Uncommon Knowledge
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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
US households have felt the pain of higher interest rates over the last two years. Homebuyers taking out a home loan with a 7% interest rate are likely budgeting hundreds more than expected to cover their average monthly mortgage payment.
A recent survey by Realtor.com noted that 22% of potential homebuyers said they’d be more willing to take on a mortgage if rates were to drop below 6%. Most mortgage forecasts don’t expect rates to dip below that number until 2025.
But you don’t have to wait for market rates to drop. Getting a 6% mortgage rate could be possible right now.
Mortgage rates change daily, but as of March, the average weekly rate on a 30-year fixed-rate mortgage has been 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.
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 are also feeling 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
As the broader market continued rubbing its eyes in disbelief over the Fed’s exceptionally calm attitude on inflation, bonds continued to improve today. Stronger bonds mean lower rates. The average mortgage lender was able to drop rates to the lowest levels in nearly 2 weeks–just a hair above March 11th levels.
Most of the bond market improvement was in place before 9am and things were very calm after that. This meant minimal mid-day price changes.
Next week has less by way of consequential calendar events compared to this week and it’s also made shorter by the Good Friday Holiday closure. After that, volatility risks will be increasing quickly as the first week of April brings several highly consequential reports.
Source: mortgagenewsdaily.com
Mortgage rates rose for all types of loans compared to a week ago, according to data compiled by Bankrate. Rates for 30-year fixed, 15-year fixed, 5/1 ARMs and jumbo loans moved higher.
Mortgage rates could gradually come down this year, according to Greg McBride, CFA, Bankrate chief financial analyst. As the Federal Reserve stopped raising rates in 2023, mortgages rates started to drop at the end of Q4. At its Jan. 31 meeting, the central bank announced it would hold off changing rates and pointed to three rate cuts this year. Rate hikes and cuts affect many areas of the economy, including the 10-year Treasury, a key benchmark for fixed-rate mortgages.
“The 10-year Treasury yield that serves as a baseline for fixed mortgage rates will have a bouncy journey lower, moving back above 4 percent early in 2024 but trending lower as inflation cools and the Fed gets closer to cutting rates,” says McBride. “For mortgage rates, that portends a general downtrend — albeit with fits and starts — in 2024.”
Rates as of February 14, 2024.
The rates listed above are averages based on the assumptions here. Actual rates available within the site may vary. This story has been reviewed by Suzanne De Vita. All rate data accurate as of Wednesday, February 14th, 2024 at 7:30 a.m.
The average rate for a 30-year fixed mortgage for today is 7.25 percent, up 15 basis points over the last week. Last month on the 14th, the average rate on a 30-year fixed mortgage was lower, at 7.01 percent.
At the current average rate, you’ll pay principal and interest of $682.18 for every $100,000 you borrow. That’s an additional $10.15 per $100,000 compared to last week.
The 30-year mortgage is the most popular option for borrowers. It has a number of advantages. Among them:
The average rate for the benchmark 15-year fixed mortgage is 6.61 percent, up 13 basis points from a week ago.
Monthly payments on a 15-year fixed mortgage at that rate will cost around $877 per $100,000 borrowed. The bigger payment may be a little tougher to find room for in your monthly budget than a 30-year mortgage payment, but it comes with some big advantages: You’ll come out several thousand dollars ahead over the life of the loan in total interest paid and build equity much faster.
The average rate on a 5/1 ARM is 6.14 percent, rising 3 basis points over the last week.
Adjustable-rate mortgages, or ARMs, are mortgage terms that come with a floating interest rate. To put it another way, the interest rate will change at regular intervals, unlike fixed-rate mortgages. These types of loans are best for those who expect to refinance or sell before the first or second adjustment. Rates could be considerably higher when the loan first adjusts, and thereafter.
While borrowers shunned ARMs during the pandemic days of super-low rates, this type of loan has made a comeback as mortgage rates have risen.
Monthly payments on a 5/1 ARM at 6.14 percent would cost about $609 for each $100,000 borrowed over the initial five years, but could ratchet higher by hundreds of dollars afterward, depending on the loan’s terms.
The average rate you’ll pay for a jumbo mortgage is 7.32 percent, up 16 basis points over the last week. This time a month ago, the average rate for jumbo mortgages was lesser at 7.06 percent.
At the current average rate, you’ll pay a combined $686.93 per month in principal and interest for every $100,000 you borrow. That’s up $10.85 from what it would have been last week.
The average 30-year fixed-refinance rate is 7.28 percent, up 9 basis points from a week ago. A month ago, the average rate on a 30-year fixed refinance was lower at 7.22 percent.
At the current average rate, you’ll pay $684.21 per month in principal and interest for every $100,000 you borrow. Compared with last week, that’s $6.10 higher.
At its meeting concluding Jan. 31, the Federal Reserve announced it was maintaining its current rate due to a resilient economy and strong jobs numbers. Policymakers also signaled the potential for three rate cuts in 2024.
“Inflation is coming down faster than has been expected but that will need to be sustained before the Fed feels comfortable cutting short-term interest rates,” says McBride. “Easing inflation pressures will help mortgage rates now, no waiting.”
Still, don’t expect rates to change drastically anytime soon.
“The budget deficit remains high, and the various inflation metrics remain above the comfort level,” says Lawrence Yun, Chief Economist with the National Association of Realtors. “That means the mortgage rates will likely be in the 6 percent to 7 percent range for most of the year.”At its meeting concluding Jan. 31, the Federal Reserve announced it was maintaining its current rate due to a resilient economy and strong jobs numbers. Policymakers also signaled the potential for three rate cuts in 2024.
“Inflation is coming down faster than has been expected but that will need to be sustained before the Fed feels comfortable cutting short-term interest rates,” says McBride. “Easing inflation pressures will help mortgage rates now, no waiting.”
Still, don’t count on mortgage rates plummeting in the near future.
“The budget deficit remains high, and the various inflation metrics remain above the comfort level,” says Lawrence Yun, Chief Economist with the National Association of Realtors. “That means the mortgage rates will likely be in the 6 percent to 7 percent range for most of the year.”
The rates on 30-year mortgages mostly follow the 10-year Treasury, which shifts continuously as economic conditions dictate, while the cost of variable-rate home loans mirror the Fed’s moves. These broader factors influence overall rate movement. The specific rate you’d qualify for is tied to your credit score, loan type and other variables.
While mortgage rates change daily, it’s unlikely we’ll see rates back at 3 percent anytime soon. If you’re shopping for a mortgage now, it might be wise to lock your rate when you find an affordable loan. If your house-hunt is taking longer than anticipated, revisit your budget so you’ll know exactly how much house you can afford at prevailing market rates.
To help you uncover the best deal, get at least three loan offers, according to Freddie Mac research. You don’t have to stick with your bank or credit union, either. There are many types of mortgage lenders, including online-only and local, smaller shops.
“All too often, some [homebuyers] take the path of least resistance when seeking a mortgage, in part because the process of buying a home can be stressful, complicated and time-consuming,” says Mark Hamrick, senior economic analyst for Bankrate. “But when we’re talking about the potential of saving a lot of money, seeking the best deal on a mortgage has an excellent return on investment. Why leave that money on the table when all it takes is a bit more effort to shop around for the best rate, or lowest cost, on a mortgage?”
Bankrate displays two sets of rate averages that are produced from two surveys we conduct: one daily (“overnight averages”) and the other weekly (“Bankrate Monitor averages”).
The rates on this page represent our overnight averages. For these averages, APRs and rates are based on no existing relationship or automatic payments.
Learn more about Bankrate’s rate averages, editorial guidelines and how we make money.
Source: bankrate.com
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Homebuyer demand for mortgages fell for the second week in a row last week as firming rates put a damper on the surge in mortgage applications seen in January, a weekly survey of lenders by the Mortgage Bankers Association (MBA) shows.
The MBA’s Weekly Mortgage Applications Survey showed applications for purchase loans fell by a seasonally adjusted 1 percent last week when compared to the week before and were down 19 percent from a year ago. Requests to refinance were up 12 percent week over week but only 1 percent from a year ago.
“Mortgage rates have stayed close to where they started the year, despite swings in Treasury yields because of slowing inflation offset by stronger than expected readings on the job market,” MBA Deputy Chief Economist Joel Kan said in a statement.
At 6.68 percent Tuesday, rates on 30-year fixed-rate conforming mortgages were up 12 basis points from a recent low of 6.56 percent registered on Dec. 27, according to loan lock data collected by Optimal Blue.
That’s still a 1.15 percentage point drop from last year’s peak of 7.83 percent, seen on Oct. 25. However, a record number of Americans polled by Fannie Mae in January — many of whom have been priced out of markets where listings remain scarce — said they’re expecting mortgage rates to come down even more in the year ahead.
“Rates at these levels have not prompted much of a reaction in the refinance market, as most homeowners have mortgages with much lower rates,” Kan said. “Purchase activity has been strong to start 2024 compared to the final quarter of 2023. However, activity is still weaker than a year ago because of low housing supply.”
Applications for purchase mortgages picked up during the first three weeks of January after rates pulled back from 2023 highs. But with mortgage rates now slightly higher than they were at the end of the year, the MBA’s surveys show demand for purchase loans contracting during the weeks ending Jan. 26 and Feb. 2.
Bond market investors’ bets that the Federal Reserve would begin cutting rates in March had been helping bring rates down. But at the central bank’s first meeting of the year, Fed Chairman Jerome Powell warned that a March rate cut was unlikely, and Fed policymakers indicated they intend to continue “quantitative tightening” that’s trimmed $1.3 trillion from the Fed’s balance sheet.
A blowout jobs report released Feb. 2 seemed to validate the Fed’s cautious approach to fighting inflation, showing U.S. businesses and government agencies added close to twice as many jobs as expected in January.
(A survey by the National Federation of Independent Business (NFIB) that’s considered to be a leading indicator of future employment trends points to slower job growth in the second quarter of this year, economists at Pantheon Macroeconomics said Tuesday in a note to clients.)
In an interview with the CBS News program 60 Minutes that aired Sunday, Powell reiterated that while almost all 19 members of the Federal Open Market Committee expect to cut rates this year, the first cut isn’t likely to come until the middle of the year.
Inflation “has been falling steadily for 11 months,” 60 Minutes reporter Scott Pelley pointed out to Powell. “You’ve avoided a recession. Why not cut the rates now?”
Powell said that with the economy still on strong footing, “we feel like we can approach the question of when to begin to reduce interest rates carefully.”
The Fed wants to see “more evidence that inflation is moving sustainably down to 2 percent,” Powell said. “We have some confidence in that. Our confidence is rising. We just want some more confidence before we take that very important step of beginning to cut interest rates.”
At 7.29 percent, rates on jumbo mortgages that exceed Fannie Mae and Freddie Mac’s $766,550 conforming loan limit are up 73 basis points from a recent low of 6.56 percent registered by Optimal Blue on Dec. 29.
The growing “spread” between conforming and jumbo mortgage rates coincides with renewed worries that falling commercial real estate values could lead to problems for regional banks that have traditionally been a leading provider of jumbo loans.
Asked by 60 Minutes about the likelihood of real estate sparking a banking crisis on the magnitude of the 2008 financial crisis, Powell said he doesn’t think that’s likely.
“We’ve looked at the larger banks’ balance sheets, and it appears to be a manageable problem,” Powell said. “There are some smaller and regional banks that have concentrated exposures in these areas that are challenged. And, you know, we’re working with them.”
While he doesn’t see a repeat of the 2008 financial crisis, Powell does expect “there will be some banks that have to be closed or merged out of existence because of this. That’ll be smaller banks, I suspect, for the most part.”
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Source: inman.com
Mortgage rates dropped 6 basis points from last week even as the benchmark 10-year Treasury yield hit its highest point in over a month, Freddie Mac reported.
The 10-year Treasury has been on the rise since last week’s inflation report. However mortgage rates can be influenced by other factors, including secondary market pricing.
Mortgage rates now above 6% should fall below that level by the end of the year, Fannie Mae’s January housing forecast, which was also issued this morning, declared. Furthermore, that government-sponsored enterprise backed off its call for a recession this year.
Instead, the U.S. will have positive economic growth, albeit below the normal trend, Fannie Mae forecast.
Freddie Mac’s Primary Mortgage Market Survey for Jan. 18 put the average for the 30-year fixed rate loan at 6.6%, versus 6.66% one week prior and 6.15% for the same time in 2023. It is the first decline in the rate in three weeks.
The 15-year FRM, which had declined in recent weeks, continued its slide, falling 11 basis points to 5.76% from 5.87%. A year ago, it was at 5.28%.
This is the lowest level for mortgage rates since May, Freddie Mac said.
“This is an encouraging development for the housing market and in particular first-time homebuyers who are sensitive to changes in housing affordability,” said Sam Khater, Freddie Mac’s chief economist in a press release. “However, as purchase demand continues to thaw, it
will put more pressure on already depleted inventory for sale.”
But on Jan. 18, the 10-year Treasury rose as high as 4.13%, a level not seen since Dec. 13, 2023, when it peaked at 4.19%. The yield closed at 3.98% on Jan. 11. That suggests there are mixed signals in the market.
The 30-year FRM should nevertheless reach 5.8% in the fourth quarter of 2024, and fall further to 5.5% by the same quarter next year, and that should boost refinance production, said Doug Duncan, Fannie Mae’s chief economist, in a press release. This compared with 6.5% and 6.1% in his December economic outlook.
“However, even at less than 6%, we think rates will still have a significant way to go in order to meaningfully reduce the ‘lock-in effect’ experienced by homeowners who refinanced or bought during the pandemic,” Duncan said. “Overall, we expect 2024 to be a better year than 2023 for homebuyer affordability and the mortgage industry.”
Duncan boosted his refinance forecast for 2024 versus December by 9% to $490 billion from $451 billion. The 2025 refi prediction now calls for $752 billion of refis, up from $686 billion in December.
The purchase mortgage outlook was also boosted for this year and next, to $1.49 trillion and $1.69 trillion respectively, from $1.43 trillion and $1.62 trillion in December. Total volume in 2024 is now expected to reach $1.98 trillion and for 2025, $2.44 trillion.
Duncan also dropped his estimate of 2023 total volume to $1.53 trillion to just under $1.5 trillion.
Source: nationalmortgagenews.com
Last week’s DataDigest offered readers a host of housing forecasts from industry experts at banks, trade associations and more, the thrust of which was housing professionals should expect a modestly better year of sales thanks to retreating mortgage rates in the year to come.
A day after publication, Federal Reserve officials made several of their own forecasts – most importantly that the “appropriate policy path” for the Federal funds rate next year will be for it to decrease 0.75 percentage points, implying three cuts of 0.25 percentage points.
Those economic projections from the 19 members of the Federal Open Markets Committee show both a tighter consensus of opinions and a lower target Federal funds rate than the projections the FOMC made in September.
Following the Fed meeting last Thursday, mortgage rates dropped. Then they dropped. And then they dropped some more.
In fact, they dropped so much that they reached 6.69% on Dec. 15, just 0.07 percentage points above the average of four forecasts for the third quarter of 2024 and roughly 0.6 percentage points below the average forecast for the first quarter of the new year.
That drop – 0.3 percentage points from Dec. 11 to Dec. 15 – is hardly trivial for forecasters. In addition to predicting mortgage rates, they based their predictions for home sales and home starts largely on mortgage rates, as several experts have stated:
“The story this year and the story next year depend on two variables: mortgage rates and inventory.”
Lawrence Yun, chief economist for the National Association of Realtors
High mortgage rates depress not only homebuyer demand but home sellers’ willingness to put their homes on the market:
“High mortgage rates are the main reason for the low level of sales. Higher interest rates make it more expensive to purchase a home and more difficult to qualify for a mortgage. The sharp increase in the mortgage rate from its lowest level on record in 2021 to a 23-year high has caused the vast majority of homeowners to become ‘locked in’ to their existing mortgages.”
Cristian deRitis, deputy chief economist at Moody’s Analytics
So with mortgage rates so important to outcomes next year and mortgage rates now at levels that are far ahead of predicted levels, are forecasts for next year already off the rails?
The Federal Reserve did not announce rate cuts or provide a schedule of future rate cuts.
Instead, the Fed kept the target Fed funds rate at 5.25-5.5% for the fourth consecutive time. It also provided committee members’ forecasts of what would be the appropriate rate in 2024, which was based on their forecasts of inflation, GDP growth and other economic indicators.
The median of these rate forecasts – 4.63% – is what implies three cuts next year, given that it is 0.75 percentage points below the current rate. But Fed Chair Jerome Powell stressed that “these projections are not a Committee decision or plan.”
Powell further noted that although the FOMC believes “we are likely at or near the peak rate for this cycle” of rate hikes, the possibility of another rate hike has not been taken off of the table if inflation does not continue to moderate.
“No one is declaring victory,” he said. “That would be premature, and we can’t be guaranteed of this progress.”
Yet what the market seems to be focusing on is not Powell’s cautionary comments, but his statement that the FOMC had begun discussing rate cuts in their meeting last week, which sparked a wave of optimism across several market sectors.
However, while Powell said, “We’re sort of just at the beginning of that discussion,” New York Fed President John Williams said on CNBC two days after Powell’s comments, “We aren’t really talking about rate cuts right now.”
Forecasters were certainly not blindsided by the possibility of the Fed cutting rates next year. Rather, their forecasts are predicated on the assumption that rates will fall.
The National Association of Realtors, for example, made their quarterly predictions for 2024 on October 30, long before last week’s Fed meeting, and predicted three cuts to the Fed funds rate in 2024 – with the rate reaching 4.4% by the end of the year.
In NAR’s outlook summit held the day before the FOMC released its forecasts, NAR predicted four cuts next year.
The Fed’s median forecast of 4.6% for 2024, then, is both fewer cuts and a higher funds rate than NAR predicted when it forecast mortgage rates of 7.5-6.9% in the first half of the year and a full-year average mortgage rate of 6.3%.
Similarly, Wells Fargo noted in its forecast made on Nov. 9 that “we look for the FOMC to cut its target range for the federal funds rate by 225 bps [2.25 percentage points] by early 2025, which is more than both Fed policymakers and market participants currently project.” Wells Fargo predicted mortgage rates of 7.2-6.7% in the first half of next year.
In other words, the forecasters expected rate cuts that are more aggressive than the Fed has so far forecasted for 2024 when they predicted mortgage rates of 6.6-7.6% in the first half of 2024.
For those who regularly watch mortgage rates, this winter’s decline may look familiar. Since October 26, the weekly average rate for a 30-year mortgage has fallen from about 7.8% to just under 7%.
The drop is reminiscent of a similar period a year ago when the weekly average rate fell from about 7.1% to 6.1% from early November through early February.
The decline in rates last year was motivated in part by a market consensus that a recession was imminent, which could in turn prompt rate cuts to stimulate the economy. When the recession proved elusive, mortgage rates about-faced.
The current market consensus seems to reflect optimistic prospects for a “soft landing,” an inflation-crushing economic slowdown that doesn’t prompt a job-loss recession. Lower mortgage rates are just one signal of this optimism; stock prices for tech, banking, real estate and other companies that went out of favor when interest rates were expected to rise have now soared.
Will this year’s favorite market theory fare better than last year’s? Wall Street Journal’s senior markets columnist James Mackintosh, for one, is skeptical.
“What’s surprising to me is that there seems to be so little investor concern that a slow-growing economy will turn into something worse, or that inflation proves stickier than expected,” he wrote.
Housing professionals can take heart that forecasters generally believe 2023 was rock bottom for this economic cycle and expect 2024 to be better – but modestly better. Most forecasters don’t expect significant improvement in home sales until mortgage rates fall to 6% or lower.
Although mortgage rates are currently well ahead of forecasters’ outlooks, they are not near 6%, and only time will tell if they continue on their current path or return to recent highs and descend more inline with forecasters’ expectations.
Forecasts can be useful for businesses planning for the year ahead, but only time will tell what 2024 will bring.
Source: housingwire.com
As 10-year Treasury yields tumbled, the average 30-year fixed mortgage fell 26 basis points in the week ending Nov. 9, the largest one-week decrease since last November.
The 30-year, fixed mortgage averaged 7.5% as of Nov. 9, according to Freddie Mac‘s Primary Mortgage Market Survey. That’s down significantly from last week’s 7.76% and up from 7.08% the same week a year ago.
However, the gap between mortgage rates now and a year ago has narrowed, Bright MLS Chief Economist Lisa Sturtevant said.
“At today’s rates, the typical monthly payment is about $3,000, just $250 higher than a year ago,” Sturtevant said.
HousingWire’s Mortgage Rates Center showed Optimal Blue’s average 30-year fixed rate for conventional loans at 7.444% on Thursday, compared to 7.576% the previous week.
“Incoming data show that household debt continues to rise, primarily due to mortgage, credit card and student loan balances,” Sam Khater, Freddie Mac’s chief economist, said in a statement. “Many consumers are feeling strained by the high cost of living, so unless mortgage rates decrease significantly, the housing market will remain stagnant.”
Lower mortgage rates helped push total mortgage applications up 2.5% for the week ending Nov. 3, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey released Wednesday.
“Applications for both purchase and refinance loans were up over the week but remained at low levels,” Joel Kan, MBA’s vice president and deputy chief economist, said in a statement. “The purchase index is still more than 20 percent behind last year’s pace, as many homebuyers remain on the sidelines until more for-sale inventory becomes available.”
While some homebuyers are already jumping on the opportunity to snag a lower rate, others will wait for 2024 in the hopes of finding even lower rates and more homes on the market.
However, while rates are poised to come down next year, they won’t return to their pandemic levels, Sturtevant cautions.
“We are in a new era for mortgage rates where prospective homebuyers can expect rates to settle above 6%,” Sturtevant said.
New inflation data comes out Tuesday, giving investors more clues on the Fed’s path moving forward. According to Chen Zhao, senior manager of the economics team at Redfin, futures markets are currently pricing in a 4.5% probability of a hike in the next Fed’s meeting.
Source: housingwire.com
This week, I read an article in the WSJ about paying the mortgage with a credit card.
Either things are really bad in the economy, or things are really bad at the WSJ. Or they’re about to be.
Regardless, it’s not a great strategy to put the mortgage on plastic, which is why most card issuers don’t allow it.
Ultimately, they don’t want you paying your debt with other debt, especially secured with unsecured.
But there might be a way to still keep your cash flow without putting the mortgage payment on a card.
When you think about making this payment or that payment, it all basically comes from the same place. Your bank account.
So you can indirectly keep your cash flowing while paying the mortgage via traditional means if you shift other spending.
To achieve this, you just need to offset other purchases. This can be achieved by pushing those other expenses to a 0% APR credit card.
Many of these credit cards offer interest-free financing for anywhere from 12 to 18 months at the moment.
This buys you time and allows those other expenses, which are totally allowed (and expected) to be paid with a credit card, to funnel to your 0% APR card.
For example, say you’ve got a $2,500 monthly mortgage payment and another $2,000 in monthly expenses.
We’ll call it gas, groceries, utilities, and other necessities, along with some discretionary purchases, such as eating out or going to the movies.
Instead of putting all those charges on your regular credit cards, which must be paid in full each month to avoid interest, you can redirect them to a 0% APR card.
This frees up that cash for more important things, such as the mortgage.
Yes, you’re still paying the same amount each month, but you’re not dealing with any extra fees for using a third-party payment processing company like Plastiq, which can be nearly 3%.
On a $2,500 mortgage payment, we’re talking $75. Ouch!
And you just need to make the minimum payment each month on the 0% APR credit, which frees up money for the mortgage.
Many years ago, pre-Great Recession, interest rates on savings accounts were in the 5% range.
This allowed savers to earn a decent return on any money in a high-yield savings account.
Then as you probably know, savings rates went to near-zero as mortgage rates hit record lows.
This is the double-edged sword of low interest rates. It’s great if you have a low fixed-rate mortgage, but you don’t earn anything in the bank for parking your money.
With 8% mortgage rates now a thing, and the 10-year bond yield close to 5%, banks are back to offering decent savings rates.
For example, Discover is currently offering 4.30%, as is Capital One. And Ally Bank is offering 4.25%, while Marcus has an even higher 4.40%.
This means you can park your money again and earn a decent yield, whether it’s 4% or perhaps as high as 5%.
So those who put their regular spending on a 0% card can keep more of their money in a high-yield savings account since only a small minimum payment is due each month.
That allows it to grow while everyday purchases accrue zero interest or finance charges during the promotional period.
Just take note of how long the 0% APR is offered. Once it comes to an end, you need to pay off the entire balance in full to avoid any interest.
Someone who is aggressive could put most spending on plastic (other than the mortgage) and keep as much as possible in the bank account earning 4-5%.
At the end of the day, it’s a pretty raw deal to have to pay money to make a mortgage payment.
Or to have pay a fee for any payment for that matter. The Consumer Financial Protection Bureau (CFPB) refers to this as a “pay-to-pay fee.” And often it’s not even legal to charge such fees.
This is why you should avoid paying your mortgage by phone or even using a debit card to pay the mortgage, as it can sometimes be accompanied by a fee as well.
Of course, I assume folks are in a crunch if there’s the need, other than the points and miles crowd who might want to put a big purchase on plastic to earn a bonus.
But there is perhaps a better way, as outlined above. Just be careful not to rack up debt thinking you’ve got more money than you actually do!
And remember that 0% APR period will come to an end, at which point the APR will likely greatly exceed that of a home loan. So it must be paid off.
Another issue with not paying your mortgage with a bank account is there could be a delay or a mix up.
You won’t want to miss a mortgage payment as a result of some third-party company. It can also get messy if your mortgage payment history is coming from different sources.
So it’s best to just pay the mortgage consistently from the same bank account to avoid any costs or unexpected surprises.
Source: thetruthaboutmortgage.com