volatility

Apache is functioning normally

If you’re saving for retirement, a broad market index portfolio is typically a good option. Investing in a target date fund or S&P 500 index fund, for instance, are low-cost ways to gain broad market exposure. However, newly published research indicates there may be a significantly more lucrative way to handle your nest egg.

A financial advisor can help find the right mix of investments for your retirement portfolio. Find a fiduciary advisor today.

An analysis from Dimensional Fund Advisors suggests retirement savers can do better than following the standard advice to use index funds, for instance, to get a balanced portfolio. Portfolios built with a focus on size, value and profitability premiums can generate more assets and better longevity than broad market portfolios, according to the DFA research. In fact, a DFA researcher calculated that a portfolio that emphasizes these premiums would leave a hypothetical investor with at least 20% more money by age 65, even if market returns were less than the historical average.

“These results are encouraging. A portfolio that incorporates controlled, moderate premium exposure can strike a balance between higher expected returns than the market and the cost of slightly higher volatility and moderate tracking error,” DFA’s Mathieu Pellerin wrote in his paper “How Targeting the Size, Value, and Profitability Premiums Can Improve Retirement Outcomes.”

“As a result, targeting these long-term drivers of stock returns is likely to increase assets at the beginning of retirement.”

What Are Size, Value and Profitability Premiums?

As part of its research, DFA compared the simulated performance of a broad market index portfolio – represented by the Center for Research in Security Prices (CRSP) 1-10 index – against that of the Dimensional US Adjusted Market 1 Index.

The DFA index comprises 14% fewer stocks than the CRSP index and places a greater emphasis on size, value and profitability premiums. Here’s how the firm defines each:

  • Size premium: The tendency of small-cap stocks to outperform large-cap stocks
  • Value premium: The tendency of undervalued stocks – those with low price-to-book-value ratios – to outperform
  • Profitability premium: The tendency of companies with relatively high operating profits to outperform those with lower profitability

As a result, the DFA index is more heavily weighted in small-cap and value stocks, as well as companies with higher profits.

Premiums Produce Better Retirement Outcomes

To test the long-term viability of its premium-based portfolio, DFA ran an extensive set of simulations and compared the results against the CRSP market index.

First, Pellerin calculated 40 years’ worth of hypothetical returns for each portfolio, assuming an investor starts saving at age 25 and retires at age 65. Both portfolios are part of a glide path that starts with a 100% equity allocation and beings to transition toward bonds at age 45. By age 65, the investor’s asset allocation eventually reaches a 50/50 split between stocks and bonds.

Then, he calculated how both portfolios would fare during the investor’s decumulation phase. To do this, DFA applied the 4% rule. This rule of thumb stipulates that a retiree with a balanced portfolio can withdraw 4% of their assets in their first year of retirement and adjust withdrawals in subsequent years for inflation, and have enough money for 30 years.

DFA tested the portfolios using both historical returns (8.1% per year) and more conservative returns (5% per year).

When applying the historical rate of return, the portfolio that targets premiums would be worth 22% more than the broad market portfolio by the time the hypothetical investor reaches age 65. In the lower growth environment, the DFA portfolios would still deliver 20% more median assets than its counterpart, according to the research.

The hypothetical investor would also have a lesser chance of running out of money with the DFA portfolio. Using historical returns, the premium-focused portfolio failed just 2.5% of the time over a 30-year retirement. That’s nearly half as many times as the market portfolio, which posted a 4.7% failure rate.

That spread grew even larger when Pellerin ran the simulations with more conservative return expectations. Over the course of a 30-year retirement, the DFA portfolio ran out of money in just 12.9% of simulations when annual returns averaged just 5%, while the market portfolio failed 19.9% of the time.

Bottom Line

Investing in index funds or target date funds that track the broad market can be an effective way to save for retirement, but Dimensional Fund Advisors found that targeting stocks with size, value and profitability premiums can produce better retirement outcomes. When comparing a broad market index to one that focuses on these factors, the latter produced at least 20% more median assets and had lower failure rates.

Retirement Planning Tips

  • How much will you have in savings by the time you retire? SmartAsset’s retirement calculator can help you estimate how much money you could expect to have by retirement age and how much you’ll potentially need to support your lifestyle.
  • Retirement planning can be complicated, but a financial advisor can help you through the process. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.

Photo credit: ©iStock.com/Tinpixels, ©iStock.com/PeopleImages, ©iStock.com/adamkaz

Patrick Villanova, CEPF®
Patrick Villanova is a writer for SmartAsset, covering a variety of personal finance topics, including retirement and investing. Before joining SmartAsset, Patrick worked as an editor at The Jersey Journal. His work has also appeared on NJ.com and in The Star-Ledger. Patrick is a graduate of the University of New Hampshire, where he studied English and developed his love of writing. In his free time, he enjoys hiking, trying out new recipes in the kitchen and watching his beloved New York sports teams. A New Jersey native, he currently lives in Jersey City.

Source: smartasset.com

Apache is functioning normally

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

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

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

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

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

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

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

***

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Source: housingwire.com

Apache is functioning normally

Mortgage rates rose at their fastest pace in decades in 2022 and if only one thing could take the blame, it would be inflation.  There are several ways to link inflation to upward pressure on rates, but the simplest is to consider that rates are based on bonds and inflation lowers the value of bonds.

In other words, if you are an investor who buys mortgages, you might be willing to accept a 6.5% rate of return today.  Now let’s say inflation skyrockets.  If you still charge 6.5%, the payments you receive will buy a lot less “stuff.”  So you have to increase your rates in order to get the same financial benefit.

Because of the inflation focus, the biggest inflation reports have been closely-watched indicator for rate momentum for more than a year now.  None are bigger than the Consumer Price Index (CPI), and the latest installment will be out on Wednesday morning, May 10th, at 8:30am Eastern Time. 

There is always a catalog of multiple professional forecasts for big economic reports.  Markets adjust to those forecast levels, or close to them well ahead of the official release of the data.  Then if the data hits the forecast, markets don’t need to move much.  But if CPI were to fall much higher or lower than forecast, the market would view this as an indication that inflation was trending higher or lower relative to previous expectations.  Rates would react accordingly (i.e. higher for high inflation and lower for low inflation). The farther from forecast the actual number falls, the bigger the reaction could be.  

As for today, there was just a bit of extra upward momentum for interest rates with the average lender moving up by less than an eighth of a percent for a conventional 30yr fixed loan.  This level of volatility isn’t really worth writing home about considering how big Wednesday might be.

Source: mortgagenewsdaily.com

Apache is functioning normally

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

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

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

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

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

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

Creating a path to success in today’s purchase market

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

Presented by: Calyx

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

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

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

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

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

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

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

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

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

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

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

Source: housingwire.com

Apache is functioning normally

With the week’s only top tier economic release hitting on Monday morning, the path of least resistance for the rest of the week is a choppy, sideways range with the expectation of a breakout surrounding CPI/Fed next Tue/Wed.  In not so many words, if it’s happening between the white lines, it’s not that interesting:

20230606 open.png

As for today, bonds started out just barely stronger  but have moved into modestly weaker territory.  European bonds and corporate issuance are causing headwinds. 

Source: mortgagenewsdaily.com

Apache is functioning normally


Washington, DC
CNN
 — 

The Federal Reserve hiked its benchmark lending rate this week for the seventh time this year, capping a year of intense pressure on the housing market that pushed mortgage rates above 7% for the first time since 2002.

But now that the Fed has signaled a softer approach to cooling the economy instead of rolling out bumper rate hikes, potential home buyers are left to wonder: Will mortgage rates come back down? Or have buyers missed their chance?

No one knows exactly where mortgage rates will go in the months ahead. But most experts agree that we have seen the end of 3% mortgages for some time.

Mortgage rates have run up so far and so fast this year that many would-be homebuyers can no longer afford to buy a home. At the end of 2022, when rates were at 3%, few predicted that just a year later rates around this week’s 6.33% would come as a relief, having dropped from over 7%.

After starting the year at an average 3.22%, according to Freddie Mac, the 30-year fixed-rate mortgage took off last spring as the Federal Reserve embarked on a historic campaign to battle decades-high inflation by raising interest rates. By fall, mortgage rates had more than doubled, eventually topping 7% in October. Rates have receded slightly in recent weeks, but loans are still expensive — especially compared to the historically low rates buyers were getting during the pandemic.

Home shoppers have watched their buying power evaporate, with higher rates adding hundreds of dollars onto what they would pay each month.

High mortgage rates remain the primary impediment to home buying, according to a recent buyer and seller sentiment survey conducted by Fannie Mae. Homebuying and home-selling sentiment are both significantly lower than they were last year.

Based on the survey, people in the real estate market continue to expect mortgage rates to rise but home prices to decline, said Doug Duncan, Fannie Mae senior vice president and chief economist.

He said he expects mortgage demand to be dampened by affordability challenges, while “homeowners with significantly lower-than-current mortgage rates may be discouraged from listing their property and potentially taking on a new, much higher mortgage rate.”

Is this the new normal?

While the Fed’s rate hikes are expected to continue, many analysts anticipate they will be smaller than the recent bout of three-quarter-point hikes and will start to taper off as inflation starts to cool, which should mean mortgage rates will likely come down too.

The Fed does not set the interest rates borrowers pay on mortgages directly. But its actions influence them. Mortgage rates tend to track the yield on 10-year US Treasury bonds, which move based on a combination of anticipation about the Fed’s actions, what the Fed actually does and investors’ reactions. When Treasury yields go up, so do mortgage rates; when they go down, mortgage rates tend to follow.

If rates do drop, just how low will they go?

“If inflation continues to decelerate over the next several months, mortgage rates will likely stabilize below 7%,” said Nadia Evangelou, senior economist and director of forecasting at the National Association of Realtors. “That’s still double the previous year’s rate, but it’s better than an 8% rate, which is the historical average for the 30-year fixed mortgage.”

Looking ahead, Melissa Cohn, regional vice president at William Raveis Mortgage, said buyers should expect rates to level off in 2023 around where they were in the years before the pandemic — around 4% or 5%.

“We had an active and healthy real estate market then,” she said.

But Cohn said she does not expect a “meaningful” decline in mortgage rates until the third or fourth quarter of 2023. “Mortgage rates will drop a bit in December, we’ll see a brief flurry of activity, but there are likely to be more increases in the new year.”

And don’t expect to see rates drop at the same speed at which they rose this year, she said.

“We have to remember mortgage rates come down much slower than they go up,” said Cohn. “Banks will want to see proof that rates are meaningfully coming down and not a one-shot wonder.”

The weekly swings in mortgage rates this year have been about three times the size of those seen in a typical year, said Danielle Hale, chief economist at Realtor.com. The Fed’s extra-large rate hikes aren’t the only thing causing that.

Economic uncertainty is creating a larger gap or “spread” between the 10-year Treasury yield and mortgage rates. Typically, mortgage rates are about two percentage points above the 10-year Treasury yield, but recently the gap has been wider.

The main driver of the widening spread is greater interest rate risk, according to a recent report from the Urban Institute.

“The uncertainty about the effects of Fed policy to date and about the trajectory of future policy has resulted in large movements in interest rates,” wrote Laurie Goodman and Michael Neal, the report’s authors.

Consumer mortgages are packaged and sold off to investors. The higher myeortgage rates are, the more money investors can make. But as rates fall, more homeowners will choose to prepay their mortgages or refinance, making the loans less attractive to investors.

“Volatility increases the level of mortgage rates, compared to Treasury rates, because of the prepayment option,” said Chester Spatt, professor of finance at Carnegie Mellon University’s Tepper School of Business. “If you’re in a new loan at 7% and rates go to 6%, you may choose to prepay and refinance into a lower rate.”

It is abnormal to have such a large spread, said Lawrence Yun, chief economist for NAR, adding that other times when the spread was wider were during the 2008 financial crisis and the early days of the pandemic.

“Hopefully this large spread will dissipate by the spring home buying season,” he said. “If so, maybe buyers will face mortgage rates in the 5’s.”

What buyers can expect

Lisa Sturtevant, chief economist at Bright MLS, a multiple listing service in the mid-Atlantic region, also expects mortgage rates to fall further in 2023, but she doesn’t expect them to drop quickly.

“We were in unprecedented territory with rates under 3%,” she said. “There is no reason to suggest we will be back there. But they will be down from where we’ve been.”

“Housing market activity will continue to be relatively sluggish — even if mortgage rates do begin to come down — since so many existing homeowners are locked into sub-3% loans and will still not be eager to move into a higher rate,” she said.

As a result, the inventory of available homes for sale will remain tight into 2023. In many markets this could guard against prices dropping by a significant amount.

“Prospective buyers may be tempted to try to ‘time’ rates to jump into the market when rates dip,” she said. “But timing rates is difficult.”

Instead, would-be buyers should shop around, getting quotes from multiple lenders, including different types like a large national bank, an online lender or a community bank or credit union.

“There is a lot of variability in rates, terms, and mortgage products in this changing market,” Sturtevant said. “It is more important than ever that buyers compare offers from different lenders to find the financing that works best for them.”

Source: cnn.com

Apache is functioning normally

California-based lender loanDepot was in the red again in the first quarter of 2023. However, margins and revenues improved in the period, according to documents filed with the Securities and Exchange Commission on Tuesday.

The lender recorded a loss of $60.2 million in non-GAAP adjusted net income from January to March, compared to a negative $110.7 million in the previous quarter. The GAAP net loss in the first quarter was $91.7 million.

It was loanDepot’s fourth consecutive quarterly loss and comes on the heels of a resolution to protracted infighting between founder and chairman Anthony Hsieh and the board of directors.

“The first quarter of this year remained challenging for the housing market as virtually all participants grappled with the impacts of ongoing volatility in mortgage interest rates, persistent cost inflation and the lack of available homes for sale,” Frank Martell, loanDepot’s president and CEO, said in a statement. 

“Profitable revenue growth and a reset of our cost structure were the key drivers behind the substantial narrowing operating losses quarter over quarter,” Martell told analysts. 

Total revenues increased to $207.9 million in the first quarter, up from $169.6 million in the previous quarter, “primarily driven by higher pull through weighted lock volume and servicing fee income,” the company told investors. Total expenses dropped to $314.4 million in Q1 2023, down from $343.7 million in Q4 2022.

Loan origination volume came in at $4.9 billion in the first quarter, down from $6.3 billion in the fourth quarter of 2022. Purchase loans comprised 71% of the total. Company executives project the second quarter volume to be anywhere between $4.5 billion and $6.5 billion.

“Although the affordability and availability of new and existing home sales remain challenging for the industry overall, we expect to continue to benefit from seasonally higher revenues and our ongoing cost reduction program,” Martell said. “Assuming the expected benefits of continuing seasonal volume increases and cost productivity, we expect to deliver improving financial results over the course of the second and third quarters of 2023.”  

loanDepot has started to display margin improvement, but they remain tight. These improvements followed major cost-cutting initiatives that reduced company headcount to roughly 4,800 from 10,000 at the end of the first quarter 2022.  

The gain-on-sale margin came in at 2.26% in the first quarter, better than the 2.21% registered in the previous quarter. 

According to Patrick Flanagan, loanDepot’s CFO, the higher gain-on-sale margin was primarily “due to a reduction in our repurchase provision,” as repurchase activity and discounts decreased substantially. Executives expect margins will be between 2.40% and 2.80% in the second quarter.

Flanagan told analysts that expenses during the second quarter may increase, reflecting seasonally higher loan origination volume. However, higher production and a further reduction in controllable expenses will help the company to narrow losses in the second quarter.

According to Martell, loanDepot is “well positioned with the originators that we have today to manage” higher volumes.  

Regarding its servicing portfolio, the unpaid principal balance increased to $141.6 billion as of March 31, 2023, from $141.1 billion as of December 31, 2022. Servicing fee income rose to $118.9 million in Q1 2023 from $107.2 million in the previous quarter.

loanDepot still has money to throw at problems. The lender said it had $798.1 million in cash balance at the end of March, down 7.6% from the fourth quarter.

Source: housingwire.com

Apache is functioning normally

  • 68 per cent feel buying a home is more out of reach compared to their parents

  • BMO’s new Pre-Qualification tool helps empower customers to make confident decisions at the start of their homebuying journey.

TORONTO, June 5, 2023 /CNW/ – BMO’s Real Financial Progress Index reveals that while homeownership is considered an important financial milestone for many Canadians, concerns about interest rates, inflation and a possible economic recession have affected their approaches to homebuying.

The survey found that over two thirds (68 per cent) of Canadians are planning on waiting until mortgage rates drop to purchase a home. The majority (68 per cent) of Canadians feel buying a home is more out of reach compared to their parents. Gen Z (ages 18 to 24) (71 per cent) are the most likely to have this outlook, followed by younger Millennials (ages 25 to 34) at 69 per cent and older Millennials (ages 35 to 44) at 65 per cent.

According to BMO Economics, Canadian housing activity has rebounded from the slow start in 2023, with home prices firming and existing home sales increasing by 11.3 per cent in April – the largest monthly rise since 2009. However even after last year’s price correction, the combination of past price gains and higher mortgage rates leaves housing affordability near the most challenging level in more than 30 years. The survey found Canadians’ perceptions of the economy have affected their homebuying plans:

  • The Waiting Game: Over two thirds (68 per cent) of Canadians are planning on waiting until mortgage rates drop to purchase a home. Among the quarter (26 per cent) of Canadians that have said current mortgage rates have affected their decision to move homes, 18 per cent are holding off as a result of market uncertainty and volatility.

  • Deferred Decisions: Half (51 per cent) are deferring their home purchases because of their concerns about the economy and 18 per cent plan on waiting until 2024 or later. 20 per cent of Canadians are no longer sure if or when they will buy a home.

  • Revisiting Refinancing: 69 per cent are planning on waiting to refinance their home until mortgage rates drop.

  • Financial Anxiety: Housing costs (71 per cent) are among the top three sources of financial anxiety for Canadians, after fears of unknown expenses (83 per cent) and concerns about their overall financial situation (81 per cent).

“Homeownership continues to symbolize real financial progress, success and security for many Canadians and their families,” said Gayle Ramsay, Head, Everyday Banking, Segment & Customer Growth, BMO. “While the challenging market and economic conditions may pose hurdles and uncertainty, we encourage Canadians to work with a professional advisor or planner to explore the many paths to homeownership and develop a personalized financial plan to help them get into the home they want within a realistic timeline.”

Paths to Homeownership

The survey also explored the different financing strategies Canadians intend on using for their home purchase:

  • Personal Savings: Half (52 per cent) of Canadians plan on using personal savings to pay for their home purchase.

  • Help with Loans: 41 per cent of Canadians plan on using loans from their financial institution and/or lines of credit to help finance their home purchase.

  • Family Support: A fifth (19 per cent) of Canadians are expecting help including financial gifts and loans from family, friends and/or others.

  • Home Buyer Programs: Among the 46 per cent planning on using Canada’s assistance programs, nearly a third (32 per cent) plan on using the First-Time Home Buyers Incentive and 16 per cent plan on using the Home Buyers’ Plan (HBP).

BMO Helps Canadians Make Real Financial Progress with Pre-Qualification Tool

To help Canadians get started with their homebuying journey, BMO has launched Pre-Qualification, an online tool that enables prospective homebuyers to get a mortgage estimate in one minute with a 130-day rate hold. Using a soft credit check that will not affect their credit scores, customers will be able to know how much they can potentially afford for a home based on information including income, assets and debt.

“Amid this challenging and changing market, homebuyers are keeping a keen eye on interest rates,” said Hassan Pirnia, Head, Personal Lending and Home Financing Products, BMO. “Regardless of when buyers are planning their purchase, it’s essential they have a clear understanding of budget and affordability at the start of their homebuying journey. BMO’s new pre-qualification tool is an important first step in that journey and provides a mortgage estimate to give buyers more clarity as to what they can afford and what carrying costs they should be considering.”

BMO offers tools and resources to help customers throughout their homebuying journey including:

  • BMO SmartProgress: Customers can learn more about homeownership, budgeting and other personal finance topics from BMO SmartProgress. The online education platform organizes personal finance topics into playlists, enabling Canadians to learn more about how to manage their finances in a widely accessible and innovative platform.

  • Pre-approval: For homebuyers, getting pre-approved provides a cushion for due diligence when purchasing a home. In addition to visiting a local branch to speak with an advisor, BMO offers the ability for homebuyers to apply for mortgage pre-approval online. And, to give extra time for house hunting BMO offers the longest rate guarantee period at 130 days of any major Canadian bank (as of March 1, 2022).

For more information about BMO’s Pre-Qualification tool, visit www.bmo.com/main/personal/mortgages/pre-qualification.

For more information about first-time home buyers programs and affordability tools, visit: www.bmo.com/main/personal/mortgages/first-time-home-buyer/.

To learn more about how BMO can help customers make financial progress, visit www.bmo.com/main/personal.

About the BMO Real Financial Progress Index

Launched in February 2021, the BMO Real Financial Progress Index is an indicator of how consumers feel about their personal finances and whether they are making financial progress. The index aims to spark dialogue that will help consumers reach their financial goals and to humanize a topic that causes anxiety for many – money.

The research detailed in this document was conducted by Ipsos in Canada from March 28th to April 28th, 2023. A sample of n=2,350 adults ages 18+ in Canada were collected. Quotas and weighting were used to ensure the sample’s composition reflects that of the Canadian population according to census parameters.

About BMO Financial Group

BMO Financial Group is the eighth largest bank in North America by assets, with total assets of $1.25 trillion as of April 30, 2023. Serving customers for 200 years and counting, BMO is a diverse team of highly engaged employees providing a broad range of personal and commercial banking, wealth management, global markets and investment banking products and services to over 13 million customers across Canada, the United States, and in select markets globally. Driven by a single purpose, to Boldly Grow the Good in business and life, BMO is committed to driving positive change in the world, and making progress for a thriving economy, sustainable future and inclusive society.

SOURCE BMO Financial Group

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View original content: http://www.newswire.ca/en/releases/archive/June2023/05/c7261.html

Source: finance.yahoo.com