What’s Really Happening with Mortgage Rates?
Are you feeling a bit unsure about what’s really happening with mortgage rates? That might be because you’ve heard someone say they’re coming down. But then you read somewhere else that they’re up again. And that may leave you scratching your head and wondering what’s true.The simplest answer is: that what you read or hear will vary based on the time frame they’re looking at. Here’s some information that can help clear up the confusion.Mortgage Rates Are Volatile by NatureMortgage rates don’t move in a straight line. There are too many factors at play for that to happen. Instead, rates bounce around because they’re impacted by things like economic conditions, decisions from the Federal Reserve, and so much more. That means they might be up one day and down the next depending on what’s going on in the economy and the world as a whole.Take a look at the graph below. It uses data from Mortgage News Daily to show the ebbs and flows in the 30-year fixed mortgage rate since last October: If you look at the graph, you’ll see a lot of peaks and valleys – some bigger than others. And when you use data like this to explain what’s happening, the story can be different based on which two points in the graph you’re comparing.For example, if you’re only looking at the beginning of this month through now, you may think mortgage rates are on the way back up. But, if you look at the latest data point and compare it to the peak in October, rates have trended down. So, what’s the right way to look at it?The Big PictureMortgage rates are always going to bounce around. It’s just how they work. So, you shouldn’t focus too much on the small, daily changes. Instead, to really understand the overall trend, zoom out and look at the big picture.When you look at the highest point (October) compared to where rates are now, you can see they’ve come down compared to last year. And if you’re looking to buy a home, this is big news. Don’t let the little blips distract you. The experts agree, overall, that the larger downward trend could continue this year. Bottom LineConnect with a professional if you have any questions about what you’re reading or hearing about the housing market.
Home Equity Can Be a Game Changer When You Sell
Are you on the fence about selling your house? While affordability is improving this year, it’s still tight. And that may be on your mind. But understanding your home equity could be the key to making your decision easier. An article from Bankrate explains:“Home equity is the difference between your home's value and the amount you still owe on your mortgage. It represents the paid-off portion of your home.You'll start off with a certain level of equity when you make your down payment to buy the home, then continue to build equity as you pay down your mortgage. You'll also build equity over time as your home's value increases.”Think of equity as a simple math equation. It's the value of your home now minus what you owe on your mortgage. And guess what? Recently, your equity has probably grown more than you think.In the past few years, home prices skyrocketed, which means your home's value – and your equity – likely shot up, too. So, you may have more equity than you realize.How To Make the Most of Your Home Equity Right NowIf you're thinking about moving, the equity you have in your home could be a big help. According to CoreLogic:“. . . the average U.S. homeowner with a mortgage still has more than $300,000 in equity . . .”Clearly, homeowners have a lot of equity right now. And the latest data from the Census and ATTOM shows over two-thirds of homeowners have either completely paid off their mortgages (shown in green in the chart below) or have at least 50% equity (shown in blue in the chart below): That means roughly 70% have a tremendous amount of equity right now.After you sell your house, you can use your equity to help you buy your next home. Here’s how:Be an all-cash buyer: If you’ve been living in your current home for a long time, you might have enough equity to buy your next home without having to take out a loan. If that’s the case, you won’t need to borrow any money or worry about mortgage rates. Investopedia states:“You may want to pay cash for your home if you're shopping in a competitive housing market, or if you'd like to save money on mortgage interest. It could help you close a deal and beat out other buyers.” Make a larger down payment: Your equity could also be used toward your next down payment. It might even be enough to let you put a larger amount down, so you won’t have to borrow as much money. The Mortgage Reports explains:“Borrowers who put down more money typically receive better interest rates from lenders. This is due to the fact that a larger down payment lowers the lender’s risk because the borrower has more equity in the home from the beginning.”The Easy Way To Find Out How Much Equity You HaveTo find out how much equity you have in your home, ask a real estate agent you trust for a Professional Equity Assessment Report (PEAR). Bottom LinePlanning a move? Your home equity can really help you out. Connect with a local real estate agent to see how much equity you have and how it can help with your next home.
Why Today’s Housing Market Isn’t Headed for a Crash
67% of Americans say a housing market crash is imminent in the next three years. With all the talk in the media lately about shifts in the housing market, it makes sense why so many people feel this way. But there’s good news. Current data shows today’s market is nothing like it was before the housing crash in 2008.Back Then, Mortgage Standards Were Less StrictDuring the lead-up to the housing crisis, it was much easier to get a home loan than it is today. Banks were creating artificial demand by lowering lending standards and making it easy for just about anyone to qualify for a home loan or refinance an existing one.As a result, lending institutions took on much greater risk in both the person and the mortgage products offered. That led to mass defaults, foreclosures, and falling prices. Today, things are different, and purchasers face much higher standards from mortgage companies.The graph below uses data from the Mortgage Bankers Association (MBA) to help tell this story. In this index, the higher the number, the easier it is to get a mortgage. The lower the number, the harder it is.This graph also shows just how different things are today compared to the spike in credit availability leading up to the crash. Tighter lending standards have helped prevent a situation that could lead to a wave of foreclosures like the last time.Foreclosure Volume Has Declined a Lot Since the CrashAnother difference is the number of homeowners that were facing foreclosure when the housing bubble burst. Foreclosure activity has been lower since the crash, largely because buyers today are more qualified and less likely to default on their loans. The graph below uses data from ATTOM to show the difference between last time and now:So even as foreclosures tick up, the total number is still very low. And on top of that, most experts don’t expect foreclosures to go up drastically like they did following the crash in 2008. Bill McBride, Founder of Calculated Risk, explains the impact a large increase in foreclosures had on home prices back then – and how that’s unlikely this time.“The bottom line is there will be an increase in foreclosures over the next year (from record level lows), but there will not be a huge wave of distressed sales as happened following the housing bubble. The distressed sales during the housing bust led to cascading price declines, and that will not happen this time.”The Supply of Homes for Sale Today Is More LimitedFor historical context, there were too many homes for sale during the housing crisis (many of which were short sales and foreclosures), and that caused prices to fall dramatically. Supply has increased since the start of this year, but there’s still a shortage of inventory available overall, primarily due to years of underbuilding homes.The graph below uses data from the National Association of Realtors (NAR) to show how the months’ supply of homes available now compares to the crash. Today, unsold inventory sits at just 2.7-months’ supply at the current sales pace, which is significantly lower than the last time. There just isn’t enough inventory on the market for home prices to come crashing down like they did last time, even though some overheated markets may experience slight declines.Bottom LineIf recent headlines have you worried we’re headed for another housing crash, the data above should help ease those fears. Expert insights and the most current data clearly show that today’s market is nothing like it was last time.
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