Placeholder canvas

Interest Rates

Why It Just Became Much Easier To Buy a Home

by

Why It Just Became Much Easier To Buy a Home | Simplifying The Market

Since the pandemic began, Americans have reevaluated the meaning of the word home. That’s led some renters to realize the many benefits of homeownership, including the feelings of security and stability and the financial benefits that come with rising home equity. At the same time, many current homeowners have decided their house no longer meets their needs, so they moved into homes with more space inside and out, including a home office for remote work.

However, not every purchaser has been able to fulfill their desire for a new home. Here are two obstacles some homebuyers are facing:

  • The ability to save for a down payment
  • The ability to qualify for a mortgage at the current lending standards

This past week, both of those challenges have been mitigated to some degree for many purchasers. The FHFA (which handles mortgages by Freddie Mac, Fannie Mae, and the Federal Housing Administration) is raising its loan limit for prospective purchasers in 2022. The term used to describe the maximum loan amount they will entertain is the Conforming Loan Limit.

What Is the Difference Between a Conforming Loan and a Non-Conforming Loan?

Investopedia explains the difference in a recent post:

“Conforming loans are the only loans that meet the requirements to be acquired by Fannie Mae and Freddie Mac. Jumbo loans, which exceed the conforming limit, are the most common type of nonconforming loan.”

What Difference Does It Make to Me as a Home Buyer?

A Forbes article earlier this year explains the benefits of a conforming loan and why they exist:

“Since lenders can’t sell non-conforming loans to Fannie Mae or Freddie Mac to free up their cash, they’re a bit riskier for the lender. This is especially true for jumbo loans, which aren’t backed by any government guarantees. If you default on a jumbo loan, it’s a huge blow to the lender.

Thus, lenders generally charge higher interest rates to compensate, and they can have even more requirements. For example, lenders who give out jumbo loans often require that you make a down payment of at least 20% and show that you have at least six months’ worth of cash in reserve, if not more.”

What Happened Last Week?

The FHFA has significantly increased its Conforming Loan Limits for 2022. Sandra L. Thompson, FHFA Acting Director, explains in the press release that:

“Compared to previous years, the 2022 Conforming Loan Limits represent a significant increase due to the historic house price appreciation over the last year. While 95 percent of U.S. countie​s will be subject to the new baseline limit of $647,200, approximately 100 counties will have conforming loan limits approaching $1 million.”

This means that more homes now qualify for a conforming loan with lower down payment requirements and easier lending standards – the two challenges holding many buyers back over the last year.

The Federal Housing Administration (FHA) also increased its Conforming Loan Limits for 2022. That could also mean an easier path to homeownership for many prospective buyers. As the Forbes article explains:

“FHA loans can be very beneficial if you don’t have as much savings, or if your credit score could use some work.”

Bottom Line

Buying your first or your next home may have just gotten much easier (less stringent qualifying standards) and less expensive (possibly lower mortgage rate). Let’s connect to discuss how these changes may impact you.

Resources:
  1. To get more information on the new FHFA Conforming Loan Limits, click here.
  2. To get more information on the new FHA Conforming Loan Limits, click here.
Content previously posted on Keeping Current Matters

Win When You Sell (And When You Move)

by

Win When You Sell (And When You Move) | Simplifying The Market

If you’re trying to decide when to sell your house, there may not be a better time than this winter. Selling this season means you can take advantage of today’s strong sellers’ market when you make a move.

Win When You Sell

Right now, conditions are very favorable for current homeowners looking for a change. If you sell now, here’s what you can expect:

  • Your House Will Stand Out – While recent data shows there are more sellers getting ready to list their homes this winter, there are still more buyers in the market than there are homes for sale. If you sell your house now before more houses are listed, it will get more attention from serious buyers who are eager to find a home.
  • Your House Will Likely Get Multiple Offers – When supply is low and demand is high, buyers have to compete with each other for a limited number of homes. The latest Realtors Confidence Index from the National Association of Realtors (NAR) shows sellers are getting an average of 3.6 offers in today’s market.
  • Your House Should Sell Quickly – According to the same report from NAR, homes are selling in an average of just 18 days. As a seller, that’s great news for you if you’re looking for a quick process.

Win When You Move

In addition to these great perks, you’ll also win big on your next move if you sell now. CoreLogic reports homeowners gained an average of $51,500 in equity over the past year. This wealth boost is the result of buyer competition driving home prices up. You can leverage that equity to fuel a move, before mortgage rates and home prices climb higher. To get a feel for how rates are projected to rise, see the chart below.Win When You Sell (And When You Move) | Simplifying The MarketThe longer you wait to make your move, the more it will cost you down the road. As mortgage rates rise, even modestly, it will impact your monthly payment when you purchase your next home. Waiting just a few months to make that change could mean a long-term financial impact.

The good news is today’s rates are still hovering in a historically low range. According to Doug Duncan, Senior VP and Chief Economist at Fannie Mae:

“Right now, we forecast mortgage rates to average 3.3 percent in 2022, which, though slightly higher than 2020 and 2021, by historical standards remains extremely low . . .”

Selling before rates climb higher means you can make your move and lock in a low rate on the mortgage for your next home. This helps you get more home for your money and keeps your payments down too.

Bottom Line

As a homeowner, you have a great opportunity to get the best of both worlds this season. You can truly win when you sell and when you buy. If you’re thinking about making a move, let’s connect so you have the information you need to get the process started.

Content previously posted on Keeping Current Matters

How Smart Buyers Are Approaching Rising Mortgage Rates

by

How Smart Buyers Are Approaching Rising Mortgage Rates | Simplifying The Market

Last week, the average 30-year fixed mortgage rate from Freddie Mac inched up to 3.1%, and experts project rates will continue rising through 2022:

“The 30-year fixed-rate mortgage was 2.9% in the third quarter of 2021. We forecast mortgage rates to increase slightly through the remainder of the year and reach 3.0%, rising to 3.5% for full year 2022.”

If you’re thinking of buying a home, here are a few things to keep in mind so you can succeed even as mortgage rates rise.

Taking Time Off Can Be Costly

Mortgage rates play a significant role in your home search. As rates go up, your monthly mortgage payment increases if you’re buying a home, directly affecting how much you can afford. And even the smallest increase can have a large impact on your monthly payment (see chart below):How Smart Buyers Are Approaching Rising Mortgage Rates | Simplifying The MarketWith mortgage rates on the rise, you’ve likely seen your purchasing power impacted already. Instead of waiting and hoping rates will fall, today’s rates should motivate you to purchase now before rates increase more.

Smart Buyers Can Succeed by Planning Ahead

You can use your newfound motivation to energize your search and plan your next steps accordingly so you’re prepared to act no matter what happens with mortgage rates. One way to do that: take rising rates into consideration as part of your budget.

Danielle Hale, Chief Economist at realtor.com, puts it best, saying:

“Smart buyers should consider calculating a monthly payment not only at today’s rates, but also at rates that are a bit higher so that they won’t be derailed by a sudden upward move. . . .”

You should also be ready to act when you find the home that meets your needs. That means getting pre-approved with a lender so there won’t be any delays when the time arrives.

The best way to prepare is to work with a trusted real estate advisor now. An agent can connect you with a lender, help you adjust your search based on your budget, and be ready to act quickly when it’s time to make an offer.

Bottom Line

Serious buyers should approach rising rates as a motivating factor to buy sooner, not a reason to wait. Waiting will cost you more in the long run. Let’s connect today so you can better understand your budget and be prepared to buy your home even before rates climb higher.

Content previously posted on Keeping Current Matters

Don’t Believe Everything You Read: The Truth Many Headlines Overlook

by

Don't Believe Everything You Read: The Truth Many Headlines Overlook | Simplifying The Market

There are a lot of questions right now regarding the real estate market as we head into 2022. The forbearance program is coming to an end and mortgage rates are beginning to rise.

With all of this uncertainty, anyone with a megaphone – from the mainstream media to a lone blogger – has realized that bad news sells. Unfortunately, we’ll continue to see a rash of troublesome headlines over the next few months. To make sure you aren’t paralyzed by a headline, turn to reliable resources for a look at what to expect from the housing market next year.

There are already alarmist headlines starting to appear. Here are two recent topics you may have seen in the news.

1. Foreclosures Are Spiking Today

There are a number of headlines circulating that call out the rising foreclosures in today’s real estate market. Those stories focus on an overly narrow view on that topic: the current volume of foreclosures compared to 2020. They emphasize that we’re seeing far more foreclosures this year compared to last.

That seems rather daunting. However, though it’s true foreclosures have been up over the 2020 numbers, it’s important to realize that there were virtually no foreclosures last year because of the forbearance plan. If we compare this September to September of 2019 (the last normal year), foreclosures were down 70% according to ATTOM.

Even Rick Sharga, an Executive Vice President of the firm that issued the report referenced in the above article, says:

“As expected, now that the moratorium has been over for three months, foreclosure activity continues to increase. But it’s increasing at a slower rate, and it appears that most of the activity is primarily on vacant and abandoned properties, or loans in foreclosure prior to the pandemic.”

Homeowners who have been impacted by the pandemic are not generally the ones being burdened right now. That’s because the forbearance program has worked. Ali Haralson, President of Auction.com, explains that the program has done a remarkable job:

“The tsunami of foreclosures many feared in the early days of the pandemic has not materialized thanks in large part to the swift and decisive foreclosure protections put in place by government policymakers and the mortgage servicing industry.”

And the government is still making sure homeowners have every opportunity to stay in their homes. Rohit Chopra, the Director of the Consumer Financial Protection Bureau (CFPB), issued this statement just last week:

“Failures by mortgage servicers and regulators worsened the impact of the economic crisis a decade ago. Regulators have learned their lesson, and we will be scrutinizing servicers to ensure they are doing all they can to help homeowners and follow the law.”

2. Rising Mortgage Rates Will Slow the Housing Market

Another topic that’s generating frequent headlines is the rise in mortgage rates. Some people are expressing concern that rising rates will negatively impact the housing market by causing home sales to dramatically decline. The resulting headlines are raising unneeded alarm bells. To counteract those headlines, we need to take a look at what history tells us. Looking at data over the last 20 years, there’s no evidence that an increase in rates dramatically forces sales to come to a halt. Nor does home price appreciation come to a screeching stop. Let’s look at home sales first:Don't Believe Everything You Read: The Truth Many Headlines Overlook | Simplifying The MarketThe last three times rates increased (shown in the graph above in red), sales (depicted in blue in the graph) remained rather consistent. It’s true that sales fell rather dramatically from 2007 through 2010, but mortgage rates were also falling at the time. The next two instances showed no meaningful drop in sales.

Now, let’s take a look at home price appreciation (see graph below):Don't Believe Everything You Read: The Truth Many Headlines Overlook | Simplifying The MarketAgain, we see that a rise in rates didn’t cause prices to depreciate. Outside of the years following the crash, prices continued to appreciate, just at a slower rate.

Bottom Line

There’s a lot of misinformation out there. If you want the best advice on what’s happening in the current housing market, let’s connect.

Content previously posted on Keeping Current Matters

Two Graphs That Show Why You Shouldn’t Be Upset About 3% Mortgage Rates

by

Two Graphs That Show Why You Shouldn’t Be Upset About 3% Mortgage Rates | Simplifying The Market

With the average 30-year fixed mortgage rate from Freddie Mac climbing above 3%, rising rates are one of the topics dominating the discussion in the housing market today. And since experts project rates will rise further in the coming months, that conversation isn’t going away any time soon.

But as a homebuyer, what do rates above 3% really mean?

Today’s Average Mortgage Rate Still Presents Buyers with a Great Opportunity

Buyers don’t want mortgage rates to rise, as any upward movement increases your monthly mortgage payment. But it’s important to put today’s average mortgage rate into perspective. The graph below shows today’s rate in comparison to average rates over the last five years:Two Graphs That Show Why You Shouldn’t Be Upset About 3% Mortgage Rates | Simplifying The MarketAs the graph shows, even though today’s rate is above 3%, it’s still incredibly competitive.

But today’s rate isn’t just low when compared to the most recent years. To truly put today into perspective, let’s look at the last 50 years (see graph below):Two Graphs That Show Why You Shouldn’t Be Upset About 3% Mortgage Rates | Simplifying The MarketWhen we look back even further, we can see that today’s rate is truly outstanding by comparison.

What Does That Mean for You?

Being upset that you missed out on sub-3% mortgage rates is understandable. But it’s important to realize, buying now still makes sense as experts project rates will continue to rise. And as rates rise, it will cost more to purchase a home.

As Mark Fleming, Chief Economist at First American, explains:

“Rising mortgage rates, all else equal, will diminish house-buying power, meaning it will cost more per month for a borrower to buy ‘their same home.’”

In other words, the longer you wait, the more it will cost you.

Bottom Line

While it’s true today’s average mortgage rate is higher than just a few months ago, 3% mortgage rates shouldn’t deter you from your homebuying goals. Historically, today’s rate is still low. And since rates are expected to continue rising, buying now could save you money in the long run. Let’s connect so you can lock in a great rate now.

Content previously posted on Keeping Current Matters

Experts Project Mortgage Rates Will Continue To Rise in 2022

by

Experts Project Mortgage Rates Will Continue To Rise in 2022 | Simplifying The Market

Mortgage rates are one of several factors that impact how much you can afford if you’re buying a home. When rates are low, they help you get more house for your money. Within the last year, mortgage rates have hit the lowest point ever recorded, and they’ve hovered in the historic-low territory. But even over the past few weeks, rates have started to rise. This past week, the average 30-year fixed rate was 3.14%.

What does this mean if you’re thinking about making a move? Waiting until next year will cost you more in the long run. Here’s a look at what several experts project for mortgage rates going into 2022.

Freddie Mac:

“The average 30-year fixed-rate mortgage (FRM) is expected to be 3.0 percent in 2021 and 3.5 percent in 2022.”

Doug Duncan, Senior VP & Chief Economist, Fannie Mae:

“Right now, we forecast mortgage rates to average 3.3 percent in 2022, which, though slightly higher than 2020 and 2021, by historical standards remains extremely low and supportive of mortgage demand and affordability.” 

First American:

“Consensus forecasts predict that mortgage rates will hit 3.2 percent by the end of the year, and 3.7 percent by the end of 2022.”

If rates rise even a half-point percentage over the next year, it will impact what you pay each month over the life of your loan – and that can really add up. So, the reality is, as prices and mortgage rates rise, it will cost more to purchase a home.

As you can see from the quotes above, industry experts project rates will rise in the months ahead. Here’s a table that compares other expert views and gives an average of those projections:Experts Project Mortgage Rates Will Continue To Rise in 2022 | Simplifying The MarketWhether you’re thinking about buying your first home, moving up to your dream home, or downsizing because your needs have changed, purchasing before mortgage rates rise even higher will help you take advantage of today’s homebuying affordability. That could be just the game-changer you need to achieve your homeownership goals.

Bottom Line

If you’re thinking of buying or selling over the next year, it may be wise to make your move sooner rather than later – before mortgage rates climb higher.

Content previously posted on Keeping Current Matters

Sellers Have Incredible Leverage in Today’s Market

by

Sellers Have Incredible Leverage in Today’s Market | Simplifying The Market

With mortgage rates climbing above 3% for the first time in months, serious buyers are more motivated than ever to find a home before the end of the year. Lawrence Yun, Chief Economist for the National Association of Realtors (NAR), puts it best, saying:

“Housing demand remains strong as buyers likely want to secure a home before mortgage rates increase even further next year.”

But the sense of urgency they feel is complicated by the lack of homes for sale in today’s market. According to the latest Existing Home Sales Report from NAR:

“From one year ago, the inventory of unsold homes decreased 13%. . . .”

What Does This Mean for Sellers Today?

With buyers eager to purchase but so few homes available, sellers who list their houses this fall have a tremendous advantage – also known as leverage – when negotiating with buyers. That’s because, in today’s market, buyers want three things:

  • To be the winning bid on their dream home.
  • To buy before rates rise
  • To buy before prices go even higher.

Your Leverage Can Help You Negotiate Your Best Terms

These three buyer needs give homeowners a leg up when selling their house. You might already realize this leverage enables you to sell at a good price, but it also means you can negotiate the best terms to suit your needs.

And since buyer demand is still high, there’s a good chance you’ll get offers from multiple buyers who are willing to compete for your house. When you do, look closely at the terms of each offer to find out which one has the best perks for you.

If you have questions about what’s best for your situation, your trusted real estate advisor can help. They have the expertise and are skilled negotiators in all stages of the sales process.

Bottom Line

Today’s buyers are motivated to purchase a home this year, and that’s great news if you’re thinking of selling. Let’s connect today to discuss how much leverage you have as a seller in today’s market.

Content previously posted on Keeping Current Matters

Housing Challenge or Housing Opportunity? It Depends.

by

Housing Challenge or Housing Opportunity? It Depends. | Simplifying The Market

The biggest challenge in real estate today is the lack of available homes for sale. The low housing supply has caused homes throughout the country to appreciate at a much faster rate than what we’ve experienced historically.

There are many reasons for the limited number of homes on the market, but as you can see in the graph below, we’re well below where we’ve been for most of the past 10 years. Today, across the country, there is only a 2.4-month supply of homes available for sale.Housing Challenge or Housing Opportunity? It Depends. | Simplifying The Market

The Opportunity 

This lack of homes for sale is creating a challenge for many buyers who are growing frustrated in their search. On the other hand, this is a huge opportunity for sellers as low supply is driving up home values. According to CoreLogic, the average home has appreciated by more than $50,000 over the past year. And for many homeowners, that’s opening new doors as they re-think their needs and use their equity to move up or downsize.

According to Dr. Frank Nothaft, Chief Economist at CoreLogic:

“The average homeowner with a mortgage has more than $200,000 in home equity as of mid-2021.”

Today, many sellers are taking advantage of low interest rates and the equity they have in their homes to make a move.

Bottom Line

The biggest challenge in real estate is the lack of homes for sale, but this challenge is also an opportunity for sellers. If you’re thinking about selling your house, let’s connect to start the process.

Content previously posted on Keeping Current Matters

The Big Question: Should You Renovate or Move?

by

The Big Question: Should You Renovate or Move? | Simplifying The Market

The last 18 months changed what many buyers are looking for in a home. Recently, the American Institute of Architects released their AIA Home Design Trends Survey results for Q3 2021. The survey reveals the following:

  • 70% of respondents want more outdoor living space
  • 69% of respondents want a home office (48% wanted multiple offices)
  • 46% of respondents want a multi-function room/flexible space
  • 42% of respondents want an au pair/in-law suite
  • 39% of respondents want an exercise room/yoga space

If you’re a homeowner who wants to add any of the above, you have two options: renovate your current house or buy a home that already has the spaces you desire. The decision you make could be determined by factors like:

  1. A possible desire to relocate
  2. The difference in the cost of a renovation versus a purchase
  3. Finding an existing home or designing a new home that has exactly what you want (versus trying to restructure the layout of your current house)

In either case, you’ll need access to capital: the funds for the renovation or the down payment your next home would require. The great news is that the money you need probably already exists in your current home in the form of equity.

Home Equity Is Skyrocketing

The record-setting increases in home prices over the last two years dramatically improved homeowners’ equity. The graph below uses data from CoreLogic to show the average home equity gain in the first quarter of the last nine years:The Big Question: Should You Renovate or Move? | Simplifying The MarketOdeta Kushi, Deputy Chief Economist at First American, quantifies the amount of equity homeowners gained recently:

“Remember U.S. households own nearly $35 trillion in owner-occupied real estate, just over $11 trillion in debt, and the remaining ~$24 trillion in equity. In inflation adjusted terms, homeowners in Q2 had an average of $280,000 in equity- a historic high.”

As a homeowner, the money you need to purchase the perfect home or renovate your current house may be right at your fingertips. However, waiting to make your decision may increase the cost of tapping that equity.

If you decide to renovate, you’ll need to refinance (or take out an equity loan) to access the equity. If you decide to move instead and use your equity as a down payment, you’ll still need to mortgage the remaining difference between the down payment and the cost of your next home.

Mortgage rates are forecast to increase over the next year. Waiting to leverage your equity will probably mean you’ll pay more to do so. According to the latest data from the Federal Housing Finance Agency (FHFA), almost 57% of current mortgage holders have a mortgage rate of 4% or below. If you’re one of those homeowners, you can keep your mortgage rate under 4% by doing it now. If you’re one of the 43% of homeowners with a mortgage rate over 4%, you may be able to do a cash-out refinance or buy a more expensive home without significantly increasing your monthly payment.

First Step: Determine the Amount of Equity in Your Home

If you’re ready to either redesign your current house or find an existing or newly constructed home that has everything you want, the first thing you need to do is determine how much equity you have in your current home. To do that, you’ll need two things:

  1. The current mortgage balance on your home
  2. The current value of your home

You can probably find the mortgage balance on your monthly mortgage statement. To find the current market value of your house, you can pay several hundreds of dollars for an appraisal, or you can contact a local real estate professional who will be able to present to you, at no charge, a professional equity assessment report.

Bottom Line

If the past 18 months have refocused your thoughts on what you want from your house, now may be the time to either renovate or make a move to the perfect home.

Content previously posted on Keeping Current Matters