Tuesday, August 9, 2022

Is The Mortgage Industry Slowing Down

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California Rental Housing Market

Rising mortgage rate not slowing down hot housing market

The pandemic resulted in a large number of residents exiting California, and many vacating apartments in the major metros. Not surprisingly, one and two bedroom rent prices have dropped. while rent drops year to year are well down from the beginning of the pandemic, month to month drops have flattened or are beginning to reverse.

A Zumper report shows the California one bedroom median rent was $1,762 in June. Lets review Zumpers findings.

Pos.

Mortgage Rates And Applications

Freddie Mac reported the 30-year, fixed-mortgage interest rate rose to 3.07 in October, up from 2.90 percent in September, and up from 2.89% last September 2020. The 5-year, ARM mortgage interest rate rose to 2.54% versus 2.45% in September.

Mortgage payment price growth is a concern for the market, as inflation increases and further rate hikes for 2022 were announced this week. Mortgage applications had declined 17 straight months. Of course, affordable housing supply and rising home prices are likely the main reason for that.

California real estate is always a hot topic. Find out more about rental property investment is wise and how property management software is providing the foundation for profitable rental portfolios.

Read more on the San Francisco Market, San Diego market, and Los Angeles market.

Please note that CAR designates the Los Angeles Metropolitan Area as a 5- region that includes Los Angeles, Orange, Riverside , San Bernardino , and Ventura. The Bay Area includes: Alameda, Contra Costa, Marin, Napa, San Francisco, San Mateo, Santa Clara, Solano, and Sonoma. And the Inland Empire includes Riverside and San Bernardino counties.

Ali Wolf Is The Chief Economist At Zonda A California Housing Data And Consultancy Firm

The turbulent January forced forecastors to recalculate their guesses as to what will happen to the year, Wolf says. Zonda initially forecast rates to be 3.5% by the end of the year, with an average of 3.3%. Thats now up to 3.8% by the end of the year, with an average of 3.6%.

We arent expecting a straight line up for mortgage rates, she says. We saw interest rates jump at the beginning of this year, but we think the markets going to have a lot more volatility moving forward.

The Federal Reserves interest rate increases could contribute to future rises in home loan rates, but those dont necessarily go hand-in-hand, she says. The key issue to watch is not necessarily what the Fed does but how the economy responds.

We expect that as costs go up for the banks consumers are going to see their costs go up as well, but we think its really going to depend on how effective that policy is on taming inflation and how the economy evolves this year, she says.

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Save More By Shopping Around

Mortgage lenders are still offering historically low rates to good borrowers. But theres a catch.

You cant just look for the lowest rate advertised online. Because the rates lenders advertise arent available to everyone.

Those offers typically represent borrowers with perfect credit, 20% down or more, and a sterling credit history.

Those criteria wont apply to everyone. The rate youre actually offered depends on:

  • Your credit score and credit history
  • Your personal finances
  • Your down payment
  • Your home equity
  • Your loan-to-value ratio
  • Your debt-to-income ratio

To figure out what rate a lender can offer you based on those factors, you have to fill out a loan application. Lenders will check your credit and verify your income and debts, then give you a real rate quote based on your financial situation.

You should get 3-5 of these quotes at minimum. Then compare them to find the best offer.

Look for the lowest rate, but also pay attention to your annual percentage rate , estimated closing costs, and discount points extra fees charged upfront to lower your rate.

This might sound like a lot of work. But you can shop for mortgage rates in under a day if you put your mind to it. And shaving just a few basis points off your rate can save you thousands.

Housing Market Slowing Down

Housing Market Slowing Down?

In this video I discuss is the housing market slowing? As a mortgage broker who has worked with thousands of buyers, I feel like I can get a feel for buyer sentiment and market trends before the data hits the radar of analysts. This video is my hunch and my feel for what is going on. Please comment below how you feel about your market and lets discuss I love real estate and everything that has to do with real estate investing mortgage, and personal finance. If you enjoyed this video and found value, please consider subscribing!

This time last year, housing industry insiders were predicting that the market would collapse under the weight of the pandemic. The opposite happened. Even as the economy suffered its worst year since World War II, the housing market boomed.

But that doesnt mean all is well. Rising prices have masked but not eliminated longstanding problems and vulnerabilities at the heart of Americas housing market. Most urgently, Fannie Mae and Freddie Macthe government-sponsored enterprises that own or guarantee roughly half the $12 trillion mortgage marketlack the capital to survive the next inevitable downturn in home prices.

The good news is that unlike the crisis in 2008, should the GSEs fail again, creditors, rather than taxpayers, can absorb the losses. Thats because the Federal Housing Finance Agency, which I direct, completed a new rule last month that creates a process to end taxpayer bailouts of the GSEs once and for all.

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Originations Will Be Down Compared With 2020

While home sales are expected to be higher than in 2020, total originations of loans are expected to decline. Fannie Mae projects that originations will come in around $3.9 trillion. Of this, it expects purchase mortgage originations to be around $1.8 trillion, up from approximately $1.6 trillion in 2020. Refinance originations are expected to come in around $2.2 trillion, down from all-time highs of $2.8 trillion in 2020. This would be a more than 10% decline in total originations compared with 2020.

Sam Khater, chief economist at Freddie Mac, is a little more pessimistic, with purchase mortgage originations projected to be $1.6 trillion and refinance originations of $1.8 trillion. Its estimate of $3.3 trillion in total originations would be a 25% decline in total originations in the market.

The Housing Market Is Cooling And 2 Other Takeaways From Real Estate Earnings

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Redfin says there are some areas of the country where homes aren’t selling as fast as they previously were.

Several housing metrics due this week are expected to show signs of a slowdown. That sentiment has also been echoed in recent comments from real estate technology companies on earnings calls.

Affordability has grown in importance as prices keep rising and mortgage rates have climbed to the highest point in more than a decade. The average rate on a 30-year fixed mortgage has increased more than two percentage points since its last reading in 2021 to 5.3% last week, according to Freddie Mac data, its highest since the summer…

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Could Rates Drop Again

We can tie the scenario of another rate drop to the pandemic. Granted, case counts are down, and concerns over the Delta variant appear to be behind us. But weve learned over the last year and a half that things can change quickly with the pandemic.

It would likely take multiple Covid surges for rates to decrease in 2022. Even then, the possibility of interest rates plummeting to new record lows as they did in 2020 is slim to none. With that in mind, take advantage of these favorable rates while you still can.

Booming Online Software Solutions

Mortgage Rates Soar As Housing Market Cools

Realtors and property management pros are already testing out online maintenance scheduling and rent payment solutions. ManageCasas state of the art property management software integrates the global payment leaders platform is the industry model. This might be the right time to make a platform switch. Check out online payments now.

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  • industry news and important trends happening

This updated report covers important stats including home prices, sales, and recent home sales trends from CAR, NAR, DOT, St Louis Fed, NAHB, Statista, Zillow and more. For national home price tends see the US housing market.

The key story with Los Angeles, San Francisco, San Jose, Santa Clara, San Diego, Orange County, Riverside, San Bernardino, etc. is the lack of listings.

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New Existing And Pending Home Sales Fell In March Compared With A Year Earlier

The combination of the limited number of homes for sale, continued double-digit price increases and the sharp rise in mortgage rates is taking a toll on home sales across the United States. New home sales were down 12.6 percent in March compared with March 2021, according to the Census Bureau.

Existing homes sales were down by 4.5 percent year-over-year in March, according to the National Association of Realtors . Pending sales, which refer to signed contracts that have yet to go to settlement, dropped by 8.2 percent in March compared with a year earlier, according to the NAR.

The market is anticipated to slow further when Aprils numbers are released because mortgage rates have continued to rise over the past month. According to Redfin real estate brokerages analysis, the average monthly mortgage payment for a home buyer was up 39 percent during the week ending April 24 compared with that same week in 2021, with the average 30-year fixed-rate loan at a 12-year high of 5.1 percent.

Mortgage applications for purchase loans declined by 17 percent during the week ending April 22 compared with that same week one year ago, according to the Mortgage Bankers Association.

However, 14 percent of homes that sold had a price drop during the four-week period ending April 24, the highest percentage since the end of November and up from 11 percent in March 2022, and 9 percent in April 2021, according to Redfin.

Impact On Canadas Housing Market

With several interest rate increases expected from the Bank of Canada going forward, Hogue said he acknowledges that some borrowers may be concerned about whether theyll be able to meet their debt obligations. This can be especially challenging given the current high-inflation environment, with the cost of groceries, gas and other items on the rise, Ostland said.

This is not good for the individual mortgage holder by any means all this does is increase the interest portion of their payment so they’re not paying down the principal, said Ostland. Thats a huge disadvantage.

Nevertheless, Hogue does not expect to see most Canadians defaulting on mortgage payments as rates rise, he said. Part of the reason for this is the stress test that Canadian homebuyers must pass before obtaining a mortgage. In order to qualify for a mortgage, borrowers must prove that they are able to afford interest payments as high as two per cent above their mortgage contract rate, or 5.25 per cent, whichever is higher.

This is where the stress test becomes really handy because borrowers have been tested for this type of situation, this very sudden rapid spike in rates, he said. So the vast majority of mortgage holders should be able to withstand higher rates.

As interest rates rise, the expectation is that home prices will decline across Canada in the coming months, Hogue said.

A decline in house prices is ultimately a good thing, Lee said.

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What We Saw In 2021

Lets first look back on an interesting year for mortgage rates. Industry experts initially predicted a gradual rise in rates once the COVID-19 vaccine became widely available. However, rates slipped to a new record low of 2.65% in January and held fairly steady through February.

The next four months proved to be critical for the economy as Americans became vaccinated and businesses reopened. Mortgage rates stayed near 3% during this time, with only minor daily fluctuations for the most part. It looked as though rates would remain on an upward trajectory through the end of the year.

Nobody couldve predicted the Delta variant or the impact it would have on the industry. Higher case counts and hospitalizations led to another rate drop, and top-tier borrowers had access to rates in the 2s from July through most of September.

Demand For California Property Never Ceases

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There might be one key fact that is inescapable in the California housing market that separates it from other states housing markets . That is that everyone would like to live in California. California Realtors understand the demand. Demand will never cease unless prices rise very steeply. Even then, people from all over the world want to live in this incredible region.

More housing may not necessarily satiate demand for houses or rentals. No matter how much housing is built, it will be sought by buyers or renters. Advancing age, retirement, another cold winter with high heating prices will encourage yet another wave of migrants from the north. And with open borders, immigrants will pour into the California market which creates positive growth for property managers and landlords.

Californian renters want to know when rent prices will fall. With the recovery kicking into higher gear, rent prices looks to grow faster than housing prices .

CAR stats show lower income Californians were hurt by the pandemic and arent participating in the recovery as yet. See more on the 2022 rental market forecast and the US rental market report.

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Housing Construction Trends & Homebuilder Confidence

The NAHB also gets input from builders on how confident they are in the housing market based on buyer behavior, sales, and incorporates any forecasts as well. Building permits have recovered from epidemic lows, and builders are scrambling to close the supply-demand imbalance. They are still optimistic a year after the Covid epidemic brought home development to a halt. Because the current house market continues to suffer from a record low number of listings, they are seeing high demand from potential purchasers.

It is becoming increasingly difficult for them to meet this housing demand due to supply delivery issues and rising material costs. NAHB Housing Market Index is a gauge of builder opinion on the relative level of current and future single-family home sales. It is a diffusion index, which means that a reading above 50 indicates a favorable outlook on home sales below 50 indicates a negative outlook.

Builder sentiment in the market for newly-built single-family homes moved three points higher to 83 in November. Low existing inventories and strong buyer demand boosted builder confidence for the third month in a row, even as supply-side challenges such as building material bottlenecks and lot and labor shortages persisted.

The solid market for home building continued in November despite ongoing supply-side challenges, said NAHB Chairman Chuck Fowke. Lack of resale inventory combined with strong consumer demand continues to boost single-family home building.

What The February Rate Forecast Means For Homebuyers

If youre shopping for a house, higher rates can make monthly payments higher, Wolf says. That could cut into your purchasing power.

That doesnt mean its not a great time to try to buy a home in todays market, because interest rates are still very low in a historical context, she says.

The important part of deciding to buy a house isnt around what mortgage rates are or even what housing prices are, says Kapfidze. Timing the market is a mugs game, he says, noting even Wall Street professionals arent always able to predict what the market will do.

Your first choice should be a lifestyle decision, he says. If you decide you want to buy a home, then figure out a budget, understand what that budget can get you in the current market, and then start thinking about mortgage rates. Dont focus on where the market is going to be in the future or where it has been in the past. Youre not participating in that market, youre participating in the market as it is today, he says.

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Talk About The Mortgage Industry Slow Down

ByAc Wan | Submitted On December 16, 2007

I just talked to my neighbor who came to California from Minnesota two years ago and he got caught up in the real estate investing and became a mortgage broker. Last year, he was on the biggest high I’ve ever seen. I just talked to him last week and he is trying to dump his properties and move back to Minnesota. The problem is he is upside down on every property and all he can do now is rent them out and take a monthly loss and wait it out. The only problem is that it will be 5 to 6 years before the market comes back. He obviously didn’t get my memo about the real estate industry cycles.

I really feel for the guy because he thought that the market would go up for ever. You see, he’s from Minnesota and the mid west doesn’t cycle as hard as the east coast or west coast. When we in California are on a high, the rest of the country see a modest increase and when we are in a low, the rest of the country see a modest dip. But in California, we have mud slides, fires and earthquakes and the real estate and mortgage industry is having all three right now at the same time and will continue this trend for the next 5 years.

Just so you know, I do not have a crystal ball in my hand, but I have watched the real estate and mortgage industry for the past 30 years and one thing is for sure is that they are in a decline and will continue to be for the next 5 years. Let’s look at some facts.

A.C. Wan,

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