May 13th, 2024 7:44 PM by Eric Willner
Radio Show Notes 05/08/24 Wednesday:
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Midweek Report - Market Surges, Mortgage Demand Rises Amid Lower Rates, More!
By Eric Willner, Host of The Real Estate Show, America’s longest running daily radio show about real estate.
Are you feeling uncertain about the current state of the economy, bombarded by conflicting news headlines, and wondering if now is a good time to be buying or selling real estate?
Well, you're in the right place. I'm Eric Willner, known as the Voice of Real Estate and founder of America’s longest-running daily radio show about real estate. Today, we're diving into the Wednesday Midweek Mortgage & Market Report Edition of The Real Estate Show.
There’s a Loan for Everyone!
Did you know? According to the National Association of Realtors, there are actually over 30 different types of mortgage loans available! That's a lot of options, and with the right guidance, you can find the perfect loan to fit your specific needs and goals.
Did you know that there's a loan tailored to meet every individual's needs and goals in real estate investing? That's right! Today, we're exploring the myriad loan options available and why understanding them is crucial for success in real estate.
Before we delve into today's topic, let me remind you about our special FREE Workshops happening this week:
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Let's continue to explore why NOW is the time to buy real estate, utilizing insights from our previous shows and the latest headlines:
Top Trending Topics for Today’s Update:
For today, Wednesday, May 08, 2024, the current average interest rate for the benchmark 30-year fixed mortgage is 7.25%, decreasing 11 basis points compared to this time last week. For homeowners looking to refinance, the average 30-year refinance interest rate is 7.26%, down 11 basis points compared to this time last week. Mortgage rates have jumped around but remain elevated. In 2024, experts were predicting the 30-year mortgage to slowly shift down, eventually landing under 6 percent. Mortgage rates change constantly, however, and many factors could play out between now and year-end to change those projections. C
Check out our mortgage rates forecast for the latest and best loans tailored to your specific needs and goals. Text the word “Loan” to 561-861-2366.
Let’s see our First Article:
KEY POINTS
· The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($766,550 or less) decreased to 7.18% from 7.29%.
· Refinance demand increased to 5% for the week, although it was still 6% lower than the same week one year ago.
· Applications for a mortgage to purchase a home rose 2% for the week but were still 17% lower than the year-earlier week.
Mortgage rates are significantly higher than they were at the start of this year, but they pulled back slightly last week after several weeks of straight increases. That was enough to spark some new demand, especially for refinances.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($766,550 or less) decreased to 7.18% from 7.29%, with points unchanged at 0.65 (including the origination fee) for loans with a 20% down payment.
“Treasury rates and mortgage rates fell last week on the news of a slowing job market, with wage growth at the slowest pace since 2021, and the Federal Reserve’s announced plans to ease quantitative tightening in June and to maintain its view that another rate hike is unlikely,” said Mike Fratantoni, MBA’s senior vice president and chief economist.
The rate for Federal Housing Administration loans fell below 7% for the first time in three weeks, which is a welcome sign for first-time buyers, who tend to use FHA loans.
“First-time homebuyers account for roughly half of purchase loans, and the government lending programs are an important source of financing for these homebuyers. The gain in FHA activity is a sign that this segment of the market is active,” Fratantoni added.
The dip in rates caused refinance demand to increase 5% for the week, although it was still 6% lower than the year-earlier week. Rates are 70 basis points higher than they were a year ago, so there are very few borrowers who can benefit from a refinance. A basis point is one-hundredth of a percentage point.
Applications for a mortgage to purchase a home rose 2% for the week but were still 17% lower than the same week a year earlier. Affordability is hitting potential buyers hard, as home prices continue to climb. Tight supply is keeping the competition high, resulting in very few bargains.
Mortgage rates fell further to start this week. The next big piece of economic data comes next week, with the release of the monthly consumer price index. That could move rates sharply in either direction, depending on what it says about inflation.
Article 2: From CNBC.com
· True to its name, a 30-year fixed-rate mortgage spreads out repayment over 30 years, with an interest rate that remains the same for the life of the loan.
· It’s “a uniquely American construct,” said Greg McBride, chief financial analyst for Bankrate.
· Most U.S. homebuyers taking out a mortgage opt for a 30-year fixed-rate option — but they may not realize how unusual that offering is.
· “The 30-year fixed-rate mortgage is a uniquely American construct,” said Greg McBride, chief financial analyst for Bankrate.
· As long as you do not refinance or sell your house, the rate you get at the start of your mortgage won’t change, said Jacob Channel, a senior economist at LendingTree. “You’ll have the exact same rate, regardless of what the broader market is doing,” Channel said.
· In 2022, 89% of homebuyers applied for a 30-year mortgage, according to government data analyzed by Homebuyer.com.
· The 30-year fixed-rate mortgage can exist in the U.S. due to the country’s deep financial markets, experts say.
· “If we did not have the dominance of the fixed-rate mortgage in the U.S. residential mortgage market, we would see a much higher level of stress among existing homeowners,” McBride said.
· The secondary market for mortgage-backed securities in the U.S. is the “whole reason” for the existence of the 30-year fixed-rate mortgage, McBride explained.
· About half of all mortgages originated in the U.S. will end up packaged into a mortgage-backed security and sold to bond investors, he said.
· While mortgage-backed securities were at the heart of the financial crisis and Great Recession, improvements have been made to avoid the risk. Lenders, for example, strengthened mortgage origination processes and improved underwriting standards and collateral assessment, and there are now other guardrails that did not exist over a decade ago.
· Mortgage-backed securities are attractive to investors in the U.S. and across the globe because their government sponsorship makes them safe investments over long periods of time. They also provide a fixed payout, said Daryl Fairweather, chief economist at Redfin, a real estate brokerage site.
· The rate on the 30-year fixed-rate mortgage tracks closely to 10-year Treasurys because “U.S. real estate is almost as good an investment as a U.S. Treasury bond,” she said.
· However, mortgage-backed securities are “only part of the story,” according to Enrique Martínez García, an economic policy advisor of the Federal Reserve Bank of Dallas.
· “There are two institutions in the U.S. mortgage market that are very specific to the U.S.: Fannie Mae and Freddie Mac,” Martínez García said.
· The insurance Fannie and Freddie provide is essential to why lenders are willing to take on the risk associated with interest rate movements, Martínez García explained.
· “In most other countries, [that risk] gets passed through to the households, the buyers,” he said.
· Even in countries where fixed-rate mortgages are prevalent, they usually span shorter periods of time. That’s because such countries lack both the path toward securitization and institutions that take on the long-term risk, Martínez García said.
· “That’s what’s missing in many other countries,” he said.
While homebuyers in other countries can typically get long-term mortgages or fixed-rate loans, the U.S. is unusual in its combination of those attributes.
In Canada, for example, homeowners might get a mortgage that spans 25 years, but they are expected to refinance every five years or so, Channel said.
In the U.K., homeowners might get fixed-rate mortgages, but such loans only span up to five years.
“Every few years, you’re nonetheless doing something that causes your rate to change,” Channel said.
The difference between fixed-rate and variable mortgage rates lies in who bears the risk of fluctuating rates, Martínez García said. With fixed-rate loans, financial institutions bear the risk. With variable-rate loans, consumers do.
Article 3: From CNBC
· The share of renters who believe that they one day will be able to afford a home, fell to a record low 13.4%, according to a New York Federal Reserve survey released Monday.
· There’s not a lot of good news on the renting front, either. Respondents expect rental costs to increase by 9.7% over the next year.
The dream of home ownership has gotten even further away for renters, with higher housing costs and elevated interest rates standing in the way of the American housing dream, according to a New York Federal Reserve survey released Monday.
The share of renters as of February who possess hopes of “residential mobility,” or the belief from renters that they one day will be able to afford a home, fell to a record low 13.4% in the central bank’s annual housing survey for 2024.
That’s down from 15% in 2023 and well off the 20.8% series high back in 2014.
Pessimism about future prospects comes amid a confluence of factors conspiring against the likelihood of renters being able to transition to home ownership.
For one, some 74.2% of renters viewed obtaining a mortgage as somewhat or very difficult, which the New York Fed said has “deteriorated substantially” from the 66.5% level in 2023 and 63.1% in 2022.
Moreover, mortgage rates have remained high by historical standards. A 30-year fixed-rate mortgage now carries an average 7.22% borrowing rate, the highest since late November 2023, according to Freddie Mac.
Housing affordability has improved little, with the median price in February at $388,700, the highest since November, according to the National Association of Realtors. The NAR’s housing affordability index was at 103 in February, down slightly from January but still at elevated levels with average monthly housing payments at $2,040.
Survey respondents expect housing prices to increase 5.1% over the next year, nearly double the 2.6% expected rate in February 2023 and above the pre-pandemic mean of 4.2%.
Despite prospects for the Fed to cut interest rates before the end of 2024, respondents think mortgage rates are only going to go higher. The outlook for a year from now is that borrowing costs will be 8.7%, and 9.7% in three years, both survey records.
There’s not a lot of good news on the renting front, either. Respondents expect rental costs to increase by 9.7% over the next year, up 1.5 percentage points from last year’s survey and the second highest in series history.
The results come a week after the Federal Open Market Committee voted to hold benchmark interest rates steady while indicating that there has been “a lack of further progress” in its efforts to bring the annual inflation rate back down to 2%.
Futures market pricing is indicating that the Fed will begin lowering rates in September, with a another cut likely to come in December.
So that’s our Midweek Report:
In today's Midweek Mortgage & Market Report, we've seen some interesting trends in the real estate landscape. Despite mortgage rates remaining elevated, there's been a slight decrease in the average interest rate for the benchmark 30-year fixed mortgage, offering a glimmer of hope for prospective homeowners. The increase in refinance demand after weeks of rate hikes indicates a potential opportunity for those looking to lower their mortgage payments. However, the dream of homeownership seems to be slipping further away for many renters, with high housing costs and challenging mortgage approval processes. As we navigate these fluctuations, it's essential to stay informed and explore all available loan options tailored to individual needs and goals. Remember to text "Loan" to 561-861-2366 for the latest mortgage rates forecast and personalized loan advice. Thank you for tuning in to The Real Estate Show, where we strive to empower you on your journey to financial independence through real estate.
Remember: It’s a stone-cold fact that Real Estate is THE best investment. Period. So get yours today!
Thank you for tuning in to today's episode of The Real Estate Show. Don’t just listen, use our show to kickstart your journey into real estate investing. Join us again tomorrow for the “ATM Edition – About The Money”. And don't forget to share this show with others who should also own real estate. Until next time, this is Eric Willner, signing off!
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Eric Willner is the Host and Founder of The Real Estate Show, an informative show about how to buy, own, and improve real estate the right way, on autopilot. - The Automatic Landlord way. (AutomaticLandlord.com) You can reach Eric Willner at Eric@Ericwillner.com or 888-595-7779.
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