Mortgage rates continue to move lower this week even as higher borrowing costs have kept activity subdued across many areas of the housing market.
According to data at HousingWire’s Mortgage Rates Center, the average rate for 30-year conforming loans was at 7.01% on Tuesday, down 5 basis points from one week ago and 10 basis points lower than two weeks ago. The rate for 15-year conforming loans averaged 6.66% on Tuesday, compared to 6.79% a week ago.
HousingWire Lead Analyst Logan Mohtashami recently wrote that higher mortgage rates “have increased recession risk by targeting the one sector that always falls before every recession: residential construction workers. And higher rates are also impacting the future supply of homes, as housing permits have been in a downtrend for a while.“
Data from the U.S. Census Bureau and the U.S. Department of Housing and Urban Development (HUD) showed that housing starts shrank 4.4% year over year in June. But this pullback was led by the multifamily sector, where starts dropped 23.4% compared to June 2023. Single-family starts rose 4.4% during the year. Permits fell by 3.1% year over year, including a 1.3% decrease in single-family permits.
Housing completions also grew by 15.5% during the year, although the bulk of this was tied to multifamily (40.2% growth). There were a record number of apartments delivered in many markets last year, but builders appear to be pulling back to avoid a glut of supply.
Lower mortgage rates are having a positive impact on application levels, with the Mortgage Bankers Association (MBA) reporting last week that applications were up 3.9% on a yearly basis during the week of July 12. Most of this growth was tied to refinance applications, which were up 37% year over year.
Fannie Mae economists project two rate cuts by the end of 2024. In a report released Tuesday, the government-sponsored enterprise anticipated the Federal Reserve would cut benchmark rates in September and December, resulting in the average 30-year rate declining to 6.8% in 2024 and to 6.4% in 2025.
Fannie also upwardly revised its forecast for purchase mortgage origination volume to $1.22 trillion due to home price appreciation that is expected to finish 2024 higher than previously anticipated. Fannie reduced its forecast for refinance originations to $346 billion this year but expects $563 billion in refis next year. In total, Fannie is forecasting $2.11 trillion in origination volume in 2025, up from a projected $1.70 trillion this year.
Survey data released Tuesday by Bright MLS concluded that “affordability is increasingly becoming more of a challenge for potential homebuyers.“ The survey of 1,180 real estate agents across six Mid-Atlantic states and the District of Columbia found that 14% of sellers in June saw a contract fall through due to a buyer’s inability to secure financing, which was up from 11% in May.
The surveyed agents also noted that affordability was the No. 1 reason for a buyer pausing their home search efforts over the past six months, while high mortgage rates were the No. 2 reason. Each of these factors were cited by nearly 60% of respondents.
“With mortgage rates hovering around 7% and home prices continuing to rise, financing is a growing challenge for buyers, and this is beginning to impact a buyer’s ability to make it across the finish line,” Bright MLS chief economist Lisa Sturtevant said in a statement.
Good news, however, came in the form of less competition. In June, 38% of buyers successfully completed a purchase through Bright MLS while submitting only a single offer. That was up from 31.2% one year ago.
(Bloomberg) — Top mortgage lender United Wholesale Mortgage is upping the incentives it offers its network of brokers for making certain types of home loans, a move likely to accelerate refinancings that could have implications for buyers of mortgage-backed securities.
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The mortgage wholesaler is offering an additional 1.25% of compensation to brokers for mortgages done through the Department of Veterans Affairs or the Federal Housing Administration, according to a notice on its website. The extra compensation will allow brokers to offer lower rates, giving homeowners a greater incentive to refinance with UWM.
That’s potentially problematic for buyers of MBS backed by Ginnie Mae, the government agency that guarantees VA and FHA home loans. Quicker-than-expected repayments cause bond investors to get their money back sooner, typically leading to lower returns.
“It’s still early, but I think this increases near-term prepayment risks for Ginnie Mae securities,” said Erica Adelberg, an MBS strategist at Bloomberg Intelligence. “It also highlights the idiosyncratic risks that come with Ginnie originations being dominated by a relatively small number of large independent mortgage banks.”
The new incentives only apply to mortgages that are eligible for a government program called a “streamlined” refinance. These are mortgages that meet certain requirements, such as being at least 210 days old and with at least six on-time payments.
“It remains to be seen, but these incentives may help a lot of borrowers qualify for a streamline refinance that may not have been able to before,” said Scott Buchta, a mortgage strategist at Brean Capital.
Most residential mortgages in the US are arranged by non-bank lenders. To get in front of potential borrowers they often rely on networks of independent brokers around the country. As compensation the brokers receive a small portion of the payments on the loans they originate.
UWM is already one of the biggest providers of mortgages in the country, and the change may signify that it’s trying to expand its footprint in the market for borrowers eligible for a loan guarantee by Ginnie Mae, according Buchta. There’s currently about $100 billion worth of VA or FHA mortgages with rates of at least 7%, he said.
Earlier this year a wave of VA and FHA borrowers refinancing their mortgages produced a spasm of anxiety for investors who’d bought Ginnie Mae MBS, leading to worries that prepayments would persist at higher levels. Since then prepayments have slowed, but the new UWM program could revive at least some of those worries.
The latest 2023 Home Mortgage Disclosure Act (HMDA) data is in, and it confirms a few key trend lines for the mortgage industry: there was significantly less interest in mortgage loans in 2023, and fewer banks thought it worth participating in the market.
The full dataset from Consumer Financial Protection Bureau (CFPB) and the Federal Financial Institutions Examination Council (FFIEC), includes information from 5,113 financial institutions, which encompass mortgage companies, banks, savings associations and credit unions. This is a 14.6% increase in the total number of reporting institutions when compared to the prior year, the CFPB stated.
“The HMDA data are the most comprehensive source of publicly available information on mortgage market activity,” the announcement said. “The data are used by industry, consumer groups, regulators, and others to assess potential fair lending risks and for other regulatory and informational purposes.
“The data also help the public assess how financial institutions are serving the housing needs of their local communities and facilitate federal financial regulators’ fair lending, consumer compliance, and Community Reinvestment Act (CRA) examinations.”
Alongside the full dataset is the Snapshot National Loan-Level Dataset, which contains national HMDA datasets as of May 1, 2024. It includes some more granular detail on attributes featured in the full dataset.
Despite the growth in the number of independent mortgage banks, the total number of applications is relatively low.
“The 2023 data include information on 10 million home loan applications, a decrease from the 14.3 million reported in 2022,” the CFPB said based on the snapshot. “Among them, 7.7 million were closed-end (e.g., a home mortgage loan) and 2.1 million were open-end (e.g., a home equity line of credit). Another 266,000 records are from financial institutions making use of statutory partial exemptions and did not indicate whether they were closed-end or open-end.”
Nonbank mortgage companies accounted for 68.8% of all “first lien, one- to four-family, site-built, owner-occupied home-purchase loans” last year, which marks an increase from the 60.2% figure recorded in 2022. The share of these loans serving Black borrowers rose by 0.1% to 8.2% in 2023, while Hispanic-White borrowers’ share grew from 9.1% to 9.9% in that same period.
In 2023, Black or African American and Hispanic-White applicants experienced denial rates of 16.6% and 12.0%, respectively. Denial rates for Asian and non-Hispanic-White applicants were 9.0% and 5.8%, respectively.
Other data products were also made available by FFIEC on Friday, including the HMDA Dynamic National Loan-Level Dataset which is updated “on a weekly basis to reflect late submissions and resubmissions,” the CFPB said.
Aggregate and disclosure reports also help to summarize data from individual financial institutions and geographic areas, while the HMDA Data Browser has user-control functionality allowing the creation of customized tables and maps.
Affiliate links for the products on this page are from partners that compensate us (see our advertiser disclosure with our list of partners for more details). However, our opinions are our own. See how we rate mortgages to write unbiased product reviews.
New doctors with a lot of student loan debt and no savings can have trouble qualifying for a conventional mortgage.
Physician mortgage loans provide an alternative that overlooks these factors.
These specialty home loans are available from many, but not all, traditional lenders.
You might think having a medical degree makes getting a home loan a snap. Not necessarily. Traditional home loans penalize you for having a high debt-to-income ratio, something medical professionals, especially recent graduates, typically have because of student loans. Other negatives for physicians include little to no savings, and in many cases, no permanent job yet.
On the other hand, doctors are among the most financially stable professionals in the workplace. Once established, they tend to have higher incomes, less overall debt, and, importantly, very low default rates when it comes to home loans. Realizing this, banks and other mortgage lenders have come up with a special type of loan tailored to medical professionals called a physician mortgage loan, or doctor loan.
What are physician mortgage loans?
A physician mortgage loan is a specialized loan offered only to medical and certain other professionals. They essentially ignore high student loan debt and low or no savings, especially early in the borrower’s career.
The reason these negatives are temporarily overlooked is because doctors and other professionals typically become high net-worth individuals, with little debt, substantial savings, and very rarely lose their homes to foreclosure.
Benefits of physician mortgage loans
Physician mortgage loans can do a lot for helping medical professionals hoping to buy a home. They come with:
Low down payment requirements
With a physician mortgage, you can buy a home with as little as no money down. This may allow you to borrow more and afford a higher-priced house without worrying about a big down payment. It can also help you buy a home sooner if you have little in savings.
No private mortgage insurance (PMI)
Private mortgage insurance (PMI) is typically required if you make a down payment of 20% or less, but that’s not the case with physician loans. According to Freddie Mac, this typically adds anywhere from $30 to $70 to your monthly payment for every $100,000 you borrow.
Flexible debt-to-income ratios
Physician loans typically require a debt-to-income ratio of 45% or less, which is higher than some other loan programs. It also won’t take student loans into account when calculating this number (more on this below).
Special consideration for student loans
Another feature of physician mortgages is that they typically ignore the total owed on student loans and only consider the amount of the mortgage’s monthly payment when looking at your debts. This can be helpful for physicians, who often have to take out very large loans to pay for their advanced education.
Physician mortgage eligibility requirements
Although the name suggests these loans are only available to doctors, many lenders offer the same loans to other high-income professionals. Eligibility for physician mortgage loans typically extends to:
Dentists
Podiatrists
Veterinarians
Optometrists
Accountants
Attorneys
Certified registered nurse anesthetists (although there are other home loans for nurses, too)
Advanced practice clinicians
Beyond being in one of these professionals you’ll also need to:
Have your income and employment verified
A signed employment contract is often accepted as proof of income, as long as it indicates the amount of your current or expected future salary. Most traditional borrowers have to supply pay stubs or two years of tax returns. You’ll also need proof of your medical or other degree.
Meet credit score requirements
While physician mortgage loan requirements tend to be more flexible than other loan programs, that’s not the case when it comes to credit scores. Though the exact number varies by lender, you’ll usually need a credit score of 700 or higher to get a physician mortgage. This is higher than most other loan programs (FHA loans allow down to 500 credit scores in some cases).
How to apply for a physician mortgage loan
If you’re a medical professional, a physician mortgage might help you buy a home. Follow these steps if you’re interested in applying for a physician mortgage loan:
Find lenders specializing in physician loans
Many banks and traditional lenders offer physician mortgage loans. Wrenne Financial Planning has compiled one list of such lenders, but the easiest way to find out is to call or visit the website of lenders in your area to determine if they offer this product.
Required documentation
You usually won’t need as much documentation with a physician mortgage as you would with another kind of loan. You won’t need tax returns or W-2s, but instead, a signed employment contract indicating your current and future income, proof of your degree, and student loan statements showing you’re current on your payments.
Application process
Once you find a lender, you’ll fill out their application, agree to a credit check, and submit the required documents. Once your loan moves through underwriting, you will pay your closing costs and sign your loan documents.
Closing costs typically include lender fees, attorney fees, title insurance, and taxes, and they average about 3% of the mortgage amount.
Comparing physician mortgage loans with conventional loans
Physician mortgage loans are structured similarly to conventional loans but are much more accommodating to doctors and other high-income individuals given their uncommon financial circumstances. For that reason, most of the accommodations have to do with getting approved.
Here’s a look at how physician mortgage loans vs. conventional loans measure up:
Key differences
Physician mortgages often require no down payment, and they come with no PMI either. With conventional loans, you’ll owe PMI if you make a down payment of less than 20%.
You’ll also need lots more documentation with conventional loans, including W-2s, tax returns, pay stubs, bank statements, and more. On the bright side, you may be allowed to have a lower credit score and still qualify.
Physician loans also treat student loans differently, often excluding them from your total debt-to-income ratio. This can make it easier for medical professionals to qualify, despite high student loan balances.
Pros and cons
We’ve already touched on the benefits of physician mortgage loans, but there are drawbacks to weigh, too.
First, consider the advantage of putting no money down versus the downside. Not only can this put you at risk of buying more house than you can afford, it can also immediately put you “underwater,” meaning you owe more on your home than you could get if you sold it.
Additionally, an average credit score requirement of 700 may preclude you from the home of your dreams before the amount of the down payment even comes up. Another factor that is often overlooked is that most physician mortgage loans usually have an adjustable interest rate instead of a fixed rate.
Physician mortgage FAQs
A physician mortgage loan is a special type of mortgage designed for doctors and medical professionals. They often have low (or no) down payment requirements, no PMI, and exclude student loans from debt-to-income ratio calculations. This can make it easier for doctors to qualify for a mortgage.
Medical doctors, dentists, and other healthcare professionals with an MD, DO, DDS, or DMD degree are usually eligible for physician mortgages.
Low down payments, no PMI, flexible debt-to-income ratios, and special consideration of student loan debt are just a few of the benefits of physician mortgage loans for doctors.
You’ll need to look for lenders specializing in physician mortgage loans, as not all companies offer these. They can guide you through the application process and required documentation.
Physician mortgage loans often have more favorable terms for doctors, but may have higher interest rates compared to conventional loans. They also may require higher credit scores.
Jim Probasco
Aly J. Yale
Aly J. Yale is a writer and editor with more than 10 years of experience covering personal finance topics including mortgages and real estate. She contributes to Personal Finance Insider’s mortgages and loans coverage.ExperienceAly began her journalism career as reporter, and later an editor, for several neighborhood sections of the Dallas Morning News.Her work has been published in several national publications, including Bankrate, CBS, Forbes, Fortune, Money, Newsweek, US News and World Report, the Wall Street Journal, and Yahoo Finance. She’s also contributed to a variety of mortgage and real-estate publications, such as The Balance, Builder Magazine, Housingwire, MReport, and The Mortgage Reports. Her favorite personal finance tip is to schedule regular check-ins to make sure your credit cards, savings accounts, and other financial vehicles still align with your budget and financial goals. She is a member of the National Association of Real Estate Editors (NAREE).ExpertiseAly’s areas of personal finance expertise include:
Mortgages
Loans
Real estate
Insurance
EducationAly is a graduate of Texas Christian University, where she received a bachelor’s degree in radio/TV/film and news-editorial journalism.
While a lot of the conversation regarding the 2024 presidential election is focused on the historically high ages of the two expected major party candidates, the aging U.S. workforce often faces doubts about their own abilities that are “crudely conflating old age with physical and cognitive capacity.”
This is according to a recent NextAvenue column co-written by two aging experts: Robert Espinoza, CEO at the National Skills Coalition and a fellow at the Brookings Institution; and Leanne Clark-Shirley, president and CEO of the American Society on Aging.
Since the first presidential debate roughly two weeks ago, discussions pairing age and fitness for the presidency have dominated the political landscape. But conflating these ideas of old age and capacity to perform required tasks of a job is “wrong,” the pair writes.
“Only a person’s medical team can offer that assessment, and age alone says nothing conclusive about one’s physical and mental health,” the pair wrote. “Further, to propose age limits for holding office with no consideration for individual differences is grossly ageist and discriminatory.”
On top of this, the conversations dominating the political sphere also serve to divert attention “from the more pressing concerns” facing older people, the authors state.
“Chief among them are the profound employment barriers facing older workers, a growing population that could help address a widespread labor shortage if our government properly supported them,” the column reads. “Yet these issues are glaringly absent from the election discourse.”
The 55-and-older population encompassed roughly 14% of the U.S. labor force in 2002, but that share is expected to reach 24% by 2032. On top of this, people 75 and older are the largest-growing segment of the workforce, according to data from the Pew Research Center.
“This trend is due to positive factors, such as healthier profiles and more age-friendly jobs, and negative factors, including more rigid retirement plans and policy changes that discourage early retirement,” the authors said. “Older workers personify the future of work, and let’s face it: most of us will age into this reality if we’re not there already, so it should feel personal.”
As workers grow older, they often face discrimination based on assumptions about their age. This can lead to older workers being passed over for advancement opportunities, with the assumption that “fresh thinking” is needed or that older workers are more expensive.
“Many older workers deal with all these factors and have always worked in low-wage jobs with limited benefits — as care workers, taxi drivers, food servers, grounds maintenance workers and many others, segregated into these occupations by decades, even centuries, of racially discriminatory policies,” the column explains. “They form the backbone of our economy and are essential to its success, yet they are egregiously neglected by government at all levels.”
The Consumer Financial Protection Bureau (CFPB) has broad authority under the Equal Credit Opportunity Act (ECOA) to prohibit discrimination against credit applicants and from discouraging prospective applicants for credit.
This reinforces the bureau’s enforcement authority as it wages a war against redlining, including in a case against Chicago-based Townstone Financial, according to court documents reviewed by HousingWire.
In the summer of 2020, the CFPB filed suit against Townstone, alleging that it violated Regulation B of the ECOA by drawing “almost no applications for properties in majority-African-American neighborhoods located in the Chicago-Naperville-Elgin Metropolitan Statistical Area (Chicago MSA) and few applications from African Americans throughout the Chicago MSA.”
This amounted to discrimination, the CFPB alleged. That October, Townstone moved to have the case dismissed. A federal judge in Illinois ruled in favor of Townstone in February 2023, but the CFPB vowed to appeal. The bureau sought a review of the decision in the U.S. Court of Appeals for the Seventh Circuit.
After more than a year of briefs and oral arguments, a three-judge panel for the appeals court ruled in favor of the CFPB on Thursday.
“The district court held that the ECOA does not authorize the imposition of liability for the discouragement of prospective applicants,” the decision stated. “For the reasons set forth in the following opinion, we take a different view.”
In a statement provided to HousingWire, Steve Simpson of the Pacific Legal Foundation — who is representing Townstone in this case — expressed disappointment in the decision but said the organization will continue to find a path forward.
“We’re disappointed with the court’s decision, which didn’t grapple with our many statutory arguments,” Simpson said in an email. “And regardless of the statutory problems with regulation B, the CFPB’s suit against Townstone is a flagrant violation of the First Amendment. We are considering what steps to take next, but Townstone’s defense of CFPB’s regulatory overreach is far from over.”
The panel went on to say that the ECOA vested sufficient authority in the Federal Reserve Board — and later, after the Dodd–Frank Wall Street Reform and Consumer Protection Act, in the CFPB — to enforce ECOA in this way.
“An analysis of the text of the ECOA as a whole makes clear that the text prohibits not only outright discrimination against applicants for credit, but also the discouragement of prospective applicants for credit,” the decision reads. “Congress vested the Board (and later the Bureau) with the authority to issue regulations ‘necessary or proper to effectuate the purposes of this title’ or ‘to prevent circumvention or evasion thereof.’”
The panel continued by saying that the intent of Congress upon the passage of ECOA was for the authority to be broad in its enforcement.
“Congress indicated that the ECOA must be construed broadly to effectuate its purpose of ending discrimination in credit applications. Moreover, other provisions of the ECOA strongly confirm that discouraging applications for credit constitutes a violation of the statute,” the decision said.
HousingWire reached out to representatives of the CFPB but did not immediately receive a response.
United Wholesale Mortgage (UWM) announced on Wednesday that it will temporarily give a 125-basis points incentive in some government refinancing programs, another step to guarantee the retention and attraction of home borrowers looking to lower their mortgage rates.
The Govy125 program includes any note rate, any occupancy for the U.S. Department of Veterans Affairs interest rate reduction refinance loans (IRRRLs), and non-credit qualifying Federal Housing Administration (FHA) streamlines.
The incentive is available on new locks through Sept. 2, with a maximum lock of 60 days.
The program has some limitations. The incentive is available to brokers who use the lender’s services that handle all the title work on refinances (TRAC+) and/or offer additional loan processing support (PA+).
Pontiac, Michigan-based UWM launched the TRAC+ in May to manage title review, closing, and disbursement for its brokers. It comes as the federal government pushes title insurance alternatives designed to save consumers money.
The company said that those who use the service will have an additional up to 60 bps in the Govvy125 program, with the incentive reaching up to 185 bps.
The top U.S. mortgage lender also reduced the PA+ full-service fee to $595 from $895 for FHA streamlines and VA IRRRLs.
Regarding its purchase loan offerings, UWM recently announced a zero-down payment loan. It gives qualified borrowers 3% in a down payment assistance loan up to $15,000.
The loan will not accrue interest and will not require a monthly payment. The company said that borrowers pay the second lien loan by the end of the loan term but have flexibility in when and how often they make payments.
Mortgage lender makes Providence Business News’ list for the 19th consecutive year
MIDDLETOWN, R.I., July 2, 2024 /PRNewswire/ — Embrace Home Loans, a top-ranked national mortgage lender, was named to Providence Business News’ (PBN’s) 2024 Best Places to Work awards list, reaching number 13 in the large employer category, or companies with 150-499 employees in the region.
This marks the 19th consecutive year Embrace has made PBN’s Best Places to Work list, making it one of only 3 companies that has won every year since the program’s inception in 2005.
All 67 of the companies and organizations recognized by the PBN this year were judged based on human resources policies and confidential surveys completed by employees. The Best Companies Group survey and awards program was designed to identify and honor the best employers in Rhode Island, benefiting the economy, workforce and businesses in the state.
“I’m incredibly proud that Embrace Home Loans has again been recognized as one of Rhode Island’s Best Places to Work,” said Ryan “Buddy” Hardiman, president of Embrace Home Loans. “At Embrace, we’re committed to providing our employees with all the tools and resources they need to succeed and grow in their careers. We believe employee happiness is key to their overall well-being and success, which is why fostering a positive work environment is so important to us.”
Embrace is known for fostering a supportive, family-like work culture and encouraging its employees’ charitable endeavors. It conducts small group trainings to facilitate discussions on building emotional intelligence and resilience. Embrace celebrates its anniversary each year with a week of companywide participation in community service known as “Orange Week.” It also pays employees for up to 100 hours of community service per year.
Embrace has been recognized with multiple workplace awards, including from National Mortgage News, Fortune and Best Companies.
To learn more about career opportunities at Embrace, visit the company’s careers page.
About Embrace Home Loans
Founded in 1983, Embrace Home Loans is a prominent mortgage lender that provides borrowers and financial institutions with an exceptional mortgage experience. Licensed in all 50 states and the District of Columbia, Embrace has been recognized seven times as one of the Best Medium-sized Companies to Work for in America by Fortune and as one of the Fastest Growing Companies in America by Inc. The company has also been recognized 19 times as one of the Best Places to Work in Rhode Island, as the Most Community Involved Company in Rhode Island, and with the Leadership Excellence Award by Providence Business News. The company is based in Middletown, Rhode Island. For more information, please visit www.embracehomeloans.com.
PRESS CONTACTS:
Henry Drennan Strategic Vantage Marketing and Public Relations (615) 497-8358 [email protected]
Mary McGarity Strategic Vantage Marketing and Public Relations (203)260-5476 [email protected]
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Data on the intersection between housing issues and politics is clear: in 2024, housing is an issue that resonates strongly with younger voters, but high mortgage rates and high home prices may be issues for years to come. This is according to a report published this week by Politico.
Recent data about attributes of the housing market — including existing home and pending sales, mortgage rates and home prices — have not painted a rosy picture of the housing market for new entrants. Subject matter experts are taking notice.
“Home sales activity is at a 30-year low — it’s essentially stuck at that level, so all of the economic activity associated with home sales is at a depressed level,” said Lawrence Yun, chief economist for the National Association of Realtors (NAR) to the outlet.
Pricing appears to be most on the mind of younger voters in particular, according to a survey conducted by Redfin chief economist Daryl Fairweather. But federal government initiatives have not made much headway on this issue in particular, since policies at the local, county and state levels are often bigger determinants of pricing changes than federal policies.
“It’s unprecedented, it’s never been such an issue,” Fairweather told Politico. “I think this is the first time housing could actually matter in the swing states — before it was mostly in the coastal areas.”
Fairweather added that the importance of the housing issue was seen in the recent U.S. presidential debate, where President Joe Biden immediately mentioned housing issues as a priority if elected to a second term.
Inventory is climbing, but not at a rate fast enough to undo supply issues that have been “years in the making,” Fairweather added. Some of this is due to the impacts of the mortgage rate lock-in effect, where borrowers who otherwise would be willing to move and sell are motivated to hold onto a low mortgage rate they obtained in 2020-2021.
“It’s really hard for the housing market to get out of this funk because of the mortgage rate lock-in effect,” she told Politico. “I don’t think that the problems with the housing market are going to clear up in a matter of years. It could take a decade.”
The Biden administration has announced a slew of housing measures over the past year designed to broaden access to the market, most recently including a new grant program, a $469 million investment in renovations and the expansion of housing counseling availability and funding.
Prices are moderating somewhat, but remain historically high, said Orphe Divounguy, senior economist at Zillow to Politico.
“Today I think we’re in a much better place than we were in 2022, when prices were growing unsustainably,” said Divounguy. “That overheated pace could result in a crash, which is why the Fed had to act when it did.”
Meaningful rate declines, meanwhile, will take longer to emerge.
Job creation slowed in June, despite continued tight labor market conditions, which economists say is good news for the Federal Reserve. Data from the U.S. Bureau of Labor Statistics released on Friday shows that total nonfarm payroll rose by 206,000 jobs in June, compared to 272,000 jobs in May.
Job gains in June were most notable in industries like government (70,000), health care (49,000), social assistance (34,000) and construction (27,000), a positive for the housing industry.
When broken out, the residential construction sector added 3,100 jobs month over month, while the number of residential specialty trade contractors rose 2,400 from a month prior. Overall, for the past year, the construction sector has added an average of 20,000 jobs per month.
The real estate and rental and leasing services sector added 1,100 jobs from May with real estate posting a 500-job gain and the rental and leasing sector gaining 800 jobs.
Despite the continuing job growth, unemployment rose slightly from May to 4.1% in June, with 6.8 million people unemployed. A year ago, the unemployment rate was 3.6% with 6 million people unemployed.
While economists noted that the month’s job gains were higher than anticipated, they highlighted that most of the jobs were in the government sector.
“Similar to May, the headline gain in nonfarm payroll employment data in June does not tell the entire story,” Mike Fratantoni, the MBA’s senior vice president and chief economist, said in a statement. “While the headline gain showed an increase of 206,000 jobs, more than one-third of that was a gain in government employment, largely a function of increases in state and local jobs. Although June’s increase was above our expectations, both April and May figures were revised down by a combined 111,000 jobs, marking the three-month average down to a 177,000 increase.”
Fratantoni also highlighted the rise in unemployment as an indicator that the job market was slowing.
Although a cooling economy is what the Federal Reserve wants to see, economist believe this jobs report does not guarantee an interest rate cut.
“This not-too-cold/not-too-hot Goldilocks economy is what we want to see as the Federal Reserve will deliberate on the timing of interest rate cuts in the second half of 2024. In addition to today’s report, the Fed is watching a range of other economic indicators, most notably inflation,” Lisa Sturtevant, the chief economist at Bright MLS, said in a statement. “The first June inflation reading will be out next week. Lower inflation and a looser labor market means it is more likely for there to be two rate cuts instead of one in 2024.”
If the Fed does cut interest rates, Sturtevant believes housing market activity will pick up as many buyers have been waiting on the sidelines hoping for lower rates.