Posted by West + Main Homes on Friday, July 26th, 2019 at 7:51am.


According to the latest data released Thursday by Freddie Mac, the 30-year fixed-rate average fell to 3.75 percent with an average 0.5 point. (Points are fees paid to a lender equal to 1 percent of the loan amount and are in addition to the interest rate.) It was 3.81 percent a week ago and 4.54 percent a year ago.

The 15-year fixed-rate average declined to 3.18 percent with an average 0.5 point. It was 3.23 percent a week ago and 4.02 percent a year ago. The five-year adjustable rate average dropped to 3.47 percent with an average 0.4 point. It was 3.48 percent a week ago and 3.87 percent a year ago.

“This is good news for buyers, particularly when you compare rates to a year ago,” said Danielle Hale, chief economist for Realtor.com. “Based on a typical listing of $316,000 with a 20 percent down payment, buyers today would pay $112 less for their principal and interest than they did a year ago.”

However, she said, that doesn’t account for rising home prices.

“If you factor in the higher price that buyers are paying this year compared to a year ago, you’re still looking at a savings of $48 per month compared to what buyers would have paid for the average house at this time last year,” Hale said.

On the other hand, she said, falling mortgage rates can be an indication of a weaker economy, which could have a negative impact on the housing market going forward.

Weekly averages for popular mortgage types

However, Sam Khater, Freddie Mac’s chief economist, said in a statement that he expects the lower mortgage rates to positively impact the housing market soon.

“Mortgage rates continued to hover near three-year lows and purchase application demand has responded, rising steadily over the last two months to the highest year-over-year change since the fall of 2017,” he said. “While the improvement has yet to impact home sales, there’s a clear firming of purchase demand that should translate into higher home sales in the second half of this year.

Analysts are also watching to see whether a potential move by the Federal Reserve next week to lower the benchmark interest rate to 2.1 percent from 2.35 percent would impact mortgage rates. Michael Borodinsky, vice president of Caliber Home Loans in Edison, N.J., said if that happens, mortgage rates wouldn’t necessarily drop as well.

“The Federal Open Market Committee monetary policy only directly impacts short-term interest rates,” Borodinsky said. “Mortgage rates are directly impacted by the direction of longer-term fixed-income instruments such as Treasury bonds and mortgage backed securities.”

Bonds are traded daily, he said, and rise or fall based on current economic data and, more importantly, in anticipation of what traders believe will be the likely move by the Federal Reserve.

[Just because it’s a sellers’ market doesn’t mean you should overprice your home]

“For example, traders have pushed bond yields and mortgage rates lower over the past few months on anticipation that the Fed will lower rates at the upcoming meeting next week,” Borodinsky said. “So the likely rate reduction is already factored into current mortgage rates. Not only that, the markets believe that there will be further rate cuts over the coming months.”

For potential borrowers who want to know what to expect from mortgage rates, the answer is uncertain.

“Traders will be looking at not only the Fed rate move but guidance as to what will influence their future actions,” Borodinsky said. “For example, does the Fed see an upcoming slowdown in economic data pointing to a future recession? That will likely mean deeper cuts in current short term rates and bond yields and mortgage rates would likely follow suit. On the other hand, if the Fed announces that they believe that the upcoming rate cut will be sufficient to sustain current economic strength, traders may be disappointed and trade bonds in the opposite direction and as a result, we would see mortgage rates reverse their downward trend and move higher.”

Meanwhile, mortgage applications declined. According to the latest data from the Mortgage Bankers Association, the market composite index — a measure of total loan application volume — dropped 1.9 percent from a week earlier. The refinance index decreased 2 percent from the previous week, while the purchase index fell 1 percent.

The refinance share of mortgage activity accounted for about half of all applications.

“Mortgage applications were down last week, even as rates moved lower across the board,” Joel Kan, MBA’s associate vice president of economic and industry forecasting, said in a statement.

“Refinance activity was lower, but we did see government refinance applications increase, driven solely by a 12 percent rise in FHA applications,” he added. “Mortgage rates right now are comparable to the average rate of 4.10 percent for June, but refinances last week were 7 percent lower than last month. This is an indication that as we see rates lower for longer, borrowers need more of a drop in rates to consider refinancing.”


Starter homes are becoming a battleground between millennials looking for their first house and investors swooping in with all-cash offers — and there’s a pretty clear winner

Hillary Hoffower
 Jun. 23, 2019, 11:54 AM

starter home
Real-estate investors are buying starter homes before millennials can get to them.
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Starter homes are scarce. In 2018, they represented just 20.9% of available housing inventory in the US, according to Trulia

The US housing market is currently a seller’s market— this causes home prices to shoot up, leaving minimal inventory at the middle and low ends, Spencer Rascoff, Zillow’s CEO, previously told Business Insider. But there are other factors driving the shortage, too: rising construction costs, restrictive zoning rules, and changing consumer desires, reported Ben Casselman and Conor Dougherty for The New York Times

That spells bad news for millennials  who are already financially behind because of a higher cost of living, student loan debt, and a fallout from the recession — looking to buy their first home. And real-estate investors are only making the problem worse.

In 2018, investors bought roughly 20% of US starter homes (homes priced in the bottom third of the local market) — twice that of 20 years ago, Casselman and Dougherty wrote, citing real-estate data provider CoreLogic. In the most popular markets, they bought nearly 50% of the most affordable homes and 25% of all single-family homes. 

Some investors flip the houses, others rent the houses out, and some resell the houses when they appreciate, which could take weeks or years, they reported. A growing number of hard-money lenders are helping their endeavors, and “in some cases, wholesalers make unsolicited offers on properties, then flip them to investors without putting them on the public market,” Casselman and Dougherty wrote.

Read moreMillennials are making 3 key decisions that are wiping out the starter home — and it’s changing what homeownership in America looks like

Millennials face another challenge on the track to homeownership 

The investors are tough competition for millennials, who are losing territory in the battleground of starter homes that they already can’t afford.

Millennials buying their first home today will pay 39% more today than they would have nearly 40 years ago, according to Student Loan Hero. A report by SmartAsset found that in some cities, the median home outweighed the median income by so much that it could take nearly a decade to save for a 20% down payment. 

Read more: Here’s the salary you’ll need if you want to afford a mortgage in 17 major US cities

And some of those who have saved enough to buy are forced to wait — and up their budgets — as they continuously lose out on potential homes to the cash-paying investors. 

Fatou Ceesay, age 38, told Casselman and Dougherty she’s spent two years losing bids to cash buyers. Some sellers are requiring cash, while some listings quickly disappear only to pop up again several weeks later at a higher price, she said. She’s since increased her budget from $300,000 to $350,000.

Millennials’ inability to get their hands on their first home in the face of tough economic conditions and a cutthroat market is creating new trends. 

For one, thing, as Business Insider previously reported, millennials are resorting to renting for a longer time. Some unmarried millennial couples are buying homes together before getting engaged just so they can split the cost of buying a home. And others are delaying homeownership so long that by the time they do buy, they’ve saved enough money to buy a luxury home, bypassing the starter home stage altogether.