By Liz Dominguez
With the way things are forecast to go in the housing market in 2021, buyers might be feeling a little overwhelmed. Home sales are predicted to increase by 21.9% with home values expected to rise 10.5% by December 2021, according to a recent Zillow report.
However, while some buyers may think it wise to wait for the market to cool, Zillow’s data shows they may benefit more from simply diving in—of course, if they are financially prepared to do so—as the possibility of rising mortgage rates could bring affordability challenges in the future. Additionally, if the persistent inventory shortage keeps up, this will continue pushing home prices even higher. And with moving trends’ seismic shift due to the ongoing coronavirus pandemic, areas that were once affordable are seeing increased activity and increased home values.
An example, Zillow reports that today’s average mortgage rate is 2.68% for a 30-year fixed loan. With a 20% down payment, that means it would cost a typical U.S. buyer about $861 per month, plus taxes and insurance, to purchase a home. However, if home values rise 8% and interest rates climb to 3%, that same house would cost buyers $969 per month. And with a 12% spike in home values, the scenario would be monthly payments of $1,005.
“The best time to buy a home should always be when it’s the right time for your family. However, home shoppers would be wise to gather as much information as possible and use it to make smart decisions that maximize their buying power,” said Zillow home trends expert Amanda Pendleton. “For someone ready to buy, jumping in sooner rather than later could mean a savings of hundreds of dollars a month. Or, more likely, it could mean having to make fewer tradeoffs to stay within budget.”
The same goes for refinancing, said Zillow. Right now, those refinancing on a typical U.S. home loan would pay $861 per month, but if rates increase 3%, that would tack on $36 per month. And if rates increased to 3.5%, monthly payments would rise to $956.
“Rates are near historic lows, and we expect rates to hover near current levels through the first quarter of 2021. Although we expect rates to slightly increase as the economy recovers from COVID-19, it remains to be seen when that recovery truly gains traction. While these rate fluctuations may seem like small changes, when homeowners do the math, it is clear how lower rates can significantly reduce monthly payments for the life of the mortgage,” said Zillow Senior Economist Chris Glynn. “Like with any consumer decision, it is important to be informed, research the market and shop around to find the best deal possible. Qualified mortgage professionals can help individual consumers identify the loan rate, repayment term and structure that meet their needs.”
Here’s the market scenario for those considering taking the leap:
– According to Freddie Mac, mortgage rates remained flat compared to the previous week, with the 30-year fixed-rate mortgage averaging 2.73%.
– The markets are bustling. According to the National Association of REALTORS®’s Pending Home Sales Index, pending transactions may have dipped slightly (0.3%) in December, but YoY, they are up 21.4%.
– Realtor.com® reports that housing inventory in the 50 largest U.S. metros declined by 41.8% YoY in January.
As for the future? NAR Chief Economist Lawrence Yun expects strong home sales momentum, with sales up roughly 8 to 12% in 2021 vs. 2020, as well as prices rising more moderately, about 4% nationwide.
Liz Dominguez is RISMedia’s senior online editor.
By RISMedia Staff | RISMEDIA, Tuesday, November 12, 2019— (TNS)
The Fed lowered rates by a quarter of a percentage point Wednesday, for the third time this year, in an 8-2 vote. Citing “global developments for the economic outlook as well as muted inflation pressures” in a statement released by the Federal Reserve, policymakers dropped the target range for the federal funds rate to 1-1/2 to 1-3/4 percent.
The mortgage holders that will benefit from the rate cut are those with adjustable rate mortgages or ARMs, as a Fed cut means another reduction to their mortgage bill. Variable rates usually move in the same direction as the federal funds rate. The federal funds rate, however, doesn’t directly affect long-term rates, which include financial products like 30-year fixed-rate mortgages; those tend to move with long-term Treasury yields.
“Fed rate cuts have very little direct correlation to long-term fixed mortgage rates. We have seen mortgage rates moving in the other direction of the rate cut or not moving at all in the past,” says Shashank Shekhar, a lender in San Jose, Calif. “However, in the short term, a Fed rate cut usually boosts the stock prices and takes the money away from bonds. Also, a rate cut is intended to increase economic growth which can be inflationary. All of this is usually bad for mortgage rates and could result in higher rates for the borrower in the immediate future.”
How Fed Rate Affects Short-Term Loans
Most variable and short-term rates are linked to two benchmark rates: the prime or the London interbank offered rate (LIBOR) plus a margin, which is a number of percentage points. These rates usually march in step with the federal funds rate, so today’s rate means an extra jingle in some borrowers’ pockets.
One thing to note is that LIBOR as the key rate in mortgage contracts is on its way out, which is important for consumers to keep an eye on. Loans might get more expensive once LIBOR is replaced, says Greg McBride, CFA, Bankrate chief financial analyst.
“The future for many adjustable-rate mortgages is further clouded by the coming demise of LIBOR as a loan index. There is an open question as to whether the replacement index and margin will mean a higher rate for borrowers than the current LIBOR plus margin,” says McBride.
Addled with credibility issues, largely due to manipulating rates in order to drive profit, LIBOR will likely be replaced by risk-free rates or RFRs. The major flaw in LIBOR is that it depends on empirical data, which means banks report rates without being required to provide numbers to back up their claims. This process led to some LIBOR banks underreporting their interest rates for profit, which meant higher loan prices for some borrowers.
Unlike LIBOR, RFRs would promote transparency by calculating rates based on real transactions in the market.
What ARM Borrowers Should Know
Variable-rate loans, such as 3/1 and 5/1 ARMs, as well as home equity lines of credit, or HELOCs, get more or less expensive as the Fed boosts or lowers rates. This can be a boon for borrowers or a drain on their wallets, which makes variable-rate loans a sometimes-risky proposition.
Products like 5/1 ARMs give consumers the first five years with a fixed rate; after the fixed-rate period ends, there are annual rate adjustments for the remainder of the loan. So, if your rate drops during the adjustment period, the cost of your ARM drops, too.
Many HELOCs are also variable-rate loans, which means a win for borrowers in a falling rate environment.
The problem is that rates don’t always drop. So, it’s important for borrowers to analyze all scenarios: how much they’ll spend as well as how much they’ll save if rates rise and fall. It’s important to ask yourself: Can I afford my mortgage payments if rates spike? Although your initial out-of-pocket payment will likely be lower with an ARM, that low cost might not last if rates rise.
“My brother and sister-in-law have a 5/5 ARM with a great rate and a low down payment. But, if rates go up in five years, their payment might go up by a couple hundred bucks a month. That’s a big increase,” says Sean Murphy, associate vice president of Equity Lending at Navy Federal Credit Union.
A 5/5 ARM is a 30-year adjustable-rate mortgage with a principal and interest payment that stays the same for the first 60 months, and after that, the interest rate could rise or fall every five years.
Often borrowers choose ARMs to get the lowest initial rate possible, regardless of the variable-rate risk. This can be a cost-saving strategy if the borrower is certain they’re going to sell before the fixed-rate period ends or can refinance into another mortgage.
For borrowers who plan on staying put or might not be able to refinance later (due to credit or employment issues, for example), that upfront cost savings likely isn’t a worthwhile gamble.
“There is only about one-quarter percentage point difference between the rate on a 7/1 ARM and a 30-year fixed. For a quarter percentage point, are you going to subject yourself to potentially higher rates seven years from now? You’ve got to be awfully certain you’ll be out of that house within seven years to make that risk pay off,” McBride says.
Consumers May Want to Keep an Eye on These Indicators
The Fed’s decisions on rate movement are often influenced by several economic factors, which consumers can easily track. Employment, inflation and consumer price index are essential data the Fed considers when deciding what to do with rates. One thing consumers may want to look at is the employment report, which is published monthly by the Bureau of Labor Statistics.
The target inflation rate is another yardstick for rate changes. Currently, inflation is still dipping just below the Fed’s target 2 percent rate, which—in concert with other economic trends—could nudge the Fed toward future rate cuts.
As long-term rates hover below 4 percent, many borrowers are in a good position to save money.
©2019 Bankrate.com
Distributed by Tribune Content Agency, LLC
BY: JANN SWANSON www.mortgagenewsdaily.com Apr 5 2017, 7:45AM
Purchase index vs 30 year fixed – mortgagenewsdaily.com
The volume of purchase mortgages continued to increase during the week ended March 31, but steadily shrinking refinance numbers once again pulled overall volume down. The Mortgage Bankers Association (MBA) said its Market Composite Index, a measure of loan application activity, declined for the third straight week, decreasing by 1.6 percent from the previous week on a seasonally adjusted basis. On an unadjusted basis the Index fell by 1 percent.
The Refinance Index lost another 4 percent on top of 3 percent losses in each of the previous two weeks. The refinance share of all loan applications decreased to 42.6 percent from 44.0 percent.
The Purchase Index gained 1 percent on both an adjusted and an unadjusted basis compared to the volume during the week ended March 24. The adjusted index has risen in five out of the last six weeks. Purchase volume was up 8 percent compared to the same week in 2016. The average loan size for purchase applications reached a survey high at $318,200.
Adjustable-rate mortgage (ARM) applications had an 8.5 percent share of the total, unchanged from a week earlier. The FHA share of total applications increased to 11.1 percent from 10.8 percent and the VA share ticked up 0.1 percentage point to 11.1 percent. USDA applications held steady at a 1.0 percent share.
Average contract interest rates were mixed during the week, but effective rates were all lower than the week before. The average contract rate for 30-year fixed-rate mortgages (FRM) with conforming loan balances ($424,100 or less) increased to 4.34 percent from 4.33 percent. Points decreased to 0.31 from 0.43.
The jumbo version of the 30-year FRM, loans with balances greater than $424,100, had an average rate of 4.24 percent, down 2 basis points from the previous week. Points dipped to 0.24 from 0.26.
FHA-backed 30-year FRM had an average contract interest rate of 4.15 percent with 0.32 point. A week earlier the rate was 4.24 percent with 0.36 point.
The average contract interest rate for 15-year fixed-rate mortgages was unchanged at 3.57 percent. Points dropped to 0.38 from 0.43.
The average contract interest rate for 5/1 ARMs rose 3 basis points to 3.33 percent. Points were down to 0.13 from 0.28.
MBA’s Weekly Mortgage Applications Survey has been conducted since 1990. It covers over 75 percent of all U.S. retail residential mortgage applications with respondents that include mortgage bankers, commercial banks and thrifts. Base period and value for all indexes is March 16, 1990=100 and interest rate data assumes mortgages with 80 percent loan-to-value ratios and points that include the origination fee.
nerdwallet mortgage rate index
HAL M. BUNDRICK, CFP |nerdwallet.com
April 4, 2017 Mortgage Rates, Mortgages
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Mortgage rates moved lower again today as 30- and 15-year fixed home loans, as well as 5/1 ARMs, all fell, according to a NerdWallet survey of current mortgage rates published by national lenders Tuesday morning.
Without major news or economic reports to account for the move, analysts are attributing the interest rate decline to beginning-of-the-month institutional portfolio rebalancing. Traders buying bonds in large volume drove prices up — which caused yields to fall.
Fixed-rate mortgages are at their lowest point since the week of Nov. 21, 2016, according to the NerdWallet Mortgage Rate Index.
MORTGAGE RATES: TUESDAY, APRIL 4:
(Change from 4/3)
30-year fixed: 4.22% APR (-0.07)
15-year fixed: 3.62% APR (-0.04)
5/1 ARM: 3.81% APR (-0.02)
Mortgage Applications Skyrocket 49 Percent – Largest Weekly Jump Since 2008
RISMEDIA, Thursday, January 15, 2015
Mortgage applications made big moves last week, increasing 49.1 percent from one week earlier and showcasing the largest jump since November 2008, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending January 9, 2015.
The Market Composite Index, a measure of mortgage loan application volume, increased 49.1 percent on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index increased 119 percent compared with the previous week. The Refinance Index increased 66 percent from the previous week to the highest level since July 2013. The seasonally adjusted Purchase Index increased 24 percent from one week earlier to the highest level since September 2013. The unadjusted Purchase Index increased 83 percent compared with the previous week and was 2 percent higher than the same week one year ago.
“The US economy and job market continued to show signs of strength, but weakness abroad and tumbling oil prices have led to further declines in longer-term interest rates,” says Mike Fratantoni, MBA’s Chief Economist.
“Mortgage rates reached their lowest level since May of 2013, and refinance application volume soared, more than doubling on an unadjusted basis, and up 66 percent after adjusting for the fact that the previous week included the New Year’s holiday. Conventional refinance volume increased to a greater extent than government refinance volume. Applications for larger refinance loans increased more than 4 times relative to the previous week. The average conventional refinance application increased to $298,700 from $233,500 the prior week. Although there was a somewhat smaller increase for government refinance volume, VA refinance applications increased by 50 percent. VA loans tend to be larger than FHA and USDA loans, and hence are more responsive to a given rate change.”
“In addition to the drop in rates, and news of improvement in the job market, there was additional positive news for prospective homebuyers with evidence that credit availability has increased somewhat, and with FHA’s announcement of a decrease in their mortgage insurance premiums. Purchase application volume increased by almost 24 percent, with stronger growth for conventional applications than for government loans. Purchase application volume was at its highest level since September 2013, increased on a year over year basis in the aggregate, and notably increased across most loan size categories, particularly for the conforming, middle of the market loan segments that had been weak for much of the past year. FHA purchase application volume was up by 17 percent for the week on a seasonally adjusted basis.”
The refinance share of mortgage activity increased to 71 percent of total applications from 65 percent the previous week. The adjustable-rate mortgage (ARM) share of activity increased to 5.9 percent of total applications.
The FHA share of total applications decreased to 7.5 percent this week from 9.3 percent last week. The VA share of total applications decreased to 9.7 percent this week from 10.7 percent last week. The USDA share of total applications decreased to 0.8 percent from 0.9 percent last week.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,000 or less) decreased to 3.89 percent, the lowest level since May 2013, from 4.01 percent, with points decreasing to 0.23 from 0.28 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans. The effective rate decreased from last week.
The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances (greater than $417,000) decreased to 3.88 percent, the lowest level since May 2013, from 3.99 percent, with points decreasing to 0.23 from 0.24 (including the origination fee) for 80 percent LTV loans. The effective rate decreased from last week.
The average contract interest rate for 30-year fixed-rate mortgages backed by the FHA decreased to 3.71 percent, the lowest level since May 2013, from 3.81 percent, with points decreasing to -0.05 from -0.03 (including the origination fee) for 80 percent LTV loans. The effective rate decreased from last week.
The average contract interest rate for 15-year fixed-rate mortgages decreased to 3.16 percent, the lowest level since May 2013, from 3.24 percent, with points remaining unchanged at 0.30 (including the origination fee) for 80 percent LTV loans. The effective rate decreased from last week.
The average contract interest rate for 5/1 ARMs decreased to 2.94 percent, the lowest level since October 2014, from 3.19 percent, with points decreasing to 0.46 from 0.51 (including the origination fee) for 80 percent LTV loans. The effective rate decreased from last week.
RISMEDIA, Wednesday, December 03, 2014
The 30-year fixed mortgage rate on Zillow(R) Mortgages is currently 3.76 percent, down one basis point from this time last week. The 30-year fixed mortgage hovered around 3.75 percent last week before settling at the current rate.
“Rates continued to slide last week, and are now down more than a half of a percentage point from their mid-September peak,” said Erin Lantz, vice president of mortgages at Zillow. “Strong economic data suggests rates should move higher, but weak demand for new loans has kept rates low. This week we expect to see some volatility as markets react to Friday’s job report, but anticipate rates to increase modestly by week’s end.”
Zillow’s real-time mortgage rates are based on thousands of custom mortgage quotes submitted daily to anonymous borrowers on the Zillow Mortgages site, and reflect the most recent changes in the market.
These are not marketing rates, or a weekly survey.
The rate for a 15-year fixed home loan is currently 2.97 percent, while the rate for a 5-1 adjustable-rate mortgage (ARM) is 2.76 percent.
Purchase Mortgage Application Activity
Zillow predicts tomorrow’s seasonally adjusted Mortgage Bankers Association Weekly Application Index will show purchase loan activity increased by 15 percent from the week prior. Zillow combines loan requests made on Zillow Mortgages last week with the previous week’s Mortgage Bankers Association (MBA) Weekly Application Index to predict the MBA’s Weekly Application Index for purchase loans, which will be released tomorrow.
For more information about this prediction, visithttp://www.zillow.com/research/mortgage-app-index-part-one-7016/.
States’ rates are available at: http://www.zillow.com/mortgage-rates.
