Category: Housing Market (Page 16 of 38)

Key Trends in Today’s Real Estate Market

January 31, 2022 / Tom Bonetto

aerial photography of buildings under blue and white sky during golden hour

As we move into 2022, one thing is clear…today’s real estate market is one for the record books.

The exact mix of conditions we have today creates opportunities for both buyers and sellers.

Home values are appreciating at rates we have not seen since the housing boom nearly 15 years ago.

At the same time, there is a general shortage of homes for sale across the nation. This has led to prevalent bidding wars, as homebuyers struggle to purchase a home before prices go even higher.

Let’s take a look at today’s real estate market and how it will affect you as a home buyer (and seller).

4 Main Developments

Home Price Appreciation

Shortage of Available Homes

Purchase Competition and Bidding Battles

Rise in Home Equity

Let’s take a closer look at these 4 factors…

Home Price Appreciation

Over the past year, we have seen incredible home price appreciation throughout the US. According to the most recent Home Price Index (HPI) from CoreLogic, national home prices have increased over 18% year-over-year!

This creates a great opportunity for current homeowners to tap into that equity via a cash-out refinance to make other investments or pay off more expensive consumer debt.

It is not at all unexpected that rising home values are a big part of why real estate remains one of the top investments. For potential sellers, it also means it is a great time to list your house to maximize the return on your investment.

Shortage of Available Homes

In 2021, the number of homes available for sale fell to an all-time low. In recent months, however, inventory levels gradually began to trend up.

According to the latest Monthly Housing Market Trends Report from Realtor.com, newly listed homes have grown by nearly 5%. This isn’t fantastic news for buyers, but the trend is heading in a positive direction.

However, even though we are experiencing small gains in the number of available homes for sale, inventory remains a challenge in most states.

This would still be considered a “seller’s market”, giving current homeowners a good deal of control if/when they decide to put their house up for sale.

Purchase Competition and Bidding Battles

Today’s low supply combined with high demand creates a market with buyer competition and bidding wars.

Purchasers are being forced to become aggressive to make sure their offer stands out from the crowd by offering over the asking price or waiving some contingencies.

multiethnic businesswomen checking information in documents

The number of offers on the average house for sale broke records last year. As a matter of fact, last year’s Confidence Index from the National Association of Realtors (NAR) stated that the average home for sale received at least five offers!

For buyers, the best way to put a convincing offer together is by working with your local real estate professional. That agent can act as your trusted advisor on what terms are best for you and what is most appealing to the seller.

Rise in Home Equity

The final key trend we see in today’s real estate market is the rise in home values and equity. One key thing to consider:

The equity in a home does not just grow when a homeowner pays their mortgage — it also increases as the home’s value appreciates.

Due to this increase in appreciation, homeowners across the country are seeing record-breaking gains in home equity.

This is clear when looking at CoreLogic’s recent reports that indicate homeowners with mortgages (which account for roughly 62% of all properties) have seen their equity increase by 19.6% year-over-year!

Again, this has produced a great opportunity for current homeowners to tap into their home equity. They can do this with a cash-out refinance to make home improvements, other real estate investments, or pay off higher balance consumer debt.

In Conclusion

If you are considering purchasing a home, conditions are a bit challenging because of low inventory, but the rewards can be substantial, as the housing appreciation is expected to continue into 2022!

Contact me to discuss becoming a homeowner or pulling out some equity in your current home, as it would be my pleasure to help you!

Major Pricing Increases Coming on Second Home Mortgages: Fannie Mae and Freddie Mac

January 24, 2022 / Tom Bonetto

Mortgage interest rates and fee structures are increasing for second home financing, thanks to the Federal Housing Finance Agency (FHFA).

The FHFA has announced targeted escalations to Fannie Mae and Freddie Mac’s upfront fees for second home loans.

Here’s their announcement:

Upfront Fee Adjustments for Second Home Loans to Take Effect

For second home loans, upfront fees will increase between 1.125 percent and 3.875 percent, depending on the loan-to-value ratio.

Why The Change?

Essentially, this appears to be the FHFA’s attempt at revenue redistribution. They will be charging more for 2^nd home financing in order to facilitate increased participation in first-time and low-income borrower programs.

Picture of Sandra Thompson — FHFA Acting Director Sandra Thompson

In a statement, FHFA Acting Director Sandra Thompson said the fee increases are to provide better access to mortgages for first-time and low-income borrowers, as well as strengthen Fannie Mae’s and Freddie Mac’s balance sheets.

“These targeted pricing changes will allow the Enterprises to better achieve their mission of facilitating equitable and sustainable access to homeownership, while improving their regulatory capital position over time,” said Thompson.

“Today’s action represents another step FHFA is taking to strengthen the Enterprises’ safety and soundness and to ensure access to credit for first-time home buyers and low- and moderate-income borrowers.”

In short, it looks like second homeowners will be footing the bill and helping fund first-time buyer and low-income borrower programs.

illustration of woman analyzing financial line graphic

What Does it Mean?

For mortgages on 2^nd homes, they will now look nearly identical to investment properties in terms of rates and fees.

Traditionally, 2^nd homes had similar rates and fees relative to primary residences. Here are a few sample scenarios prior to the FHFA’s move…assumptions: 760 credit score, 20% down (80% loan-to-value):

Primary residence or 2^nd home

Interest Rate – 3.5%
Points – $0

Investment Property – single family residence

Interest Rate – 4.5%
Points – 1.5 (1.5% of the loan amount)

After April 1^st,, here’s what we can expect:

Primary residence

Interest Rate – 3.5%
Points – $0

Second Home or Investment Property – single family residence

Interest Rate – 4.5%
Points – 1.5 (1.5% of the loan amount)

These rates/fees are just examples to show the differences in between primary residences and 2nd home/investment properties. Of course, rates are subject to change daily.

wallet with coins banknotes and credit card for payment

Also, these increases are for loans purchased by Fannie Mae and Freddie Mac on/after April 1^st, 2022 – and most lenders will need to have these increases in place for loans closing in March.

For example, under the new plan, the buyer of a second home with a $300,000 mortgage loan amount and loan-to-value ratio of 65% will pay an additional fee of $4,875 if their mortgage is acquired by Fannie Mae or Freddie Mac, per the National Association of Home Builders.

Prior to the policy change, the same buyer would pay no additional fee for the comparable mortgage.

Dissenters

“With the nation in the midst of a housing affordability crisis and many more workers electing to telework, this is exactly the wrong time for federal regulators to be raising fees on homeownership and second homes,” Chuck Fowke, chairman of the NAHB, which has spoken out against the fee increases.

close up of mans mouth with crooked teeth

The National Association of Realtors (NAR) chimed in, as well: “Fannie Mae and Freddie Mac will face greater risks as the market is waned off of the extraordinary federal support during the pandemic, and these changes may help them to support the maximum access and affordability possible for the market in a sound manner,” said NAR President Leslie Rouda Smith.

“However, we are concerned that any fee increases that exceed necessary levels in the current environment will harm affordability and access for consumers. REALTORS® believe any excess revenues gleaned from the fee increases must be used to support homeownership opportunities in underserved communities, expanding affordability and access in a safe manner.”

In Conclusion

Unfortunately, get ready to pay more for your second home.

As always, mortgage rates for second homes will depend on a borrower’s credit score and down payment. With current mortgage rates on the rise during the first part of 2022, some market watchers are even forecasting that the new fees could increase interest rates to nearly 5% for second home purchases late this spring.

If the new mortgage interest rates aren’t to your liking for 2nd homes, you always have the alternative lending market to explore. There are other options out there!

Do reach out to me to find out more, as it would be my pleasure to help you!

First-Time Buyers: Facts Young Home Buyers Should Know

January 24, 2022 / Tom Bonetto

joyful young couple dancing after moving in new purchased apartment

As we all know, there’s a good deal of anxiety out there for first time home buyers. Home ownership is a major investment and isn’t something to be taken lightly. This one of the most important financial decisions one can make…and it will have a long term effects in building wealth.

It is never too early to start planning for your financial future, including that first home purchase.

There are some serious benefits to home ownership, to be sure (and you can find out more on that here…).

However, there are a few things that young homebuyers frequently fail to consider when starting the home buying process.

Let’s take a look at these key facts…

The Home Buying Process Begins With Mortgage Pre-Approval

Before you start looking for that dream home, would-be buyers need to have a good understanding of their overall financial position. This means having financial information readily available, such bank, savings, and investment statements.

You might want to check your credit score via a free, online site. While it won’t give you the exact score, it will give you a good idea of what to expect. More on that here…

It’s important to konw that mortgage interest rates tend to be higher with lower credit scores, which can dramatically affect the total costs associated with a new home purchase.

In general, saving for a down payment is sometimes viewed as one of the biggest obstacles for homebuyers, but that does not have to be the case. There are a wide variety of down payment options available – from 0% to 20%+! You can find out more on that here…

Home Ownership Becomes Less Affordable the Longer You Wait

With mortgage rates starting to rise along with home prices appreciating, putting off buying a home now could cost you much more later.

a couple taking a selfie with their new home key

Sam Khater, Chief Economist at Freddie Mac, recently noted, “As the economy progresses and inflation remains elevated, we expect that rates will continually rise in the second half of the year.”

Most experts also forecast interest rates will rise in the months ahead, and even the smallest increase can influence your buying power. So, if you have been on the fence about buying a home, there really is no time like the present to purchase one.

Do you think you might be too late and have missed out on purchasing? Not at all! You can find out more on that here.

Know What You Can Afford and Your Mortgage Options

Some young homebuyers are unsure they can actually afford a mortgage payment for a home that suits their growing needs.

Fortunately, there are a multitude of options! For example, the Federal Housing Administration (FHA) loan for first-time buyers (and a minimum 3.5% down payment). Or a VA loan backed by the Department of Veterans Affairs (if you qualify), along with other home loan programs available to you.

a couple walking through the door while carrying boxes

What’s more, many buyers may be able to afford more home than you think. It’s important to work with a mortgage professional who can help analyze the different programs to find one that suits your individual needs.

Knowing how much home you can afford and understanding the current market when starting the process are musts—and could be just what you need to stop renting and start buying.

Would you like to find out more? Contact me to discuss your current situation and how you might be able to take advantage of today’s real estate market. It would be my pleasure to help you!

Housing “Crash” in 2022? Extremely Doubtful.

January 17, 2022 / Tom Bonetto

woman walking toward black sedan parked in front of colorful houses

Home prices have climbed rapidly over the last 3 years. So much so, many in the media worry that a housing market crash might be looming.

Is this really a valid fear?

Will the Housing Market Crash In 2022? Nearly all experts say “no”.

Given the increases in value of homes, there are a few in the news media pontificating that a housing market crash is on the horizon.

Experts and the data, however, suggest otherwise. Here are two key factors…

New “Millennial” Buyers

woman in white crew neck t shirt using silver macbook

The Millennial demographic makes up a major portion of homebuyers. Most experts believe that next year, they’ll continue to the major players in the national housing market. Many of them will be first time buyers, which will help keep demand for homes robust over the next few years.

Believe it or not, household formations of those ages 27-35 is over double the rate of actual homes being built. There will continue to be a wide gap between the number of homes that need to be built to keep up with demand. This alone is putting pressure on prices which won’t change in the foreseeable future.

Low Inventory

Housing inventory has made things tough for homebuyers as of late. This has been a crucial factor in the rapid rise of home prices over the past year. Although demand among buyers continues to remain strong, existing inventory has not been sufficient to keep up with that demand.

Most industry insiders believe that this situation stay with us in 2022. According to Fannie Mae, a total of 6.8 million new and existing homes are expected to sell by the end of this year. In 2022, about 5.6 million existing homes are expected to be sold, along with 893,000 new home sales.

What Can We Expect in 2022?

According to Zillow, the average price of a home in the US has jumped 19% over the last year. They also predict home prices to increase at a rate of 13.6% over the next 12 months.

As you might remember from your basic economics coursework, the price of anything is based on supply and buyer demand. Over last 2 years, demand among homebuyers has been strong, while housing inventory has been very tight.

Continued Constricted Inventory

While buyer demand remains high, housing inventory is shrinking for the time being. Year-over-year, the number of listed properties decreased 22% compared to 2020. Unfortunately for buyers, seller activity continues to be much slower relative to buyer traffic.

Strong Buyer Demand

Real estate professionals anticipate home buyer demand to remain strong into 2022. In September of 2020, listed homes received an average of 3.4 offers, and by the same month a year later, that number moved up to nearly 4 offers.

These figures suggest that buyer demand has remained fairly strong yet stable, which is expected to be the case moving into 2022.

Mortgage Rates

Low mortgage rates make home buying more affordable. Even though home prices have risen dramatically over the past year, historically low interest rates have still made it achievable for buyers to get into the market.

Over the past three years, mortgage rates have been on a steady decline, though they’ve recently shown a slight uptrend. In the fall of 2018, the rate for a 30-year fixed-rate mortgage peaked at nearly 5%

Today, the rate for the same mortgage type now sits right around 3.375%. This makes a huge difference in the overall cost of a mortgage and monthly mortgage payment amounts.

According to the Mortgage Bankers Association (MBA), the average 30-year fixed-rate mortgage rate will reach 3.7% by the third quarter of 2022, and could hit 4% by the end of the year.

Find Out More

In 2022, most believe that property values will most likely continue to rise, although at a slower rate. With that said, a crash is highly unlikely.

Would you like to find out more? Contact me to discuss your current situation and how you might be able to take advantage of today’s real estate market. It would be my pleasure to help you!

2022 Real Estate and Mortgage Rate Forecast – The Lending Coach

January 10, 2022 / Tom Bonetto

In looking at the 2022 real estate and mortgage rate forecast, I’ll analyze what’s driving the real-estate market and what should impact mortgage rates over both the long and short term.

Similarly to 2021, the biggest issue will be finding enough homes for buyers, as housing inventory is still near all-time lows throughout much of the country. With that said, inventory has shown improvement for buyers over the last 3-4 months.

At the same time, because of today’s historically low mortgage rates (which are rising), housing affordability is still at a good level, even with the increases in home prices and rates. This is good news for buyers.

Interest rates are up in 2022…and that’s expected to continue – but it’s important to understand that rates are still historically VERY low.

Real Estate

Inventory

The total supply of available homes for sale will continue to be the biggest issue in 2022.

Per Zillow’s chief economist: “We predict that the current sellers’ market will continue into 2022, driven by the same factors that drove up home values by double-digit percentages in 2021…”

“A tight supply of for-sale homes, plenty of millennial and baby boomer buyers competing for those homes, low mortgage rates, and a shift toward remote work that opens new possibilities for home shoppers.”

Fortunately, there are a few bright spots, as new homes are being built at a faster pace.

“With more housing inventory to hit the market, the intense multiple offers will start to ease,” National Association of Realtors (NAR) economist Lawrence Yun said recently. “Home prices will continue to rise but at a slower pace.”

According to the NAR, new-home sales are forecast to rise to 920,000 in 2022, up from last year, which is expected to have been around 800,000. Existing-home sales are anticipated to dip to 5.9 million, down from last year, which is expected to have been around 6 million.

Appreciation

Home prices escalated very quickly in 2021. The national median home price hit $362,800 in June, an all-time high, according to the NAR. The Case-Shiller home price index peaked in August when prices rose 19.8 percent year-over-year that month!

Zillow’s forecast calls for an 11% increase in home values in 2022. That’s down from the 19.5% jump projected for 2021, but still among the strongest years since Zillow began tracking home values.

With that said, our forecast for 2022 is continued appreciation, but not as quickly. Most experts believe that home values will rise between 7% to 11% in 2022.

Interest Rates

Mortgage rates have risen over .375% during the first 10 days of 2022, due to the market’s concern of increased inflation, government spending, and debt.

This pattern will most likely continue into the first half of 2022.

Inflation Fears

Mortgage rates are affected by inflation because inflation erodes the buying power of the fixed return that a mortgage holder receives. Interestingly, the best way to combat inflation is by raising the Fed Funds Rate. Because inflation is already over 7%, mortgage rates are climbing in response.

The Federal Reserve and its President, Jerome Powell, stated they are forecasting multiple rate increases this year AND a tapering of their balance sheet in 2022, which they believe will limit inflation and begin to bring it down closer to their 2% target.

Facts from 2021 year under Jerome Powell

Many experts hope these actions will bring DOWN interest rates later in the year, possibly into the low 3% range once again. This will depend on how effective the Federal Reserve is in fighting this current inflation battle.

Silver Lining for Certain Buyers

Rising rates might not necessarily bad news for some buyers. The “silver lining” of higher mortgage rates is that fewer speculative buyers will be in the market, because there is less money to be made. That could actually help first-time buyers.

“When you have higher interest rates, it becomes more of the people who buy homes just to live in them,” says Skylar Olsen, the principal economist at Tomo. “That’s something the market will benefit from, coming back down to sanity.”

Mortgage Rates in 2022

NAR’s Yun projects that mortgage rates will increase to 3.7 percent in 2022, pushed up by persistently higher inflation.

Economists at the Mortgage Bankers Association predict that the 30-year fixed-rate mortgage will rise to 4 percent in 2022.

Interest Rate Forecast with Red Percentage Sign in the Background

“Mortgage lenders and borrowers should expect rising mortgage rates over the next year as stronger economic growth pushes Treasury yields higher,” said Mike Fratantoni, MBA’s chief economist.

Greg McBride, the chief financial analyst at Bankrate.com, predicts that the 30-year fixed mortgage rate will peak near 3.75% during the year and fall back to 3.5% by the end of the year.

“Long-term rates will move higher in the first half of the year, but by the close of 2022, concerns about slowing economic growth will be unwinding that and bringing them back down,” he said. “This will be higher than where mortgage rates started the year but ending at levels previously unseen before the pandemic began in 2020. The drop-off in refinancing activity will mean lots of competition among lenders thirsting for volume and plenty of lenders with rates much better than the average.”

In Conclusion

2022 looks to be a decent one for both buyers and sellers, although the market would clearly be considered a “seller’s market”, because inventory is quite low.

Also, we can expect mortgage rates to rise through the summer – possibly moving as high as 4%.

Although that’s higher than the lows we’ve seen over the last 2 years, a 4% mortgage rate is historically CRAZY low and something buyers should take advantage of!

To sum up the 2022 real estate and interest rate forecast:

Mortgage rates will rise in the beginning of the year and could drop later in the year
Housing inventory will continue to remain tight
Home prices will continue to move upward, although at a slower rate than 2021
Housing will still remain affordable, due to historically low mortgage rates
Inflation will be the big “wild-card” factor and could change things

In reality, now is a fantastic time to purchase or refinance and take advantage of market appreciation and low mortgage rates. Contact me for more information, as it would by my privilege to help you.

Key Trends in Today’s Real Estate Market

4 Main Developments

Home Price Appreciation

Shortage of Available Homes

Purchase Competition and Bidding Battles

Rise in Home Equity

In Conclusion

Major Pricing Increases Coming on Second Home Mortgages: Fannie Mae and Freddie Mac

Why The Change?

What Does it Mean?

Dissenters

In Conclusion

First-Time Buyers: Facts Young Home Buyers Should Know

The Home Buying Process Begins With Mortgage Pre-Approval

Home Ownership Becomes Less Affordable the Longer You Wait

Know What You Can Afford and Your Mortgage Options

Housing “Crash” in 2022? Extremely Doubtful.

New “Millennial” Buyers

Low Inventory

What Can We Expect in 2022?

Continued Constricted Inventory

Strong Buyer Demand

Mortgage Rates

Find Out More

2022 Real Estate and Mortgage Rate Forecast – The Lending Coach

Real Estate

Inventory

Appreciation

Interest Rates

Inflation Fears

Silver Lining for Certain Buyers

Mortgage Rates in 2022

In Conclusion

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