Mortgage Rates Lowest in Nearly a Month But Not For Long

Slow and steady wins the race, and mortgage rates have been making slow, steady progress back down from recent long-term highs seen at the end of March.  Over that time, the average conventional 30yr fixed rate quote has fallen anywhere from .125 to 0.25% depending on the lender.  That's not a bad move over the course of 2 weeks and especially in an environment where lenders have every right to be defensive.  After all, there have been numerous "false starts" for the sort of winning streak we're currently enjoying.  

Beyond that, with rates so closely tied to covid and the economy, "higher rates in 2021" has been an easy thesis for market watchers.  Anything that runs counter to that will need to bring a compelling explanation.  It's no surprise, then, to see the "pause" of the J&J vaccine in the news this morning just before rates enjoyed another modest drop.  

Be careful though.  These are small-scale moves in the bigger picture.  Unless progress against the pandemic is legitimately derailed, we can't count on the good times to stick around for too much longer.  This could even be as simple as the market "taking a break" from the prevailing trend before deciding on the pace and timing of the next move.

BY: MATTHEW GRAHAM

Mortgage Rates

30 Yr FRM : 3.25%

5 Yr FRM : 2.72%

FHA 30 Year Fixed : 2.75%

Jumbo 30 Year Fixed : 3.32%

5/1 Yr ARM : 2.64%

5 Real Estate Reality TV Myths Explained

Have you ever been flipping through the channels, only to find yourself glued to the couch in an HGTV binge session? We’ve all been there, watching entire seasons of shows like “Property Brothers,” “Fixer Upper,” and “Love It or List It,” all in one sitting.

When you’re in the middle of your real estate-themed TV show marathon, you might start to think everything you see on the screen must be how it works in real life. However, you may need a reality check.

Reality TV Show Myths vs. Real Life:

Myth #1: Buyers look at 3 homes and decide to purchase one of them.
Truth: There may be buyers who fall in love and buy the first home they see, but according to the National Association of Realtors, the average homebuyer tours 10 homes as a part of their search.  

Myth #2: The houses the buyers are touring are still for sale.
Truth: Everything is staged for TV. Many of the homes shown are already sold and are off the market. 

Myth #3: The buyers haven’t made a purchase decision yet.
Truth: Since there is no way to show the entire buying process in a 30-minute show, TV producers often choose buyers who are further along in the process and have already chosen a home to buy. 

Myth #4: If you list your home for sale, it will ALWAYS sell at the open house.
Truth: Of course, this would be great! Open houses are important to guarantee the most exposure to buyers in your area, but they are only one piece of the overall marketing of your home. Keep in mind, many homes are sold during regular showing appointments as well. 

Myth #5: Homeowners decide to sell their homes after a 5-minute conversation.
Truth: Similar to the buyers portrayed on the shows, many of the sellers have already spent hours deliberating the decision to list their homes and move on with their lives and goals.

Bottom Line

Having an experienced professional on your side while navigating the real estate market is the best way to guarantee you can make the home of your dreams a true reality.

Home Prices Up 5.05% Across the Country

Some Highlights:

• The Federal Housing Finance Agency (FHFA) recently released their latest Quarterly Home Price Index report.

• In the report, home prices are compared both regionally and by state.

• Based on the latest numbers, if you plan on relocating to another state, waiting to move may end up costing you more!

What a Difference a Year Makes for Sellers

Over the last few years, many sellers have been hesitant to put their houses on the market because they feared not being able to find another home to buy.

We’ve reported on inventory shortages in the past, and it’s been a constant concern for potential buyers throughout recent years. New research shows the inventory concern is starting to decrease among potential buyers.

According to First American, the two leading obstacles to homeownership that buyers feel today are Affordability and Limited Inventory. This means the feeling that homes are less affordable has risen, while the fear of limited inventory has decreased, delivering a wealth of good news for sellers.

At the same time, over the past 12 months, we’ve seen a steady month-over-month increase in the number of homes coming to market for purchase. In the past, the lack of listings and available inventory slowed down the real estate market. This recent increase in current inventory has many buyers and sellers now thinking it is time to make their move – and rightfully so! For the last two months, we’ve seen over 4 months of inventory become available for sale, a promising number that’s been slowly increasing this year and creating more buying opportunities.

To further support the idea of an improving real estate market, Sam Khater, the Chief Economist at Freddie Mac says,

“…In the near-term, we expect the housing market to continue to improve from both a sales and price perspective.” 

Many experts, like Sam, believe the second half of 2019 will drive a stronger market than we saw at the beginning of the year. This is great news for homeowners who have put off getting their houses on the market and are now ready to make a move.

Bottom Line

What a difference we’ve seen over the course of this year! If you’re thinking of selling, now is the time as inventory is on the rise.

Should I Refinance My Home?

With the recent lower interest rates, many homeowners are wondering if they should refinance.

To decide if refinancing is the best option for your family, start by asking yourself these questions:

Why do you want to refinance?

There are many reasons to refinance, but here are three of the most common ones:

1. Lower your interest rate and payment – This is the most popular reason. If you have a 5% interest rate or higher, it might be worth seeing if you can take advantage of the current lower interest rates, hovering below 4%, to reduce your monthly payment and overall cost of the loan.

2. Shorten the term of your loan – If you have a 30-year loan, it may be advantageous to change it to a 15 or 20-year loan to pay off your mortgage sooner.

3. Cash-out refinance – With home prices increasing, you might have enough equity to cash out and invest in something else, like your children’s education, a vacation home, or a new business.

Once you know why you might want to refinance, ask yourself the next question:

How much is it going to cost?

There are fees and closing costs involved in refinancing, and Lenders Network explains:

“If you were to refinance that loan into a new loan, total closing costs will run between 2%-4% of the loan amount.”

They also explain that there are options for no-cost refinance loans, but be on the lookout:

“A no-cost refinance loan is when the lender pays the closing costs for the borrower. However, you should be aware that the lender makes up this money from other aspects of the mortgage. Usually pay charging a slightly higher interest rate so they can make the money back.”

If you’re comfortable with the costs of refinancing, then ask yourself one more question:

Is it worth it?

To answer this one, we’ll use an example. Let’s assume you have a $200,000 home loan. A 4% refinance cost will be $10,000. If you want to lower your interest rate from 6% to 4%,  then refinancing is going to save you $244 per month. To break even ($10,000/$244), you need to continue owning your home for over 40 months.

Now that you know how the math shakes out, think about how much longer you’d like to own your current home. If you plan to stay for more than 3 years, then maybe it is advantageous for you to refinance.

If, however, your current home does not fulfill your present needs, you might want to consider using your potential refinance costs for a down payment on a new move-up home. You will still get a lower interest rate than the one you have on your current house, and with the equity you’ve already built, you can finally purchase the home of your dreams.

Bottom Line

There are many opportunities for growth in the current real estate market. To find out what’s right for your family, contact me and I’d be happy to help.

Highest Mortgage Rates in More Than 3 Weeks

Mortgage rates moved decisively higher this week as the underlying bond market finally began shifting gears.  After the Fed meeting in June, rates moved to the lowest levels in more than 2 years and had been holding in a narrow range since then.  The risks of a breakout were set to increase as the market digested several key events.  One of the most important of those events was this week's congressional testimony by Fed Chair Powell.  

Interestingly enough, Powell's testimony actually helped rates at first.  In the 2nd part of the testimony yesterday, there wasn't much of a market reaction.  Instead, it was stronger economic data and poorly received Treasury auction that pummeled the bond market.  As bonds weaken, rates rise. 

Not all lenders fully adjusted their rate sheets to reflect yesterday's market movement.  That means many lenders offered even higher rates on Friday despite the fact that the underlying bond market actually improved somewhat.  That leaves today's rates at the highest levels since before the Fed meeting on June 19th.

Loan Originator Perspective

Bond markets recovered a good portion of yesterday's pronounced losses, but we're far from out of the danger zone here.  Market sentiment has gone from bond-friendly to (at least) bond-neutral.  It's going to take a LOT to spur rates lower, and not much motivation for them to rise.  I'm locking loans closing within 45 days. -Ted Rood, Senior Originator

Today's Most Prevalent Rates

• 30YR FIXED - 4.00%

• FHA/VA - 3.625%

• 15 YEAR FIXED - 3.5-3.625%

• 5 YEAR ARMS - 3.375-3.75% depending on the lender

  Ongoing Lock/Float Considerations 

• Early 2019 saw a rapid reevaluation of big-picture trends in rates and in markets in general

• The Federal Reserve has been a key player, and while they aren't the ones pulling the global economic strings, their response (and even their EXPECTED response) to the economy has helped rates fall more quickly than they otherwise might.

• Based on the Fed's laundry list of concerns, the bond market (which determines rates) will be watching economic data closely, both at home and abroad, as well as trade-related concerns. The stronger the data and trade relations, the more rates could rise, while weaker data and trade wars will lead to new long-term lows.

• Rates discussed refer to the most frequently-quoted, conforming, conventional 30yr fixed rate for top tier borrowers among average to well-priced lenders. The rates generally assume little-to-no origination or discount except as noted when applicable. Rates appearing on this page are "effective rates" that take day-to-day changes in upfront costs into consideration.

Mortgage News Daily

5 Powerful Reasons to Own Instead of Rent

Owning a home has great financial benefits.

In a recent research paper, Homeownership and the American Dream, Laurie S. Goodman and Christopher Mayer of the Urban Land Institute explained:

“Homeownership appears to help borrowers accumulate housing and nonhousing wealth in a variety of ways, with tax advantages, greater financial flexibility due to secured borrowing, built-in ‘default’ savings with mortgage amortization and nominally fixed payments, and the potential to lower home maintenance costs through sweat equity.”

Let’s breakdown 5 major financial benefits of homeownership:

1. Housing is typically the one leveraged investment available

Homeownership allows households to amplify any appreciation on the value of their homes by a leverage factor. A 20% down payment results in a leverage factor of five, meaning every percentage point rise in the value of your home is a 5% return on your equity. If you put down 10%, your leverage factor is 10.

Example: Let’s assume you purchased a $300,000 home and put down $60,000 (20%). If the house appreciates by $30,000, that is only a 10% increase in value but a 50% increase in equity.

2. You’re paying for housing whether you own or rent

Some argue that renting eliminates the cost of property taxes and home repairs. Every potential renter must realize that all the expenses the landlord incurs (property taxes, repairs, insurance, etc.) are baked into the rent payment already – along with a profit margin!!

3. Owning is usually a form of “forced savings”

Studies have shown that homeowners have a net worth that is 44X greater than that of a renter. As a matter of fact, it was recently estimated that a family buying an average priced home this past January could build more than $42,000 in family wealth over the next five years.

4. Owning is a hedge against inflation

House values and rents tend to go up at or higher than the rate of inflation. When you own, your home’s value will protect you from that inflation.

5. There are still substantial tax benefits to owning

We know that the new tax reform bill puts limits on some deductions on certain homes. However, in the research paper referenced above, the authors explain:

“…the mortgage interest deduction is not the main source of these gains; even if it were removed, homeowners would continue to benefit from a lack of taxation of imputed rent and capital gains.”

Bottom Line

From a financial standpoint, owning a home has always been and will always be better than renting.

Americans Rank Real Estate Best Investment for 6 Years Running!

Some Highlights:

• Real estate has outranked stocks/mutual funds, gold, savings accounts/CDs, and bonds as the best long-term investment among Americans for the last 6 years.

• Stock owners are more positive about real estate than stocks as an investment.

• Of the 4 listed, real estate is the only investment you can also live in!