The Lending Coach and Finance of America Mortgage are proud to present a special virtual event featuring mortgage and housing expert Barry Habib on Wednesday, April 6th. He will be discussing where the housing market’s heading in 2022.
In case you are unfamiliar, Barry Habib is a real estate and mortgage industry executive, bestselling author, and founder and CEO of MBS Highway. Barry is also a well known media resource and TV commentator on the mortgage and real estate markets.
He has recently been named America’s top real estate forecaster by Zillow and Pulsenomics®.
Join us to learn all about housing rates, recession, and how to be best prepared to serve your borrowers this year!
Wednesday – April 6, 2022 at 10:00 a.m. PDT:
As a professional in the real estate industry, you know that interest rate fluctuation and real estate pricing can be a challenge to predict.
Stay ahead of your competition and find resources to help you become a trusted advisor to buyers and borrowers in your community in this rapidly changing environment.
Barry will discuss his predictions for the housing market going forward in 2022 and the benefits of utilizing this system to show clients and referral partners the power of homeownership.
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.
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!
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 2nd home financing in order to facilitate increased participation in first-time and low-income borrower programs.
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.
What Does it Mean?
For mortgages on 2nd homes, they will now look nearly identical to investment properties in terms of rates and fees.
Traditionally, 2nd 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 2nd 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 1st,, 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.
Also, these increases are for loans purchased by Fannie Mae and Freddie Mac on/after April 1st, 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.
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!
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.
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.
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.
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.
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!
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
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!
Thomas Eugene Bonetto
Mortgage Loan Originator
NMLS: 1431961
About The Coach
Tom Bonetto has been helping his customers and players achieve their best for nearly 30 years. His goal is to provide both a superior customer experience and tremendous value for both his business associates and his players alike.
