Mortgage rates, to some extent, are reactionary. And so, as the economy grows stronger, rates increase. That’s been the story so far this year and, according to the latest results from the Mortgage Bankers Association’s Weekly Applications Survey, last week was no exception. That’s because, rates were up across all loan categories, including 30-year fixed-rate mortgages with both conforming and jumbo balances, loans backed by the Federal Housing Administration, and 15-year fixed-rate loans. Joel Kan, MBA’s associate vice president of economic and industry forecasting, told CNBC the increase was a response to improved economic data. “Treasury rates increased through the week, mainly in response to stronger data on the manufacturing sector, unemployment claims and signs of faster wage growth,” Kan said. In other words, the economy is stronger, people feel more secure in their jobs and are making more money, which caused rates to move to a five-week high. But, though mortgage rates moved up, they are still low when compared to what is historically typical and demand from home buyers remains undeterred. In fact, though affordability concerns persist, the MBA’s measure of demand for home purchase loans moved up last week and is now four percent higher than at the same time last year. More here.
Choosing a house to buy is an important decision. After all, you’re committing a lot of money and several years of your life to a particular property. And so, home buyers tend to know what they want, whether it be a large kitchen, an appealing outdoor space, or an ample amount of storage. But surprisingly, large majorities of home buyers spend too little time paying attention to the neighborhood surrounding the home they’re considering. And, make no mistake, the neighborhood you move to will play an important role in how much you enjoy your new home. Surrounding amenities, schools, and safety are just a few of the factors that can lead to a case of buyer’s remorse. And, according to a recent survey, there are lot of buyers who’ve experienced just that. In fact, 36 percent of respondents said they’d have chosen a different neighborhood had they known more about the one they moved to. One reason this is so common is the number of buyers who do very little neighborhood research before buying. For example, less than half of recent home buyers searched photos of different parts of the neighborhood, visited hot spots, researched police reports, or took a trip to the area after dark. If you want to be certain you’re making a smart choice, do your homework and consider the area outside your potential new house just as much as you do the inside. More here.
These days, just about everyone has some debt. It’s almost more remarkable not to carry a balance of one type or another. In fact, a report last year found that 73 percent of consumers died with unpaid debts and, among them, the average owed was $62,000. That’s a lot. But accruing debt over a lifetime is different than starting one already in the hole. And, unfortunately, many young Americans today find themselves in that situation. For the most part, student loans are responsible for the money millennials owe, but credit cards and auto loans can also add to the mix. And, unsurprisingly, this is a factor when it comes time to decide whether or not to buy a house. But just how much debt are potential first-time home buyers facing? Well, according to a new study, in the top 10 cities where millennials owe the most, half of them have an outstanding balance of $25,000 or more, while about 25 percent of them owe more than $50,000. To what extent this has caused fewer young Americans to pursue homeownership, it’s hard to know. However, having some debt won’t necessarily prevent you from buying a house. And, since there are many financial factors at play, you won’t know for sure whether you might qualify for a home loan until you sit down with a mortgage professional and go over your numbers. More here.
It’s said that there are two sides to every story. But there are also two sides to the calculations potential home buyers undergo when deciding whether or not it’s a good time for them to look for a new house. After all, buyers have to take into consideration the cost of homes in the areas they’re looking to live but also their own financial security. That’s why Fannie Mae’s most recent Home Purchase Sentiment Index is encouraging. Because, though Americans have concerns about housing affordability, they are feeling confident financially and secure in their jobs. In fact, the number of survey respondents who said they aren’t concerned about losing their job rose 15 percent over the month before and those reporting that their income is higher than it was 12 months earlier hit a new survey high. Doug Duncan, Fannie Mae’s chief economist, says Americans are feeling the effects of a stronger economy. “Consumers are attuned to the divergence between the slowing housing market and strong macro economy,” Duncan said. “Consumers were less optimistic this month about both home buying and home selling conditions, while perceptions of income growth and confidence about job security are at survey highs.” More here.
When calculating how much house you can comfortably afford, there are a few commonly cited rules that can be used. Among them, the one that says your home’s price shouldn’t be more than three times your annual income is popular. Of course, there are many other factors that play a role, including the amount of debt you have, your retirement goals, other expenses, etc. However, as a simple rule, it can be a good way to quickly come up with a ballpark price range before you work out the fine details. Using a variation on this rule, a recent study took data from the Home Mortgage Disclosure Act and looked at the median amount home buyers borrowed and compared it to borrowers’ median income to calculate how and where buyers were pushing their financial limits to purchase a house. The results, in all but a few cases, weren’t that surprising. That’s because the cities where home buyers had to stretch the most were mostly out West, including Los Angeles, San Francisco, Denver, and Seattle. However, though rust-belt metros like Cleveland, Detroit, and Buffalo were the least leveraged, the middle of the pack included places like Atlanta, Orlando, Chicago, Dallas, and Houston, which might not be the first places thought of when listing affordable areas to buy a house. More here.
This year, home buyers hoping to find smaller, more affordable homes have had a harder time than those shopping at the high end of the market. Partly, this is because there are fewer entry-level homes available for sale than is typical. But, according to the Mortgage Bankers Association’s Weekly Applications Survey, there may be evidence that first-time buyers are beginning to find their way into the market. That’s because the average loan size has fallen to its lowest level since last December, which indicates that the supply of affordable homes may be rising to meet demand. However, Mike Fratantoni, MBA’s chief economist, told CNBC it may also be because spring home buyers are more likely to be looking for larger, family homes, while later in the year smaller, more affordable homes are more popular. Whatever the case, it is an encouraging sign in a challenging market. The MBA’s report also showed that average mortgage rates were little changed from the week before, as was purchase and refinance activity. More here.
There are many different factors that play a role in the housing market’s health. When home buyers and sellers decide that its time for them to make a move everything from their job security to the global economy has an effect. For example, economic instability half way around the world can move mortgage rates, which will affect how much house you can afford. But what you can afford is also affected by how much you earn and how secure you feel in your job. In short, there’s a lot to keep an eye on. That’s why it can be helpful to tune into expert forecasts and opinions, since most of us don’t have the time or inclination to weigh all of the moving parts that determine what it’ll cost to buy the home of our dreams. So what are the experts saying about the upcoming fall market? Well, according to Freddie Mac’s most recent outlook, there may be reason for optimism. That’s because, though they say fall buyers will face many of the same challenges that held summer sales back, Freddie Mac chief economist Sam Khater says there is good news to be found. “The good news is that the economy and labor market are very healthy right now, and mortgage rates, after surging earlier this year, have stabilized in recent months,” Khater says. “These factors should continue to create solid buyer demand, and ultimately an uptick in sales, in most parts of the country in the months ahead.” More here.
If you’re in the market to buy a home, you’ll be choosing a house from those listed for sale in your area, unless you hire a builder and architect to construct a home to your exact specifications. That means, to some extent, your choices are limited. In today’s market, that’s especially true, since there are a lower-than-normal number of homes available for sale. In other words, not only do low inventory levels cause prices to increase, they can also make it less likely that you’ll quickly locate a home that fits your needs and fulfills your wish list. But that may be changing. According to new data from the National Association of Realtors, active listings are on the rise and in areas where they’re needed the most. For example, several large metro areas, including Denver, Portland, Seattle, Nashville, and San Jose, saw month-over-month gains in August. Lawrence Yun, NAR’s chief economist, says the trend will help slow price increases and help buyers. “Rising inventory levels – especially if new home construction finally starts picking up – should help slow price appreciation to around two-and-four percent, which will help aspiring first-time buyers, and be good for the long-term health of the nation’s housing market,” Yun said. More here.