Saving for a Down Payment? Here’s What You Need To Know. If you're planning to buy your first home, then you're probably focused on saving for all the costs involved in such a big purchase. One of the expenses that may be at the top of your mind is your down payment. If you’re intimidated by how much you need to save for that, it may be because you believe you must put 20% down. That doesn’t necessarily have to be the case. As the National Association of Realtors (NAR) notes: “One of the biggest misconceptions among housing consumers is what the typical down payment is and what amount is needed to enter homeownership.” And a recent Freddie Mac survey finds: “. . . nearly a third of prospective homebuyers think they need a down payment of 20% or more to buy a home. This myth remains one of the largest perceived barriers to achieving homeownership.” Here’s the good news. Unless specified by your loan type or lender, it’s typically not required to put 20% down. This means you could be closer to your homebuying dream than you realize. According to NAR, the median down payment hasn’t been over 20% since 2005. In fact, the median down payment for all homebuyers today is only 14%. And it’s even lower for first-time homebuyers at just 6% (see graph below): What does this mean for you? It means you may not need to save as much as you originally thought. Learn About Options That Can Help You Toward Your Goal And it’s not just how much you need for your down payment that isn’t clear. There are also misconceptions about down payment assistance programs. For starters, many people believe there’s only assistance available for first-time homebuyers. While first-time buyers have many options to explore, repeat buyers have some, too. According to Down Payment Resource, there are over 2,000 homebuyer assistance programs in the U.S., and the majority are intended to help with down payments. That same resource goes on to say: “You don’t have to be a first-time buyer. Over 38% of all programs are for repeat homebuyers who have owned a home in the last 3 years.” Plus, there are even loan types, like FHA loans with down payments as low as 3.5% as well as options like VA loans and USDA loans with no down payment requirements for qualified applicants. If you’re interested in learning more about down payment assistance programs, information is available through sites like Down Payment Resource. Then, partner with a trusted lender to learn what you qualify for on your homebuying journey. Bottom Line Remember, a 20% down payment isn’t always required. If you want to purchase a home this year, let’s connect to start the conversation about your homebuying goals.

Looking for a luxurious, modern home that offers breathtaking views of Sandy Hook Bay and the NYC skyline? Look no further than this stunning custom-built property located in the hills of Highlands, NJ. With a listing price of $1,350,000, this complete home renovation boasts everything new, custom, and high-end. From the beautifully crafted oak wood flooring, black Pella windows, and wrought iron front door and rails to the James Hardie Lap siding, Shaker doors, and tankless high-efficiency hot water unit, no detail has been overlooked in creating this dream home. https://njshorerealtors.com/d8qukv1z The interior is an open-concept design, with an oversized family/dining room and living room that flow seamlessly into a modern white kitchen. The kitchen boasts a center island with quartz countertops, Viking 5 series appliances, and plenty of storage space. The home features four bedrooms and three-and-a-half baths, including an in-law suite on the first floor. The master bedroom and bath are truly luxurious, with a terrace that provides stunning views of the bay. But perhaps the most impressive feature of this home is the loft, which opens onto a breathtaking terrace with unparalleled views of Sandy Hook Bay and the NYC skyline. Imagine sipping your morning coffee as you take in the stunning scenery, or entertaining friends and family while enjoying the fresh ocean air. The property's exterior is just as impressive, with a four-car driveway that includes an EV charging station. The backyard features beautiful Cambridge Pavers and is perfect for relaxing or entertaining guests. In short, this property is a must-see for a luxurious, modern home that offers the best of both worlds: breathtaking views and all the amenities of a custom-built dream home.

30YR Fixed 6.89% -0.01% 15YR Fixed 6.28% -0.01% Mortgage Rates 101, Part 5: What Causes Mortgage Rates to Change? Mortgage rates change daily, and sometimes multiple times per day. In this article, “mortgage rates” will refer to the combination of upfront cost and actual interest rate described here: The 2 Components of Mortgage Rates. For example, if we talk about “higher rates,” it could either mean that the interest rate is higher, or simply that the upfront cost is higher for the same interest rate. These frequent changes are not arbitrary in any way. Instead they are the result of multiple factors with varying levels of importance and interdependence. Mortgages exist because investors want to earn interest by offering loans. Because of this, mortgage rates end up being directly driven by all the various market forces and operational considerations that dictate what those investors can/should/must charge. Factors relating to market forces Much like mortgage borrowers need money to buy a home, the US government needs money to finance Federal spending. Political commentary aside, this creates a massive market for government debt, which in turn serves as the plainest, most risk-free benchmark for many other types of debt. Collectively, this is known as “the bond market.” There are many other types of bonds with varying levels of risk and different features. They all exist because investors need or want to lend money and various entities need or wants to borrow money and. Mortgage borrowers are one such entity. When lenders have enough of the same type of loan from mortgage borrowers with similar circumstances, those loans can be grouped together to form a bond that can then be sold to other investors. Once the mortgage lender sells those loans to other investors, they now have the cash flow to go make news loans—assuming there are other investors who are interested in buying more loans. Thus, a market for these mortgage-backed-securities (MBS) is born. It’s quite a bit more complex in practice, but generally speaking, it’s simply a market for groups of loans. These trade on the open market and tend to follow the broader movements of more mainstream bonds like US Treasuries. In short, all the factors that can affect interest rates in the bond market can also affect the price that investors are willing to pay for these groups of mortgages. Those prices have a more direct influence on the rates that mortgage lenders can offer than anything else! Bottom line: loans become mortgage-backed-securities which trade on the open market, and the prices of mortgage-backed-securities dictate the rates that lenders can offer to new mortgage borrowers. Factors relating to operational considerations Knowing the price that investors are willing to pay for a group of similar mortgages gives lenders a baseline for the costs they must charge borrowers. The lender’s operational considerations will account for the rest. These considerations are all directly or indirectly related to how much profit the lender wants to make or how much business they are capable of doing. For instance, we tend to think of banks as always being available to make loans to borrowers who fit the right criteria, but that isn’t always the case. Many mortgage lenders have a certain amount of cash flow that they’d ideally like to use over a certain time frame. If a lender isn’t on pace to lend as much as they’d like, they might lower rates in order to entice more business. Conversely, if a lender is on pace to lend out more money than it has, it could raise rates in order to deter business. Apart from the availability of funding, lenders must also consider the availability of personnel. It takes human beings to make loans happen, and at a certain point, a lender will be at capacity. It can then either hire more staff or simply raise rates to throttle the amount of incoming business. These are two of the most basic operational considerations for lenders that complement the actual market-driven prices of mortgages. This can be thought of as any sort of business that sells a product made from raw materials. A car company, for example, is greatly affected by the cost of steel and aluminum, but the cost that buyers end up paying is also greatly affected by how that car company does business. How many factories do they have? How well-trained are their employees? How efficient are they? In the mortgage world, mortgage-backed-securities would be like the steel and aluminum while individual lenders would be like auto manufacturers, each trying to build/sell cars as efficiently and as profitably as possible. Bringing it all together The lender-specific considerations certainly change and certainly account for a portion of any given mortgage rate offering. Quite simply, this is why different lenders offer loans at different rates even though they’re all working with the same raw materials. But it’s those raw materials—those mortgage-backed-securities—that move throughout the day and do most to affect the moment-to-moment changes in lenders’ rate sheets. If something in the world is happening to cause investor demand to increase in bond markets, MBS tend to benefit as well. When MBS prices rise, investors are willing to pay more for those bundles of loans, meaning that lenders may be able to offer lower rates. Conversely, if investors are seeking riskier investments for whatever reason, MBS prices could fall, meaning investors aren’t paying as much for mortgages, thus forcing lenders to raise rates.  

Oops! Home Prices Didn’t Crash After All During the fourth quarter of last year, many housing experts predicted home prices were going to crash this year. Here are a few of those forecasts: Jeremy Siegel, Russell E. Palmer Professor Emeritus of Finance at the Wharton School of Business: “I expect housing prices fall 10% to 15%, and the housing prices are accelerating on the downside.” Mark Zandi, Chief Economist at Moody’s Analytics: "Buckle in. Assuming rates remain near their current 6.5% and the economy skirts recession, then national house prices will fall almost 10% peak-to-trough. Most of those declines will happen sooner rather than later. And house prices will fall 20% if there is a typical recession.”  Goldman Sachs:  “Housing is already cooling in the U.S., according to July data that was reported last week. As interest rates climb steadily higher, Goldman Sachs Research’s G-10 home price model suggests home prices will decline by around 5% to 10% from the peak in the U.S. . . . Economists at Goldman Sachs Research say there are risks that housing markets could decline more than their model suggests.” The Bad News: It Rattled Consumer Confidence These forecasts put doubt in the minds of many consumers about the strength of the residential real estate market. Evidence of this can be seen in the December Consumer Confidence Survey from Fannie Mae. It showed a larger percentage of Americans believed home prices would fall over the next 12 months than in any other December in the history of the survey (see graph below). That caused people to hesitate about their homebuying or selling plans as we entered the new year. The Good News: Home Prices Never Crashed However, home prices didn’t come crashing down and seem to be already rebounding from the minimal depreciation experienced over the last several months.  In a report just released, Goldman Sachs explained: “The global housing market seems to be stabilizing faster than expected despite months of rising mortgage rates, according to Goldman Sachs Research. House prices are defying expectations and are rising in major economies such as the U.S.,. . . ” Those claims from Goldman Sachs were verified by the release last week of two indexes on home prices: Case-Shiller and the FHFA. Here are the numbers each reported: Home values seem to have turned the corner and are headed back up. Bottom Line When the forecasts of significant home price depreciation were made last fall, they were made with megaphones. Mass media outlets, industry newspapers, and podcasts all broadcasted the news of an eminent crash in prices. Now, forecasters are saying the worst is over and it wasn’t anywhere near as bad as they originally projected. However, they are whispering the news instead of using megaphones. As real estate professionals, it is our responsibility – some may say duty – to correct this narrative in the minds of the American consumer.

  Getting pre-approved for a mortgage is a crucial step in the home buying process. It allows buyers to know how much they can afford to spend on a home and shows sellers that they are serious about making an offer. But how exactly do you get pre-approved for a mortgage? In this blog, we’ll walk you through the stages of getting pre-approved for a mortgage. Step 1: Gather Your Financial Information The first step in getting pre-approved for a mortgage is to gather your financial information. This includes your income, assets, and debts. You will need to provide documents such as pay stubs, W-2s, tax returns, bank statements, and investment account statements. Having this information ready and organized will save you time and make the process smoother. Step 2: Choose a Lender The second step is to choose a lender to work with. You can get pre-approved for a mortgage through a bank, credit union, or mortgage broker. It’s important to shop around and compare rates and fees from different lenders. You can also ask for recommendations from friends and family who have recently gone through the home buying process. Step 3: Submit an Application Once you’ve chosen a lender, you will need to submit a mortgage application. This can be done online, over the phone, or in person. The application will ask for your personal and financial information, such as your income, employment history, and credit score. Be prepared to answer questions about the type of home you are looking to buy and how much you are planning to put down as a down payment. Step 4: Provide Documentation After submitting your application, you will need to provide documentation to support your financial information. This includes the documents mentioned in step one, such as pay stubs and tax returns. Your lender may also request additional documents, such as proof of insurance or a copy of the sales contract for the home you are purchasing. Step 5: Wait for Approval Once you’ve submitted your application and provided all the necessary documentation, you will need to wait for approval. The lender will review your application and determine how much you are pre-approved to borrow. This amount will be based on your income, credit score, and other factors. If you are approved, you will receive a pre-approval letter from the lender. Step 6: Shop for a Home With your pre-approval letter in hand, you can start shopping for a home. It’s important to keep in mind that your pre-approval amount is not necessarily the amount you should spend on a home. You should consider your monthly budget and other expenses when deciding how much to spend. You should also work with a real estate agent who can help you find homes that fit your budget and needs. In conclusion, getting pre-approved for a mortgage is an important step in the home buying process. By following these six stages, you can get pre-approved and start shopping for your dream home. Remember to gather your financial information, choose a lender, submit an application, provide documentation, wait for approval, and then shop for a home. With pre-approval in hand, you’ll be one step closer to owning the home of your dreams.

There is no one-size-fits-all answer to the question of how much a house is worth. A house's value depends on several factors, including the location, size, condition, and amenities of the home. The value of a house can also be affected by the current market conditions. Here are some of the factors that can affect the value of a house: Location: The location of a house is one of the most important factors that affects its value. Houses in desirable neighborhoods with good schools and access to amenities tend to be worth more than houses in less desirable neighborhoods. Size: The size of a house also affects its value. Larger homes tend to be worth more than smaller houses. Condition: The condition of a house also affects its value. Homes that are in good condition tend to be worth more than houses that are in need of repairs. Amenities: The amenities that are included in a house can also affect its value. Houses with pools, hot tubs, and other amenities tend to be worth more than houses that do not have these amenities. Market conditions: The current market conditions can also affect the value of a house. In a seller's market, when there are more buyers than sellers, houses tend to sell for more money. In a buyer's market, when there are more sellers than buyers, houses tend to sell for less money. If you are interested in finding out how much a specific house is worth, you can use a home value estimator. Home value estimators are online tools that use a variety of factors to estimate the value of a home. However, it is important to remember that home value estimators are just estimates, and a home's actual value may be higher or lower than the estimate. If you are serious about buying or selling a home, it is important to get an appraisal. An appraisal is a professional assessment of the value of a home. An appraisal can give you a more accurate estimate of the value of a home than a home value estimator. Here are some additional tips for finding out how much a house is worth: Talk to a real estate agent. A real estate agent can help you find out the value of a specific house and can also help you buy or sell a home. Look at recent sales in the area. You can look at recent sales in the area to get an idea of what similar homes are selling for. Consider the cost of repairs. When you are estimating the value of a house, you should also consider the cost of any repairs that may be needed. By following these tips, you can better understand how much a house is worth.

Keys to Success for First-Time Homebuyers Buying your first home is an exciting decision and a major milestone that has the power to change your life for the better. As a first-time homebuyer, it’s a vision you can bring to life, but, as the National Association of Realtors (NAR) shares, you’ll have to overcome some factors that have made it more challenging in recent years:   “Since 2011, the share of first-time home buyers has been under the historical norm of 40% as buyers face tight inventory, rising home prices, rising rents and high student debt loads.” That said, if you’re looking to purchase your first home, here are two things you can consider to help make your dreams a reality. Save Money with First-Time Homebuyer Programs Being able to pay for the initial costs and fees associated with homeownership can feel like a major hurdle. Whether that’s getting a loan, being able to put together a down payment, or having money for closing costs – there are a variety of expenses that can make buying your first home feel challenging.  Fortunately, there are a lot of public and private first-time homebuyer programs that can help you get a loan with little-to-no money upfront. CNET explains:   “A first-time homebuyer program can help make homeownership more affordable and accessible by offering lower mortgage rates, down payment assistance and tax incentives.”  In fact, as Bankrate says, many of these programs are offered by state and local governments:   “Many states and local governments have programs that offer down payment or closing cost assistance – either low-interest-rate loans, deferred loans or even forgivable loans (aka grants) – to people looking to buy their first house . . .”  To take advantage of these programs, contact the housing authority in your state and browse sites like Down Payment Resource. The Supply of Homes for Sale Is Low, So Explore Every Possibility It’s a sellers’ market, meaning there aren’t enough homes on the market to meet buyer demand. So, how can you be sure you’re doing everything you can to find a home that works for you? You can increase your options by considering condominiums (condos) and townhomes. U.S. News tells us these housing types are often less expensive than single-family homes:   “Condos are usually less expensive than standalone houses . . . They are also less expensive to insure.” One reason why they may be more affordable is because they’re often smaller. But they still give you the chance to get your foot in the door and achieve your dream of owning and building equity. Beyond that, another major perk is they typically require less maintenance. As U.S. News says in the same article:   “The strongest reason for purchasing a condo is that all external maintenance is usually covered by the condo association, such as landscaping, pool maintenance, external painting, paving, plowing and more. This fee also covers some internal maintenance, such as gas, electric, plumbing, HVAC and other mechanical systems.”  Townhomes and condos are great ways to get into homeownership. Owning your home allows you to build equity, increase your net worth, and can fuel a future move. The best way to make sure you’re set up for success, especially if you’re just starting out, is to work with a trusted real estate agent. They can educate you on the homebuying process, help you understand your local area to find options that are right for you, and coach you through making an offer in a competitive market. Bottom Line Today’s housing market provides some challenges for first-time homebuyers. But, there are still ways to achieve your goals, like utilizing first-time homebuyer programs and considering all of your housing options. Let’s connect so you have an expert on your side who can help you navigate the process.

The Benefits of Selling Now, According to Experts If you’re trying to decide if now’s the time to sell your house, here’s what you should know. The limited number of homes available right now gives you a big advantage. That’s because there are more buyers out there than there are homes for sale. And, with so few homes on the market, buyers will have fewer options, so you set yourself up to get the most eyes possible on your house. Here’s what industry experts are saying about why selling now has its benefits: Lawrence Yun, Chief Economist at the National Association of Realtors (NAR):   “Inventory levels are still at historic lows. Consequently, multiple offers are returning on a good number of properties.” Selma Hepp, Chief Economist at CoreLogic:   “We have not seen the traditional uptick in new listings from existing homeowners, so undersupply of housing will continue to heighten market competition and put pressure on prices in most regions. Some markets are already heating up considerably, but price premiums that we saw last spring and summer are unlikely.” Clare Trapasso, Executive News Editor at Realtor.com:   “Well-priced, move-in ready homes with curb appeal in desirable areas are still receiving multiple offers and selling for over the asking price in many parts of the country . . .” Jeff Tucker, Senior Economist at Zillow:   “. . . sellers who price and market their home competitively shouldn’t have a problem finding a buyer.” Bottom Line If you’re thinking about selling your house, let’s connect so you have the expert insights you need to make the best possible move today. 

30YR Fixed 6.98% -0.03% 15YR Fixed 6.27% -0.03%   Mortgage Applications Decrease Again, Volatile Rates, Stagnant Inventories The Mortgage Bankers Association (MBA) said its Market Composite Index, a measure of mortgage loan application volume, decreased 4.6 percent on a seasonally adjusted basis during the week ended May 19 and was 5 percent lower than the previous week on an unadjusted basis. It was the second consecutive weekly decline. The Refinance Index was down 5 percent and was 44 percent lower than the same week one year ago. The refinance share of applications was unchanged at 27.4 percent.  View Refinance Applications Chart The seasonally adjusted Purchase Index fell 4 percent. The unadjusted version was 5 percent lower week-over-week and 30 percent lower on an annual basis.View Purchase Applications Chart “Mortgage applications declined almost five percent last week as borrowers remained sensitive to higher rates. The 30-year fixed rate increased to 6.69 percent, the highest level since March,” said Joel Kan, MBA’s Vice President and Deputy Chief Economist. “Since rates have been so volatile and for-sale inventory still scarce, we have yet to see sustained growth in purchase applications. Refinance activity remains limited, with the refinance index falling to its lowest level in two months and more than 40 percent below last year’s pace.”  Kan added, “Investors remained attuned to the uncertainty around the U.S. debt ceiling and communication from several Federal Reserve officials last week, which sent Treasury yields higher, along with mortgage rates. Economic data released over the past week have also pointed to a still-resilient economy. The housing market received positive data on new residential construction – which is seen as a key solution to the lack of housing inventory.” Other Highlights from MBA’s Weekly Mortgage Applications Survey Loan sizes grew by around $2000 compared to the prior week. Purchase loans averaged $442,000 and the overall average was $393,600. The FHA share of total applications increased to 12.5 percent from 12.0 percent and the VA share ticked up to 12.5 percent from 12.2 percent. USDA applications accounted for 0.5 percent of the total. The average 6.69 percent contract interest rate for conforming 30-year fixed-rate mortgages (FRM) was 12 basis points higher than the previous week. Points increased to 0.66 from 0.61. The rate for jumbo 30-year FRM rose to 6.57 percent from 6.46 percent, with points increasing to 0.57 from 0.38. FHA-backed 30-year FRM had an average rate of 6.56 percent with 1.24 points. The prior week the rate was 6.39 percent, with 0.97 point. The rate for 15-year FRM increased by 19 basis points to 6.15 percent. Points averaged 0.72, up from 0.68. The average contract interest rate for 5/1 adjustable-rate mortgages (ARMs) was 2 basis points higher at 5.73 percent, with points increasing to 1.19 from 1.10. The ARM share of activity increased to 6.7 percent from 6.5 percent.

For many of us, visiting the same vacation spot every year is a summer tradition that’s fun, relaxing, and restful. If that sounds like you, now’s the time to consider your plans and determine if buying a vacation home this year makes more sense than renting one again. According to Forbes:  “. . . if the idea of vacationing at the same place every year makes you feel instantaneously relaxed, buying a vacation home might be a wise move.”   To help you decide if making a move like this is right for you, let’s explore why you may want to consider purchasing a vacation home today.  Benefits of Owning Your Vacation Home You don’t have to worry about finding a place to stay. It can be a challenge to find a rental where you want, when you want. Some summer vacation destinations are more popular than others, meaning your favorite place may be booked up in advance. Bankrate explains why owning your vacation home means you don’t have to worry about that sort of inconvenience:  “. . . a second home can offer a place to have quality time with your family and ensures that you always have a vacation destination.”   It’s an investment. Home values typically appreciate over the long haul. That holds true for your vacation home as well, especially if it’s in an area with growing market demand. This can help grow your net worth with time.   Vacation homes may provide tax benefits. If you own a vacation home, you may be eligible for tax deductions based on where it is. However, before buying, you’ll want to consult with a tax professional to discuss first, as taxes can vary by location. It could potentially turn into a retirement location. If you love the location of your vacation home, you could possibly sell your primary residence and retire there in the future. How a Pro Can Help You Find Your Perfect Match As you’re preparing for summer vacation, remember, you could potentially visit your second home instead of another rental unit or hotel. A local real estate agent is your best resource if that sounds appealing to you. They have the knowledge and resources to help you understand the area and what vacation homes are available in your budget. Plus, these agents can explain the perks of how owning a second home can benefit you.  Bottom Line Let's connect if any of these reasons for owning a vacation home resonate with you. You still have time to enjoy spending the summer in your vacation home.

Introduction: Embrace the Home Buying Adventure Ready to dive into the crazy waters of home buying? Sure, it’s exciting, nerve-wracking, and you'll learn more about septic systems than you ever cared to know. But hey, welcome to adulting in Monmouth County, New Jersey!  Understanding the Local Real Estate Market: A Brief Overview Our real estate market here in Monmouth is as diverse as the folks arguing about the best bagel shop in town. From Red Bank's urban vibe to Sea Girt's "I-can’t-believe-I-live-here" beach life, there's a slice of heaven for every taste. The median home prices aren’t that scary (well, for New Jersey). So, grab your calculator, it's time to crunch some numbers and put that high school math to use!  Preparation: Saving and Budgeting for Your Dream Home Unless you've recently won the lottery, saving is your new best friend. First, there's the down payment – the big chunk of change you'll need upfront. And then come the ‘Oh-I-forgot-about-that’ costs like closing fees and home insurance. Let's not forget about the cash for those rainy-day home repairs (because who knew a water heater could cost that much?). Time to embrace your inner Scrooge!  Finding the Right Mortgage: Not as Scary as it Sounds Unless you're Scrooge McDuck and have a vault full of money, you'll probably need a mortgage. Lucky for you, Monmouth County is packed with banks just itching to lend you some dough. Local, regional, national—they’re all here. So, put on your best shopping attitude and start comparing! And remember, first-time buyer programs and FHA loans are like the Black Friday deals of mortgages.  House Hunting in Monmouth County: Where the Fun Begins Here comes the fun part—house hunting! You'll need an eagle-eyed real estate agent, someone who can spot a money pit from a mile away and knows the difference between "charming" (real estate code for tiny) and truly charming. Keep your budget in mind and remember, a heated bathroom floor isn’t necessary, but boy, it sure is nice!  Making an Offer and Closing: The Final Frontier Found your dream home? Great! Now it's time to wrestle, negotiate and make sure you don’t pay a penny more than you should. This is where your real estate agent turns into a superhero, guiding you to make a competitive offer. If accepted, you’ll need to part with some earnest money. (Don't worry, it's not a scam. It’s just to show you're serious.) Then comes the home inspection (fingers crossed no gremlins in the basement), final negotiations, and the closing process. And voila! The keys are yours!  Conclusion: Time to Turn that Key Buckle up, buttercup! Buying your first home in Monmouth County is a wild ride, from learning real estate lingo to finding out your spouse has strong opinions on crown molding. But with this guide and a sense of humor, you'll be turning your home-buying battle stories into backyard barbecue anecdotes in no time. Got questions, rants, or funny house hunting stories? Drop 'em in the comments below! 

30YR Fixed 6.69% +0.02% 15YR Fixed 6.05% +0.01%   Lack of Existing Home Listings Boost Builder Confidence Home builders’ attitudes about the market for newly constructed homes continued to improve in May, partially due to the lack of available pre-owned homes for sale. The National Association of Home Builders (NAHB) said the NAHB/Wells Fargo Housing Market Index which measures builder confidence jumped 5 points to 50, the fifth straight month the index has risen. It was also the first time the index has reached the midpoint of the index since July 2022. NAHB’s chief economist Robert Dietz said “New home construction is taking on an increased role in the marketplace because many homeowners with loans well below current mortgage rates are electing to stay put, and this is keeping the supply of existing homes at a very low level. In March, 33 percent of homes listed for sale were new homes in various stages of construction. That share from 2000-2019 was a 12.7 percent average. With limited available housing inventory, new construction will continue to be a significant part of prospective buyers’ search in the quarters ahead.” While optimism is rising, builders remain cautious amid ongoing industry challenges. In addition to shortages of building materials – Dietz specifically cited transformers – tightened conditions for construction and development loans are also hampering builders. Derived from a monthly survey that NAHB has been conducting for more than 35 years, the NAHB/Wells Fargo HMI gauges builder perceptions of both current single-family home sales and sales expectations for the next six months as “good,” “fair” or “poor.” The survey also asks builders to rate the traffic of prospective buyers as “high to very high,” “average,” or “low to very low.” Scores for each component are then used to calculate a seasonally adjusted index where any number over 50 indicates that more builders view conditions as good than poor. All three major HMI indices posted gains in May. The HMI index gauging current sales conditions rose 5 points to 56, the component charting sales expectations over the next six months jumped 7 points to 57 and the gauge measuring traffic of prospective buyers was 2 points higher at 33. With interest rates more than doubling compared to 2021, the HMI survey revealed the extent to which builders have used incentives to attract buyers in this new economic climate, and that use of these inducements is gradually slowing: The share of builders reducing home prices dropped to 27 percent in May, down from 30 percent in April, 31 percent in both February and March and 36 percent in November. The average price reduction has remained at 6 percent for the past four months. Fifty-four percent of builders surveyed offered some type of buyer incentive to bolster sales in May, down from 62 percent last December. The three-month moving average for regional HMI scores held steady at 45 in the Northeast and edged up 2 points in the Midwest to 39. Averages in the South and West bumped up 3 points to 52 and 41, respectively.  

30YR Fixed 6.67% +0.12% 15YR Fixed 6.04% +0.09%   Hi, My Name is Consolidation, And I Can Explain Everything Scroll down far enough on the list of Webster's definitions of the word "consolidate," and you'll find "to form together into a compact mass."  Financial markets appropriated that definition long ago and have been using it to refer to the condensed mass of prices, yields, or whatever else is being measured on a chart. Speaking of charts, consolidation has a tell-tale pattern of lower highs and higher lows that form a sort of triangle or pennant (incidentally, market participants also use those terms more or less interchangeably).  Regardless of the label, the underlying phenomenon is one of indecision or anticipation of a big move that has a chance to be higher or lower.  Consolidation is everywhere in the market these days.  If we zoom way out and simply consider the general flow of events, this makes good sense.  As inflation surged at the fastest pace in decades, the Fed tightened monetary policy at a similarly fast pace.  Inflation can also act as a natural brake on economic activity as consumer buying power declines. At some point, the inflationary surge levels off and we wait for price growth to moderate back toward more sustainable levels.  The presence of consolidation makes sense because we're smack dab in the middle of finding out whether inflation has leveled off as a sign that it's about to go lower, or simply to take a breath before remaining stubbornly high.  Consolidation patterns are equally likely to be seen for both reasons. This week's focal point for economic data and the broader consolidation theme was Wednesday's release of April's Consumer Price Index (CPI).  More than any other inflation report, CPI has had the power to push rates rapidly higher or lower. CPI was right in line with expectations this time around, which doesn't really help clear up much indecision. The monthly change of 0.4% at the core level (the one that gets the most attention from the Fed and financial markets) is right in the middle of consolidation pattern.  And the annual number remains fairly flat after coming off the higher levels seen at the end of 2022. There were some subtleties underneath the headlines that were helpful for rates.  Specifically, there was a nice little drop in core services inflation excluding housing.  This is a hot button for the Fed, as it captures a vast majority of the inflation that has been the most problematic.  Removing housing from the equation allows the market to see a shift earlier than it otherwise might (because the housing components don't move as much or as quickly). All that to say: interest rates moved lower on Wednesday despite CPI coming in flat.  The following day, Jobless Claims and the Producer Price Index (PPI) helped the move continue, although bank sector drama was also driving investors into US Treasuries.   Yields bounced on Friday after the Consumer Sentiment survey showed 5-year inflation expectations at their highest level since 2011. The chart of 10yr Treasury yields above is a good proxy for interest rate momentum throughout the week.  It may not look like a good example of consolidation on such a short time scale, but if we zoom out, things change. And what would a good proxy for rate momentum be if its sideways vibes didn't translate to the mortgage market? In fact, as of Friday, mortgage rates clocked their flattest calendar month since May 9th through June 9th, 2022.   The point of all this consolidation observation is simply to convey that the market is at a crossroads--albeit with a very long stop light--that will inform the next big move for rates and the housing market.  If inflation moves lower out of its consolidation pattern, rates would almost certainly do the same, thus allowing homeowners some breathing room to shop for new homes without worrying about sacrificing their ultra low existing rate.  In the week ahead, we'll get to see how that process is going via the Existing Home Sales data on Thursday. Two days prior, the Retail Sales report will provide an update on consumer spending.  In general, lower sales suggest downward pressure on inflation, but economists expect a +0.7% increase this time around compared to a 0.6% decrease in the last report.

Buyer Activity Is Up Despite Higher Mortgage Rates If you’re a homeowner thinking about making a move, you may wonder if it’s still a good time to sell your house. Here’s the good news. Even with higher mortgage rates, buyer traffic is actually picking up speed. Data from the latest ShowingTime Showing Index, which is a measure of buyers actively touring homes, helps paint the picture of how much buyer demand has increased in recent months (see graph below): As the graph shows, the first two months of 2023 saw a noticeable increase in buyer traffic. That’s likely because the limited number of homes for sale kept shoppers looking for homes even during colder months. To help tell the story of why the latest report is significant, let’s compare foot traffic this February with each February for the last six years (see graph below). It shows this was one of the best Februarys for buyer activity we’ve seen in recent memory. In the last six years, we saw the most February buyer traffic in 2021 and 2022 (shown in green above), but those years were highly unusual for the housing market. So, if we compare February 2023 with the more normal, pre-pandemic years, data shows this year still marks a clear rise in buyer activity. The uptick in buyer traffic is even more noteworthy considering the increase in mortgage rates this February. The Freddie Mac 30-year fixed mortgage rate rose from 6.09% during the week of February 2nd to 6.50% in the week of February 23rd. But even with higher rates, more buyers were looking for a home. Jeff Tucker, Senior Economist at Zillow, says the increased buyer activity could continue: “More buyers will keep coming out of the woodwork. We always see a seasonal uptick in home shoppers in March and April . . .” If you’re looking to sell your house, seeing buyers still active in the market this year should be encouraging. It’s a sign buyers are out there and could be looking for a home just like yours. Working with a real estate professional to list your house now will help you get your home in front of eager buyers today. Bottom Line Rising foot traffic is a bright spot for this year’s housing market and indicates that buyers are looking to purchase this year, even with higher mortgage rates. If you’re ready to sell your house, let’s connect.

30YR Fixed 6.49% -0.09% 15YR Fixed 5.90% -0.10%   Lowest Mortgage Rates in Weeks After Fed Hikes Rates. Here's How That Works... The implication of "Fed rate hikes" is a constant source of confusion in the housing market.  The general belief is that the Fed controls rates and if they're hiking, then rates are going higher.  That's not exactly how it works. Let's leave aside the question of the Fed's control for another day.  It's a fairly circular and philosophical debate (chicken/egg kinda thing) with no real relevance to today's mortgage rate movement).  Instead, let's focus on why today's Fed rate hike coexists with mortgage rates moving lower. The Fed hike the Fed Funds Rate.  That applies to loans between large institutions for period of less than a day.  By influencing the cost of the shortest-term capital at the highest levels, the Fed is attempting to cool demand for goods and services, thereby reducing inflation.   Mortgage rates apply to loans that last more than 5 years on average (before the home is sold or the loan is refinanced).  That means they serve a very different purpose for investors and can move quite differently versus shorter-term debt.  But this isn't even the biggest reason for the disconnect. The most obvious reason that a Fed rate hike can coexist with lower mortgage rates is that the bond market already knew the Fed was going to hike and had long since priced that in to the present level of rates.  It would be different if the Fed could hike rates any time, any day, but there are only 8 meetings per year that result in rate changes.  That means the market has a lot of time to adjust its expectations in between those meetings. Because the market had already accounted for the hike, all that was left was to react to the changes in the Fed's verbiage and the comments from Fed Chair Powell in the post-announcement press conference.  That verbiage generally conveyed the possibility that this was the last Fed rate hike for a long time.  Even if that possibility is heavily dependent on economic data, the bond market liked the fact that the Fed wasn't set on continuing to hike. The average mortgage lender is down to the lowest levels in roughly 3 weeks.  Additional gains will depend on the economic data in the coming days--particularly Friday's jobs report and next week's Consumer Price Index (CPI).

30YR Fixed 6.73% +0.14% 15YR Fixed 6.12% +0.14%   Housing and Rates Having Tough Time Finding Momentum Mortgage rates fell nicely to start the week but only after rising rather abruptly in the previous two weeks. That said, short term ups and downs are just a sideshow in the bigger picture where rates have been locked in a pattern of indecision that will ultimately give way to the next big move. There's a slightly smaller version of the bigger picture seen in 10yr Treasury yields, which tend to correlate highly with mortgages.   If it looks like Treasuries have been a bit more willing to hang out near the bottom of their range, there's good reason.  A resurgence of concerns over the banking sector sent investors to seek cover in the safest of havens.  After several back-and-forth headlines, the week ended with reports that it was only a matter of time before First Republic Bank officially failed. In not so many words, when these banks officially fail, another bank or financial firm acts as a sort of trustee to minimize the amount of FDIC's insurance payout.  That involves selling the bank's assets.  In SVB's case, there have been billions in mortgage-backed securities.  From there, it's just supply/demand 101.  Higher supply = lower prices.  And in the bond market, lower prices mean higher rates.   What's it going to take for things to change?  In a word: inflation.  That's how we ended up here in the first place, after all.  The present market limbo is a reflection of the present inflation limbo, which has been more persistent than many fans of low rates expected. This week brought another update on the state of inflation in March, this time from the PCE price index (not to be confused with the Consumer Price Index or CPI which tends to have a much bigger impact on rates).  PCE prices were close to expectations, but far from looking eager to return to target levels.   In separate data, some of the effects of March's higher mortgage rates were seen in the form of lower Pending Home Sales.  This data series form the National Association of Realtors is an advance indicator of Existing Home Sales.  The chart below compares the two.  Simply put, the sharp drop in pending sales suggests the housing market is also in a sort of limbo and not necessarily eager for a sharp rebound. Next week brings more significant economic data as well as the latest rate decision from the Fed.  It's all but certain that we'll see another 0.25% rate hike, but at that point, there will be an even more intense focus on data to determine if that's the ceiling until further notice.  Next Friday's jobs report and the Consumer Price Index release on the following Wednesday could go a long way toward challenging the sideways pattern in rates, but only if they both send the same message.  

Mortgage application volume increased during the week ending April 21. The Mortgage Bankers Association (MBA) said its Market Composite Index, a measure of that volume, rose 3.7 percent on a seasonally adjusted basis compared to the prior week and was 5 percent higher before adjustment. The Refinance Index increased 2 percent from the previous week but was 51 percent lower than the same week one year ago. The refinance share of mortgage activity decreased to 26.8 percent of total applications from 27.6 percent the previous week. Refinancing accounted for 35 percent of applications during the same week in 2022.View Refinance Applications Chart The seasonally adjusted Purchase Index was up 5 percent week-over-week and 6 percent higher on an unadjusted basis. Purchase mortgage volume was 28 percent lower than the same week one year ago.View Purchase Applications Chart “Both conventional and government home purchase applications increased last week. However, activity was still nearly 28 percent below last year’s pace, as high mortgage rates and low supply have slowed the market this year, even as home-price growth has decelerated in many markets across the country,” Joel Kan, MBA’s Vice President and Deputy Chief Economist said. “Refinance applications also increased last week but remained at half of last year’s levels. Although incoming data points to a slowdown in the U.S. economy, markets continue to expect that the Fed will raise short-term rates at its next meeting, which have pushed Treasury yields somewhat higher. As a result of the higher yields, mortgage rates increased for the second straight week to their highest level in over a month, with the 30-year fixed rate now at 6.55 percent.” Highlights from MBA’s Weekly Mortgage Applications Survey Loan sizes slipped slightly from the week ended April 14. The overall average was $384,600, down from $389,200 and purchase loans declined from an average of $437,700 to $431,600. The FHA share of applications decreased to 12.6 percent from 12.7 percent and the VA share to 11.2 percent from 11.7 percent. The USDA share of 0.4 percent was the lowest of the year. The average contract interest rate for conforming 30-year fixed-rate mortgages (FRM) increased to 6.55 percent from 6.43 percent, with points unchanged at 0.63. Jumbo 30-year FRM had an average rate of 6.40 percent with 0.5 point. The prior week the rate was 6.28 percent with 0.51 point. Thirty-year FHA-backed FRM rates averaged 6.41 percent, 8 basis points higher than the prior week. Points increased to 1.04 from 0.94. There was an increase of 14 basis points in the average contract interest rate for 15-year FRM to 6.03 percent. Points declined to 0.56 from 0.65. The average contract interest rate for 5/1 adjustable-rate mortgages (ARMs) decreased to 5.47 percent from 5.56 percent, with points jumping to 1.18 from 0.72. The ARM share of activity rose from 6.3 percent of the week’s applications to 6.7 percent.    

30YR Fixed 6.66% -0.01% 15YR Fixed 6.04% -0.01%   Is There Really a New, Unfair Mortgage Tax on Those With High Credit? Seemingly overnight, the internet is awash with news regarding a "new," unfair tax on mortgage borrowers with higher credit scores. Some have gone so far as to suggest that someone could intentionally lower their credit score in order to get a better deal. Before you stop paying your bills in the hope of cashing in, let's separate fact from fiction.  First and most importantly, you will absolutely NOT get a better deal on a mortgage rate if your credit score is lower, even if your nephew just texted you a screenshot of a news headline saying "620 FICO SCORE GETS A 1.75% FEE DISCOUNT" and "740 FICO SCORE PAYS 1% FEE."   So why would your nephew make such a claim? This all has to do with changes to Loan Level Price Adjustments (LLPAs) imposed by Fannie Mae and Freddie Mac (the "agencies"), the two entities that guaranty a vast majority of new mortgages. LLPAs are based on loan features such as your credit score and the loan-to-value ratio among other things.  They've been changed several times over the years and a fairly substantial change was announced in January of this year. Wait... This news is from JANUARY?!  Why are people talking about it now? Yes, in fact, we already told you about it.  People are confused because they don't understand how "delivery dates" work when it comes to Fannie and Freddie.  Changes that impact fees and guidelines are almost always implemented based on the date the loan in question is "delivered" to Fannie/Freddie.  "Delivery," in this context, typically occurs a matter of weeks AFTER the loan is closed, although it can be more than a month.   Now consider that a closed loan has often been quoted and locked for more than 3 weeks--call it a month to be safe.  Since these changes go into effect on loans delivered on or after May 1st, 2023, lenders began to implement them weeks ago.  Many lenders implemented them months ago--especially for loans that are locked for longer periods of time. So low credit borrowers are already getting a discount while high credit borrowers pay more?  Not exactly, and this is where the confusion comes in.  Also, from here on out, please note that there is no opinion offered here as to whether this is good/bad/etc.  The only goal is to clear up confusion and offer facts.   The fact of matter is that LLPAs are indeed changing in a way that improves costs for those with lower credit scores and increases costs for those with higher credit scores (in many cases, anyway).  But people are confusing the CHANGE for the ACTUAL cost. So a low credit borrower isn't paying less than a high credit borrower?  The gap between what they pay is just smaller than it was? YES! Again, all value judgements and political commentary aside, the change amounts to a tweak of an existing fee structure in favor of those with lower credit scores and at the expense of those with higher credit scores, but there's no scenario where someone with lower credit will have a lower fee.  In other words, don't go skipping those credit card payments in the hopes of getting a lower rate. How about some color-coded charts/tables? I thought you'd never ask.  Let's start with the changes that have everyone so upset.  The following tables shows the DIFFERENCES in LLPAs before and after the change.  RED = rising costs.  GREEN = falling costs.++ If you only saw this chart, you could be forgiven for thinking someone with a 640 credit score was paying less than someone with a 740, but again, these are just the changes.   Now let's look at a table with OUTRIGHT LLPAs for the same matrix of credit scores and loan-to-value ratios.  This is the NEW structure, after the implementation of the change. As you can now plainly see, if you have a score of 640, you'll be paying significantly more than if you had a 740.  Using an 80% loan-to-value ratio as an example, your LLPA at 640 is 2.25% versus 0.875% for a 740 score.  That's a difference of 1.375%, or just over $4000 on a $300k mortgage.  This is almost HALF the previous difference, and that's certainly a big change. Yes, it's a big change, so why is the government doing this to people with higher credit?!   Fannie and Freddie technically have a "mission" to promote affordable home ownership.  Here is the statement on the topic by their regulator, the FHFA: FHFA Announces Updates to the Enterprises’ Single-Family Pricing Framework. Note in the first two tables that there is more of an improvement for the lower FICO rows on PURCHASES (i.e. home ownership vs refis). Any other misconstrued news I need to know about? Yes, actually.  While not as viral as the LLPA stuff, there has been a fair amount of press on a new 40yr FHA mortgage.  THERE IS NO NEW 40yr FHA LOAN!  Lenders who collect payments on FHA loans have a new option to offer loan modifications with terms of 40 years to borrowers who are unable to pay their existing FHA loans.   Don't you usually talk about financial markets in these newsletters? Indeed!  But since we've taken a fair amount of space on more interesting stuff above, we can keep the market recap fairly short.  Rates moved higher to start the week as economic data was strong on Monday morning.  There were several other examples of reactions to economic data at home and abroad as the week continued, but all of them played out in a sideways range that continues to wait on the first two weeks of May for the most relevant input.

30YR Fixed 6.66% -0.01% 15YR Fixed 6.04% -0.01%   Existing Home Sales Hit by Higher Rates and Low Inventory The National Association of Realtors (NAR) measures the sales of previously owned homes.  These so-called Existing Home Sales account for a vast majority of all home sales in the US.   Existing sales bottomed out in January at an annual pace of 4.00 million units.  The numbers for March came out today at 4.44 million.  While that's a nice improvement, it was lower than last month's reading of 4.55 million and just shy of forecasts calling for 4.50 million. In short, much like the world of interest rates, home sales are not quite as bad as they were a few months ago, but have generally been muddling along waiting for something to change.  As for things that might change, interest rates are being watched very closely. In fact, it's hard to overlook the fact that home sales arrested their freefall at the same time that interest rates experienced a small amount of relief after their fastest spike in decades.  Looking back over the past few years, there is definitely a correlation between the ebbs and flows in rates and home sales. There are other factors in play as well, even if one might argue they're related to the interest rate landscape.  Inventory, for example, has been remarkably restrained by an unwillingness on the part of homeowners to give up the low rates obtained over the past 2 years.  Those homeowners aren't expecting to go out and get another 2.75% mortgage rate, but something around 5% would free up a lot of inventory that is currently frozen by rates near 7%.   The knock-on effect of low inventory is that prices haven't declined in an especially alarming way.  Looking at the following chart of sales vs prices vs inventory, we can see just how different the current correction is than the run up to the financial crisis in 2006. In other words, things are completely different this time around because the drop in sales has already happened while inventory remains low.  Back then, inventory spiked well before the drop in sales.

30YR Fixed 6.67% -0.08% 15YR Fixed 6.05% -0.07%   Rates Having a Tough Time Turning The Corner The good news is that last November increasingly looks like the moment when rates stopped surging higher at the fastest pace in 40 years. The not-so-good news is that they still don't seem sure what to do next.  Rates have been able to stop the bleeding due to inflation broadly leveling off over the past 6 months, but mixed messages in the inflation data are preventing a faster drop. This week's most closely watched inflation report, the Consumer Price Index (CPI), came in just a bit lower than the market expected, but is still fairly far from target levels. Although it's not nearly as relevant of a report, the Producer Price Index agreed that runaway inflation is no longer the concern.  In fact, at the producer level, prices actually moved lower last month for the first time since things started getting crazy in 2020. Unfortunately, that's not exactly the inflation the market is worried about.  "Core services" inflation is all the rage these days and the Fed says it hasn't seen enough evidence of a drop to suggest taking it easy on rates.  That hasn't stopped the market from looking for early evidence that such a drop could be on the horizon. One of the biggest sticking points for services inflation has been the cost of keeping a roof over one's head.  CPI tracks that via a line item known as Owners Equivalent Rent (OER).  Much like the broader core CPI, OER is off its highest levels but still much higher than it needs to be. With the inflation data promising but inconclusive, traders turn their attention to other data that's likely to inform the inflation trends.  This is why rates fell so much at the start of the string of bank failures in early March.  Investors figured drama in the banking sector would help cool demand (and thus, inflation). Some of the early April data seemed to confirm that (which is why rates hit their lowest levels in 2 months last week). Last Friday's jobs report began to push things back in the other direction (toward higher rates).  By the end of the present week, Retail Sales made a similar case.  It's not that sales were strong.  In fact, overall retail sales fell by 1% versus forecasts calling for a 0.4% decline. The issue is that investors were prepared to see consumers cut back on spending even faster.  The resilience was especially notable in some of the more granular data, such as the "non-store sales" component which accounts for pretty much everything bought on the internet. At a time when the economy is supposed to be cooling, this data shows consumers just strung together 3 very respectable months.  In fact, before the pandemic, there are only 3 other examples of a similar quarter in the past 20 years.  Simply put, investors hoping to see evidence of a rattled consumer would have to look elsewhere or wait for the next report.  The bond market instantly reflected that realization, primarily in the form of Fed rate hike expectations.   Fed rate expectations correlate best with the shortest term bonds, but long-term bonds (which correlate more with mortgage rates) took a hit as well. The 10yr Treasury yield has been trying to sustain a break below 3.4% since December, but continues hitting a wall.  Last week looked promising, but this week had other thoughts. It makes sense for rates to be treating these levels with respect.  We're essentially at an inflection point between the highest post-pandemic rate range and something that's close enough to what were, at the time, the super high rates of late 2018. Then there's the mortgage market.  It has had to endure the departure of the Federal Reserve as the biggest, guaranteed buyer of newly originated mortgage debt in the market.  That process, known as quantitative tightening, happened in the first 8 months of 2022 and it drastically changed the relationship between mortgage rates and Treasury yields.  The spread between the two is still fairly extreme by recent standards, but even when it begins to tighten, without the Fed buying mortgages, we shouldn't expect to see the "old normal" levels any time soon. Next week doesn't boast as many potentially significant economic reports, but bank earnings and comments from Fed speakers can nonetheless cause volatility for markets.  On the plus side for rates, the scariest levels are indeed likely behind us unless inflation manages an unexpected resurgence.  On the downside, it will remain very difficult for rates to move much lower than they were last week without data that does more to confirm a shift among consumers and/or inflation itself.