represents more than 10% of all homes with a mortgage, per data from CoreLogic.
Additionally, some two million of these unlucky homeowners owe at least 25% more than their homes are currently worth.
Clearly this doesn’t provide much motivation to stick around and make costly monthly mortgage payments, especially if these homeowners can’t take advantage of the current low mortgage rates.
Principal Reduction Today for Your Appreciation Tomorrow
Enter a new bill aimed at tackling the problems associated with underwater mortgages, like high default rates and zombie foreclosures, the latter of which results in property blight.
The so-called “Preserving American Homeownership Act,” introduced this week by U.S. Senator Robert Menendez (D-NJ) is essentially a shared equity mortgage modification program.
It’s supposed to be a win-win situation for both homeowners and lenders, giving each party motivation to modify and keep up with payments, respectively.
The way it works is fairly simple. A borrower with an underwater mortgage has their principal balance reduced to 100% of the current value, provided the borrower can make payments.
The principal reduction takes place over a period of three years or less, in increments of one-third each year. So if borrowers make timely payments their principal balance will be reduced further over time.
The mortgage rate may also be cut if the principal reduction isn’t enough to make payments affordable.
Once it comes time to sell or refinance, the bank (or investor) will received a fixed share (up to 50%) of the increase in the home’s value. This amount cannot exceed twice the dollar amount of the principal reduction.
The value will be assessed via appraisal when the borrower first enters the pilot program, and again when they sell or refinance.
The program would be available on primary and secondary homes, and borrowers would be eligible regardless of how deeply underwater they are.
The plan is to launch two pilot programs, one under the FHFA and another under the FHA.
Menendez noted that a similar program launched by a private mortgage servicer led to a near-80% participation rate and a re-default rate of just 2.6%.
That sounds pretty good, especially when you’re giving away half of your future appreciation. The question is whether this type of relief comes a little too late in the game.
But for those who really love their homes and want to remain in them, it could be a lifesaver seeing that widespread principal reduction never came to fruition.
Former President Donald Trump has not made his real estate great again.
Trump has dominated the headlines recently, as he announced his intention to run for office again and then became the first former commander in chief to face criminal charges. But the polarizing politician and reality TV star is first, and perhaps foremost, a real estate mogul. And the past few years have not been kind to his sprawling residential real estate portfolio.
While home prices across America generally rose quickly during the “pandemic pump” housing market, sale prices at the properties listed on the Trump Organization’s website have either declined or appreciated at a slower pace than the local markets they’re in.
To be sure, the COVID-19-era real estate market will be one for the history books, defined initially by ultracheap mortgages, the liberation of newly mobile Americans who could pursue “remote work” away from their abandoned offices, and a continued housing shortage that all pushed home prices up in dramatic ways. The price gains have begun to correct in some areas, but in large part, historically high prices appear to have stuck.
But Trump’s real estate brand hasn’t benefited as much from the favorable housing market. Price appreciation for condos in properties listed on the Trump Organization’s website has been lower both in the luxury real estate and overall housing markets.
For example, the median condominium sale price in the U.S. rose 38% between 2019 and 2022, according to CoreLogic data. But over the same period, the median sale price at Trump Organization properties declined 14%. (The properties Realtor.com® analyzed were all condos.)
And while the price changes varied around the country, his condos didn’t outperform any of the local markets where they’re located.
Some local experts believe the price declines are related to the former president’s controversial politics, especially since most of his properties are in Democratic-leaning areas. Since he ran for office, his name has been pulled off some of his prime real estate holdings in major cities.
“A lot of people have said the buildings are great,” says Dan Neiditch, the president of River 2 River Realty in New York. “But when they have the Trump name on the buildings, it’s all about branding. And when that’s the case, you live and die by your brand, by your name.”
Trump was recently charged with 34 felony counts related to hush money payments made to an adult film star, is under investigation for election interference in Georgia, and is facing multiple lawsuits. That could also affect his real estate holdings, especially in places where the former president isn’t popular.
To come up with our findings, we pulled home sale records from CoreLogic, a real estate transaction data provider, for properties listed on the Trump Organization’s website. Then we compared them with condo sale prices for the counties where those properties are located. Because the CoreLogic data is not perfect, we also excluded transactions that appear to have erroneously high and low transaction amounts recorded (likely data entry mistakes).
While all of the Trump Organization’s condo projects were included in the national numbers, Trump real estate markets with fewer residential units (including Connecticut, Hawaii, and Westchester, NY) are not detailed in the pull-out sections below.
We used 2019—the year before pandemic fluctuations roiled U.S. housing—as a starting point/benchmark for our calculations.
Note: It’s unclear if every property listed on the Trump Organization’s website is owned by the organization. The Trump Organization is a privately held corporation, so it isn’t required to disclose the specifics of its real estate holdings to the public. And even though the Trump name might prominently grace a building, it doesn’t mean that the organization owns the property. The former president licenses his name for a host of different things, including real estate and consumer products.
The Trump Organization did not respond to a request for comment.
For decades, Donald Trump made a name for himself as a New York City real estate celebrity and tabloid fixture. The Big Apple was his launching pad, where the Trump Organization began developing residential properties in the early 1980s. And it’s still where his company has the most buildings.
He announced his first run for the presidency, in 2015, in his iconic Trump Tower on 5th Avenue, where he rode down a golden escalator.
But in the past few years, the organization’s Manhattan properties have fallen behind the competitive Manhattan condo market.
In 2022, the median sale price for all of the organization’s New York City properties combined was about $1.75 million. Within the past 10 years, that figure hit a high point in 2015, at $2.3 million, and a low in 2020, at around $1.4 million.
Since just before the COVID-19 pandemic, the Trump Organization’s prices are down about 16%—far behind the roughly 11% price growth for all condos in Manhattan over the same period.
The list of Manhattan buildings listed on the organization’s website includes the Trump Tower, in Midtown, and Trump Parc, on the southern edge of Central Park. On the Upper West Side, the organization has six buildings that make up Trump Place, situated along the Hudson River. Three are apartment buildings, which were not included in this analysis, and three are condominium buildings. Residents voted to remove the Trump name from the buildings in 2019. There is also Trump International Hotel & Tower, on Central Park West. In Midtown East, the organization owns Trump World Tower, looking onto the East River, just across the street from the United Nations headquarters. And on the Upper East Side, the organization owns Trump Park Avenue, Trump Palace, and 610 Park Avenue.
Despite the successful efforts to remove the Trump branding from several of his New York properties, much of the Trump residential real estate is still highly valued among certain buyers.
According to luxury real estate broker Dolly Lenz, the properties themselves and their management are second to none.
“The management of the properties—whether it’s Trump Tower, Trump International, Trump World Tower—are some of the best-run buildings in New York,” she says. “They choose the best doormen, the best concierges, so the service is top quality.”
But many of the Trump Organization’s properties are older and have trouble competing with the newer buildings, which offer more modern designs, layouts, and amenities. Trump Tower opened in 1983—40 years ago.
For some local experts, it’s politics that have caused the lagging prices.
“New York and New Jersey are majority-Democrat states. I believe the prices of Trump’s properties take a hit just because of the politics of the people in the area,” says Neiditch, of River 2 River Realty. “We’ve had people who lived there, who said, ‘Hey, we want to sell. We don’t want to live in a building where that name’s on the outside.’”
Access to Trump Tower, which was more restricted during Trump’s presidency due to heightened security and Secret Service activity, also likely affected the value of the units in the bellwether building, says one real estate expert, who asked not to be named.
Fed up with the backlash against him and his politics, Trump officially left New York. Since 2019, the former president has called the purple state of Florida home. He now resides in his oceanside Mar-a-Lago resort in Palm Beach.
The Trump Organization has residential properties in and around Miami, including Trump Grande, Trump Tower Sunny Isles, and Trump Hollywood.
The Trump-branded properties in Florida’s Miami-Dade and Broward Counties appreciated by about 15% between 2019 and 2022, after first dipping in 2020, the biggest price gains of any location analyzed.
But prices shot up much higher in Florida during the pandemic as the Sunshine State saw an influx of companies and new residents. In the Miami-Dade and Broward markets where Trump properties are located, the median condo sale price has increased by more than 50%, going from just under $200,000 in 2019 to just above $300,000 in 2022.
And for the luxury condo segment in the same area (the upper 10% of sales by price), which is closer to the price range of the organization’s properties, prices grew by more than 60% over the same period.
Trump International Hotel & Tower’s opening in Las Vegas in 2008 marked the organization’s first expansion into the western U.S. But condo sale prices in the building have substantially lagged behind overall Las Vegas condo price appreciation.
The median sale price at Trump International Hotel & Tower took a significant hit in 2020, dropping from $305,000 to $214,500. Since then, the prices rose but were still down about 8% below pre-pandemic prices.
Meanwhile, in Clark County, which includes Las Vegas and the surrounding cities, the median condo sale price rose by more than 50% from 2019 to 2022.
June Stark, a real estate agent and broker at The Stark Team–Elite Realty, in Las Vegas, blamed pandemic restrictions as one of the reasons that Trump property prices dropped. Reduced tourism affected the building, which is a combined hotel and condo tower.
“The building itself is beautiful, probably the best-maintained hotel and condo tower in the city,” Stark says, noting that she was among the first agents to sell the residences.
Trump International Hotel & Tower in Chicago looms large in the city, with its height, distinctive style, and prime location, but the sale prices have taken a dive.
At 98 stories and reaching 1,388 feet, it’s the seventh-tallest building in the nation and second in Chicago (behind the Willis Tower, formerly known as the Sears Tower). The building’s off-centered, tapering spire is hard to mistake, but it’s the 20-foot-tall and 141-foot-wide “TRUMP” sign on the building on the northern bank of the Chicago River that informs anyone who passes by who owns the building.
But while the building’s prominence is unquestionable, the median sale price for residences there dropped by almost half in 2020 alone—going from just below $1.5 million the year before to $750,000. Since then, prices have come back some, but at $1 million in 2022, the median sale price is still down more than 30% compared with before the pandemic.
During the same three-year period, 2019–22, the median condo sale price in Cook County, which includes most of the Chicago area, rose about 12%. But for additional context, condos priced closer to Trump International Hotel & Tower in Chicago, those within the top 10% of sales by price for Cook County, also saw a big drop in prices in 2020, and an overall price decline greater than the Trump Organization’s building.
Across the Hudson River from the Trump Organization’s Manhattan properties is 88 Morgan Street Condominiums, formerly known as Trump Plaza Residences, in downtown Jersey City. The 55-story building, developed by the organization in the late 1980s, provides a sweeping view of the Manhattan skyline and the Upper Bay.
But 88 Morgan Street has not seen the same price gains as condos nearby. The median condo price in Hudson County, NJ, which includes everything from Bayonne to North Bergen and from the Hudson River across the Hackensack River to Kearny and Harrison to the west, saw modest appreciation during the pandemic, rising by about 14% from 2019 to 2022.
In Jersey City, condo sale prices at 88 Morgan Street rose only 4%.
“I know in those buildings in New Jersey, there have been fights about taking his name off,” says Neiditch, of River 2 River Realty, “but that’s been going on since back in 2016.”
Today let’s talk about PrimeLending, a PlainsCapital Company, which is a top-10 mortgage lender that does business in all 50 states.
Perhaps their biggest claim to fame is their 96% customer satisfaction rating given to their fleet of 1,500 loan officers.
They certainly seem to pride themselves on making their customers happy, with the slogan “Home Loans Made Simple.”
They also have a mascot named “Mo,” short for momentum, that is a real live buffalo living near Fort Worth, TX.
Let’s learn more about who they, what types of loans they offer, and why you might use them on your next purchase or refinance transaction.
Who Is PrimeLending?
A direct-to-consumer mortgage lender owned by the PlainsCapital Company that has been around since 1986
A wholly owned subsidiary of PlainsCapital Bank (that is also a wholly owned subsidiary of Hilltop Holdings Inc.)
Publicly traded under the symbol (NYSE: HTH)
Funded more than $22 billion in home loans during 2021
Most active in the states of California and Texas but licensed nationwide
First a little bit about their history – PrimeLending started out back in 1986, which if you’re good at math, is just over 35 years. Back then, they had just 20 employees.
Today, they’ve got more than 3,000 employees throughout the nation. And since that time, they’ve apparently helped more than 500,000 Americans purchase a home, fix up a property, or refinance an existing mortgage.
They seem to excel in home purchase lending, as evidenced by the fact that they’ve been a top-10 purchase lender from 2012 to 2017, per data from Marketrac, a CoreLogic company.
They’re also ranked 6th for retail home loan volume by Scotsman Guide, and 11th in volume overall. It’s unclear if that’s overall or a specific category of lender.
If you’re curious who owns them, they’re a PlainsCapital Company that is also a wholly owned subsidiary of PlainsCapital Bank, which is owned by Hilltop Holdings Inc.
Confused yet? Yeah, there’s a lot of corporate structuring going on, but basically their a billion-dollar financial holdings company based out of Dallas, Texas with thousands of employees.
Hilltop actually acquired PlainsCapital and PrimeLending as recently as November 2012.
In late 2022, PrimeLending launched a joint venture with Texas home builder Kindred Homes called Kindred Home Loans.
PrimeLending will provide financing to home buyers in Kindred Homes’ communities in the state of Texas.
Applying for a Mortgage with PrimeLending
They are a consumer direct lender with no middlemen
You get connected with one of their loan officers nearby
And can apply online, by phone, or in-person
Their digital, mostly paperless home loan process is known as Loanplicity
The company relies on a network of mortgage loan officers throughout all 50 states to help borrowers apply for a mortgage.
If you’ve already made contact with a loan officer, you enter their name on the PrimeLending website and it’ll populate a list. Once selected, they become your point of contact.
If you don’t yet have an assigned loan officer, you can enter your zip code or city and choose one near you.
The website will list a variety of locations near you (assuming you live next to a lot of PrimeLending offices). Then you can then see all the loan officers at that branch and choose one based really on name only.
While the loan officers have their own mini websites, they don’t seem to feature any unique qualities, other than contact information, which I feel would make them stand out more.
They could show their strengths and specialties, but at the moment they seem to have boilerplate content that doesn’t differ from one loan officer to the next.
Anyway, from there you’d just hit the “apply now” button or you could call their direct phone line to get the home loan process underway.
You can also apply in person if that’s your thing, though most folks these days like to do things remotely.
Loanplicity Is Their Digital Home Loan Process
They just launched their digital mortgage offering known as Loanplicity
Allows you to apply online or get pre-qualified using their award-winning application process
You can connect financial accounts or upload documents using your smartphone
Also lets you pay fees using PayPal or connect to a loan officer at any time if you need help
In February 2020, PrimeLending launched its version of a digital mortgage known as Loanplicity.
It allows you to apply online with their “award winning application process,” or get pre-qualified to determine how much home you can afford.
Once you submit your loan, you can securely connect financial accounts or take photographs of documents with your smartphone for upload.
They also let you pay fees along the way via PayPal, perhaps for things like an appraisal or application fee (deposit).
At any point during the process, you can also call, text, or email your loan officer for assistance.
And you can see loan status in real-time to determine where you’re at in the loan process.
The one negative at the moment is there doesn’t seem to be a mobile app available.
If you’re a prospective home buyer, their PrimeLending Approval AdvantEDGE will allow you to see how much home you can afford.
What PrimeLending Offers to Its Customers
Home purchase loans and refinance loans
Home improvement and renovation loans
New construction loans
Conforming and jumbo loan amounts
Government loans including VA, FHA, and USDA loans
Fixed-rate and adjustable-rate options available
Reverse mortgages
In the fixed-rate department, they advertise both the 30-year and 15-year fixed, which are by far the most popular. It’s unclear if they offer other terms in between and beyond.
For ARMs, they discuss the 3/1, 5/1, 7/1, 10/1, which happen to be the most popular ARM offerings available. All are hybrids with a fixed period followed by an adjustable period.
They’ve got the usual conforming stuff backed by Fannie Mae and Freddie Mac, along with a variety of government loans like FHA, VA, and USDA.
PrimeLending also advertises an FHA cash-out refinance, which is a little less usual.
When it comes to jumbos, they offer LTVs as high as 95% with both fixed-rate and adjustable-rate options.
The company seems to have the new construction and renovation market well covered, with lots of offerings including an FHA 203k loan, lot loans, HUD REO and USDA with repair escrow, Fannie Mae HomeStyle, and jumbo renovation loans.
In April 2023, they announced the availability of reverse mortgages via the FHA’s home equity conversion mortgage (HECM) program.
PrimeLending Mortgage Rates
They don’t advertise their interest rates online
Nor can I find a ratesheet to get more information on their pricing
So if/when you get a quote from PrimeLending
You may also want to comparison shop with other lenders to see where they stand
Sadly, the company doesn’t openly advertise their mortgage rates, so it’s impossible to know if they’re good, bad, or just plain average.
I prefer companies that advertise their rates, though you can argue that they aren’t all that meaningful because rates can vary tremendously from borrower to borrower at the same company.
However, it does mean that if you apply with PrimeLending, you may want to shop your rate with other lenders to see where you stand.
And to determine if you can do better elsewhere, assuming you are interest rate-sensitive, which you generally should be.
Of course, many mortgage borrowers choose lenders for things other than the lowest rate, so it may not be super important to you.
The ability to actually close your loan on time can be just as important, if not more so.
PrimeLending Reviews
Now let’s talk about customer reviews, for which PrimeLending has a ton.
On Zillow, the company has a 4.99/5 rating from over 21,000 customer reviews. That’s near perfection and doubly amazing given the sample size.
Over at LendingTree, they’ve got a slightly less good 4.3/5 from about 1,000 reviews, along with a 93% recommended rating.
They are an accredited business with the Better Business Bureau (BBB) and currently hold an ‘A+’ rating based on complaint history.
If you search individual brick-and-mortar locations near you, they also tend to have very good Google reviews.
Why Choose PrimeLending for Your Mortgage Needs?
They are big on customer satisfaction and survey every customer after their loan closes
Some 40% of customers actually complete the surveys vs. the industry average 10-15%
Their 96% approval rating outperforms the usual 89% average seen with other lenders
The company also seems to keep things simple and stress-free
Have a digital loan process known as Loanplicity
Licensed to do business in all 50 states
While they used to lack some of the eye-catching technology other companies offer, such as Rocket Mortgage from Quicken Loans, their digital mortgage solution known as Loanplicity is now live.
And they seem to excel in customer satisfaction as well, meaning PrimeLending could be a good fit no matter how you apply.
For those who might favor a personal touch, as opposed to speaking to no one and just using a smartphone app to get through it, they could be the right choice.
Perhaps you need more guidance to make your loan decision, or simply like having someone on call to help you along the way.
As noted, their slogan is “Home Loans Made Simple,” meaning the process should be an easy one despite any obvious technology claims.
They also have a wide range of lending products to choose from to suit most borrowers in lots of different situations.
Now a couple of negatives. PrimeLending doesn’t offer a mobile app, nor do they make applying for a home loan as easy as I’d like.
Something as simple as an “Apply Now” button on their homepage could change that, as opposed to only their “Connect with a Loan Expert” button.
They also kind of lack that special quality that differentiates themselves from other lenders, so it’s unclear why a consumer would seek them out versus another bank for their mortgage needs unless pricing is unbeatable.
There’s been a lot of speculation that home prices would crash as mortgage rates surged.
The argument was especially convincing after the 30-year fixed climbed from around 3% to over 7% in less than a year.
This was unprecedented movement, even if mortgage rates remain below those crazy double-digits from the 1980s.
Sure, they are still low historically, at around 6/7%, but the doubling in less than 12 months is what you need to pay attention to.
Going from 12% to 15% isn’t fun either, but it’s not as much of a payment shock percentage-wise.
Do Higher Mortgage Rates Mean Lower Housing Prices?
At first glance, you’d think that mortgage rates and home prices have an inverse relationship.
In that if one variable goes up, the other must come down. And vice versa. So if mortgage rates shoot higher, home prices must tumble lower.
But here we are, looking at new all-time highs for home prices while the 30-year fixed averages nearly 7%.
How is it possible that both home prices and mortgage rates rose in tandem?
Well, for one, history reveals that they aren’t negatively correlated. In other words, they can rise together, or fall at the same time.
As to why, remember how mortgage rates are determined. Much of their direction is based on the health of the economy.
At the moment, the economy is strong, if not too strong, which is why the Fed began tightening the screws and raising its own fed funds rate in the first place.
This was meant to cool off the overheated housing market, which was experiencing unprecedented demand.
And it seemed to work, pushing home price appreciation back to much more normal levels, instead of double-digit annual gains.
However, the Fed could really only fiddle around with the demand side of things. By that, I mean cool demand by making mortgage financing more expensive.
And they accomplished that goal. There’s a lot less demand out there, whether it’s driven by a lack of affordability or just less willingness to buy at this combination of prices/rates.
But the Fed can’t really do anything about the supply piece, which is the other key part of the equation.
They can attempt to rein in inflation with monetary policy, but they can’t build more homes.
Unfortunately, low inventory was an issue before the Fed got involved. So their attempt to tame the housing market might be in vain, at least partially.
This might also explain, why despite markedly higher mortgage rates, the typical U.S. home value surpassed $350,000 for the first time ever in June.
Per Zillow, national home prices increased 1.4% from May to June, their fourth monthly gain in a row.
That put the typical home at $350,213, nearly 1% above the price seen the previous June, and just enough to beat out the old Zillow Home Value Index (ZHVI) record set last July.
It’s All About the Inventory, or Lack Thereof
If we shift our attention away from mortgage rates, and instead focus on available inventory, the current state of the housing market begins to make a lot more sense.
When you realize there are virtually no homes for sale, it begins to explain why home prices are up in spite of near-7% mortgage rates.
The latest piece of data on the inventory front comes courtesy of Redfin, which reported that the turnover rate is the lowest it has been in at least a decade.
This is defined as the number of homes that are listed divided by the total number of sellable properties that exist in a given area.
It includes all residential properties, including single-family homes, condos/townhouses, and 2-4 unit properties.
Just 14 out of every 1,000 U.S. homes changed hands during the first half of 2023, compared to 19 of every 1,000 during the same period in 2019.
Looked at another way, prospective home buyers have 28% fewer homes to choose from versus four years ago.
And it was already slim pickings back then, before the pandemic upended the U.S. housing market.
California appears to be the hardest hit, with roughly six of every 1,000 homes in San Jose selling this year. Similar low turnover rates can be found in nearby Oakland, as well as down south in San Diego.
They add that the “pandemic homebuying boom depleted supply, and it hasn’t been replenished because homeowners are hanging onto their relatively low mortgage rates.”
This is known as the mortgage rate lock-in effect, or golden handcuffs to some.
Simply put, homeowners can’t (due to affordability) or are unwilling (due to the price disparity) to give up their current 2-3% mortgage rate.
As such, existing home supply is basically nonexistent. And the only supply in town is coming via the home builders, who incidentally are enjoying this odd dynamic at the moment.
Last week, the National Association of Realtors 2023 Member Profile revealed that a shortage of housing supply was the biggest impediment to their clients buying a home.
NAR also noted that housing inventory fell to the lowest level recorded since the year 1999.
Home Prices Defying Gravity Thanks to Low Supply
Zillow said there were 28% fewer new listings this June versus last June. We’ll find out soon if inventory gets even worse.
But they added it might be “the low water point for year-over-year comparisons in new listings” because inventory plunged last July.
So we might not see as many startling headlines regarding low supply since it’ll be hard to go much lower, at least relative to recent readings.
Regardless, it’s clear that a lack of supply, well below healthy levels of 4-5 months, is allowing home prices to defy gravity as interest rates remain elevated.
This differs tremendously from the boom years of the early 2000s, when there was an oversupply of homes (8-9 months), similar mortgage rates, and exotic financing to boot.
It also explains why home prices aren’t dropping, despite much higher mortgage rates and poor affordability.
And why many forecasts now have home prices gaining steam, with CoreLogic predicting an increase of 4.5% by May 2024.
In other words, don’t expect home prices to fall anytime soon because of high mortgage rates. Instead, watch inventory.
If inventory starts rising, you can begin to make the argument for falling home prices.
“After peaking in the spring of 2022, annual home price deceleration continued in May,” CoreLogic chief economist Selma Hepp said. “Despite slowing year-over-year price growth, the recent momentum in monthly price gains continues in the face of recent mortgage rate increases.” The annual price growth of attached properties (2.7%) was 1.7 percentage points higher than … [Read more…]
There are three levers that can help to ease housing affordability heading forward: Falling mortgage rates, falling home prices, or rising incomes. Due to financial market volatility, mortgage rates are always the lever that can have the biggest impact in the short-term.
A new housing report put out by Morningstar expects mortgage rates will indeed be the primary lever that helps to ease housing affordability.
As of Friday, the average 30-year fixed mortgage rate tracked by Mortgage News Daily stands at 7.14%. Morningstar expects that’ll trend down in the second half of the year, and we’ll average 6.25% for 2023. Morningstar’s forecast model then expects mortgage rates will average 5.00% in 2024 followed by 4.00% in 2025.
“The Fed has engineered a massive increase in interest rates in order to combat high inflation. We expect it to cut the federal-funds rate aggressively in the coming years, driving the [Federal funds] rate down from 5% currently to below 2% by 2025,” wrote economists at Morningstar. “Once the Fed wins the battle against inflation, its priority will shift to jump-starting economic growth, which will require much lower interest rates, in our view.”
Long-term, Morningstar expects mortgage rates to remain low. They cite factors like an aging population and slowed productivity growth that’ll put downward pressure on long-term rates, like mortgage rates.
“Regardless of what happens in the next few years, we expect interest rates to ultimately settle back down at the low levels that prevailed before the pandemic. The low-interest-rate regime will resume once the dust settles from the pandemic economic volatility,” wrote Morningstar. “Our long-term interest-rate projections are driven by secular trends. Factors such as aging demographics, slowing productivity growth, and increasing inequality have acted to push down real interest rates for decades, and these forces haven’t gone away.”
Economists over at Morningstar also expect the other two levers to help out: rising incomes and falling home prices.
“Our revised home price forecast now projects new- and existing-home prices to decline 6% and 4% over 2022 to 2024, respectively,” wrote economists at Morningstar. They call their prediction a “mild correction,” adding that a steeper decline in home prices would be prevented by the fact that “inventory of existing homes for sale remains below pre-pandemic levels.”
Among forecasters, Morningstar is on the low side when it comes to mortgage rates. Heading forward, the Mortgage Bankers Association and Fannie Mae expect the average 30-year fixed mortgage rate to end 2023 at 4.9% and 5.6%, respectively. Moody’s Analytics expects mortgage rates to drift down to 6% by late 2024, and to 5.5% by the end of 2025.
On the price front, Morningstar is on the bearish side. Firms like Zillow and CoreLogic think national house prices will rise 5.0% and 4.6%, respectively, over the coming 12 months. Moody’s Analytics doesn’t think the bottom is in, and expects a peak-to-trough decline of around 8% for national house prices.
When it comes to mortgage rate and home price forecasts, it might be best to take them with a grain of salt. Uncertainty in the economy makes it hard to predict both mortgage rates and house prices.
Want to stay updated on the housing market? Follow me on Twitter at @NewsLambert, or on Threads at newslambert.
Buying a home can be challenging these days. Home prices remain high, and interest rates are up significantly compared to a few years ago. In fact, according to Freddie Mac, the average rate on 30-year loans is now creeping toward 7%.
Will rates stay high for the foreseeable future? There’s no way to tell for sure, but there are ways to get around them if they do.
Find out what today’s mortgage rates are here.
What to do if mortgage interest rates stay high
If you’re looking to purchase a house but high mortgage rates are holding you back, here are the strategies that might help.
Buy now, refinance later
One clear option is to buy a house now, at today’s rate, and then refinance your loan when interest rates inevitably drop.
According to Robert Esposito, director of sales at RelatedISG Realty, mortgage refinancing is a particularly good option for those searching for average-priced homes, as their value will only increase in price as time goes on.
“They will encounter the most competition,” Esposito says. “A property worth $500,000 today might be worth $600,000 a year from now, and then you realize you didn’t save any money.”
Check out current mortgage rates here to start exploring your options.
Make a larger down payment
Making a big down payment can help in two ways. First, “it could offer a lower interest rate,” says Sam Sharp, executive vice president of national sales at Guaranteed Rate.
It will also reduce your total loan balance and help you avoid private mortgage insurance, which means lower monthly payments.
“Making a large down payment lowers the total loan amount and interest rate,” Esposito says.” It also makes you eligible for better loan terms or even to avoid private mortgage insurance altogether.”
Consider different loan options
Exploring less-common mortgage products is another option. Adjustable-rate mortgages, for example, offer lower rates than fixed ones for the first few years of the loan. These are good if you only plan to be in the home for a few years — before your rate can increase.
“Having worked with buyers in every stage of life over the years, we find that most people overestimate the amount of time they will live in a property and thus end up with a rate higher than necessary,” says Lindsay Barton Barrett, a licensed associate real estate broker at Douglas Elliman. “If you can get an ARM, you can save substantially — even if you stay beyond the adjustment date. What happens is that you pay a higher mortgage rate for one year in five years versus paying a higher rate for all six years.”
Getting a shorter-term loan can help, too. For example, the current average rate on 30-year loans is 6.71%, according to Freddie Mac. With 15-year loans, though, the average drops to just 6.06%. This could save you quite a bit in long-term interest. Just keep in mind that you’ll have a higher payment due to the shortened pay-off timeline.
Begin comparing your loan options online today.
Stay put and improve your current home instead
If you already own a home, tapping into your equity with a home equity loan, home equity line of credit (HELOC) or cash-out refinance may be another strategy. These allow you to borrow from your home equity, which could provide funds for improving or expanding your current home as needed.
According to CoreLogic, the typical homeowner has a whopping $274,000 in home equity, so this could be a viable option for many. Still, it depends on where you live. If you’re in a condo or tight urban area, for example, there may not be space to expand.
Using your home equity also means taking on more debt, often at variable rates. These rates can be volatile, particularly as the Federal Reserve continues to fight inflation.
“Home equity lines at a variable rate track higher interest rate numbers since they are tied to factors like benchmark rates, which are currently very high,” Barrett says.
See today’s home equity rates and find out how much you may be eligible to borrow.
Buy down your rate
Buying down your rate can work as well. In this scenario, you purchase “points” — usually for 1% of the loan amount — which reduces your interest rate by a nominal amount (typically 0.125% to 0.25%).
“In recent years, we’ve found it very common for buyers to buy points, which act as prepayment interest and reduce the overall interest rate on the mortgage,” Esposito says.
Some lenders also offer temporary buydowns, where a seller or lender pays to reduce a buyer’s interest rate for a set period. After that, it goes back to the normal rate.
“This will allow for a credit from the seller that will pay the interest difference on a loan over the course of one to three years, resulting in a temporary rate reduction as high as 3% below the market rate,” Sharp says. “This is a great way to lower the monthly payment for homebuyers.”
Wait for rates to drop
Finally, you can always wait it out. As they say, “what goes up, must come down,” so mortgage rates will inevitably fall at some point. The question is when.
Fannie Mae’s forecast currently projects rates will finish out 2023 at an average 6.3%. The Mortgage Bankers Association predicts a bigger drop to 5.8%.
Still, these aren’t guarantees. And even if rates drop, it could mean more buyers in the market, which could drive up home prices.
“If rates decrease because inflation is deemed under control, then the economy overall will be more stable and lend itself to confidence,” Barrett says. “Between more purchasing power and confidence in the market, home prices would increase — meaning many will have missed the opportunity to buy real estate.”
Ready to see your mortgage options? Start by viewing today’s rates here.
Every situation is different
There’s no clear-cut strategy for dealing with today’s high mortgage interest rates. The right move for you will depend on your goals, your budget and your personal situation, so make sure to talk to a mortgage professional before deciding how to proceed.
And once you do decide to move forward, make sure to shop around for your mortgage. Freddie Mac estimates that getting at least four rate quotes can save you up to around $1,200 every year.
There’s renewed fear that another housing crisis is on the horizon because home values are inching closer and closer to their so-called “bubble-era prices.”
However, this line of thinking is flawed for a number of reasons, the most obvious being that it’s now a decade later.
I was reading an article in the Orange County Register, which is certainly housing (and mortgage) central here on the West Coast and perhaps nationwide.
The headline served as a warning, proclaiming a return to bubble-era prices in the ritzy county that’s home to places like Newport Beach and Corona del Mar.
Get Ready for New Highs in the OC
Apparently the median home price rose to $645,000 in the OC last month, its highest point since peaking in June 2007.
As the article points out, the bottom dropped out a month later, thanks to subprime mortgages and bloated home prices.
Over the course of 19 months, the median slipped to $275,000, leading to scores of mortgage delinquencies, short sales, and foreclosures.
The OC is the first Southern California county to reach its pre-recession peak, per data from CoreLogic, with nearby counties such as Los Angeles and San Diego still off 5.5% from their highs.
In more outskirty places like Riverside and San Bernardino, prices are still way off their highs, 23.6% and 28.9% lower, respectively.
Meanwhile, many Bay Area counties up in the north of California are enjoying new all-time highs and have been for some time.
The same is true of other desirable parts of the country, such as red hot Denver, where home prices keep ascending to new heights.
Should We Prepare for Another Crisis?
Now the article says home “buyers are balking at paying these record-level prices,” but only basing that on the fact that Orange County home sales fell 6.5% in April from a year earlier.
It was just one of two year-over-year sales declines in the past 14 months, which CoreLogic analyst Andrew LePage attributes “to a lack of affordability, inventory and mortgage credit.”
Oh, so it’s not necessarily high home prices, but perhaps inventory that’s the problem. Prospective home buyers are still hungry but there just isn’t enough to go around.
The mortgage credit comment is also a headscratcher, given the fact that you can buy a home with just 3% down nowadays. And the average credit score on newly approved loans has been dropping.
That supposed tougher underwriting environment would also mean that the housing market is healthier, with fewer bad mortgages being extended to home buyers at these supposed peak prices.
As mentioned earlier, those bubble-era prices were also achieved about a decade ago. Why does it really matter if we reach them again? Are today’s dollars worth the same amount they were 10 years ago?
Last time I checked, just about everything is more expensive than it was in 2006-2007…I don’t remember a pint of beer setting me back $7-9 back then. It was probably closer to $4-6.
Inflation means today’s home prices may not actually be as high as they were during the previous boom.
Sure, nominal prices (those not adjusted for inflation) might be at or above the prices back then, but real home prices (adjusted for inflation) are still much lower than they once were.
The Current Batch of Mortgages Is Pristine
Oh, and let’s not forget that mortgage rates are a lot lower than they were back then too, and would need to rise significantly to stall home price growth.
That would explain why the Mortgage Debt Service Ratio, which is the the percentage of disposable income that goes toward the mortgage, is at its lowest point since 1980.
That statistic comes from the latest S&P/Experian Consumer Credit Default Indices.
So to get this straight, borrowers are spending the least amount of money on their mortgages in nearly 40 years and home prices aren’t really as high as they appear.
And pretty much every homeowner these days has a 30-year or 15-year fixed mortgage with a super low interest rate that was fully documented during origination (they can actually afford it!).
That sure doesn’t sound like a crisis, even if homes aren’t so cheap anymore. Just practice discretion when home shopping, there are a lot of turds out there that don’t deserve to be priced as they are.
It’s been a particularly bad twister season this year—and not just for those living in “Tornado Alley.”
The preliminary count of twisters between January and March, when tornado season began ramping up, means 2023 will be one of the most active first quarters on record, according to the National Oceanic and Atmospheric Administration. And it could end up being the worst ever seen.
This all has us wondering about tornado risks for homeowners across the country and how much climate change is affecting the frequency, severity, and locations of these unstoppable storms that remind us of how small we are. So we analyzed climate risk data from CoreLogic, a real estate data supplier, to figure out how much tornado damages are likely to cost homeowners each year, depending on where they live—and what sort of bills they could be facing in the future as tornadoes become more dangerous.
While tornadoes mostly affect the Eastern swath of the country, this year places not normally associated with tornado risk have been touched by them. A 140-mph tornado struck Delaware (measured as the widest on record for the state) on April 1, the same day an “outbreak” of tornadoes touched down in New Jersey, Maryland, and Pennsylvania. That followed a tornado that hit Los Angeles on March 22 and where a set of “twin tornadoes” hit again on May 4.
For a homeowner living in an area where tornadoes are a possibility, this is a reminder that although the chance a tornado affects you is small, it can still happen. But the science on how a changing climate affects tornadoes is far from settled.
“There’s no agreement, and there’s good reason for that,” says Howard Bluestein, a professor of meteorology at the University of Oklahoma.
Bluestein says there are far too many factors to predict with accuracy the changes in tornado frequency or intensity, from wind shears to soil moisture.
“We don’t understand why some supercell storms produce tornadoes and others don’t,” he adds.
CoreLogic’s predictions, which rely on widely used greenhouse gas modeling, show that damage costs resulting from severe convective storms—the kind that causes tornadoes and also other damaging wind, rain, and hail—could rise by more than 10% by 2040 and more than 25% by 2050, depending on the location, and that’s without adjusting for whatever future inflation occurs.
One caveat: The possibility exists of observation bias, where the count of tornadoes might have increased in part because the tools we use to observe these storms have gotten better. In addition, as more homes go up and areas become more populated, damages are likely to become more widespread. That’s not because there are more tornadoes, necessarily, only that there are more homes in their way.
According to CoreLogic’s data, in a place like Tarrant County, TX, severe convective storms currently cause around $411 million in residential damage in any given year. That translates into a risk of about $690 per homeowner each year. That, in turn, is worked into insurance premiums.
But by 2040, CoreLogic expects those costs to rise by 10%, to about $436 million across the county, or about $729 per homeowner, using the most extreme model (RCP85, which is based on increasing fossil fuel use). By 2050, those costs could rise by almost 20%, to about $522 million, or about $872 per homeowner—and that’s before accounting for inflation or the effects of population growth.
That’s where the science hits homeowners’ wallets. As the risks increase, homeowners are likely to spend more on their insurance premiums.
We plotted CoreLogic’s data on a map, to show where in the country tornado damage costs are expected to increase, and by how much.
For each of the 2,610 counties where there’s enough past tornado data to make predictions about the future (about three-quarters of all counties), CoreLogic’s data shows the current estimated average annual cost to a homeowner from severe convective storms, as well as the amount that figure is expected to rise under the RCP85 scenario. You can explore the data using the map below.
Though predictions about the effects of climate change are still not an exact science, says Harold Brooks, a senior research scientist at the NOAA’s severe storms laboratory, improvements in home construction techniques can be used to help mitigate these risks.
“The bottom line is we aren’t completely sure what climate change will do,” he says. “But we know enough to know the bounds of what climate change might do.”
And that’s enough to prompt him to take measures in his own home, where Brooks recently had an in-residence tornado bunker installed.
“It’s a walk-in closet, with 6-inch concrete walls and a steel-reinforced door. FEMA has plans online for these,” he says. “The guy who poured the concrete said it was relatively simple, and when he was done, he asked if he could come over if there’s a bad storm.”
The tornado fortification doesn’t stop there, though.
“Historically, roofs have been nailed on, but really held in place by gravity,” Brooks says. “What happens in most home failures in a tornado is the roof gets lifted off. You have pressure on the walls, there’s no place for it to go, you get upward pressure, and the roof goes.”
But builders are now using hurricane clips to protect against severe weather events that threaten to tear roofs from buildings. These clips secure roof rafters to the walls with inexpensive metal fittings.
“The buzzword in the community is ‘continuous load path,’” Brooks says. “These can add an order of magnitude to the pressure the roof can take.”
Bolts that more securely hold walls to a structure’s foundation are another of the “relatively inexpensive things that can reduce the risk for this kind of damage,” Brooks adds.