Tag Archives: #FreddieMac

What Impacts Home Affordability

Every time there’s a news segment about the housing market, we hear about the affordability challenges facing today’s buyers. Those headlines are focused on how much mortgage rates have climbed this year. And while it’s true rates have risen dramatically, they’ve also dropped to much less media coverage and comment.

But, it’s important to remember that mortgage interest rates aren’t the only factor in the affordability equation.

Here are three measures used to establish home affordability: home pricesmortgage rates, and wages. Let’s look closely at each one.

1. Mortgage Rates

This is the factor most people are focused on when they talk about homebuying conditions today. So far, current rates are almost four full percentage points higher than they were at the beginning of the year. As Len Kiefer, Deputy Chief Economist at Freddie Mac, explains: “U.S. 30-year fixed mortgage rates have increased 3.83 percentage points since the end of last year.”

The increase in mortgage rates is impacting how much it costs to finance a home purchase, creating a challenge for many buyers as it’s pricing some out of the market. While the current global uncertainty makes it difficult to project where mortgage rates will go in the future, experts do say that rates will likely remain high as long as inflation does.

But, it’s important to remember that individual lenders offer different rates and different options. You have many potential sources for your mortgage from banks, to mortgage finance companies and credit unions. Be sure to shop them all before deciding what you can or can’t afford.

2. Home Prices

The second factor at play is home prices. Home prices have made headlines over the past few years, because they skyrocketed during the pandemic. nationally have decelerated for a fifth consecutive month. (shown in green in the graph below):

Key Factors Affecting Home Affordability Today | MyKCM

This deceleration is happening, because higher mortgage rates are moderating demand, and as a result, easing the buyer competition and bidding wars that previously drove prices up.

What’s worth noting though, is how much higher home prices still are than they were before the pandemic (shown in blue in the graph above). Even now, we have a long way to go to get to more normal levels of home price appreciation, which is historically closer to 4%. When both mortgage rates and home prices are high, affordability and your purchasing power become a greater challenge.

But while prices are still elevated in many markets, some areas are seeing slight declines. It all depends on your local market.

On Cape Cod, prices are moderating. Property is not being sold in a weekend and there are more price reductions. Those crazy bidding wars seem to be over. Open houses have returned to normal as those lines down the driveway are gone. Sellers are seeing more competition from their neighbors.

3. Wages

The one big, positive component in the affordability equation is the increase in wages. The graph below uses data from the Bureau of Labor Statistics (BLS) to show how wages have grown over time. This year is no exception.

Key Factors Affecting Home Affordability Today | MyKCM

As the Bureau of Labor Statistics (BLS) reports: “Median weekly earnings of the nations 120.2 million full-time wage and salary workers were $1,070 in the third quarter of 2022. This was 6.9% higher than a year earlier.”

So, when you think about affordability, remember the full picture includes more than just mortgage rates. Home prices and wages need to be factored in as well. Because wages have been rising, they’re a big reason why serious buyers are still active.

The decision to buy is not as simple as the so called experts and commentators would like the public to believe.

It’s important to work with a reputable lender, who can keep you appraised about the impact mortgage rates are having on what you can afford. If you’re not connected with a lender, we can put you in touch with several who we work with.

If you’re looking to sell, as well as buy, you should know the value of your current property. Please visit our website to find out what your home is worth and how much equity you may have.

Finally, please sit down with us to review your options whether buying, selling, or both. Let’s connect at 508-360-5664 or msennott@todayrealestate.com.

Earlier this year, we sold our home and bought something that better suits our lifestyle. So, hopefully our experience can help you make the best decisions for your situation. Talk soon…

Mari and Hank

What Actually Determines Your Mortgage Rate

There’s lots of commentary about impact when the Federal Reserve raises the federal funds rate. (That’s the amount banks charge each other for short term loans.)

Even though the rate has very little to do with mortgage interest, it often becomes a point for discussion, which can illustrate how much he “experts” actually don’t know about the subject.

So, here are the four items that do impact your mortgage interest rate.

Your Credit Score

Credit scores can play a big role in your mortgage rate. Freddie Mac explains: “When you build and maintain strong credit, mortgage lenders have greater confidence when qualifying you for a mortgage because they see that you’ve paid back your loans as agreed and used your credit wisely. Strong credit also means your lender is more apt to approve you for a mortgage that has more favorable terms and a lower interest rate.”

That’s why it’s important to maintain a good credit score. If you want to focus on improving yours, a trusted financial advisor can give you expert advice.

Your Loan Type

There are many types of loans, each offering different terms for qualified buyers. The Consumer Financial Protection Bureau (CFPB) says: “There are several broad categories of mortgage loans, such as conventional, FHA, USDA, and VA loans. Lenders decide which products to offer, and loan types have different eligibility requirements. Rates can be significantly different depending on what loan type you choose.”

When working with your real estate advisor, make sure you know which types of loans you may qualify for as it may influence the kind of property you can purchase.

Your Loan Term

Another factor to consider is the term of your loan. Just like with location and loan types, you have options. Freddie Mac says: “When choosing the right home loan for you, it’s important to consider the loan term, which is the length of time it will take you to repay your loan before you fully own your home. Your loan term will affect your interest rate, monthly payment, and the total amount of interest you will pay over the life of the loan.”

Depending on your situation, the length of your loan can also change your mortgage rate.

Your Down Payment

If you’re a current homeowner looking to sell and make a move, then you can use the home equity you’ve built over time toward the down payment on your next home. The CFPB explains: In general, a larger down payment means a lower interest rate, because lenders see a lower level of risk when you have more stake in the property. So if you can comfortably put 20 percent or more down, do it—you’ll usually get a lower interest rate.”

To learn more, connect with a lender to find out the difference a higher down payment can make for your new mortgage.

Bottom Line

These are the major factors that can help determine your mortgage rate, if you’re buying a home. It’s important to work with a reputable lender, who can pre-approve you and give you honest advice about interest rates now and what can be expected in the future.

If you are looking for a lender, we work with several, who we can highly recommend. Let’s connect at 508-360-5664 or msennott@todayrealestate.com and we’ll pass along their contact information.

Knowing what you can afford then helps us locate the homes that fit your budget. And we’ll be sure that you stay in touch with your lender in case a rate change impacts what you can afford.

Let’s talk soon…

Mari and Hank

What You Can Expect from the Spring Market

With the spring housing market underway, many of you are probably curious about what you can expect when it comes to buying or selling a house. While there are multiple factors causing some uncertainty, the housing market seems to be relatively immune from the impacts of the war in Ukraine, rising inflation, and the first rate increase from the Federal Reserve in over three years.

Here’s a look at what the real experts say you can expect this spring.

1. Mortgage Rates Will Climb

Freddie Mac reports the 30-year fixed mortgage rate has increased by more than a full point in the past six months. And despite some mild fluctuation in recent weeks, experts believe rates will continue to edge up over the next 90 days. As Freddie Mac says: “The Federal Reserve raising short-term rates and signaling further increases means mortgage rates should continue to rise over the course of they year.”

If you’re a first-time buyer or a seller thinking of moving to a home that better fits your needs, realize that waiting will likely mean you’ll pay a higher mortgage rate on your purchase. And that higher rate drives up your monthly payment and can really add up over the life of your loan.

2. Housing Inventory Will Increase

There may be some relief coming for buyers searching for a home to purchase.

 Realtor.com recently reported that the number of newly listed homes has grown for each of the last two months. Also, the National Association of Realtors (NAR) just announced the months’ supply of inventory increased for the first time in eight months. The inventory of existing homes usually grows every spring, and it seems, based on recent activity, the next 90 days could bring more listings to the market.

On Cape Cod, there were a little over 200 new listings in January. In February that number was over 400. While that’s not close to normal inventory, it is trending in the right direction.

Anecdotally, our colleagues at our Today Real Estate company wide meetings seem to be talking more about new listings than they have in a while.

If you’re a buyer and have been frustrated with the limited supply of homes available for sale, it looks like you could find some relief this spring. However, be prepared to act quickly if you find the right one.

If you’re a seller, listing now instead of waiting for additional competition to hit the market makes sense. Your leverage in any negotiation during the sale will be impacted as additional homes come to market.

3. Home Prices Will Rise

Prices are always determined by supply and demand. Though the number of homes entering the market is increasing, buyer demand remains very strong.

As realtor.com explains in their most recent Housing Report: “During the final two weeks of the month, more new sellers entered the market than during the same time last year…However, with millions of millennials at first-time buying ages, housing supply faces a long road catching up with demand.”

What does that mean for you? With the demand for housing still outpacing supply, home prices will continue to appreciate. Many experts believe the level of appreciation will decelerate from the high double-digit levels we’ve seen over the last two years. That means prices will continue to climb, just at a more moderate pace. Most experts are predicting home prices will not depreciate.

Won’t Increasing Mortgage Rates Cause Home Prices To Fall?

While some people may believe a 1% increase in mortgage rates will impact demand so dramatically that home prices will have to fall, experts say otherwise. Doug Duncan, Senior Vice President and Chief Economist at Fannie Maesays: “What I will caution against is making the inference that interest rates have a direct impacting on house prices. That is not true.”

Freddie Mac studied the impact that mortgage rates increasing by at least 1% had on home prices in the past. Here are the results of that study:

What You Can Expect from the Spring Housing Market | MyKCM

As the chart shows, mortgage rates jumped by at least 1% six times in the last 30 years. In each case, home values increased.

So again, if you’re a first-time buyer or a repeat buyer, waiting to likely means you’ll pay more for a home later in the year (as compared to its current value).

Bottom Line

Three things seem certain going into the spring housing market:

  1. Mortgage rates will continue to rise.
  2. The selection of homes available for sale will modestly improve.
  3. Prices will continue to appreciate, just at a slightly slower pace.

Curious about your options? We’re happy to answer your questions. Let’s connect at 508-360-5664 or msennott@todayrealestate.com.

It’s important that you have the right information to make an educated and informed decision.

Enjoy your week…

Mari and Hank

Five Tips for Making Your Best Offer for a Home

As 2021 ended, there seemed be a subtle shift in the Cape Cod real estate market. While many properties still received multiple offers, there weren’t as many as earlier in the year.

And while most successful offers were for above asking price, the final figures were not as head scratching as they were in the summer.

As a buyer in a sellers’ market, it can feel like you’re stuck between a rock and a hard place. How far over asking price should your offer be? How willing are you to get involved in a bidding war, even when the competition isn’t as challenging?

When you’re ready to make an offer on a home, remember these five easy tips to help you rise above the competition.

1. Know Your Budget

Knowing your budget and what you can afford is critical to your success as a homebuyer. The best way to understand your numbers is to work with a reputable lender so you can be pre-approved for a loan. As Freddie Mac puts it: “This pre-approval allow you to look for a home with greater confidence and demonstrates to the seller that you’re a serious buyer.”

As a practical matter, offers without pre-approval letters have little chance of being accepted. We work with several reputable lenders who serve the Cape Cod market and will pass on their contact information. Please reach out if you’re interested.

2. Be Ready To Move Fast

Homes are selling quickly in today’s competitive housing market. According to the Existing Home Sales Report from the National Association of Realtors (NAR): “Eighty-three percent of homes sold in November 2021 were on the market for less than a month.”

With houses selling this fast, staying on top of the market and moving quickly are key. Know what you’re looking for in a home and be ready to act when you see it.

3. Lean on a Local Real Estate Professional

No matter what the housing market looks like, rely on a trusted real estate advisor. As Freddie Mac advises: “Be sure to select experienced, trusted professionals who can help you make informed decisions and avoid any pitfalls.”

Real estate markets are different from area to area. Your uncle’s best friend’s godson who just got his license and works in western Massachusetts is probably not the best choice to help you buy (or sell) property on Cape Cod.

Cape-based based professionals have insight into what’s worked for other buyers here and what sellers may be looking for in an offer. It may seem simple, but catering to what a seller needs can help your offer stand out.

4. Make a Strong, but Fair Offer

According to the latest Realtors Confidence Index from NAR, 40% of offers today are above the list price. Submitting a strong, yet fair offer is critical in these situations. If you are really interested in a property, a low ball offer to “see what happens” is not a strategy for success.

Not all that long ago asking price was the most a seller could hope for. Now, it’s the minimum they expect.

5. Be a Flexible Negotiator

When putting together an offer, consider what options you have to make your proposal the most attractive. Can you be flexible with the closing date? Are you willing to let the seller leave behind furniture, even if you have no use for it?

Of course, there are certain contingencies you don’t want to give up. Freddie Mac advises resisting the temptation to waive the home inspection as you could move into a house and discover repairs that you can’t afford.

If you’re thinking 2022 is the year to make your move, we’d be happy to answer your questions. Let’s connect at 508-360-5664 or msennott@todayrealestate.com.

You need the right information to make an educated and informed decision about buying or selling in the year ahead.

Stay warm….

Mari and Hank

Patience Is Key to Buying a Home This Year

There’s one question were consistently asked: “Why is it so hard to find a house?

The answer is that we’re in the midst of the ultimate sellers’ market, which means real estate is ultra-competitive for buyers right now. The National Association of Realtors (NAR) says homes are getting an average of 4.8 offers per sale, and that number — and prices — keep rising.

On Cape Cod, 43% of all transactions that closed in March 2021 were for above asking price, compared to 11% in March 2020 and 9.5% in March 2019.

In addition, the median sales price for a single family home in Barnstable County rose to $653,500 last month, setting a new record high for median sale price on Cape.

Why?

It’s because there are so few houses for sale.

New listings in March on Cape for single-family homes were 391 and 93 for condominiums. This is a 18 percent decrease, and a 19.1 percent decrease respectively from last March, which had 477 new listings for single-family homes and 115 new listings for condominiums.

At the end of this March, there were 346 single-family homes for sale and 131 condominiums for sale in the Cape Cod & Islands Multiple Listing Service. Last March, there were 1,567 single-family homes and 446 condos listed for sale, a 77.9 percent decrease, and a 70.6 percent decrease, respectively.

Low inventory in the housing market isn’t new, but it’s becoming more challenging. Danielle Hale, Chief Economist at realtor.com put it simply: “Buyers can’t buy what’s not for sale.”

While many homeowners paused their plans to sell during the height of the virus crisis, this isn’t the main cause of today’s gap between supply and demand. (But, the lack of current homeowners looking to upsize, downsize or move to that someday neighborhood certainly isn’t helping…)

Sam Khater, Vice President and Chief Economist at Freddie Mac’s Economic and Housing Research Division, says that the main driver of the housing shortfall is a long term decline in the construction of single family houses, which has resulted in a decrease in the supply of starter homes.

When you consider the number of houses built in the U.S. by decade, the serious lack of new construction is obvious. (See graph below)

Patience Is the Key to Buying a Home This Year | MyKCM

To catch up to current demand, Freddie Mac estimates we need to build almost four million homes. The good news is that nationally there were 1.74 million housing starts in March – the highest in 14 years. Experts say the industry will need to keep that pace for three years to make up for the shortfall.

If you’re planning to buy this year, the key to success is being patient and working with real estate professionals — like Mari Sennott Plus — who know the Cape Cod market and can guide you through this very competitive environment. Providing our clients with the best advice has been our full time job for more than 20 years. So, let’s connect at 508-568-8191 or msennott@today realestate.com to review your options.

Your new home is out there waiting for you. It’s just going to take a little longer to find it.

Don’t wish for it; go for it!

Mari and Hank

PS: If you’ve been thinking about selling, what are you waiting for?? Let’s talk soon…