Monthly Archives: May 2023

One way homeowners build up equity is by paying off their mortgage month by month. Over time, paying your monthly mortgage bill will reduce what you owe on your house and grow your ownership share. The other way to build up equity is home price increases. That’s made the past few years great for homeowners, as home values saw double-digit spikes. But what can a homeowner do with their equity once they’ve built some up? The short answer is just about anything. There are, though, a few uses that are more common than others. In fact, according one new survey, there’s one use of home equity that’s far and away the most popular. The survey found the top reason homeowners are looking to take out a home equity loan or line of credit is to fund a home improvement project. Among respondents who plan to borrow against their home, 35 percent said they were using the money to better it through remodeling and maintenance projects. Home improvement is not only a popular use of a home’s value but also a smart one, as it reinvests it and can potentially add to it. Other popular ways homeowners are using their equity included major purchases and to pay down high-interest loans and credit cards. (source)

Spring is the hottest time of year for home sales. It’s when buyers get active and the market ramps up. So how’s it looking so far this spring? Well, home buyers seem to be following typical seasonal patterns, with demand rising as we move toward summer. But while buyers seem to be returning, sellers may not be. In fact, the inventory of homes for sale continues to run low. According to one recent analysis, new listings are down 28 percent from where they were last year at the same time. That means many homeowners – who may have considered selling – have stayed on the sidelines so far this year. That’s led to upward pressure on prices. In April, for example, home prices rose 1 percent from the month before. The good news, though, is that’s a relatively normal price increase for this time of year. And after last year’s ups-and-downs, a return to normal this spring would be a positive sign. (source)

According to the Mortgage Bankers Association’s Weekly Applications Survey, average mortgage rates fell again last week across all loan categories. Rates were down for 30-year fixed-rate loans with both conforming and jumbo balances, loans backed by the Federal Housing Administration, 15-year fixed-rate loans, and 5/1 ARMs. Joel Kan, MBA’s vice president and deputy chief economist, says demand for mortgage applications rose as a result. “Mortgage applications responded positively to a drop in rates last week, as the Fed signaled a potential pause at the current level for the federal funds rate in anticipation of inflation slowing and tightening financial conditions that will slow economic and job growth,” Kan said. Favorable rates led to a 5 percent increase in demand for home purchase loans and a 10 percent increase in refinance activity. The MBA’s weekly survey has been conducted since 1990 and covers 75 percent of all retail residential mortgage applications. (source)

There are many reasons you might be thinking about buying a house, and a lot of them are based on your age. After all, different age groups have different needs and some are more likely to be ready to buy than others. For example, a recent survey found 52 percent of respondents said they’re thinking about buying a house. But when broken down into age groups, one generation lead the list of prospective buyers by a significant amount. In fact, among participants, millennials were by far the most likely to say they were looking to buy, with 61 percent responding that a home purchase was in their plans. Next up was Gen X, at 25 percent. From there, it drops off even further, with Gen Z at 12 percent and baby boomers last on the list at 2 percent. The explanation is simple: Millennials are at the age when they’re most likely to be starting a family, settling down, and looking to buy their first home. (source)

Americans are feeling better about the housing market, according to the most recent results of Fannie Mae’s monthly Home Purchase Sentiment Index. The index – which surveys Americans and asks them whether they think now is a good time to buy or sell a house, how confident they are in their finances and job, and where they think home prices and mortgage rates are headed – found respondents more optimistic than they’ve been in months. In fact, the index was at its highest level since May 2022, with an increasing number of respondents saying they feel now is a good time to buy a house. Doug Duncan, Fannie Mae’s senior vice president and chief economist, says Americans’ optimism is partly due to mortgage rates. “This month’s increase in the HPSI was the largest in over two years, primarily driven by consumers’ more optimistic mortgage rate expectations,” Duncan said. “An increased number of respondents indicated that they think mortgage rates will go down over the next year, a belief that could be due to a combination of factors, including an awareness of decelerating inflation, market suggestions that monetary conditions will ease in the not-too-distant future, and, of course, actual mortgage rate declines over the month.” (source)

You can tell a lot about how competitive a housing market is by looking at how many showings the typical listing receives. If listings are seeing a lot of traffic from buyers, it’s a pretty good indication that homes will sell quickly and bidding wars may be more likely. So what do things look like today? Well, according to one new analysis of showings per listing, the number of home showings increased in March and remains significantly higher than its pre-pandemic norm. In fact, showings are 43 percent higher than where they were in 2019. But while showings are higher than they were before the pandemic, they have slowed from the record-breaking heights of 2021 and 2022. That means markets will be slower than last spring, but still fairly competitive depending on where you’re looking. Showings in the Midwest and Northeast both saw double-digit increases in March, while the South was up 1.4 percent and the West saw a 2.7 percent decrease. (source)

If you’re selling your house, you’re also looking for a new place to live. In many cases, that means buying another home. Which is why a recent survey from the National Association of Realtors’ consumer website found finding a home to buy among the top concerns for today’s potential home sellers. It makes sense. Before you put your home up for sale, you have to weigh the available homes in your target area and the financial costs of making the move. In other words, you have to have a plan, especially in today’s market. Danielle Hale, the website’s chief economist, says some households are better positioned than others. “Many sellers are likely future buyers too, which may be why a majority of would-be sellers report feeling ‘locked-in’ to their current home because of a low mortgage rate, especially younger homeowners,” Hale said. “But older seller-buyers, who are likely to have a smaller mortgage balance and built up greater equity, are less likely to report feeling locked-in by a low interest rate and are more likely to report that they need to sell anyway.” (source)

According to the Mortgage Bankers Association’s Weekly Applications Survey, average mortgage rates fell last week from one week earlier. It was the first decline following three consecutive weeks of increases. Rates were down for 30-year fixed-rate loans with both conforming and jumbo balances, 15-year fixed-rate loans, and 5/1 ARMs. Loans backed by the Federal Housing Administration were up slightly from the week before. But despite more favorable rates, demand for mortgage applications still fell last week. Both refinance and purchase activity were down from the week before. Joel Kan, MBA’s vice president and deputy chief economist, says home buyers have been sensitive to market trends so far this year. “Home purchase activity has been very sensitive to rates and local market trends, including the low supply of existing-home inventory,” Kan said. “However, newly constructed homes account for a growing share of inventory, giving more options for prospective buyers.” The MBA’s weekly survey has been conducted since 1990 and covers 75 percent of all retail residential mortgage applications. (source)

Mortgage points allow home buyers to pay an upfront fee in exchange for a lower mortgage rate. It’s an option for buyers looking to lower monthly mortgage costs and one more borrowers are opting to use. In fact, a recent analysis found that nearly 45 percent of conventional borrowers opted to buy points in 2022. That’s a jump from 29.6 in 2021 – and an even bigger increase over 2019 when just 27.3 percent of buyers purchased points. The reason behind the increase is fairly easy to see, as mortgage rates rose early in 2022 after hovering just above historic lows for several years. As mortgage rates increased, buyers began looking for ways to cut costs, including points. But they may not be the right strategy for every buyer. There are several things to consider, including how long you intend to stay in the house you’re buying. (source)

Buying a home is a big undertaking. So when you purchase a house, you typically plan to stay a while. But for how long? The average number of years a homeowner lives in their home before selling tends to vary over time. As recently as a few years ago, homeownership tenure was growing. It hovered around eight years for a long time, with it occasionally reading closer to 10. But these days, it’s headed in the opposite direction. In fact, according to ATTOM Data Solutions’ first-quarter 2023 U.S. Home Sales Report, homeowners who sold at the beginning of this year had owned their homes an average of 5.59 years. That’s down from 5.81 years at the end of last year and is the shortest tenure has been since the middle of 2011. Among individual metros, tenure dropped the most from last year in Atlantic City, which saw it fall 27 percent. Other cities where homeowners are on the move included Dayton, Tallahassee, Chattanooga, and St. Louis. Homeownership tenure was longest in the Northeast and West, with Honolulu leading the list with an average tenure of 8.21 years. (source)