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The Cost Of Purchasing A Home In The U.S. Increased 55% Last Year. But It’s Still A Great Time To Buy A House For These Five Reasons

May 31, 2022 by Amy Leave a Comment

I’ve always been all-in on homeownership. Yet, for the first time in two decades since the beginning of the pandemic, I haven’t owned a home.

All of which got me thinking: The National Association of Realtors (NAR) just issued a report calculating that the cost of purchasing a house in the U.S. has increased 55% year over year since 2021 after factoring in home value appreciation, tax re-assessments, and mortgage rate increases.

So, from a seller’s standpoint did I just miss out on the frothiest bull housing market in decades?

Home Sales Increase Slightly As Prices Drop

The pandemically-fueled housing market is breaking records and making homeowners fortunes.

In two senses the answer, unfortunately, is yes.

The pandemically-fueled housing boom since 2020 as a function of appreciation over time is unprecedented against any other historical financial metric, including the recent Dow Jones, NASDAQ, and S&P run ups.

That percentage gain also translates directly into higher appraised home values, which means more equity in sellers’ pockets when they decide it’s time to move. Ergo in sum, homeowners have seen a better return on their real estate investments over a shorter period of time since 2020 than even the pre-Great Recession housing bubble.

The good news for people like me who’ve either rented by choice, been priced out of the current market by the math, or sat on the real estate sidelines for other personal reasons over the past two years, however, is that now is still a great time to buy a home for several reasons under the right circumstances.

UK Daily Life 2021

It’s no longer just a seller’s market.

First and foremost, the COVID housing froth finally is cooling off.

Listings are up along with new housing starts, closings are down, and the days of all cash, waive-all-contingencies bidding wars are waning. So, excluding places like San Francisco or Manhattan where home prices had reached the point of almost stupid years ago, buyers in most markets already are on the back side of the pandemic peak.

“The overheated market of 2021 is already transitioning toward a less frantic landscape in response to several factors, and housing’s fundamentals are already shifting from the early days of the pandemic,” says George Ratiu, Manager of Economic Research at Realtor.com. “Builders have ramped up the pace of construction and more new homes are hitting the market. In addition, many homeowners who delayed their plans during the pandemic are ready to move forward with their lives so we’re already seeing an increase in the number of new listings—a sign of improving supply in existing homes. This boost in inventory, coupled with higher mortgage rates, inevitably is going to put downward pressure on the frenetic price growth we have experienced over the past year. That’s good news for buyers who have time on their side since the real estate landscape over the next 8-12 months is likely to shift away from a seller’s only market.”

The 25-44 year old population is up about 50% in the past decade in the Logan Circle/Shaw neighborhoods.

Millennials are now the largest demographic cohort in the U.S. and the largest pool of potential.

Many would-be home buyers, especially Millennials without kids, also have been stashing cash in lieu of eating out and taking vacations since the beginning of the pandemic, resulting in a COVID-induced nest egg alternatively deployable for down payments, closing costs, moving, and renovations—which often are the primary financial impediments to purchasing a home in the first place.

Perhaps most importantly, almost every expert I’ve spoken with agrees that the current housing boom isn’t a “bubble” a la 2007. Housing’s core fundamentals are strong—meaning the basics of supply and demand as well as the mortgages and household balance sheets upon which those foundations are based aren’t about to shatter from a glass house rock out of nowhere any time soon.

Here are five other specific reasons why now is a great time to buy a home.
Lake Boca Raton and city skyline with reflections at sunset

Housing prices aren’t going down any time soon especially in places like South Florida.

Prices Aren’t Going Down

No matter who you talk to, it’s widely agreed that U.S. home values across the board aren’t dropping any time soon. This is due primarily to a single-family housing supply crisis and demographic shifts that have been building for years. So even while homes prices might seem inflated right now by the numbers, they aren’t artificially elevated like they were back in in 2005.

“A couple of factors are likely to keep pressure on prices for the foreseeable future,” says Realtor.com’s Ratiu. “The first one is demographics. Millennials are the largest cohort in the U.S., are embracing homeownership, and eager to use real estate as a foundation for financial and economic growth. With over 4.5 million Millennials turning 30 over the next few years, housing demand will remain robust. At the same time, we started 2022 in the wake of over a decade of under-building. Based on Realtor.com’s calculations, we are short 5.8 million new single-family homes across the country which will sustain demand and prices.”

That means buying a home now is still a solid, low risk money parking strategy, especially when the non-financial benefits of homeownership are taken into account like being the master of your destiny instead of a landlord’s and being able to renovate or build an addition if you end up working from home for the rest of your life.
Federal Reserve Board Chairman Jerome Powell Speaks At ″Fed Listens″ Event

Despite the Federal Reserve’s recent interest rate hikes residential mortgage rates are still 

Mortgage Rates

In 1981, interest rate hikes by the Federal Reserve to put the breaks on inflation pushed 30-year fixed mortgage rates to an all-time high of 18.63%. So, despite the Federal Reserve’s recent monetary tightening and interest rate increases (the current 30-year mortgage rate according to Bankrate is 5.46%)—and the possibility of subsequent ones to come later this year—mortgage interest rates overall remain historically low.

While the days of crazy cheap money are temporarily over and paying down a typical mortgage has jumped by $633/month for a median priced home, the historical price of entry to purchase a house in the U.S. is still lower than it’s been on average for the past 50 years.
New Home Construction At The Highest Level In 17 Years

The mortgage interest tax deduction is still one of the best financial benefits of homeownership. 

Taxes

For first time homebuyers who’ve been renting for years, homeownership comes with a ton of perks.

One of the more mundane yet financially profound of them is the mortgage income tax deduction, which the National Association of Realtors has masterfully lobbied to keep in the U.S. tax code for decades. This allows for up to 100% of the interest you pay on your mortgage to be deducted from your gross income in addition to the other deductions for which you are eligible like the standard personal deduction and deducting for home office expenses before your final tax liability in any given year is calculated.

Depending on the price of your home and the size of your mortgage, these aren’t small numbers, especially as interest rates rise. Some years in some houses, particularly in 2005 when I bought a home at an 8%+ rate, my mortgage interest deduction was well into the $20,000 range—which for a writer is no small nut to be able to write down off of my total earned income (in some years the mortgage interest deduction alone brought me down into an entirely different tax bracket).

In addition, after two years the profits from selling your house assuming it’s your primary residence aren’t taxed by capital gains which means more net money into your pocket after closing costs.

Rents Are Increasing Too

The pandemically-fueled home price increases in the U.S. over the past two years have been widely reported in the media, yet far less covered has been the fact that residential rents have been rising too. Rents in Boise, ID, for example, have increased over 13% since the beginning of the pandemic, almost double that of inflation as a whole. In Miami according to some estimates they’re up over 31%.

So for home buyers weighing the opportunity costs of continuing to rent and throwing their money away versus getting into the homeownership game and building long-term wealth, the logic isn’t as clear as it’s been in the past when rents typically have dropped asymmetrically relative to home price increases in a similar fashion to investors fleeing stock markets in favor of government backed bonds.

Landlords, and the rent increases they impose, also aren’t tied to the federal funds rate like banks and mortgage lenders, so when it comes to owning a home there’s at least some certainty that homeownership inflation will remain linked long-term to well-intended monetary policy rather than the whims of Wall Street and private equity firms.
Bay Area Feels The Effects Of Plunging Housing Market

Real estate is still one of the best wealth building strategies long term. 

Wealth Building

No matter how you slice the numbers, long-term homeownership is still one of the most predictable, risk-manageable wealth building strategies compared with other ways of deploying one’s income for a return on investment. So compared with renting, even at today’s 5.46% mortgage rates, building equity in a house instead of renting is still a hard logic to argue with—especially if home prices remain strong.

“Inflation and its upward pressure on price levels is less like the tide and more akin to climate change and the impact it has had on rising ocean levels,” says Realtor.com’s Ratiu. “Once prices reach a higher watermark, they are likely to only move up from there. Consider that in 1972, the median value of a new home in the U.S. was $29,200. By 1992, median price reached $126,000, and it further advanced to $190,100 in 2002. During the mid-2000s housing boom, median prices peaked at $257,400. The housing bust of 2008 saw median new home values decline to $208,400. However, the ensuing recovery pushed prices to $327,100 by the fourth quarter of 2019, and the shift brought about by the pandemic only accelerated the trajectory. Based on Census data, the first quarter of 2022 saw median prices above $428,000 for new homes. Meanwhile, hampered by a significant shortage of supply, median prices for existing homes also reached new records, hitting $425,000. While the historical values are not adjusted for inflation, housing remains one of the most predictable ways to build wealth over time.”
Celebs' mansions in Miami, United States on February 09, 2001.

Real estate—still a safe bet. Especially in markets like Miami. 

What all of this means for the U.S. housing market writ large is good news, says Craig Studnicky, founder of Miami-based real estate brokerage RelatedISG.

“The pandemic set off a worldwide frenzy for single-family homes. In the early days of COVID, people started to realize that it was easier to manage social distancing in a house where you typically have more space and you didn’t have to share an elevator or lobby with your neighbors. People then discovered the joy of owning a house because of the space and privacy it offers. In addition, suddenly people could work remotely and had the freedom to live anywhere, so they wanted to move to places like South Florida where the weather is great all year round. Mortgage rates also hit historic lows which helped accelerate the home buying frenzy, especially as the Millennial generation became of homebuying age. Demand quickly started to outstrip supply, sending prices spiraling. And historically when prices go up to these levels, they rarely come down and the widespread housing supply shock we’re currently experiencing won’t be resolved anywhere overnight. Houses have become a gold standard for investments and that’s not changing anytime soon on Wall Street or Main Street.”
By:
Peter Lane Taylor

Filed Under: Eastside Real Estate Blog, Issaquah Community Blog Tagged With: Home Buying, Home Prices, homeownership, Housing Market, Mortgage Rates, Taxes

Mortgage Rates Trend Down

July 27, 2021 by Kathy Reichle Leave a Comment

Concerns about the Delta variant, and the overall trajectory of the pandemic, are undoubtedly affecting economic growth. While the economy continues to mend, Treasury yields have decreased, and mortgage rates have followed suit. Unfortunately, many homebuyers are unable to take advantage of low rates due to low inventory and high prices.

  • Current Mortgage Rates Data Since 1971 xls

 

Primary Mortgage Market Survey®

U.S. weekly averages as of 07/22/2021
Average commitment rates should be reported along with average fees and points to reflect the total upfront cost of obtaining the mortgage. Visit the following link for the Definitions. Borrowers may still pay closing costs which are not included in the survey.

Filed Under: Issaquah Community Blog Tagged With: Economic Growth, Freddie Mac, Mortgage Rates

Seattle area’s home prices take biggest-ever 12-month leap

July 7, 2021 by Kathy Reichle Leave a Comment

A ferry departs Edmonds, part of Snohomish County’s rapidly climbing housing market, in November. Home prices in the Seattle metro area and around the country continue to increase steadily. (Ken Lambert / The Seattle Times)

What a difference just two years can make.

Around this time in 2019, Seattle-area home prices had dipped and price growth nationwide was slowing.

Cut to 2021: Seattle has clocked another month as one of the hottest American housing markets as home prices here and nationwide climb at a record-breaking pace.

Single-family home prices in the Seattle metro area were up 20.2% in April from a year earlier, the region’s biggest-ever 12-month leap, according to the S&P CoreLogic Case-Shiller Home Price Index released Tuesday. (The index lags by two months and reflects portions of King, Pierce and Snohomish counties.)

Travis Meidell, who works in tech and bought a home in Lake Stevens this spring, said the local housing market felt like it “got more competitive” over the course of his home search that stretched from 2020 into this spring. “It became more cutthroat.”

Prices climbed faster in Seattle than nationwide even as costs nationally jumped 14.6%, “literally the highest reading in more than 30 years of S&P CoreLogic Case-Shiller data,” said S&P Managing Director Craig Lazzara in a statement.

For more than a year, a flood of buyer demand, a tight supply of homes and super-low interest rates have fueled wild growth in housing markets all over the country. While there are some recent signs buyer demand could finally be slipping, things were still red-hot in April.

The frenzied market has laid bare the vast divide of pandemic experiences, with many low-wage workers losing jobs early in the outbreak while others worked from home and tech stocks soared. Rising housing costs could also exacerbate racial gaps in homeownership. A recent Redfin survey found that Black homeowners were more likely than white homeowners to have made financial sacrifices, like taking on an extra job, in order to afford their first home.

Among major metro areas in April, only Phoenix and San Diego saw quicker year-over-year growth than Seattle, both at roughly 22%, according to the Case-Shiller index. The index reports a three-month rolling average of home prices.

Not everywhere in the Seattle area has seen the same trends. Many of the toughest markets to buy a home in recent months have been outside Seattle proper.

In April and May, home prices were up between 17% and 22% year-over-year in parts of Snohomish and Pierce counties, compared with jumps between 9% and 11% in Seattle, according to Zillow. Hot spots included Snohomish, Mill Creek and Lake Stevens in Snohomish County and Parkland in Pierce County.

All that competition has left homebuyers feeling the pressure.

Kristen Mandery, who grew up in Edmonds, has watched the sizzling market with a front-row view as she searched in recent months for a new house to be close to her mom.

The first house for which she submitted an offer went to another buyer for $400,000 over its list price, the second for $375,000 over. She finally secured her new house in an off-market deal and paid about $25,000 over the list price.

“I’ve lived in this area over 40 years and I’ve never ever seen the housing market like this,” Mandery said.

When Meidell began searching, he and his wife hoped to buy in Edmonds but prices there eventually stretched beyond their reach, he said. They instead bought farther north in Lake Stevens, settling for a longer commute and paying about $90,000 over the five-bedroom home’s list price to compete against other buyers.

As the couple searched for a new house, Meidell said he set up a search with filters for his budget and other parameters. The options seemed to get slimmer before his eyes.

“Every week you could watch the dots just rapidly disappear,” Meidell said. “It was this continuous state of anxiety: If I don’t do this, eventually there will be nothing left.”

Just how long can all this last?

New data on local home sales to be released next week will show whether demand has begun to slow in Western Washington.

Nationally, CoreLogic Deputy Chief Economist Selma Hepp predicted Tuesday that price increases will stay in the double digits through the rest of this year.

Hepp argues that although jaw-dropping price jumps may feel reminiscent of the 2008 crash, “mortgage interest rates remain 50% lower than they were in 2005, when home price growth last peaked, keeping the ratio of mortgage payments to monthly households income lower today.”

By 

Heidi Groover 
Seattle Times business reporter

Filed Under: Issaquah Community Blog Tagged With: Competing offers, Home Prices, Home Trends, Low Inventory, Mortgage Rates, Real Estate

Mortgage Rates Remain Near Record Low Heading Into 2021

January 2, 2021 by Kathy Reichle Leave a Comment

MCLEAN, Va., Dec. 31, 2020 (GLOBE NEWSWIRE) — Freddie Mac (OTCQB: FMCC) today released the results of its Primary Mortgage Market Survey® (PMMS®), showing that the 30-year fixed-rate mortgage (FRM) averaged 2.67 percent.

“All eyes have been on mortgage rates this year, especially the 30-year fixed-rate, which has dropped more than one percentage point over the last twelve months, driving housing market activity in 2020,” said Sam Khater, Freddie Mac’s Chief Economist. “Heading into 2021 we expect rates to remain flat, potentially rising modestly off their record low, but solid purchase demand and tight inventory will continue to put pressure on housing markets as well as house price growth.”

News Facts

  • 30-year fixed-rate mortgage averaged 2.67 percent with an average 0.7 point for the week ending December 31, 2020, up slightly from last week when it averaged 2.66 percent. A year ago at this time, the 30-year FRM averaged 3.72 percent.
  • 15-year fixed-rate mortgage averaged 2.17 percent with an average 0.7 point, down from last week when it averaged 2.19 percent. A year ago at this time, the 15-year FRM averaged 3.16 percent.
  • 5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 2.71 percent with an average 0.4 point, down from last week when it averaged 2.79 percent. A year ago at this time, the 5-year ARM averaged 3.46 percent.

The PMMS is focused on conventional, conforming, fully amortizing home purchase loans for borrowers who put 20 percent down and have excellent credit. Average commitment rates should be reported along with average fees and points to reflect the total upfront cost of obtaining the mortgage. Visit the following link for the Definitions. Borrowers may still pay closing costs which are not included in the survey.

Freddie Mac makes home possible for millions of families and individuals by providing mortgage capital to lenders. Since our creation by Congress in 1970, we’ve made housing more accessible and affordable for homebuyers and renters in communities nationwide. We are building a better housing finance system for homebuyers, renters, lenders, investors and taxpayers. Learn more at FreddieMac.com, Twitter @FreddieMac and Freddie Mac’s blog FreddieMac.com/blog.

 

Filed Under: Issaquah Community Blog Tagged With: Homebuyer, Housing Market, Mortgage Rates

Weekly mortgage applications soar 30% as homebuyer demand hits the highest level in 11 years

January 28, 2020 by Kathy Reichle Leave a Comment

It was a seriously strong start to 2020 in the mortgage business for new home loans and refinances.

Total mortgage application volume surged 30.2% last week from the previous week, according to the Mortgage Bankers Association’s seasonally adjusted index.

Refinancing led the surge, thanks to a drop in mortgage rates. Those applications jumped 43% for the week and were 109% higher than a year ago. The refinance share of mortgage activity increased to 62.9% of total applications from 58.9% the previous week.

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($510,400 or less) decreased to the lowest level since September, 3.87%, from 3.91%, with points decreasing to 0.32 from 0.34 (including the origination fee) for loans with a 20% down payment. The rate was 87 basis points higher the same week one year ago.

“Refinances increased for both conventional and government loans, as lower rates provided a larger incentive for borrowers to act,” said Joel Kan, an MBA economist. “It remains to be seen if this strong refinancing pace is sustainable, but even with the robust activity the last two weeks, the level is still below what occurred last fall.”

Homebuyers also rushed in, sending purchase application volume up 16% for the week and up 8% from one year ago. Purchase mortgage activity hit the highest level since October 2009. Demand is so strong that real estate agents offered open houses on new properties the first weekend of the new year. Usually, they wait until February.

“Homebuyers were active the first week of the year. Low rates and the solid job market continue to encourage prospective buyers to enter the market,” Kan said.

Unfortunately, buyer demand is bumping up against near record-low supply. Price gains have reaccelerated, and if supply doesn’t improve markedly, some of the tightest markets will overheat quickly, leaving less affluent buyers out in the cold.

Diana Olick

Filed Under: Issaquah Community Blog Tagged With: Buyer demand, First Time Buyer, Homebuyers, Mortgage Application, Mortgage Rates

Real Estate Market Strengthens as Mortgage Rates Continue to Drop

August 27, 2019 by Kathy Reichle Leave a Comment

August 22, 2019

The drop in mortgage rates continues to stimulate the real estate market and the economy. Home purchase demand is up five percent from a year ago and has noticeably strengthened since the early summer months, while refinances surged to their highest share in three and a half years. Households that refinanced in the second quarter of 2019 will save an average of $1,700 a year, which is equivalent to about $140 each month. The benefit of lower mortgage rates is not only shoring up home sales, but also providing support to homeowner balance sheets via higher monthly cash flow and steadily rising home equity.

  • Current Mortgage Rates Data Since 1971 xls

 

Primary Mortgage Market Survey®

U.S. weekly averages as of 08/22/2019
30-Yr FRM
3.55%
0.05 1-Wk
0.96 1-Yr
0.5 Fees/Points
15-Yr FRM
3.03%
0.04 1-Wk
0.95 1-Yr
0.5 Fees/Points
5/1-Yr ARM
3.32%
0.03 1-Wk
0.50 1-Yr
0.3 Fees/Points
Freddie Mac market survey

Average commitment rates should be reported along with average fees and points to reflect the total upfront cost of obtaining the mortgage. Visit the following link for the Definitions. Borrowers may still pay closing costs which are not included in the survey.

Filed Under: Issaquah Community Blog Tagged With: Economy, Mortgage Rates

Housing sentiment surges in March, and sellers are the most optimistic

April 16, 2019 by Kathy Reichle Leave a Comment

KEY POINTS
  • More consumers think now is a good time to buy and sell a home, and more expect interest rates to fall in the next year.
  • The net share of those who say it is a good time to buy increased 7 percentage points to 22%, still 10 points lower than a year ago.
  • The share of those who say now is a good time to sell a home increased 13 percentage points to 43%, up 4 points from a year ago.

Lower mortgage rates are likely behind a surge in housing sentiment, which could help rev up what started as a sluggish spring season.

A monthly survey from Fannie Mae showed that, in March, positive sentiment jumped to the highest level since June, which was just below the record high.

More consumers think now is a good time to buy and sell a home, and more expect interest rates to fall in the next year. The net share of those who say it is a good time to buy increased 7 percentage points to 22%, although this is 10 points lower than a year ago. The share of those who say now is a good time to sell a home increased 13 percentage points to 43%, up 4 points from a year ago.

Continuing a five-month trend, the share of consumers who believe mortgage rates will go down increased 7 percentage points, as rates dropped sharply in March.

“The results further corroborate the positive effect of falling mortgage rates on affordability, which we expect will help support a rebound in home sales,” said Doug Duncan, Fannie Mae’s chief economist. “Meanwhile, job confidence — little changed from last month’s survey high — also continues to support housing sentiment, while income growth perceptions firmed from both prior month and year-ago levels, potentially supporting an uptick in housing demand.”

The average rate on the 30-year fixed mortgage jumped over 5% at the start of November, after moving slowly higher last summer. It then began falling in December but took a deep dive in the middle of March. It has moved slightly higher since then but is still below where it was at this time a year ago.

Affordability may be improving slightly with lower rates, but more consumers in March expected home prices to rise, compared with February. That component is down slightly from a year ago, when home prices were still heating up quickly.

While prices are still up annually, the gains have been shrinking since last summer, when mortgage rates began to rise. Lower rates today could help reignite the heat under prices.

Diana Olick

Filed Under: Issaquah Community Blog Tagged With: Mortgage Rates, The time to buy, The time to Sell

Home-builder shares are bouncing back thanks to lower mortgage rates

April 2, 2019 by Kathy Reichle Leave a Comment

Lower borrowing costs may give the housing market a boost

Stronger performance stems in part from higher household confidence amid lower borrowing costs (Credit: Pixabay and Wikipedia)

After a year of decline, home-building companies are getting a boost.

Shares of home-building companies are on track for their best quarter in seven years, the Wall Street Journal reported. The SPDR S&P Homebuilders exchange-traded fund — which includes building-products and home-furnishing companies — has soared 17 percent this quarter and is on pace for its best three-month period since 2012.

Shares of Beazer Homes USA, BZH, Lennar, KB Home and D.R. Horton have all bounced back — each climbing about 20 percent. Meanwhile, NVR and Toll Brothers have risen 15 percent and 9 percent, respectively.

The stronger performance stems in part from higher household confidence amid lower borrowing costs. In recent months, more consumers who were previously on the sidelines have been willing to buy or refinance homes, the report said.

“Home builders have performed well under the assumption that the Fed is going back off on raising rates for a longer period of time, and that should give some relief on mortgage rates,” said Derek Maupin, portfolio manager at Hodges Capital Management. “If mortgage rates continue to come back down, we’ll probably see more people pull the trigger and buy a home. What’s getting priced in the stocks now is that affordability is improving on a long-term basis.”

Interest rates on 30-year mortgages slid to 13-month lows — which could bode well for demand. The rate for a 30-year fixed-rate mortgage was 4.28 percent last week, its lowest level since the week ended Feb. 1, 2018.

The decline comes as bond yields have fallen thanks to the Federal Reserve’s concerns about slowing economic growth. The yield on the benchmark 10-year U.S. Treasury note fell to 2.418 percent on Monday, the lowest since December 2017.

The housing market may also be looking up heading into spring selling season. Existing home sales rose 11.8 percent in February from the prior month — a sign the market could be seeing a lift from lower rates. [WSJ] — Meenal Vamburkar

 

Filed Under: Mortgage Rates Tagged With: homebuilders, Housing Market, Mortgage Rates, Residential Real Estate

Mortgage Rates Move Lower

March 22, 2019 by Kathy Reichle Leave a Comment

MCLEAN, Va., March 21, 2019 (GLOBE NEWSWIRE) — Freddie Mac (OTCQB: FMCC) today released the results of its Primary Mortgage Market Survey® (PMMS®), showing that mortgage rates dropped with the beginning of spring homebuying season.

Sam Khater, Freddie Mac’s chief economist, says, “Mortgage rates have dipped quite dramatically since the start of the year and house prices continue to moderate, which should help on the homebuyer affordability front. The combination of improving affordability and more inventory than the last few spring selling seasons should lead to improved home sales demand.”

News Facts

  • 30-year fixed-rate mortgage (FRM) averaged 4.28 percent with an average 0.4 point for the week ending March 21, 2019, down from last week when it averaged 4.31 percent. A year ago at this time, the 30-year FRM averaged 4.45 percent.
  • 15-year FRM this week averaged 3.71 percent with an average 0.4 point, down from last week when it averaged 3.76 percent. A year ago at this time, the 15-year FRM averaged 3.91 percent.
  • 5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 3.84 percent with an average 0.3 point, unchanged from last week. A year ago at this time, the 5-year ARM averaged 3.68 percent.

Average commitment rates should be reported along with average fees and points to reflect the total upfront cost of obtaining the mortgage. Visit the following link for the Definitions. Borrowers may still pay closing costs which are not included in the survey.

Freddie Mac makes home possible for millions of families and individuals by providing mortgage capital to lenders. Since our creation by Congress in 1970, we’ve made housing more accessible and affordable for homebuyers and renters in communities nationwide. We are building a better housing finance system for homebuyers, renters, lenders, investors and taxpayers. Learn more at FreddieMac.com, Twitter @FreddieMac and Freddie Mac’s blog FreddieMac.com/blog.

MEDIA CONTACT: 
Nicole Flores
703-903-4068
Nicole_Flores@FreddieMac.com

 

Filed Under: Issaquah Community Blog Tagged With: Mortgage Rates

To PMI or Not to PMI

November 2, 2018 by Kathy Reichle Leave a Comment

Is Private Mortgage Insurance (PMI) necessary? Will it help me buy a house? Is there a way around it? Those are the questions.

Actually, they probably constitute only the tip of the mortgage iceberg if you’re buying your first home. But squaring away the PMI query is an important effort that will help you zero in on the right loan for you and better understand your monthly commitment as a homeowner. Let’s tackle those questions.

So, what is PMI anyway?

Call it an insurance policy that protects your lender against the possibility that you could default on your loan. “One of the risk measures that lenders use in underwriting a mortgage is the mortgage’s loan-to-value (LTV) ratio,” said Investopedia. “This is a simple calculation made by dividing the amount of the loan by the value of the home. The higher the LTV ratio, the higher the risk profile of the mortgage. Most mortgages with an LTV ratio greater than 80% require that private mortgage insurance (PMI) be paid by the borrower. That’s because a borrower who owns less than 20% of the property’s value is considered to be more likely to default on a loan.”

Why do I need it?

Coming up with 20% for a down payment obviously isn’t easy. “Many first-time homebuyers don’t have that kind of money sitting around,” Randall Yates, founder and president of The Lenders Network, told us. So, PMI can spell the difference between being able to buy a home, and not—even if it costs you a couple hundred dollars a month.

How much will it cost me?

You can expect to pay between $30–70 for every $100,000 that you borrowed to purchase your home every month. Unison’s estimated monthly payments based on the example of a “30-year loan for $250,000 with an interest rate of 4 percent” breaks down as:

• Principal and interest: $1,194
• Property taxes: $100
• Homeowners insurance: $80
• PMI: $125

Do I have to pay PMI no matter what?

Not necessarily. “There are a couple alternatives that may work for some buyers,” said Yates. “If you’re a veteran, you’re in luck because VA loans are the only type of home loan that doesn’t require PMI. A piggy-back mortgage or 80/10/10 is another option some buyers use if they do not have the full 20% down payment. The borrower puts 10% down and gets a second loan for the other half of the down payment. In this scenario, you would have two loans to repay, but you avoid paying PMI. If you’re in a rural area, you could qualify for a USDA loan. USDA loans are a type of government-backed mortgage that does not require a down payment and has a very low PMI rate of just 0.35% of the loan amount.”

Can I ever get rid of PMI?

You can, but it’s not easy. “To remove PMI, or private mortgage insurance, you must have at least 20 percent equity in the home. You may ask the lender to cancel PMI when you have paid down the mortgage balance to 80 percent of the home’s original appraised value,” said Bankrate. “When the balance drops to 78 percent, the mortgage servicer is required to eliminate PMI. Although you can cancel private mortgage insurance, you cannot cancel Federal Housing Administration insurance. You can get rid of FHA insurance by refinancing into a non-FHA-insured loan.”

WRITTEN BY JAYMI NACIRI

Filed Under: Down Payment, Finances, First Time Homeowner, Homeownership, Issaquah Lifestyle Blog, Mortgage Rates, Private Mortgage Insurance Tagged With: Finances, Issaquah Real Estate, Mortgage Rates, Private Mortgage Insurance, Trending Topics

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