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The median monthly housing payment for U.S. homebuyers rose to a record $2,775 during the four-week period ending April 14, up 11% year over year, according to a Redfin report.
The recent hotter-than-expected inflation reading sent mortgage rates upward. On Thursday, HousingWire’s Mortgage Rates Center showed the average 30-year fixed rate for conventional loans at 7.31%, up from 7.19% a week earlier.
Additionally, Federal Reserve Chair Jerome Powell made statements at the Washington Forum on Tuesday that indicate there will be no rate cuts anytime soon because the economy and the labor market continue to run hot and inflation has remained sticky.
Furthermore, the median price for all types of existing homes rose to $393,500 in March, an increase of 4.8% from the median price of $375,300 in the same month last year, according to the National Association of Realtors (NAR).
Despite the challenging housing market, demand isn’t fading. Mortgage applications, for instance, increased for the second week in a row on the back of a strong economy.
According to Chen Zhao, Redfin’s economic research lead, some house hunters are eager to buy now as they fear a further increase in mortgage rates. Meanwhile, others have grown accustomed to elevated rates and have accordingly factored the inflated rates into their home purchase budget.
“Home sales are slower than usual, but there are still people buying and selling because if not now, when?” Connie Durnal, a Redfin Premier agent in Dallas, said in a news release. “I’ve had a few prospective buyers touring homes for the last several years, since mortgage rates started going up, and they wish they would have bought last year because prices and rates are even higher now.
“My advice to them: If you can afford to and you find a house you love, buy now. There’s no guarantee that rates will come down soon.”
At the end of March, NAR reported that total housing inventory sat at 1.11 million units, up 4.7% from February and up 14.4% from one year ago.
Source: housingwire.com
While builder confidence in the market for new residential construction improved in March, it remained flat in April and residential construction numbers showed a decline in momentum as well.
Residential construction starts, which had surged in February, gave back all of those gains in March. The U.S. Census Bureau and the Department of Housing and Urban Development (HUD) report that construction began at a seasonally adjusted annual rate of 1.321 million housing units during the month, a decline of 14.7 percent from February’s level of 1.549 million units. Starts were 4.3 percent lower than their level in March 2023.
Single-family starts fell 12.4 percent to an annual rate of 1.022 million and multifamily starts dived 20.8 percent to 290,000 units. The two categories were down 21.2 percent and 43.7 percent respectively year-over-year.
Permits also declined. The annual rate was 4.3 percent lower at 1.458 million units compared to 1.523 million in February. Permits increased 1.5 percent on an annual basis. Single-family authorizations dropped from 1.032 million to 973,000, a 5.7 percent decline. This was still a 17.4 percent improvement from March of last year. Multifamily permits were unchanged at 433,000 units, down 22.1 percent year-over-year.
Analysts polled by Econoday had forecast starts at 1,480 million and permits at 1.510 million, substantially overshooting both numbers.
The National Association of Home Builders (NAHB) said the NAHB/Wells Fargo Housing Market Index (HMI) broke a four-month string of gains this month, remaining at the 51 level, unchanged from March, but still above the key breakeven point of 50.
Robert Deitz, NAHB’s chief economist, said the flat reading suggests the potential for demand growth is there, but buyers appear to be waiting until there is more clarity on the direction of rates. “With the markets now adjusting to rates being somewhat higher due to recent inflation readings, we still anticipate the Federal Reserve will announce future rate cuts later this year, and that mortgage rates will moderate in the second half of 2024,” he said.
The HMI gauges builder perceptions of current single-family home sales and sales expectations for the next six months as “good,” “fair” or “poor” and asks builders to rate traffic of prospective buyers as “high to very high,” “average” or “low to very low.” Scores for each component are then used to calculate a seasonally adjusted index where any number over 50 indicates that more builders view conditions as good than poor.
The HMI index charting current sales conditions in April and the index gauging buyer traffic each increased 1 point to 57 and 35, respectively. The component measuring sales expectations in the next six months fell 2 points to 60.
Looking at the three-month moving averages for regional HMI scores, the Northeast increased 4 points to 63, the Midwest gained 5 points to 46, the South rose 1 point to 51 and the West registered a 4-point gain to 47.
The April survey also showed that 22 percent of builders cut home prices this month, down from 24 percent in March and 36 percent in December 2023, while the average price reduction held steady at 6 percent for the 10th straight month. Fifty-seven percent of builders used some form of sales incentives. The share was 60 percent in March.
On an unadjusted basis, the Census/HUD report shows housing starts in March are estimated at 110,900 including 87,100 single-family units. The totals in February were 110,100 and 81,700. There were 123,500 permits issued during the month compared to 119,100 in February. The single-family totals rose from 79,400 to 84,300.
Homes were completed during the month at an annual rate of 1.469 million units. This was a decline of 13.5 percent from February and 13.9 percent from the previous March. Single-family completions dropped 10.5 percent and were 8.5 percent lower than a year earlier while multifamily completions were down 19.9 percent.
For the year to date (YTD) housing starts total 318,800, up 1.3 percent from the same period in 2023. Single-family starts have risen 27.1 percent to 239,100 while multifamily starts have fallen by 38.0 percent to 76,400 units.
YTD permits are up 3.8 percent, entirely due to a 24.9 percent increase in single-family permits which helped offset a drop of 25.2 percent in the multifamily sector.
Completions total 347,300 thus far in 2024, an increase of 4.3 percent from 2023. There have been 5.8 percent fewer single-family homes completed but multifamily completions have risen 27.4 percent.
At the end of the reporting period, there were 1.646 million homes under construction, 689,000 of which were single-family homes. in addition, there were 273,000 permits available 141,000 for single-family houses.
Starts dropped by double digits in three of the four major regions and permits also drifted lower.
Starts In the Northeast were down 36.0 percent compared to February and 56.8 percent on an annual basis. Permits dropped 20.8 percent but increased 8.1 percent for the year.
In the Midwest, starts were down 23.0 percent for the month but were 18.0 percent above the March 2023 pace. Permits dropped 14.7 percent from February and 3.4 percent on an annual basis.
The South’s starts fell by 17.8 percent and 11.0 percent from February and from March 2023, respectively. Permits fell 0.6 percent but increased by 0.4 for the year.
The only positive changes were in the West, up 7.1 and 48.1 percent for the month and year. Permitting increased 5.1 percent and 4.1 percent from the two earlier periods.
Source: mortgagenewsdaily.com
Average mortgage rates edged higher yesterday. It was a modest increase by any standards but tiny by comparison with Wednesday’s big jump.
First thing, it was looking as if mortgage rates today could fall. But that could change later in the day.
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Our table is having technical problems. But we’re working hard to fix them.
Program | Mortgage Rate | APR* | Change |
---|---|---|---|
30-year fixed VA | 7.222% | 7.262% | +0.05 |
Conventional 20-year fixed | 7.007% | 7.058% | +0.07 |
Conventional 10-year fixed | 6.51% | 6.584% | +0.09 |
Conventional 30-year fixed | 7.127% | 7.173% | +0.07 |
30-year fixed FHA | 7.056% | 7.1% | +0.09 |
Conventional 15-year fixed | 6.64% | 6.713% | +0.1 |
5/1 ARM Conventional | 6.785% | 7.888% | +0.08 |
Rates are provided by our partner network, and may not reflect the market. Your rate might be different. Click here for a personalized rate quote. See our rate assumptions See our rate assumptions here. |
Markets have turned gloomy over the prospects of the Federal Reserve cutting general interest rates over the next few months. And that’s been pushing mortgage rates higher.
So, for now, my personal rate lock recommendations remain:
However, with so much uncertainty at the moment, your instincts could easily turn out to be as good as mine — or better. So, let your gut and your own tolerance for risk help guide you.
>Related: 7 Tips to get the best refinance rate
Here’s a snapshot of the state of play this morning at about 9:50 a.m. (ET). The data are mostly compared with roughly the same time the business day before, so much of the movement will often have happened in the previous session. The numbers are:
*A movement of less than $20 on gold prices or 40 cents on oil ones is a change of 1% or less. So we only count meaningful differences as good or bad for mortgage rates.
Before the pandemic, post-pandemic upheavals, and war in Ukraine, you could look at the above figures and make a pretty good guess about what would happen to mortgage rates that day. But that’s no longer the case. We still make daily calls. And are usually right. But our record for accuracy won’t achieve its former high levels until things settle down.
So, use markets only as a rough guide. Because they have to be exceptionally strong or weak to rely on them. But, with that caveat, mortgage rates today look likely to decrease. However, be aware that “intraday swings” (when rates change speed or direction during the day) are a common feature right now.
Find your lowest rate. Start here
Two economic reports are scheduled for this morning.
The March import price index (IPI) landed at 8:30 a.m. Eastern. And that would normally be bad for mortgage rates. Markets had been expecting it to hold steady at 0.3% and it came in at 0.4%.
So, how come mortgage rates were falling first thing? Well, it’s too early to be sure. But those rates often move in the opposite direction after a sharp movement one way or the other. That’s simply markets reflecting on the change and deciding they over-reacted.
This morning’s other report isn’t due until 10 a.m. Eastern. And that means I won’t have time before my deadline to assess its likely impact on markets. They were expecting the preliminary consumer sentiment index for April to improve slightly to 79.9% from 79.4%.
A lower figure may help mortgage rates to fall while a higher one could push them upward. But this is one of those reports that rarely move those rates far unless they contain shockingly good or bad data.
Mortgage rates might also be affected by earnings reports later from three of the biggest U.S. banks, JPMorgan Chase, Wells Fargo and Citigroup. If they all tell a really positive story, stock market reactions could spill over into the bond market that largely determines mortgage rates.
We’ve had April’s two most important reports over the last six days. And, taken together, they were pretty bad for mortgage rates.
Next week’s reports aren’t typically as influential by a long way. But a couple of them (retail sales and industrial production) could move mortgage rates higher if they feed markets’ current pessimism over Fed rate cuts — or push them downward if they contradict it.
Don’t forget you can always learn more about what’s driving mortgage rates in the most recent weekend edition of this daily report. These provide a more detailed analysis of what’s happening. They are published each Saturday morning soon after 10 a.m. (ET) and include a preview of the following week.
According to Freddie Mac’s archives, the weekly all-time lowest rate for 30-year, fixed-rate mortgages was set on Jan. 7, 2021, when it stood at 2.65%. The weekly all-time high was 18.63% on Sep. 10, 1981.
Freddie’s Apr. 11 report put that same weekly average at 6.88%, up from the previous week’s 6.82%. But note that Freddie’s data are almost always out of date by the time it announces its weekly figures.
Looking further ahead, Fannie Mae and the Mortgage Bankers Association (MBA) each has a team of economists dedicated to monitoring and forecasting what will happen to the economy, the housing sector and mortgage rates.
And here are their rate forecasts for the four quarters of 2024 (Q1/24, Q2/24 Q3/24 and Q4/24).
The numbers in the table below are for 30-year, fixed-rate mortgages. Fannie’s were updated on Mar. 19 and the MBA’s on Mar. 22.
Forecaster | Q1/24 | Q2/24 | Q3/24 | Q4/24 |
Fannie Mae | 6.7% | 6.7% | 6.6% | 6.4% |
MBA | 6.8% | 6.6% | 6.3% | 6.1% |
Of course, given so many unknowables, both these forecasts might be even more speculative than usual. And their past record for accuracy hasn’t been wildly impressive.
Here are some things you need to know:
A lot is going on at the moment. And nobody can claim to know with certainty what will happen to mortgage rates in the coming hours, days, weeks or months.
You should comparison shop widely, no matter what sort of mortgage you want. Federal regulator the Consumer Financial Protection Bureau found in May 2023:
“Mortgage borrowers are paying around $100 a month more depending on which lender they choose, for the same type of loan and the same consumer characteristics (such as credit score and down payment).”
In other words, over the lifetime of a 30-year loan, homebuyers who don’t bother to get quotes from multiple lenders risk losing an average of $36,000. What could you do with that sort of money?
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Mortgage rate methodology
The Mortgage Reports receives rates based on selected criteria from multiple lending partners each day. We arrive at an average rate and APR for each loan type to display in our chart. Because we average an array of rates, it gives you a better idea of what you might find in the marketplace. Furthermore, we average rates for the same loan types. For example, FHA fixed with FHA fixed. The end result is a good snapshot of daily rates and how they change over time.
Mortgage and refinance rates vary a lot depending on each borrower’s unique situation.
Factors that determine your mortgage interest rate include:
Remember, every mortgage lender weighs these factors a little differently.
To find the best rate for your situation, you’ll want to get personalized estimates from a few different lenders.
Verify your new rate. Start here
Rates for a home purchase and mortgage refinance are often similar.
However, some lenders will charge more for a refinance under certain circumstances.
Typically when rates fall, homeowners rush to refinance. They see an opportunity to lock in a lower rate and payment for the rest of their loan.
This creates a tidal wave of new work for mortgage lenders.
Unfortunately, some lenders don’t have the capacity or crew to process a large number of refinance loan applications.
In this case, a lender might raise its rates to deter new business and give loan officers time to process loans currently in the pipeline.
Also, cashing out equity can result in a higher rate when refinancing.
Cash-out refinances pose a greater risk for mortgage lenders, so they’re often priced higher than new home purchases and rate-term refinances.
Check your refinance rates today. Start here
Since rates can vary, always shop around when buying a house or refinancing a mortgage.
Comparison shopping can potentially save thousands, even tens of thousands of dollars over the life of your loan.
Here are a few tips to keep in mind:
Many borrowers make the mistake of accepting the first mortgage or refinance offer they receive.
Some simply go with the bank they use for checking and savings since that can seem easiest.
However, your bank might not offer the best mortgage deal for you. And if you’re refinancing, your financial situation may have changed enough that your current lender is no longer your best bet.
So get multiple quotes from at least three different lenders to find the right one for you.
When shopping for a mortgage or refinance, lenders will provide a Loan Estimate that breaks down important costs associated with the loan.
You’ll want to read these Loan Estimates carefully and compare costs and fees line-by-line, including:
Remember, the lowest interest rate isn’t always the best deal.
Annual percentage rate (APR) can help you compare the ‘real’ cost of two loans. It estimates your total yearly cost including interest and fees.
Also, pay close attention to your closing costs.
Some lenders may bring their rates down by charging more upfront via discount points. These can add thousands to your out-of-pocket costs.
You can also negotiate your mortgage rate to get a better deal.
Let’s say you get loan estimates from two lenders. Lender A offers the better rate, but you prefer your loan terms from Lender B. Talk to Lender B and see if they can beat the former’s pricing.
You might be surprised to find that a lender is willing to give you a lower interest rate in order to keep your business.
And if they’re not, keep shopping — there’s a good chance someone will.
Mortgage borrowers can choose between a fixed-rate mortgage and an adjustable-rate mortgage (ARM).
Fixed-rate mortgages (FRMs) have interest rates that never change unless you decide to refinance. This results in predictable monthly payments and stability over the life of your loan.
Adjustable-rate loans have a low interest rate that’s fixed for a set number of years (typically five or seven). After the initial fixed-rate period, the interest rate adjusts every year based on market conditions.
With each rate adjustment, a borrower’s mortgage rate can either increase, decrease, or stay the same. These loans are unpredictable since monthly payments can change each year.
Adjustable-rate mortgages are fitting for borrowers who expect to move before their first rate adjustment, or who can afford a higher future payment.
In most other cases, a fixed-rate mortgage is typically the safer and better choice.
Remember, if rates drop sharply, you are free to refinance and lock in a lower rate and payment later on.
You don’t need a high credit score to qualify for a home purchase or refinance, but your credit score will affect your rate.
This is because credit history determines risk level.
Historically speaking, borrowers with higher credit scores are less likely to default on their mortgages, so they qualify for lower rates.
So, for the best rate, aim for a credit score of 720 or higher.
Mortgage programs that don’t require a high score include:
Ideally, you want to check your credit report and score at least 6 months before applying for a mortgage. This gives you time to sort out any errors and make sure your score is as high as possible.
If you’re ready to apply now, it’s still worth checking so you have a good idea of what loan programs you might qualify for and how your score will affect your rate.
You can get your credit report from AnnualCreditReport.com and your score from MyFico.com.
Nowadays, mortgage programs don’t require the conventional 20 percent down.
Indeed, first-time home buyers put only 6 percent down on average.
Down payment minimums vary depending on the loan program. For example:
Keep in mind, a higher down payment reduces your risk as a borrower and helps you negotiate a better mortgage rate.
If you are able to make a 20 percent down payment, you can avoid paying for mortgage insurance.
This is an added cost paid by the borrower, which protects their lender in case of default or foreclosure.
But a big down payment is not required.
For many people, it makes sense to make a smaller down payment in order to buy a house sooner and start building home equity.
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No two mortgage loans are alike, so it’s important to know your options and choose the right type of mortgage.
The five main types of mortgages include:
Your interest rate remains the same over the life of the loan. This is a good option for borrowers who expect to live in their homes long-term.
The most popular loan option is the 30-year mortgage, but 15- and 20-year terms are also commonly available.
Adjustable-rate loans have a fixed interest rate for the first few years. Then, your mortgage rate resets every year.
Your rate and payment can rise or fall annually depending on how the broader interest rate trends.
ARMs are ideal for borrowers who expect to move prior to their first rate adjustment (usually in 5 or 7 years).
For those who plan to stay in their home long-term, a fixed-rate mortgage is typically recommended.
A jumbo loan is a mortgage that exceeds the conforming loan limit set by Fannie Mae and Freddie Mac.
In 2023, the conforming loan limit is $726,200 in most areas.
Jumbo loans are perfect for borrowers who need a larger loan to purchase a high-priced property, especially in big cities with high real estate values.
A government loan backed by the Federal Housing Administration for low- to moderate-income borrowers. FHA loans feature low credit score and down payment requirements.
A government loan backed by the Department of Veterans Affairs. To be eligible, you must be active-duty military, a veteran, a Reservist or National Guard service member, or an eligible spouse.
VA loans allow no down payment and have exceptionally low mortgage rates.
USDA loans are a government program backed by the U.S. Department of Agriculture. They offer a no-down-payment solution for borrowers who purchase real estate in an eligible rural area. To qualify, your income must be at or below the local median.
Borrowers can qualify for a mortgage without tax returns, using their personal or business bank account as evidence of their financial circumstances. This is an option for self-employed or seasonally-employed borrowers.
These are mortgages that lenders don’t sell on the secondary mortgage market. And this gives lenders the flexibility to set their own guidelines.
Non-QM loans may have lower credit score requirements or offer low-down-payment options without mortgage insurance.
The lender or loan program that’s right for one person might not be right for another.
Explore your options and then pick a loan based on your credit score, down payment, and financial goals, as well as local home prices.
Whether you’re getting a mortgage for a home purchase or a refinance, always shop around and compare rates and terms.
Typically, it only takes a few hours to get quotes from multiple lenders. And it could save you thousands in the long run.
Time to make a move? Let us find the right mortgage for you
Current mortgage rates methodology
We receive current mortgage rates each day from a network of mortgage lenders that offer home purchase and refinance loans. Those mortgage rates shown here are based on sample borrower profiles that vary by loan type. See our full loan assumptions here.
Source: themortgagereports.com
While the steady reading suggests underlying demand, potential buyers are taking a wait-and-see approach, according to NAHB chief economist Robert Dietz. “April’s flat reading suggests potential for demand growth is there, but buyers are hesitating until they can better gauge where interest rates are headed,” Dietz said in the report. “With the markets now adjusting … [Read more…]
Editorial Note: We earn a commission from partner links on Forbes Advisor. Commissions do not affect our editors’ opinions or evaluations.
As we head into peak home-buying season, signs of life have begun to spring up in the housing market.
Even so, still-high mortgage rates and home prices amid historically low housing stock continue to put homeownership out of reach for many.
Moreover, the National Association of Realtors agreed to a monumental $418 million settlement on March 15 following a verdict favoring home sellers in a class action lawsuit. Still subject to court approval, the settlement requires changes to broker commissions that will upend the buying and selling model that has been in place for years.
Elevated mortgage rates, out-of-reach home prices and record-low housing stock are the perennial weeds that experts say hopeful home buyers can expect to contend with this spring—and beyond.
“The housing market is likely to continue to face the dual affordability constraints of high home prices and elevated interest rates in 2024,” said Doug Duncan, senior vice president and chief economist at Fannie Mae, in an emailed statement. “Hotter-than-expected inflation data and strong payroll numbers are likely to apply more upward pressure to mortgage rates this year than we’d previously forecast.”
Despite ongoing affordability hurdles, Fannie Mae forecasts an increase in home sales transactions compared to last year. Experts also anticipate a slower rise in home prices this year compared to recent years, but price fluctuations will continue to vary regionally and depend strongly on local market supply.
U.S. home prices declined in January for the third consecutive month due to high borrowing costs, according to the latest S&P CoreLogic Case-Shiller Home Price Index. But prices year-over-year jumped 6%—the fastest annual rate since 2022.
Chief economist at First American Financial Corporation Mark Fleming predicts a “flat stretch” ahead.
“If the 2020-2021 housing market was too hot, then the 2023 market was probably too cold, but 2024 won’t yet be just right,” Fleming said in his 2024 forecast.
For a housing recovery to occur, several conditions must unfold.
“For the best possible outcome, we’d first need to see inventories of homes for sale turn considerably higher,” says Keith Gumbinger, vice president at online mortgage company HSH.com. “This additional inventory, in turn, would ease the upward pressure on home prices, leveling them off or perhaps helping them to settle back somewhat from peak or near-peak levels.”
And, of course, mortgage rates would need to cool off—which experts say is imminent despite rates edging back up toward 7%. For the week ending April 11, the 30-year fixed mortgage rate stood at 6.88%, according to Freddie Mac.
However, when mortgage rates finally go on the descent, Gumbinger says don’t hope they cool too quickly. Rapidly falling rates could create a surge of demand that wipes away any inventory gains, causing home prices to rebound.
“Better that rate reductions happen at a metered pace, incrementally improving buyer opportunities over a stretch of time, rather than all at once,” Gumbinger says.
He adds that mortgage rates returning to a more “normal” upper 4% to lower 5% range would also help the housing market, over time, return to 2014-2019 levels. Yet, Gumbinger predicts it could be a while before we return to those rates.
Nonetheless, Kuba Jewgieniew, CEO of Realty ONE Group, a real estate brokerage company, is optimistic about a recovery this year.
“[W]e’re definitely looking forward to a better housing market in 2024 as interest rates start to settle around 6% or even lower,” says Jewgieniew.
Following years of litigation, the National Association of Realtors (NAR) has agreed to pay $418 million to settle a series of antitrust lawsuits filed in 2019 on behalf of home sellers.
The plaintiffs claimed that the leading national trade association for real estate brokers and agents “conspired to require home sellers to pay the broker representing the buyer of their homes in violation of federal antitrust law.”
Though the landmark settlement is subject to court approval, most consider it a done deal.
The settlement requires NAR to enact new rules, including prohibiting offers of broker compensation on multiple listing services (MLS), the private databases that allow local real estate brokers to publish and share information about residential property listings. The rule is set to take effect in mid-July, once the settlement receives judge approval.
Moreover, sellers will no longer be required to pay buyer broker commissions and real estate agents participating in the MLS must establish written representation agreements with their buyer clients.
NAR denies any wrongdoing and maintains that its current policies benefit buyers and sellers. The organization believes it’s not liable for seller claims related to broker commissions, stating that it has never set commissions and that commissions have always been negotiable.
Per the settlement’s terms, the costs associated with buying and selling a home are set to change dramatically.
“The primary things that will change are the decoupling of the seller commission and the buyer commission in the MLS,” says Rita Gibbs, a Realtor at Realty One Group Integrity in Tucson. “It’s gonna cause some chaos.”
While sellers will no longer be able to offer broker compensation in the MLS, there’s no rule prohibiting off-MLS negotiations. Because of this, Gibbs suspects buyers and sellers will continue offering broker compensation off the MLS.
The Department of Justice confirmed it will permit listing brokers to display compensation details on their websites. However, buyer agents will need to undergo the tedious task of visiting countless broker websites to find who’s offering what.
Michael Gorkowski, a Virginia-based real estate agent with Compass, is also trying to figure out how to manage the potential ruling.
“We often work with buyers for many months and sometimes years before they find exactly what they’re looking for,” Gorkowski says. “So in a case where a seller isn’t offering a co-broker commission, we will have to negotiate that the buyer pays an agreed-upon commission prior to starting their search.”
“In the short term, it is absolutely going to injure buyers, especially FHA and VA buyers,” Gibbs says. “With rare exception, these buyers are not in a position to pay for their own agent.”
Gibbs says that if sellers don’t offer compensation, many buyers who can’t otherwise afford to pay a broker will choose to go unrepresented.
Gorkowski notes that veterans taking out VA loans face a unique challenge under the new rules. “[P]er the VA requirements, buyers cannot pay so it must be negotiated with the seller for now.”
As a result, NAR is calling on the U.S. Department of Veterans Affairs to revise its policies prohibiting VA buyers from paying broker commissions. Even so, there’s skepticism that the federal government will be able to implement changes in time for the July deadline.
Gibbs and Gorkowski are among the many agents especially concerned about first-time home buyers. After July, first-time and VA buyers will be required to sign a buyer-broker agreement stating that they will compensate their broker—but Gibbs says many won’t have the means to do so.
In this situation, agents would likely only show buyers homes where sellers are offering compensation.
“This is a very troubling situation,” Gorkowski says.
With many homeowners “locked in” at ultra-low interest rates or unwilling to sell due to high home prices, demand continues to outpace housing supply—and likely will for a while—even as some homeowners may finally be forced to sell due to major life events such as divorce, job changes or a growing family.
“I don’t expect to see a meaningful increase in the supply of existing homes for sale until mortgage rates are back down in the low 5% range, so probably not in 2024,” says Rick Sharga, founder and CEO of CJ Patrick Company, a market intelligence and business advisory firm.
Housing stock remains near historic lows—especially entry-level supply—which has propped up demand and sustained ultra-high home prices. Here’s what the latest home values look like around the country.
Yet, some hopeful housing stock signs have begun to sprout:
The most recent National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI), which tracks builder sentiment, saw a fourth consecutive monthly rise, surpassing a crucial threshold with an increase from 48 to 51 in March. A reading of 50 or above means more builders see good conditions ahead for new construction.
At the same time, new single-family building permits ticked up 1% in February—the 13th consecutive monthly increase—according to the latest data from the U.S. Census Bureau and U.S. Department of Housing and Urban Development (HUD).
Though some housing market data indicates signs of growth are in store this spring home-buying season, persistently high mortgage rates may hinder activity from fully flourishing.
Here’s what the latest home sales data has to say.
Existing-home sales came to life in February, shooting up 9.5% from the month before, according to the latest data from the NAR. Sales dipped 3.3% from a year ago.
Experts attribute the monthly jump to a bump in inventory.
“Additional housing supply is helping to satisfy market demand,” said Lawrence Yun, chief economist at NAR, in the report.
Existing inventory rose 5.9%—logging 1.07 million unsold homes at the end of February. However, there are still only 2.9 months of inventory at the current sales pace. Most experts consider a balanced market falling between four and six months.
Meanwhile, existing home prices continue to soar to unprecedented heights, reaching $384,500, which marks the eighth consecutive month of yearly price increases and a February median home price record.
Sales of newly constructed single-family houses ticked down by a nominal 0.3% compared to January, but outpaced February 2023 sales by 5.9%, according to the latest U.S. Census Bureau and HUD data.
Amid a high percentage of homeowners still locked in to low mortgage rates, home builders have been picking up the slack.
“New construction continues to be an outsized share of the housing inventory,” said Dr. Lisa Sturtevant, chief economist at Bright MLS, in an emailed statement.
Sturtevant notes that declining new home prices are coming amid a recent trend of builders introducing smaller and more affordable homes to the market.
The median price for a new home in February was $400,500, down 7.6% from a year ago.
Source: U.S. Census Bureau and U.S. Department of Housing and Urban Development
NAR’s Pending Homes Sales Index rose 1.6% in February from the month prior even as mortgage rates approached 7% by the end of the month. Pending transactions declined 7% year-over-year.
A pending home sale marks the point in the home sales transaction when the buyer and seller agree on price and terms. Pending home sales are considered a leading indicator of future closed sales.
The Midwest and South saw monthly transaction gains while the Northeast and West saw declines due to affordability challenges in those higher-cost regions.
“While modest sales growth might not stir excitement, it shows slow and steady progress from the lows of late last year,” said Yun, in the report.
Though down from its 2023 high of 7.79%, the average 30-year fixed mortgage rate in 2024 remains well over 6% amid rising home values. As a result, home buyers continue to face affordability challenges.
According to data from its first-quarter 2024 U.S. Home Affordability Report, property data provider Attom found that median-priced single-family homes remain less affordable than the historical average in over 95% of U.S. counties.
For one, the data uncovered that expenses are eating up more than 32% of the average national wage. Common lending guidelines require monthly mortgage payments, property taxes and homeowners insurance to comprise 28% or less of your gross income.
At the same time, home prices and homeownership expenses continue to outpace wage growth.
Consequently, the latest expense-to-wage ratio is hovering at one of the highest points over the past decade, according to the Attom report, despite some slight affordability improvements over the last two quarters.
“Affording a home remains a financial stretch, or a pipe dream, for so many households,” said Rob Barber, CEO at Attom.
Here are some expert tips to increase your chances for an optimal outcome in this tight housing market.
Hannah Jones, a senior economic research analyst at Realtor.com, offers this expert advice to aspiring buyers:
Gary Ashton, founder of The Ashton Real Estate Group of RE/MAX Advantage, has this expert advice for sellers:
Despite some areas of the country experiencing monthly price declines, the likelihood of a housing market crash—a rapid drop in unsustainably high home prices due to waning demand—remains low for 2024.
“[T]he record low supply of houses on the market protects against a market crash,” says Tom Hutchens, executive vice president of production at Angel Oak Mortgage Solutions, a non-QM lender.
Moreover, experts point out that today’s homeowners stand on much more secure footing than those coming out of the 2008 financial crisis, with many borrowers having substantial home equity.
“In 2024, I expect we’ll see home appreciation take a step back but not plummet,” says Orphe Divounguy, senior macroeconomist at Zillow Home Loans.
This outlook aligns with what other housing market watchers expect.
“Comerica forecasts that national house prices will rise 2.9% in 2024,” said Bill Adams, chief economist at Comerica Bank, in an emailed statement.
Divounguy also notes that several factors, including Millennials entering their prime home-buying years, wage growth and financial wealth are tailwinds that will sustain housing demand in 2024.
Even so, with fewer homes selling, Dan Hnatkovskyy, co-founder and CEO of NewHomesMate, a marketplace for new construction homes, sees a price collapse within the realm of possibility, especially in markets where real estate investors scooped up numerous properties.
“If something pushes that over the edge, the consequences could be severe,” said Hnatkovskyy, in an emailed statement.
In February, total foreclosure filings were down 1% from the previous month but up 8% from a year ago, according to Attom.
“These trends could signify evolving financial landscapes for homeowners, prompting adjustments in market strategies and lending practices,” said Barber, in a report.
Lenders began foreclosure on 22,575 properties in February, up 4% from the previous month and 11% from a year ago. Meanwhile, real estate-owned properties, or REOs, which are homes unsold at foreclosure auctions and taken over by lenders, spiked year-over-year in three states: South Carolina (up 51%), Missouri (up 50%) and Pennsylvania (up 46%).
Despite foreclosure activity trending up nationally and certain areas of the country seeing notable annual increases in REOs, experts generally don’t expect to see a wave of foreclosures in 2024.
“Foreclosure activity is still only at about 60% of pre-pandemic levels … and isn’t likely to be back to 2019 numbers until sometime in mid-to-late 2024,” says Sharga.
The biggest reasons for this, Sharga explains, are the strength of the economy—we’re still seeing low unemployment and steady wage growth—along with excellent loan quality.
Massive home price growth in homeowner equity over the past few years has also helped reduce foreclosures.
Sharga says that some 80% of today’s homeowners have more than 20% equity in their property. So, while there may be more foreclosure starts in 2024—due in part to Covid-era mortgage relief programs phasing out—foreclosure auctions and lender repossessions should remain below 2019 levels.
Buying a house—in any market—is a highly personal decision. Because homes represent the largest single purchase most people will make in their lifetime, it’s crucial to be in a solid financial position before diving in.
Use a mortgage calculator to estimate your monthly housing costs based on your down. But if you’re trying to predict what might happen next year, experts say this is probably not the best home-buying strategy.
“The housing market—like so many other markets—is almost impossible to time,“ Divounguy says. “The best time for prospective buyers is when they find a home that they like, that meets their family’s current and foreseeable needs and that they can afford.”
Gumbinger agrees it’s hard to tell would-be homeowners to wait for better conditions.
“More often, it seems the case that home prices generally keep rising, so the goalposts for amassing a down payment keep moving, and there’s no guarantee that tomorrow’s conditions will be all that much better in the aggregate than today’s.”
Divounguy says “getting on the housing ladder” is worthwhile to begin building equity and net worth.
Declining mortgage rates will likely incentivize would-be buyers anxious to own a home to jump into the market. Expect this increased demand amid today’s tight housing supply to put upward pressure on home prices.
Most experts do not expect a housing market crash in 2024 since many homeowners have built up significant equity in their homes. The issue is primarily an affordability crisis. High interest rates and inflated home values have made purchasing a home challenging for first-time homebuyers.
If you’re in a financial position to buy a home you plan to live in for the long term, it won’t matter when you buy it because you will live in it through economic highs and lows. However, if you are looking to buy real estate as a short-term investment, it will come with more risk if you buy at the height before a recession.
Source: forbes.com
There are now 526,000 single-family homes active unsold on the market. That’s up 2.6% from the previous week when the data included the Easter holiday. It’s a holiday week jump so it’s not super crazy, but a 2.6% jump in unsold inventory in a week is very notable. This is absolutely a function of high and rising mortgage rates. I’ve been sharing this view for two full years now. As mortgage rates rise, inventory rises. Or, to put it another way: demand slows, inventory grows. So, rates are up and inventory is undeniably growing.
Available inventory of unsold homes on the market is 30% greater than last year at this time and 102% more than in mid-April 2022. There are 120,000 more homes on the market now than there were last year. There are 250,000 more homes on the market now than two years ago. Much of this inventory increase is concentrated is a few key markets.
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Two years ago, rates were obviously rising for the first time in years and inventory was rising too. Inventory was coming off the record lows of the pandemic, but was already increasing 2-3% per week as demand slowed.
Year-over-year inventory growth like this can lead to home-price declines in the future since sales price measures lag way behind the changes in supply and demand. Because we have 30% year-over-year inventory gains now, we’ll be on the lookout for more signals of weakness in home prices as the year progresses.
It’s important to note that we don’t see any signs in the data of a major home-price crash. In early 2022, inventory rose quickly and home prices fell in Q4 of that year. Home prices recovered in 2023 very quickly though. If we finally get some stability in mortgage rates, expect stability also in home prices. If we are in a world of continued rising mortgage rates, supply and demand will continue their imbalance and we’ll likely see price adjustments.
Inventory growth is from a combination of fewer buyers as affordability worsens, but also gradually improving seller volume. There were 66,000 new listings unsold last week plus another 20,000 immediate sales for 86,000 total new listings. That’s 32% more new listings last week than the same week a year ago.
The measure from last year included last year’s Easter holiday weekend so some of this 32% is from that easy comparison. But each week in 2024 is averaging 13% more sellers than last year at this time. So we have obvious seller growth as we settle into mortgage rates higher for longer.
This concept is counter-intuitive. Many listeners are familiar with the concept of a mortgage rate lock-in. This was the topic of my Top of Mind podcast interview last week with Jonah Coste from FHFA discussing their paper on the lock-in effect.
The lock-in premise is that if rates rise, it becomes more expensive for homeowners to move, so higher rates create more lock-in and fewer sellers. But that’s proving to be only partially true. The lock-in effect keeps us with relatively few sellers: 80,000 instead of 100,000 each week in previous healthy years, but we have more sellers every week than last year even though mortgage rates are higher now.
In fact, there were more new listings last week at 66,000 than any week in 2023 and we have a couple months of spring still for that number to climb.
Meanwhile, there were 69,000 new pendings last week. These are homes that were listed, took offers and started the contract process. It takes just under 40 days on average to close the transaction, so these are sales that will close in May for the most part.
The 69,000 contracts is 10% more than a year ago and 7% more than the previous week, which included the Easter holiday. So like the inventory numbers, last week’s big jump is mostly a rebound from the holiday. But it’s really encouraging that sales each week continue to come in ahead of last year.
If rates finally fall, we’ll see this transaction rate accelerate, and we’ll see inventory fall too. But there doesn’t seem to be any inclination of rates falling. This weekly new pendings data is a very handy measure of interest-rate sensitivity.
There are 371,000 single-family homes in contract right now. That’s just 4% more than last year at this time. A lot of places in the country still have fewer sales than last year. The market is trying to grow, but a new jump in mortgage rates doesn’t help. More sales are happening with cash right now, so the mortgage indices are still at record lows. If we get lucky and rates don’t keep climbing, then we’ll continue to see home sales run just a little ahead of last year. The more stable rates stay, the more sales can inch forward.
The median price of the homes that took offers last week was $389,900. That is actually below 2022 by 1%. In 2022, home prices still had pandemic momentum into the second quarter. The median price of all the homes in contract is $399,000, which means the homes that sell in April and May will be 5% higher priced than 2023.
The median price of the active market was $447,527 last week. That’s up for the week and 1.7% above last year. The asking prices are leading indicators of where future sales prices will happen. And the growth in those leading indicators is not very strong — just barely above last year at this time.
The price of the newly listed cohort came in pretty strong in the week after Easter at $435,000, which was a new all-time high for that measure. So, not all of the pricing indicators are bearish. That’s good to keep our eyes on.
On the other hand, 32.1% of the homes on the market have taken a price cut. That’s up a fraction from the previous week, 10 basis points. If this most recent move in mortgage rates is stifling homebuyers, we’ll see the price reductions number jump in next Monday’s video.
Some of the homes that are on the market and expected offers last week didn’t get their offers because of the most recent mortgage rate jump. If they don’t get the offer, then on Monday or Tuesday, a few are going to reduce their asking price to try to stimulate demand.
Two takeaways from the price-reductions data: One, next week we will be watching for how many listings cut their prices as a result of newly higher mortgage rates. We can see that moment in September of 2022 when price cuts jumped and we saw it again last September when rates jumped. Will we see it again in next Monday’s data?
And two, because price cuts are a bit high and climbing now, we have to look at that as a slightly bearish signal for home prices for the rest of the year. Transaction volume is climbing but prices do not appear to be climbing considering these levels of unaffordability.
Source: housingwire.com
If you’re in the market for a home, here are today’s mortgage rates compared to last week’s.
Loan term | Today’s Rate | Last week | Change |
---|---|---|---|
30-year mortgage rate | 7.01% | 6.95% | +0.07 |
15-year fixed rate | 6.46% | 6.34% | +0.12 |
10-year fixed | 6.31% | 6.20% | +0.11 |
5/1 ARM | 6.33% | 6.45% | -0.12 |
30-year jumbo mortgage rate | 7.15% | 7.04% | +0.11 |
30-year mortgage refinance rate | 7.03% | 6.98% | +0.05 |
Average rates offered by lenders nationwide as of April 11, 2024. We use rates collected by Bankrate to track daily mortgage rate trends.
Mortgage rates change every day. Experts recommend shopping around to make sure you’re getting the lowest rate. By entering your information below, you can get a custom quote from one of CNET’s partner lenders.
About these rates: Like CNET, Bankrate is owned by Red Ventures. This tool features partner rates from lenders that you can use when comparing multiple mortgage rates.
Over the last few years, high inflation and the Federal Reserve’s aggressive interest rate hikes pushed up mortgage rates from their record lows around the pandemic. Since last summer, the Fed has consistently kept the federal funds rate at 5.25% to 5.5%. Though the central bank doesn’t directly set the rates for mortgages, a high federal funds rate makes borrowing more expensive, including for home loans.
Mortgage rates change daily, but average rates have been moving between 6.5% and 7.5% since late last fall. Today’s homebuyers have less room in their budget to afford the cost of a home due to elevated mortgage rates and steep home prices. Limited housing inventory and low wage growth are also contributing to the affordability crisis and keeping mortgage demand down.
Mortgage forecasters base their projections on different data, but most housing market experts predict rates will move toward 6% by the end of 2024. Ultimately, a more affordable mortgage market will depend on how quickly the Fed begins cutting interest rates. Most economists predict that the Fed will start lowering interest rates later this summer.
Since mortgage rates fluctuate for many reasons — supply, demand, inflation, monetary policy and jobs data — homebuyers won’t see lower rates overnight, and it’s unlikely they’ll find rates in the 2% range again.
“We are expecting mortgage rates to fall to around 6.5% by the end of this year, but there’s still a lot of volatility I think we might see,” said Daryl Fairweather, chief economist at Redfin.
Every month brings a new set of inflation and labor data that can change how investors and the market respond and what direction mortgage rates go, said Odeta Kushi, deputy chief economist at First American Financial Corporation. “Ongoing inflation deceleration, a slowing economy and even geopolitical uncertainty can contribute to lower mortgage rates. On the other hand, data that signals upside risk to inflation may result in higher rates,” Kushi said.
Here’s a look at where some major housing authorities expect average mortgage rates to land.
When picking a mortgage, consider the loan term, or payment schedule. The most common mortgage terms are 15 and 30 years, although 10-, 20- and 40-year mortgages also exist. You’ll also need to choose between a fixed-rate mortgage, where the interest rate is set for the duration of the loan, and an adjustable-rate mortgage. With an adjustable-rate mortgage, the interest rate is only fixed for a certain amount of time (commonly five, seven or 10 years), after which the rate adjusts annually based on the market’s current interest rate. Fixed-rate mortgages offer more stability and are a better option if you plan to live in a home in the long term, but adjustable-rate mortgages may offer lower interest rates upfront.
The average 30-year fixed mortgage interest rate is 7.01%, which is an increase of 7 basis points from seven days ago. (A basis point is equivalent to 0.01%.) A 30-year fixed mortgage is the most common loan term. It will often have a higher interest rate than a 15-year mortgage, but you’ll have a lower monthly payment.
The average rate for a 15-year, fixed mortgage is 6.46%, which is an increase of 12 basis points from the same time last week. Though you’ll have a bigger monthly payment than a 30-year fixed mortgage, a 15-year loan usually comes with a lower interest rate, allowing you to pay less interest in the long run and pay off your mortgage sooner.
A 5/1 adjustable-rate mortgage has an average rate of 6.33%, a decrease of 12 basis points from the same time last week. You’ll typically get a lower introductory interest rate with a 5/1 ARM in the first five years of the mortgage. But you could pay more after that period, depending on how the rate adjusts annually. If you plan to sell or refinance your house within five years, an ARM could be a good option.
While it’s important to monitor mortgage rates if you’re shopping for a home, remember that no one has a crystal ball. It’s impossible to time the mortgage market, and rates will always have some level of volatility because so many factors are at play.
“Mortgage rates tend to follow long-date Treasury yields, a function of current inflation and economic growth as well as expectations about future economic conditions,” says Orphe Divounguy, senior macroeconomist at Zillow Home Loans.
Here are the factors that influence the average rates on home loans.
Getting a mortgage should always depend on your financial situation and long-term goals. The most important thing is to make a budget and try to stay within your means. CNET’s mortgage calculator below can help homebuyers prepare for monthly mortgage payments.
Though mortgage rates and home prices are high, the housing market won’t be unaffordable forever. It’s always a good time to save for a down payment and improve your credit score to help you secure a competitive mortgage rate when the time is right.
Source: cnet.com
American renters are fearful that their home-owning aspirations are increasingly getting out of reach, according to a recent survey by the real-estate platform Redfin, amid an environment of high home prices and elevated mortgage rates.
Almost 40 percent of the renters polled told surveyors they did not believe they would own a home of their own, up from 27 percent in a similar survey Redfin conducted in May and June. Part of the struggle for these Americans is that homes are beyond what they can afford. Securing a down payment can prove elusive, and high mortgage rates may discourage them from acquiring property.
Read more: How to Get a Mortgage in 2024
The Redfin survey sampled about 3,000 U.S. residents in February, and its analysis of renters’ expectations came from a 1,000 renters in the poll.
Mortgage rates in particular have stayed elevated over the past six months. After hitting a peak of 8 percent—the highest level since the turn of the century—mortgage rates declined to the mid-6 percent range at the end of the year and into 2024. In recent weeks, however, the cost of home loans have ticked up to above 7 percent, depressing activity in the mortgage market.
On April 11, the 30-year fixed rate rose to almost 7.4 percent, Mortgage News Daily reported, the highest levels since November 2023. The rise follows news that suggests borrowing costs may stay elevated for longer than economists initially anticipated.
High mortgage rates now mean that first-time buyers must earn about $76,000 to afford what the industry describes as a starter home, which is an 8 percent increase from a year ago and almost 100 percent higher than it was before the pandemic, Redfin said. It added that home prices have soared more than 40 percent since 2019, as buyers took advantage of low borrowing costs during the pandemic to acquire houses, increasing demand, escalating competition and pushing up prices.
Read more: Compare Top Mortgage Lenders
“Buying a home has become increasingly out of reach for many Americans due to the one-two punch of high home prices and high mortgage rates,” Redfin wrote.
Renters being unable to buy homes has in turn contributed to increased competition and price jumps in the rental market. The median asking rent is at $2,000 in the U.S., close to the record high it reached in 2022, Redfin said. Still, despite the elevated cost of rent, renting may be a more affordable option than homeownership.
“Housing costs are high across the board, but renting is a more affordable and realistic option for many Americans right now—especially those who have never owned a home and aren’t able to tap into equity from a previous sale,” said Daryl Fairweather, Redfin’s chief economist. “While owning a home is usually a sound long-term investment, the barriers to entry and upfront costs of buying are higher than renting.”
To purchase a house, a buyer would need about $60,000 as a down payment for a home loan, an amount that is out of reach for many Americans.
Fairweather added, “The sheer expense of purchasing a home is causing the American Dream of homeownership to lose some of its shine.”
Newsweek is committed to challenging conventional wisdom and finding connections in the search for common ground.
Newsweek is committed to challenging conventional wisdom and finding connections in the search for common ground.
Source: newsweek.com
Mortgage rates continue to surge, pushing back above 7% after months of volatility. Homebuyers taking out a home loan with a 7% interest rate are budgeting hundreds more than expected to cover their average monthly mortgage payment.
For the past two years, prospective homebuyers have been pushed to the sidelines due to higher interest rates. A February survey by Realtor.com noted that 40% of potential homebuyers said they’d be more willing to take on a mortgage if rates were to drop below 6%. Yet most mortgage forecasts don’t expect rates to dip below that number until 2025.
Though mortgage rates fluctuate daily, you don’t have to wait another year for market rates to drop. Getting a 6% mortgage rate could be possible right now, as long as your finances are in shape and you find a mortgage lender that fits your needs.
In early April, the average weekly rate on a 30-year fixed-rate mortgage is hovering around 7%, according to Bankrate, CNET’s sister site.
Rates generally climb higher when the economy is strong and drop at the sign of trouble. When the pandemic pushed the economy into uncertainty in 2020, rates plummeted to historic lows and hovered below 4% for the next two years.
Yet high inflation and the Federal Reserve’s aggressive interest rate hikes pushed rates higher, reaching 8% last October.
“What’s keeping rates volatile and higher is an underlying strong economy,” said Nicole Rueth, senior vice president with Movement Mortgage. “We continue to have economic reports and indicators that show consumers are spending and staying confident.”
The good news for homebuyers is that mortgage rates are expected to slowly decline in 2024, though they won’t reach record lows again.
Read more: You Won’t Get a 2% Mortgage Again. How to Adjust to a Different Housing Market
Snagging a 6% rate can offer savings on your monthly payment and over the life of the loan. A difference of 1 percentage point may not seem like much, but the savings add up over time.
For instance, let’s say you buy a home for $400,000 and make a down payment of 20% on a 30-year fixed-rate mortgage. The difference between a 7% rate and a 6% rate means a savings of $210 a month, which amounts to $75,746 saved over the life of the loan.
Many factors go into determining mortgage rates. You can’t control the economic factors, but there are ways to prepare your finances to get the best deal and lower your personal rate.
A mortgage point, also known as a mortgage discount point, is an upfront fee you can pay the lender in exchange for a lower interest rate on your home loan. Each point costs 1% of the purchase price of a home and usually knocks the rate down by 0.25%.
On a $400,000 home, you’d pay $4,000 for one discount point. The lender may even allow you to buy four mortgage points to lower the rate from 7% to 6%, though you’d have to shell out $16,000 to get there.
To check whether this strategy is worthwhile, take the total cost of the points, and compare it to the overall monthly savings. “How long is it going to take you to pay it back? Are you going to be in the house that long?” Rueth asked.
In this case, when you pay $16,000 to buy four points and save $210 per month, it would take you more than six years to reach your break-even point.
Lenders look at your credit score to decide whether you qualify for a home loan and the interest rate you receive. Generally, a higher credit score shows you’ve managed debt responsibly in the past. A better credit history lowers your risk to a lender, which can help you secure a lower interest rate.
In fact, raising your credit score from the “fair” range to the “very good” range may help lower your rate by around 0.22 percentage points, according to a 2024 Lending Tree survey. In the survey example, that rate difference helped borrowers save $16,677 over the lifetime of a home loan.
Your down payment is the amount you can contribute to your home purchase upfront. Each type of home loan comes with a minimum down payment, usually ranging from 0% to 5%, but a higher down payment can help lower your rate. That’s because the lender takes on less risk when you contribute more toward the loan.
Because a down payment lowers your rate and contributes to your home equity, some home loan experts recommend making a larger down payment, around 20%, instead of buying mortgage points. That’s because if you sell the home or refinance before reaching your break-even point, you lose money. But the amount you spent for your down payment becomes part of your equity.
An adjustable-rate mortgage, or ARM, is a home loan with a fixed rate for a set introductory period, such as five years. Once that period ends, the interest rate can go up or down in regular intervals for the remaining term.
The big appeal of ARMs is that the introductory interest rate is often lower than the rate on traditional mortgages. In early March, the average 5/1 ARM rate was 6.61% compared to 6.98% for 30-year fixed-rate mortgages.
When you’re applying for mortgage loans, you don’t have to go with the company that did your preapproval. In fact, research shows that getting rate quotes from multiple lenders and comparing offers can result in significant savings. If you want to use this strategy, start by submitting a mortgage application with lenders that fit your criteria. Once you have a few loan estimates in hand, use the best one to negotiate with the lender you want to work with.
The loan officer may lower your rate, help you save on closing costs or offer other incentives to get you onboard. In early 2022, one-third of homebuyers negotiated their mortgage rates and many were able to get a better deal, according to research from Fannie Mae.
Nearly 90% of homebuyers choose a 30-year fixed mortgage term because it offers the most flexibility and monthly payment affordability. Payments are lower because they’re stretched over a longer timeline, but you can always put more toward the principal here and there. But when you take out a longer-term home loan, “you’re holding up the lender’s money, and there’s an opportunity cost for the funds to be invested elsewhere,” Rueth said.
Shorter loan terms (10-year and 15-year mortgages) and ARMs have lower interest rates, giving you the option of reducing your rate now.
Choosing a shorter repayment term could help you save money since you’ll be paying less in interest over the long term. But don’t make the homebuying mistake of choosing a shorter loan term just for the lower rate. Because you’ll have less time to pay back the money you borrow, shorter loan terms break down to higher monthly payments, and you’ll need to make sure those fit within your budget.
In short, yes, but it’s all relative.
“In today’s market, 6% is a great rate compared to the historic average of a little over 7%,” Rueth said. “However, 6% no longer looks good because homeowners were spoiled by 2.75% mortgage rates a few years ago.”
Homeowners also feel the burden of steep home prices, making those high rates hurt even more.
But you can save money on your mortgage by taking some (or all) of these steps. Improving your credit score, increasing your down payment, buying points and negotiating your rate may help bring your rate from 7% down to 6%, or even lower.
Source: cnet.com
CHARLOTTE — Inflation continues to overwhelm many families in the Carolinas, keeping the cost high for things like borrowing money to buy a home, and while you might think that would mean a drop in home prices, realtors in the Charlotte area say they’re seeing the exact opposite.
In Charlotte’s hot housing market, prices haven’t really gone down. Channel 9′s Evan Donovan spoke with realtors who say it’s not like the COVID-19 pandemic, but they’re having to get creative with their buyers.
“She sent me tons of properties, locations, we went to visit them but then I just said let’s build a home,” said Ebony Covington.
She got in the market to buy a home in January, but even with the help of her realtor, she couldn’t find the right fit in an existing home.
“We went to the design center, I was able to pick out exactly what I wanted in my home, inside and outside. It was a celebration every step of the way, and I probably asked a million questions,” Covington told Donovan.
But realtor Bre Gaither says it’s still a seller’s market. The Charlotte are has less than two months of inventory, but a balanced market is around six months of inventory. Gaither says the market is almost as hot as it was during the pandemic.
“We are still seeing multiple offers, we are still seeing bidding wars,” Gaither said. “Homes are being on the market and off the market in less than 24 hours. It’s not as crazy as the $50-60,000 over asking, but I’ve seen $15 to 20 thousand, for sure.”
A report from Rocket Mortgage in March showed the average home price in Charlotte is up nearly $15,000 over last year. In surrounding areas like Matthews, Pineville, and Huntersville, it’s even higher.
Covington says she’s happy to finally own a home that’s exactly how she wanted it.
“The outside is going to be blue. Since [we’re the] first house on the cul-de-sac, we get to choose and no one else can have that home color,” Covington said.
Moving into a new home in 2024 costs a lot more than in the past. According to data from Redfin, the average monthly housing payment just hit an all-time high of more than $2,700. The average 30-year fixed mortgage rate as of Thursday is about 6.8%, more than double the rate before the pandemic.
(WATCH: City of Charlotte unveils potential affordable housing developments)
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Source: wsoctv.com