Category Archives: Mortgage Rate Trends and Analysis

Commentary on mortgage rate trends

Rising Mortgage Rates: Three Things To Keep an Eye On

download (2)Thanks to historically low mortgage interest rates, many have been able to live the American dream and purchase a home. Mid-September figures for the 30-year fix-rate mortgage had a national average of 4.28 percent but we all know good things come to an end.

Just as 2015 comes around the corner, many real estate professionals and economists believe this will also bring rising mortgage rates.

According to Stan Humphries, the chief economist for Zillow, the 30-year rate could reach the five percent mark by the middle of next year as the Federal Reserve discontinues their mortgage-backed security purchases.

Should rates go north, prospective homeowners may see their home-buying opportunities change. But it doesn’t have to be all doom and gloom. Here are three things for consumers to keep their eyes on should mortgage rates rise.

A cut in buying power

For most of this year, rates have sat between four to five percent, but are poised to rise around .75 percent in 2015. Borrowers will see this cut into their buying power—perhaps more than they realize.

This increase could produce higher monthly mortgage payments next year by $700-plus in the more expensive U.S. places.

In a comparison by Zillow that reviewed 35 metropolitan areas for a one percent increase in 30-year mortgages (from 4.1 percent to 5.1 percent), with rising increases for home values during the next year, monthly payments could increase for the St. Louis area to $65 per month and $200 per month for the New York metropolitan area. Over in Silicon Valley/San Jose area, there’s a possible $710 jump.

Decreased inventory

Along with spending more per month, consumers will have fewer homes to choose from when they’re ready to buy—especially hard hit will be those first-time homeowners seeking either mid- or lower-priced dwellings.

Real estate broker Redfin has July data supporting this with July property figures. They saw homes under the $375,000 range hard hit from 2011 figures as there were 28 percent less of homes in this price range and for a sticker price $130,000 or less, 50 percent fewer.

But for those seeking homes greater than a $375,000, this inventory rose 16 percent as compared to 2011.

However, when reviewing August numbers, the down trend continued. “Affordable inventory” fell by 9 percent as compared to July’s numbers.

Less competition

Sure, the two aforementioned points are concerning, but here’s one silver lining for consumers: a less competitive housing market. The National Association of Realtors recently reported in August, investors and all-cash purchase dramatically fell.

For prospective homeowners, this is a good thing according to Nela Richardson, Redfin’s chief economist. She said, “Many markets are not going to see the same multiple-bid environment that we saw even earlier this year. It will be easier to win the home of your dreams than it was a few months ago.”

Furthermore, for those first-time buyers, she believes they can take a deep breath as over the next few months as rates will remain low and they can take their time looking around.

While mortgage rates will likely change in the next year, prospective homeowners still have time to take advantage of these historic lows now. But similar to any major investment, it will be important to look at the current market, comparison shop and make an informed decision.

Mortgage Rate News for Friday, November 21, 2014

mortgage ratesSo guess what happened yesterday?  Not a whole lot.  Despite a slew of economic data that was on balance pretty decent, our markets held their ground, and mortgage rates ended the day virtually unchanged.  On the whole, mortgage rates improved a bit this week, with the average 30-year fixed-rate mortgage falling to 3.99% according to Freddie Mac’s Primary Mortgage Market Survey.  Quite honestly, I don’t have much else to say today.

Mortgage Rate News for Friday, November 14th, 2014

mortgage ratesMorning meetings have taken me away from my blogging activities the past couple days, and in the interim period, not a whole lot happened.  Mortgage rates got a little worse after Veteran’s Day, but have levelled off since that time.  Freddie Mac’s Primary Mortgage Market Survey found the average rate on a 30-year fixed-rate mortgage to be 4.01%, virtually unchanged from last week.  However, the answers to the survey are collected early in the week, and probably don’t reflect the change in pricing that resulted from Wednesday’s bond sell-off.  Effectively, the average rate is probably a couple of basis points higher.  The lowest reading we’ve seen on the PMMS this year was 3.92% on the week of October 23rd.  This morning mortgage backed securities are selling off, and we could see some deterioration in rates.

Mortgage Rate News for Monday, November 3, 2014

pmms_chart“Day after day, day after day, we stuck, nor breath nor motion; as idle as a painted ship upon a painted ocean.” -Samuel Taylor Coleridge Taylor, The Rime of the Ancient Mariner.

Once again, last week was kind of a boring one for mortgage rates.  Save for the excitement of October 15th, it’s been kind of a slow sideways grind for rates for about a month now. Last week’s Primary Mortgage Market Survey from Freddie Mac saw the average rate on a 30-year fixed-rate mortgage rise six basis points to 3.98%, putting rates a touch above 14 month lows.  From a broader perspective, rates have been trending lower for the past year (see above chart), but it’s not an extreme trend by any means.  Much closer to a sideways grind.  UPDATE: we’re seeing a sell-off in bonds this morning following some good manufacturing data.  If it is sustained, mortgage rates will tick up.

Mortgage Rate News for Friday, October 24, 2014

arrow-pointing-down-bigAfter last week’s dramatic drop, mortgage rates have continued to decline at a more sedate pace. For you, that means lows not recorded since June of 2013.

The average rate for 30-year fixed-rate mortgages fell to 3.92%, down from 3.97% last week. 15-year fixed-rate mortgages were down 10 basis points to 3.08%, and 5/1 ARMs dropped only slightly, from 2.92% to 2.91%.

Are Lenders Easing Up on Jumbo Mortgage Loan Requirements?

imagesIn today’s real estate market, lenders are hungry for borrowers who are looking to take on jumbo mortgages. As a result, some lenders have loosened their requirements when it comes to what it takes to qualify.

Underwriting is more strict than it was years ago because of new laws lenders must abide by that were passed in early 2014. But if you’re looking for a jumbo mortgage, there are some choices of lenders and options available.

What Is a Jumbo Mortgage?

A jumbo mortgage is exactly what it sounds like: a loan for larger homes that are priced at $417,000 or more in some areas. In more expensive locations, the price point for a jumbo mortgage starts at $625,500 and works up from there.

They are referred to as “jumbo” loans because they exceed the conforming limit (or max loan amount) that Fannie Mae and Freddie Mac will buy. Note that the conforming limits vary by county and market. Typically, more expensive housing markets allow for loans at $625,500 or more.

Who Is Qualifying?

It’s safe to say that several lenders are relaxing their requirements on what it takes to qualify for one of these jumbo mortgages. That said, there are still a few underwriting guidelines you should be aware of. They’re guidelines as there are no hard and fast rules across the board. The requirements can vary by lender and location when it comes to determining what a financial institution is looking for a borrower to have.

You’ll increase your chances of qualifying based on the following:

  • A debt-to-income ratio of 38-45 percent is recommended.
  • Traditionally, lenders have looked for borrowers to have a 720 credit score or better. As with any loan, the higher your credit score, the more likely you are to be approved (and with a better interest rate). Many lenders have lowered their credit requirements, so if your credit score is below 720, shop around to ensure you’re getting the best rate.
  • Lenders also like to see that you have six to 12 months of mortgage payments in reserves, which makes the loan less risky for them.
  • If you’re looking to get a jumbo mortgage for a second property, such as an investment or rental, inquire at different banks as their policies all differ on this. There are banks that will approve it.

How Lenders Are Being Lenient in Favor of Securing Jumbo Mortgages

Again, lenders are eager to start finding big borrowers as the housing market recovers. They’re willing to be more lenient if you at least meet a few of their requirements. Here are some of them, but keep in mind they change as often as the market does.

Interest rates for jumbo loans have been even lower than traditional 30-year fixed-rate mortgages for the past few months. Private mortgage insurance is also not required for many jumbo mortgages. With low interest rates, no PMI, and low down payments, it seems like now is the time to buy.

Some lenders are only requiring down payments of 10-20 percent, according to CNN Money. Lower down payments are attractive to those that can afford jumbo mortgages, as it means they will be able to invest more money elsewhere for a better return.

Even though falling property values are a big concern for lenders, the real estate markets in popular places, such as DC, New York, and San Francisco, are booming. The risk is worth it to lenders, especially since wealthier borrowers tend to default at a lower rate.

It could also be worth looking into going with a credit union for your jumbo mortgage. Credit unions are offering some of the best deals, a few going so far as to do away with down payments completely. Why? They’re in favor of building customer relationships, which means the ability to sell members on other products that they offer.

Now Is the Time to Buy

If you’re in the market for a large residential house, now might be the best time to buy. Lenders are working harder to make jumbo mortgages more attractive, and you should take advantage of it. Various lenders are in different stages of figuring out what direction they want to take with jumbo mortgages, so be diligent and shop around.

Omaha, NE Mortgage Rates and Real Estate Overview

“Put your drinks up for Nebraska,” sings Lady Gaga on her song Yoü and I. If you’ve ever been OLYMPUS DIGITAL CAMERAthere, you’ll know there’s more to America’s heartland than corn, hills and the occasional farmhouse.

Omaha has a great music scene, is one of the fastest growing cities in the country and has family friendly suburbs as welcoming as any in the Midwest. Home to five Fortune 500 companies and four Fortune 1000 companies representing the railroad, food packaging, insurance and construction industries, Omaha has a vigorous economy and is home to Warren Buffett, no less. Newsweek also listed Omaha as one of the top 10 high-tech “havens” in the nation.

Despite this, Omaha is not an especially expensive place to live. The median value of the city’s homes is currently $144,500, lower than an equivalent city such as Saint Louis. Interest rates for a 30-year fixed-rate mortgage in the area range, according to Zillow, from 4.55 percent to 4.86 percent. This results in monthly payments on an average Omaha property ranging from $586 to $603.

Whether you’re looking for a distinctive urban neighborhood like the historic Morton Meadows in midtown Omaha or a pleasant suburb like Armbrust Acres with its access to Lake Zorinsky, Omaha’s housing market has plenty of choice. Downtown Omaha has many loft units and apartment buildings, as well as proximity to the boutique shops of the Old Market Historic District.

Northwest Omaha comprises suburbs like Bennington, Irvington and Briggs, with large, affordable homes perfect for raising a family. The median sales value of Bennington homes is $235,500 and is currently increasing due to the neighborhood’s popularity. On a 30-year fixed-rate mortgage for an average Bennington property, expect to make monthly payments ranging from $941 to $969. Interest rates in the area currently stand between 4.38 percent and 4.69 percent, according to a Zillow sample.

Like any city, Omaha has rough areas. There are certainly deprived neighborhoods in the north of the city. If safety is a prime concern, stick to suburbs like Harvey Oaks to the west and Millard to the southwest of downtown Omaha. These suburbs have been popular since the 90s and are great for families. Looking for something out of town? Across the Missouri River, Council Bluffs is a small community surrounded by interesting geography with a current median home value lower than Omaha ($110,000).

Let’s hear it one more time: “Put your drinks up for Nebraska!”


Should you rent or buy? A new map helps answer this question

rent-vs-buyWhether it’s a challenging roommate, a long commute, or marriage (just to name a few reasons) at some point many of us decide to stop renting and take the plunge of purchasing a home. The housing market continues recovering from its 2008 crash and home prices are rising although they’re not quite back to normal. In fact, in June, the S&P/Case-Shiller Home Price Index showed that average U.S. home prices are sitting around summer 2004 levels but remain almost 20 percent off the mid-2006 peak.

Depending on where you live, prices in your area still may not have topped out and the value of your new home could increase in the next couple of years.

Is it time to pull the trigger and buy? Maybe this map could help answer this question as it depends on where you live.

Baltimore Sits at the Top for Value

Maybe you live in Baltimore. Lucky you, as it is the most valuable U.S. market for home buyers. This comes with its rent versus buying differential: a net difference of $1,160 between the two. As rents average $1,599, an average monthly mortgage payment is only $439, when based on a median $85,000 home sales price.

But it’s not the cheapest place to purchase a home. Washington County, Miss. has this distinction with its average monthly mortgage of $217 and $42,000 median home sales price.

San Francisco is Unfriendly for Buyers

If you head across the country to San Francisco, you’ll find the most expensive real estate with its average home mortgage of $4,599 and median $890,500 home value.

Maybe you just want to rent in San Francisco. This will cost you as well. The Bay Area’s six counties, which include Alameda, Contra Costa, San Francisco, Santa Clara and San Mateo, all sit in the top 10 nationally for the highest rent. This averages at more than $2,400 per month.

Good to be a renter in New York

But the City by the Bay is not the only unfriendly city. Again, across to the other coast, New York City is the least friendly for buyers as it has a rent versus buying net difference of $2,729. This bodes well for renters as the city’s average rent is $1,852 per month. This compares to an unfavorable average mortgage of $4,581per month, according to RealtyTrac data. However, there’s more to the story.

Sure, there are high real estate prices in New York (this is always the case) but some buyers actually have the advantage in the city. When looking at the four neighboring boroughs, it’s a little better for Brooklyn and the Bronx residents to buy while Queens and Staten Island are better for renters.


Stay Away from Hawaii

While the San Francisco Bay area causes a lot of pause for real estate, it’s not the most expensive place in the rent. Honolulu comes in at the top with its $2,862 average monthly rent.

Living among beauty has its price.

If you’re really looking for a bargain and perhaps a less desirable venue than Hawaii, you can pay $699 per monthly rent in Montgomery County, Ark.

Now that we’ve presented you with some options, don’t fret if you find yourself living in an area that is expensive to even rent. You’re not alone. According to RealtyTrac data, in 2013 one third of Americans lived in areas with an unaffordable average rent for median income earners.