Naturally, when world events cause economic uncertainty, markets react. However, the housing market has some things going for it that may help offset any upcoming volatility. For example, there have been a lower than normal number of homes for sale in many markets for a while now. Combined with a high level of home buyer demand, that lack of inventory meant more competition, increasing prices, and fewer choices for buyers. But it may also mean the market is well positioned to absorb any changes to the current balance of supply and demand. Additionally, historically low mortgage rates are expected to help support housing activity. That’s the opinion of Fannie Mae’s Economic and Strategic Research Group. “While uncertainty and heightened financial volatility may soften demand for ‘big ticket’ items including home purchases, the ESR Group expects historically low mortgage rates to provide some offsetting relief,” their most recent release says. “The lower interest rate environment is likely to continue to support housing and fuel a surge in refinance activity, even as macroeconomic growth slows.” In other words, though the current environment is uncertain, housing market conditions may help offset the effects of that uncertainty. (source)
Archive for March 2020
Lenders Expect Low Rates To Spur Activity
Fannie Mae’s quarterly Mortgage Lender Sentiment Survey tracks the views and outlook of senior mortgage executives. And, according to their first quarter survey results, those executives feel good about the mortgage market. Why? Well, mostly because mortgage rates are at, or hovering just above, historic lows. Doug Duncan, Fannie Mae’s senior vice president and chief economist, says lenders are expecting strong consumer demand for mortgage loans. “Lenders’ expectations of consumer demand for purchase and refinance mortgages hit survey highs this quarter, with many lenders pointing to favorable interest rates as the engine driving the demand,” Duncan said. “The first quarter survey data, which were collected during the first two weeks of February, do not reflect the potential impact of the decline in the 10-year Treasury rate seen in recent weeks.” In short, Duncan expects mortgage rates to stay low this year, providing current homeowners a chance to refinance their loans and prospective home buyers the opportunity to buy while rates are lower than they’ve been in years. (source)
Majority Of Homes Are Affordable For Buyers
These days, you hear a lot about how there are too few homes for sale and it’s driving prices upward. But though that’s true in many markets, it doesn’t mean hopeful home buyers should give up on buying. In fact, the most recent Housing Opportunity Index from the National Association of Home Builders shows there are still plenty of available homes for buyers earning the U.S. median income. According to the index, 63.2 percent of all new and existing homes sold between the beginning of October and the end of December were affordable. But obviously, where you’re looking to buy will determine how many affordable homes you find. The West Coast, for example, was far less affordable than the nation’s most accessible markets, which were found in places like Scranton, PA, Kokomo, Ind., Fairbanks, Alaska, Davenport, Iowa, and Springfield, Ohio. Robert Dietz, NAHB’s chief economist, says there are a number of factors at play. “Growing household formations, ongoing job creation, and rising wage growth are fueling housing demand,” Dietz said. “But a record-low resale inventory, coupled with underbuilding as builders deal with supply-side constraints, continue to put upward pressure on home prices even as interest rates remain at low levels.” (source)
Mortgage Rates Fall To All-Time Lows
According to the Mortgage Bankers Association’s Weekly Applications Survey, average mortgage rates fell last week across all loan categories, including 30-year fixed-rate loans with both conforming and jumbo balances, loans backed by the Federal Housing Administration, and 15-year fixed-rate loans. The drop brought rates to their lowest level since 2012 and matched an all-time survey low. Joel Kan, MBA’s associate vice president of economic and industry forecasting, said rates fell due to uncertainty about the coronavirus. “Market uncertainty around the coronavirus led to a considerable drop in U.S. Treasury rates last week, causing the 30-year fixed rate to fall and match its December 2012 survey low …,” Kan said. “Homeowners rushed in, with refinance applications jumping 79 percent – the largest weekly increase since November 2008.” Kan says rates should remain low for, at least, the near future and will help Americans who hope to refinance their home or purchase a house this spring. The MBA’s weekly survey has been conducted since 1990 and covers 75 percent of all retail residential mortgage applications. (source)
How To Choose The Right Renovation Project
There’s usually a long checklist of items to go through before selling a house. After all, you want to maximize your profit and make sure your home is attractive to buyers. That’s why, in addition to cleaning up clutter, planting some flowers, and touching up chipped paint, you may be considering a renovation project. But not all renovations have the same return on investment. That’s why the Appraisal Institute suggests hiring an appraiser to estimate your property’s value before and after a potential upgrade. “Real estate appraisers have the local market knowledge required to gauge how an improvement may affect a home’s value,” Jefferson L. Sherman, president of the Appraisal Institute, says. “While they can’t make guarantees, appraisers can use their expertise and experience to help homeowners make wise decisions about which improvement projects to take on.” For example, projects like a garage door replacement, a minor kitchen remodel, or replacing old windows and siding provide a bigger return on investment than some other projects. Getting a professional opinion before doing any work can help give you confidence that you’re making the smartest choice for your home and finances. (source)
Nearly 60% Of Americans Say Now’s The Time To Buy
Each month, Fannie Mae’s Home Purchase Sentiment Index surveys Americans to measure interest in home buying and selling. The index looks at how people view the housing market, home prices, mortgage rates, their jobs, income, and expectations for the future. In February, the HPSI was relatively flat from the month before but remained near all-time highs. In fact, the survey found 59 percent of Americans believe now is a good time to buy a house and 67 percent say it’s a good time to sell. Doug Duncan, Fannie Mae’s senior vice president and chief economist, says the housing market has started the year off strong. “The HPSI remained relatively steady in February, reflecting another month of robust consumer sentiment consistent with strong housing market data to start the year,” Duncan said. “In particular, household income sentiment picked back up as more workers saw their wages rise amid tight labor market conditions, helping bolster already strong housing demand.” However, though Americans are optimistic about the housing market and economy, Duncan warns that February’s results don’t yet account for the potential economic impact of the coronavirus, which could affect future survey results. (source)
Young and Old Share Common Buying Preferences
A lot of what you look for in a home has to do with the particulars of your day-to-day life. For example, a home buyer who has young children would be more likely to prioritize living in a good school district than a buyer who doesn’t have kids. That makes sense, after all. So you’d probably think that the buying preferences of younger buyers are much different than those of older buyers. And yet, the latest Home Buyer and Seller Generational Trend report from the National Association of Realtors found some surprising results. In fact, it found that buyers between the ages of 22 and 29 had some of the same priorities as buyers between 74 and 94, including living close to loved ones. “The silent generation – older Americans who are typically grandparents and great-grandparents – for years have prioritized living near family and other loved ones,” Lawrence Yun, NAR’s chief economist, says. “But it was surprising to see younger millennials with home buying preferences and ideals similar to older segments of the population.” The survey found that 53 percent of buyers between the ages of 22 and 29 said that proximity to friends and family was a high priority when deciding where to live. (source)
Farmhouse Style Popular With Home Buyers
Home design trends come and go. But whether today’s fad is mid-century inspired or favors a more contemporary look, home buyers can’t help but be swayed by the latest décor trends. After all, no one wants their house to look dated or like it hasn’t been touched since 1982. So which trends are dominating today’s market? Well, according to one recent analysis, the style that buyers will pay the highest premium for is modern farmhouse. Comfortable, casual, and a little rustic is popular with today’s buyers. In fact, listings that advertise a home’s farmhouse aesthetic sold at a 10.3 percent premium, which outpaced all others. That means, an extra $25,000 on the typical American home. Other design trends that were associated with a higher premium included waterfall countertops, Moroccan tile, exposed brick, and free-standing tubs. Ultimately, though, buyers should choose a home that fits their specific lifestyle and personal preferences, because today’s hottest style is likely to be out of fashion by the time you’re ready to put the house back on the market. (source)
Mortgage Rates Now At Lowest Point In 7 Years
According to the Mortgage Bankers Association’s Weekly Applications Survey, average mortgage rates fell to their lowest level in more than seven years last week. Rates were down across all loan categories, including 30-year fixed-rate loans with both conforming and jumbo balances, loans backed by the Federal Housing Administration, and 15-year fixed-rate loans. Michael Fratantoni, MBA’s senior vice president and chief economist, said the decline was due to concerns about the coronavirus. “The 30-year fixed-rate mortgage dropped to its lowest level in more than seven years last week, amidst increasing concerns regarding the economic impact from the spread of the coronavirus, as well as the tremendous financial market volatility,” Fratantoni said. “Refinance demand jumped as a result, with conventional refinance applications increasing more than 30 percent.” Refinance activity is now 224 percent higher than it was at the same time last year. Purchase activity is also up from last year, rising 10 percent above year-before levels. The MBA’s weekly survey has been conducted since 1990 and covers 75 percent of all retail residential mortgage applications. (source)
Freddie Mac Says Market Is Short Millions Of Homes
You don’t have to be an economist to understand supply and demand. When there are more buyers than there are sellers, prices rise. This is true for any market, including the housing market. When there are too few home buyers, homeowners have to price their homes low enough to attract the buyers that are active. When there are too many buyers, the opposite is true. This is why prices have been increasing now for several years. Many housing markets across the country are suffering from a lack of homes for sale. But why? Well, according to Freddie Mac, the issue has its roots in the financial crisis and housing crash. After the crash, many small home builders went out of business and have not returned. That’s led to fewer new homes being built and especially in the affordable price ranges that are most in demand. Freddie Mac estimates that the market is now 3.3 million homes short of where it should be. Fortunately, recent trends point to an uptick in new residential construction and, as the rate of new home building increases, it should help bring balance to the market and keep prices in check. (source)
