Mortgage demand at lowest level in 22 years
To find the last time mortgage demand was this low, you’d have to put on your Y2K glasses. For the week ending June 3, the Mortgage Bankers Association’s index measuring mortgage loan application volume dropped 6.5 percent from the week before, sinking to its lowest level in 22 years. Driving the decline are increases in mortgage rates and home prices and a paucity of homes for sale. Rates have been rising all year, predating the Federal Reserve’s efforts to slow the economy, although the average 30-year fixed rate for conventional loans did edge down for three straight weeks before jumping 7 basis points to 5.40 percent last week. The increased rates led to drops in the MBA’s refinancing and purchasing indices. “While rates were still lower than they were four weeks ago, they remain high enough to still suppress refinance activity,” said Joel Kan, an MBA associate vice president, in a statement. The refinance index dropped 6 percent from the previous week and is down 75 percent year-over-year. The purchase index, which tracks mortgage applications to buy homes, plunged 18 percent from the previous week and is 21 percent lower than a year ago. “The purchase market has suffered from persistently low housing inventory and the jump in mortgage rates over the past months,” Kan said, noting the particular difficulties for first-time buyers. Points rose to 0.51 from 0.60 (including origination fee) for loans with a 20 percent down payment. The share of total applications through the FHA — reflecting buyers seeking to make a small down payment — increased from 10.8 percent to 11.3 percent from a week earlier, while the share of Veterans Administration applications also increased, from 10.2 percent to 11.4 percent. The USDA share of applications remained at 0.5 percent, or 1 out of every 200 loans. While mortgage rates are still lower than they were before the pandemic, buyers are feeling some sticker shock after growing accustomed to rates in the neighborhood of 3 percent. In the first week of this year, the average rate for a 30-year fixed-rate loan was 3.22 percent. In early 2021, it was 2.65 percent. Rising mortgage rates and hefty price increases across the country have some wondering if this is the last call for the country’s housing boom. Photo: Mortgage Bankers Association’s Joel Kan (LinkedIn, iStock) The post Mortgage demand at lowest level in 22 years appeared first on The Real Deal South Florida.
How Deductions Can Backfire in Real Estate
If you’re looking to buy, think twice about your taxes this year. Today I have another critically important tip for buyers: How do you prepare to buy a home around tax time? Most of the time, people who own their own business or file with a 1099 will do as many write-offs as possible, but that can cause a problem. Over 95% of residential real estate loans are backed by the federal government, so the loan criteria typically look at your adjusted gross income, which is your gross income less your deductions. “You may be approved for more if you don’t make as many deductions.” If you don’t take the deductions, you will have a higher gross income, but you will have to pay higher taxes. If you’re planning to buy a home, you need to look at if it’s worth it to make these deductions. For example, if you have FHA financing, the lender will typically approve you for five times your adjusted gross income. If you made $100,000 but had $50,000 in deductions, you will only be approved for a $250,000 home. If you made no deductions, you would be approved for a $500,000 home. It is critically important to speak with your accountant and real estate professional. They can make sure you are taking the correct deductions and maximizing your ability to purchase the home you want. If you have any further questions, I’m here for you. Just call or email me.
Redfin CEO says sellers are “starting to freak out” as market shifts
The housing market has been the record-shattering domain of sellers since the start of the pandemic, but Redfin CEO Glenn Kelman believes a shift is coming. Kelman told CNBC’s Closing Bell the housing market will look relatively similar to now in six months. He did have an encouraging prediction for buyers, though. “Rates are probably six percent, inventories are increasing, sales volume will be somewhat fine, but prices are going to soften,” Kelman said. Softening prices would be a big deal for potential buyers, who have contended with the rising cost of purchasing a home for months. The S&P CoreLogic Case-Shiller Index in February posted a 19.8 percent annual gain, the third-largest reading in 35 years. Kelman said a market pinch was coming due in part to rising mortgage rates that shot up from historic lows in the wake of the pandemic. Homeowners locked into a lower mortgage rate likely wouldn’t be inclined to pay both higher prices and higher rates for their next homes, which could signal a retreat in the market. “Buyers are saying ‘I’ve had enough’ and sellers are starting to freak out a little bit,” Kelman said. Kelman pointed to secondary markets where sellers would be most inclined to “freak out” as prices start to take a step back, including Tacoma, Washington, and Sacramento, as well as a more affordable market in Sarasota, Florida. A lack of sellers has caused housing listing inventory to collapse across the country. A recent estimate by Realtor.com found the country is short by more than 5 million homes. The number of homes on the market dropped to a record low of 456,000 in March, according to Redfin data, a 50 percent decrease from two years ago. Fannie Mae economists recently warned a “meaningful slowdown” in home sales could take root during the second and third quarters as a result of low inventory and rising mortgage rates. The economists forecasted 6.1 million total home sales this year, a reduction from previous estimates that would represent an 11.1 percent decline from last year. The Redfin CEO also noted that home flipping has become a more dicey proposition for those looking to make a quick buck. [CNBC] — Holden Walter-Warner Photo: Redfin’s Glenn Kelman (Redfin, iStock) The post Redfin CEO says sellers are “starting to freak out” as market shifts appeared first on The Real Deal South Florida.
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