During the 4th quarter of 2022, 7,622 home buyers in St Louis applied for a home mortgage according to the latest report from ATTOM Data. According to the report, this is the lowest number of mortgage applications in a quarter from home buyers in St Louis since the 1st quarter of 2011 when there were just 5,629 applications. Mortgage applications to purchase a home peaked in St Louis in the 3rd quarter of 2005 when there were 18,002 applications.
As the chart below illustrates, the drop in St Louis homeowners refinancing their mortgage is even more dramatic. During the last quarter of 2022, 4,208 homeowners refinanced their existing mortgage marking the lowest number for a quarter in St Louis since AATOM began tracking the data back in 2000. The refinancing boom in St Louis was during the 3rd quarter of 2003 when 54,281 St Louis homeowners refinanced their mortgage.
HELOC’s (home-equity line of credit) are down in St Louis as well. During the 4th quarter of 2022, 3,166 St Louis homeowners took out a HELOC compared with 15,317 that did so during the HELOC peak in Q3 2003. HELOC’s hit their low point during the 3rd quarter of 2000 when just 356 were originated.
Today, the U.S. Department of Housing and Urban Development (HUD) announced a reduction in the mortgage insurance premium charged to borrowers on FHA loans. The mortgage insurance premium is a charge over and above the interest on the loan that is the fee to HUD for insuring the loan. Currently, the FHA mortgage insurance premium varies from 0.45% to 1.05% of the loan amount depending upon the loan term (15 or 30 years) and the LTV (loan to value). Effective with FHA mortgages endorsed for insurance by FHA on or after March 20, 2023, the rate will be reduced by 0.30% across the board.
The table below shows the current charges for FHA mortgage insurance premiums for various loan terms and LTV’s as well as what the new charges will be. On an FHA loan amount of $265,000 a borrower will have a monthly payment that is about $66.00 lower as a result of the reduction in mortgage insurance premiums.
FHA Annual Mortgage Insurance Premium (MIP) – Current Rates vs. New Rates
(click on table to see complete HUD press release)
This week the Federal Housing Finance Administration (FHFA) announced that the limits for all conforming home loans to be acquired by Fannie Mae and Freddie-Mac (most of the conventional home loans originated) will increase to $726,200 on January 1, 2023. This is an increase of $79,000 for the current loan limit of $647,200.
Also this week, the Federal Housing Administration (FHA) announced that the limits for all FHA loans will increase to between $472,030 and $1,089,300 for single-family homes depending on the area the property is located in. Below are the limits for the low cost mortgage areas as well as high-cost mortgage areas:
Low Cost Area: (The entire state of Missouri falls into this category)
-
- One-unit: $472,030
- Two-unit: $604,400
- Three-unit $730,525
- Four-unit: $907,900
High Cost Area:
-
- One-unit: $1,089,300
- Two-unit: $1,394,775
- Three-unit 1,685,850
- Four-unit: $2,095,200
The Veteran’s Administration, as of 2020, removed the lending limit for veteran’s with full entitlement so there remains no limit on VA loans.
As the chart below illustrates, on November 10th, mortgage interest rates on a 30-year fixed rate mortgage dropped sharply from 7.22% the day before to 6.62% on the 10th. Since dropping, interest rates have remained around the 6.6% level.
Historically, the current rates are not bad, but that does lessen the impact…
As the bottom chart below shows, interest rates have been above the current levels for over half the period. However, understandably, that doesn’t mean much to first-time home buyers or younger homebuyers as for over the past 10 years the rates have been much less, even to the point of hitting all-time lows in the mid 2’s.
Today, the interest rate for a 30-year fixed-rate mortgage hit 7.08% marking the first time in over 20-years the rate has gone above 7%. Historically speaking, as the 2nd chart shows, this is not that high of an interest rate and, in fact, lower than the median rate over the past 50 years, however, it’s a very high rate based upon the the recent past.
The affect of interest rates on home prices…
Interest rates just began increasing in the past few months, rising above the 4% level in February, so it will take time to see the impact of this on home prices. We’re beginning to see the effect in prices somewhat, particularly with the decrease of “overbids” and an increase in reduced prices on active listings, but nothing too dramatic yet. For example, as the bottom chart shows, the median price of homes sold in St Louis in August was $280,000, a nearly 11% increase from the median price of $252,450 a year ago. Since home prices typically peak around June, they are usually lower in August than June or July. If we examine this to see if perhaps there was a bigger decline in those months this year than last we find that last year prices dropped 3/4 of 1% from June to July and then dropped 4% from July to August, for a total decline of 4.7% from June’s peak to August. This year, prices dropped 3.9% from June to July, then 1.7% from July to August for a total decline of 5.6%, only slightly higher than last year. I do think we’ll see a larger impact than this, but thus far it’s not so bad.
Mortgage Interest Rates Based Upon the MND Rate Index
(click on chart for live, interactive chart)
30-Year Fixed Rate Mortgage Interest Rates 1970-Present
(click on chart for live, interactive chart)
St Louis 5-County Core Home Prices and Sales – Past 25 Months
(click on chart for live, interactive chart)
I saw dozens and dozens of headlines yesterday reporting that mortgage interest rates had fallen below 5% on a 30-year fixed rate mortgage. The catch is on the day that was reported, yesterday, interest rates were actually above 5% on a 30-year fixed-rate loan. As our chart below shows, the MND Rate index was reporting 5.09% and, below that, Optimalblue was reporting 5.326%. Both of the aforementioned charts are updated daily and considered by many in the industry to have the most current and accurate information.
How could all the big headlines be wrong?
Well, actually the articles I scanned were not wrong in what they were reporting, the headline would just give many home buyers a different impression perhaps than what was actually being reported. What prompted the headlines was yesterday, like every week on Thursday, the Freddie Mac Primary Mortgage Market Survey® (PMMS®) results were released. In Freddie Mac’s report, it showed the average 30-year fixed rate mortgage was 4.99% (see the Freddie Mac chart at bottom). The catch is, the survey is done from Monday through Wednesday of the week and then the results reported on Thursday. Many lenders submit their rates to Freddie Mac on Monday meaning by the time the report comes out they are 3-days old. A lot happens in the mortgage market in 3-days, in fact a lot can happen during one day. Oh yeah, the other thing worth noting is if you read the details on the Freddie Mac survey the stated rate was only obtained by paying 0.80 in points, so 8/10 of 1% of the loan amount would be paid up front to get that rate.
Freddie Mac’s Survey Is Very Valuable and Relevant
Interest rates on a 30-year fixed-rate mortgage peaked at 6.28% a little over a month ago on June 14th, sending shockwaves through the St Louis housing market. After peaking however the rates have subsided, today dropping to 5.5%, the lowest rate since July 5th. This decline brings the mortgage rates down to the range they were I for most of May this year.
After hitting the highest rate in over 13 years just two weeks ago at 6.28%, as the chart below shows, mortgage interest rates on 30-year fixed mortgages declined today to 5.75%. The likelihood of interest staying under 6% is hard to to say at this time but I would say enjoy it while it lasts!
The bond market had one of the worst days in history yesterday resulting in mortgage interest rates on a 30-year fixed rate mortgage hitting 6.0% and above. This is the highest rates have been since November 20, 2008 when the mortgage interest rates were 6.04%, according to Freddie Mac’s Primary Mortgage Market Survey®.
Is there a silver-lining to the higher interest rates?
Given that the reason for the higher interest rates has to do with our high inflation rates and declining economic conditions, it’s hard to find much positive to say about what is happening. Having said that, the one thing that comes to mind is these rate increases will no doubt slow down the rapid price growth on homes we’ve seen over the past couple of years. This will likely cause home prices to flatten and the premiums buyers have paid over and above what the buyer, seller and agents involved knew the home was actually worth are history in my opinion.
So, while as a buyer, you will be facing higher interest rates than you would have a year ago, you should receive some relief in the price not being as high as it would have if the low rates were still here, less competition due to some buyers leaving the market and being able to purchase a home without paying a significant premium above the value to get it.
Mortgage Interest Rates – 2000-Present- 30-year fixed rate mortgage
(click on chart for live, interactive chart)
There were 2.71 million home loan originations during the first quarter of this year in the U.S., according to the U.S. Residential Property Mortgage Origination Report from ATTOM. This is an 18% decline from the prior quarter, the largest quarterly decline since 2017 and marks the fourth straight quarterly decline in loan originations according to the report.
Refinancing saw a bigger decline than home purchases…
During the first quarter of this year there were 1,446,622 loans originated that were refinances of existing mortgages which is a decline of 21.7% from the prior quarter. There were 1,011,975 loans originated for home purchases during the quarter and this was down 18.3% from the prior quarter.
St Louis is the metro that saw the second-highest decline…
I according to the report the metro area with the largest quarterly decrees and loan origination’s for home purchases was Huntsville Alabama with a 61.3% decrease followed by St Louis Missouri with a 55.3% decrease.
On May 12th the 30-year fixed rate mortgage interest rate hit 5.3%, the highest rates since June 2009, according to Freddie Mac’s Primary Mortgage Market Survey®. As the chart below illustrates, mortgage interest rate have declined the last three consecutive weeks falling to 5.09% at the end of last week, the lowest rate since April 14th when the average interest rate was 5.0%.
Mortgage Interest Rates – 30 and 15-Year Conventional Loans and 5/1 ARM Loan
(click on chart for live, interactive chart)
On May 12th the 30-year fixed rate mortgage interest rate hit 5.3%, the highest rates since June 2009, according to Freddie Mac’s Primary Mortgage Market Survey®. As the chart below illustrates, mortgage interest rate have declined the last two consecutive weeks falling to 5.10% yesterday, the lowest rate since April 28th.
There are more affordable options…
The chart I selected to show below also shows the mortgage interest rates for 15-year mortgages as well as something almost no one has had a reason to talk about for several years, adjustable rate mortgages (ARM’s). With mortgage interest rates as low as they were, ARM’s were rarely considered by a purchaser however, today they provide a more affordable option than a 30-year fixed mortgage. For example, the 5/1 arm shown on the chart below had a rate of 4.2% yesterday.
Mortgage Interest Rates – 30 and 15-Year Conventional Loans and 5/1 ARM Loan
(click on chart for live, interactive chart)
Most anyone that is interested in buying or selling a home is pretty much aware of two things: there is a low inventory of homes for sale and prices have increased a fair amount as a result. That part is likely largely a result of basic economics related to supply and demand. When the demand is greater than the supply, prices will increase. In St Louis, home prices have done just that. As the chart below (exclusively available from MORE, REALTORS®) illustrates, the median price of homes sold in January 2020 was $221, 200 and in January 2021 was $245,000, an increase of 10.8%.
Interest rates are the other part of the equation with regard to the “cost” of a home…
Since the overwhelming majority of home buyers that purchase a typical home in St Louis do so utilizing a mortgage or home loan, the interest rate on that home loan has a direct impact on what that home “costs” the homeowner in terms of the monthly payment. When buyers get pre-approved for a home loan, as well as consider how much they can afford to or want to, spend on a home, it all pretty much usually starts with the house payment. Therefore, we can’t underestimate the impact interest rates can have on home prices.
As the mortgage interest rate chart below shows, the average interest rate on a 30-year conforming conventional home loan in January 2021 was 2.811% and today has increased to 3.744%.
The change in the “cost” of a typical St Louis home in the past year…
So, if we look at the increase in the price of a typical St Louis home and then factor in the increase in the interest rates we find that the actual “cost” of a typical St Louis home (in terms of house payment) increased 25% n the past year. To keep things simple, I based this on a loan amount of 90% of the purchase price so the cost will vary depending upon downpayment of course and I’m only computing principal and interest so I’m not including escrows for property taxes or homeowners insurance.
- Typical payment on a typical St Louis home January 2021 – $ 805.00
- Typical payment on a typical St Louis home January 2022 – $ 1,009.00
Is it too late to buy since the cost has increased so much?
As the charts below illustrate, at the beginning of this year, mortgage interest rates for a 30-year conforming conventional loan were at 2.771%, FHA loans were at 2.703%, and VA loans were at 2.372%. As of yesterday, those rates have increased to 3.357%, 3.468%, and 3.101% respectively.
While conforming 30-year conventional loans have seen an increase of 21% in rates (from 2.771% to 3.357%), FHA loans have seen an increase of 28% (from 2.703% to 3.468%) and VA loans have seen an increase of 30% (from 2.372% to 3.101%).
What does this mean in terms of the cost of a home?
To make the comparison simple, I’ll just base my comparison on the price of a “typical” home in the St Louis 5-county core market using the median price of homes sold in October which was $234,900. Downpayments will vary based upon loan type from no downpayment being required on a VA loan, to a minimum of 3% on a conventional and 3.5% on an FHA but based upon a loan amount equal to the median price of $234,900, below are the differences in the monthly payment on that amount by loan type from the beginning of this year until now:
- Conventional – $948 to $1,023
- FHA – $939 to $1,038
- VA – $898 to $990
If we factor in the increase in home prices, it gets worse.
In the “to add insult to injury” category, home prices have increased significantly since January as well, In January the median price was $215,000, so between then and October the median price of a St Louis home increased 9.2%. With the interest rates increasing at the same time the cost of a typical St Louis home increased fairly significantly as shown below:
- Conventional – $867 to $1,023 (+18%)
- FHA – $859 to $1,038 (+21%)
- VA – $821 to $990 (+21%)
The moral of the story…don’t wait to buy.
While I certainly can’t predict the future, especially given all the uncertainty in our economy with inflation, employment issues, etc, if I were in the market to buy a home I don’t think I would wait “until things get better”. The reason for my opinion is, as I’ve illustrated here, the true “cost” of a home (assuming you are not paying cash for it) is a combination of price and interest rate. So, even if home prices see an adjustment or the seasonal dip we often see during winter if interest rates continue to rise, is the higher cost of borrowing going to offset the lower price? I think that is a possibility. Or, the flip side, if interest rates go down but then prices go up, is the savings in lower rates lost?
To benefit from waiting, in terms of the cost of the home, we would need interest rates to stay the same, or decline and home prices to decline or interest rates to drop and home prices stay the same. Right now I don’t see either of the two aforementioned scenarios likely to happen.
Anyone paying even a little attention to the St Louis real estate market will likely be aware of the fact that we have been in a strong seller’s market for the past couple of years and St Louis home prices, as a result, have increased significantly. In fact, as the infographic below shows (exclusively available from MORE, REALTORS®) the median home price for a St Louis home has increased more than 50% in the past 14 years. However, the good news is that during that same period mortgage interest rates have fallen and remained low resulting an increase in the house payment on a typical home increase just over 5% during the same period!
Mortgage interest rates dropped peaked in the spring of this year with the rate on a 30-year fixed rate conventional loan hitting 3.353% in mid-March then staying near that range until mid-April when rates started to ease. In mid-June the rate had crept back up to 3.229% but last week dipped below 3% to 2.982%. As of yesterday, the rate has increased slightly but is still just a tad over 3% (3.019%).
Mortgage Interest Rates – 30 Years Conforming Conventional Loan -Past 12 Month Period
(click on chart for live, interactive chart and other loan types)
Every month Fannie Mae surveys consumers about owning and renting a home as well as about other issues related to the housing market and economy and from the results publish their Home Purchase Sentiment Index® (HPSI). One of the components of the index is what the sentiment is on whether now is a good time to buy a home or sell a home. In the April 2021 HPSI 49% of consumers felt home prices would go up in the next 12-months and 54% felt interest rates would increase in the next 12-months.
Mortgage interest rates dropped below 3% this past week with an average interest rate of 2.97% on a 30-year fixed-rate mortgage according to the Freddie Mac Primary Mortgage Market Survey. As the chart below shows, mortgage interest rates have not been below 3% since February 25, 2021 when they also averaged 2.97%. Rates are still up from the record low rate of 2.65% in January, but as you can see on the chart, are still at a rate that is historically low!
Now is the time to buy or perhaps refinance your existing mortgage.
Anyone that has been thinking of buying a home should, if able, shift into high geat and find one now to take advantage of the low rates and the increased buying power that comes with it. The first step would be to get yourself pre-approved and, for that, I would recommend Michael McCarthy with Flat Branch Home Loans…he’s great and our firm does a lot of business with him. You can find his info at STLBestLender.com. If you a homeowner with a mortgage and no plans to move, I would also suggest you get in touch with Mike to see how much money you can save by refinancing your existing mortgage at a lower rate.
Mortgage Interest Rates – 30 Year Fixed-Rate
(click on chart for live, interactive chart)
LendingTree just released a list of the 50 large metro areas with the most competitive housing markets in the U.S. on which St Louis was ranked as the 6th most competitive market. This list was based upon LendingTree’s assessment of the quality of the buyer’s in each market, based upon their strength as a buyer from a financing standpoint.
So, while not an analysis of which cities have the most buyers showing up at a listing or where listings are receiving the highest number of offers, it’s about the quality of the home buyer’s from a competitive standpoint. This makes sense, as today the hard part isn’t necessarily finding a buyer for a new listing, it’s about the listing agent analyzing the offers and helping the seller determine not only which may have the best terms, but which buyer has the best ability to perform. After all, having a great offer doesn’t really mean anything if the deal doesn’t close.
Most Competitive Housing Markets
(click on table for complete list)
In analyzing the quality of the buyer’s and assessing the competitiveness of each market, LendingTree took into consideration the following for each metro area:
- The share of home buyers shopping for a mortgage even before they found the house they wanted. This is indicative of a good buyer that wants to be prepared to react quick and understands the importance of being pre-approved to be make their offer more attractive to the seller.
- The average down payment percentage. A buyer with a larger downpayment is going to look like a stronger buyer to a seller.
- Percentage of buyers have have good credit (above a 680 credit score). Better credit means more financing options and lower cost financing which can enable the buyer to pay more than someone with lower credit and have the same monthly cost in terms of payment. A better credit score also means there is a better chance of the deal closing.
A good buyer’s agent will know everything above and help their client through the process to make them have the best chance possible of getting their offer accepted. Likewise, a good listing agent will know how to scrutinize buyer’s and help their seller client pick the one that not only has offered an acceptable price and terms but has the highest likelihood of closing. For a recommendation of a great St Louis buyer’s agent or listing agent, contact me.
According to a report just released by the Consumer Financial Protection Bureau (CFPB), titled “Housing insecurity and the COVID-19 pandemic“, there are over 2 million homeowners that have fallen behind at least three months on their mortgage payments. This represents a 250% increase from pre-Covid-19 levels and is now at a level we haven’t seen since the height of the Great Recession in 2010.
Homeowners with an FHA mortgage delinquency rates double rate for all loans:
As the chart below shows, homeowners with an FHA mortgage hit a serious mortgage delinquency rate of 10.8% during the 3rd quarter of 2020, with the rate for all mortgages was just under half that at 5.2%.
Serious Mortgage Delinquency Rate By Loan Type- Q1 2005 – Q3 2020
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Last week, the Federal Housing Finance Agency (FHFA)announced that effective January 1s, 2021, the maximum loan amounts for Fannie Mae and Freddie Mac conforming loans will be increased from $510,400 to $548,250. Once a home buyers loan amount exceeds the Fannie and Freddie limits, their loan is considered a “jumbo” loan and typically less attractive terms, so an increase in the Fannie and Freddie limits is definitely helpful to home buyers in higher price ranges.
Fannie Mae and Freddie Mac are also increasing the loan limits for loans to purchase multi-family properties as well. The multi-family property limits for 2021 are:
- Two Units – $702,000
- Three Units – $848,500
- Four Units – $1,054,500
Fannie Mae issued their monthly housing forecast for April which includes, among other data, a forecast of what mortgage interest rates will be in the coming months. Last months forecast had projected that mortgage rates would continue to decline moving forward but only to a low of 3.1% before the end of 2021 while the April forecast predicted the interest rate on a 30-year fixed-rate mortgage would fall to 2.9% in the 2nd quarter of 2021 and stay there through the balance of the year.
If you’re able, now’s the time to buy!
While the effects of the COVID-19 pandemic, such as job loss, is going to take some would-be home buyers out of the market, for those that are still able to buy, now is a great time to buy a home. There are many factors that play in favor of buyers today, such as the fact that there are about 1/3 fewer of them (buyers in the market) now than this time last year, sellers that want to have fewer people coming through their homes and interest rates. As our chart below shows, not only are rates low now, they are projected to go much lower even.
Why not wait until next year when the rates hit their lowest?
Good question, but there are several reasons not to wait. First off, the rates shown on my chart are “projections”, or to put it another way “an educated guess”, so there is no guarantee rates will actually come down as predicted. In addition, once the stay at home orders go away and we start moving back to something closer to normal, I anticipate there will be a flood of buyers to the market which, along with lower interest rates (if that happens) will likely drive home prices up. So, for buyers that are able, they may get a better buy today, with less competition, still get a good interest rate and then if rates do fall as predicted can easily refinance to take advantage of lower rates.
Fannie Mae Mortgage Interest Rate Forecast April 2020 (Chart)
Data source: Fannie Mae – Copyright ©2020 St Louis Real Estate News, all rights reserved
As a result of the COVID-19 National Emergency Servicing and Loss Mitigation Program declared by President Trump, the U.S. Department of Housing and Urban Development (HUD) sent a letter yesterday to its loan servicers making them aware of new COVID-19 National Emergency Loss Mitigation Options. HUD told the lenders that the new options for borrowers go into effect immediately but the lender must implement them no later than April 30, 2020.
Highlights of the new forbearance plan:
- The Mortgagee (lender) must not deny COVID-19 National Emergency Home Retention Options to Borrowers that experience an adverse impact on their ability to make on-time Mortgage Payments due to the COVID-19 National Emergency and satisfy the loss mitigation criteria set forth in this section.
- (A) Forbearance for Borrowers Affected by the COVID-19
National Emergency If a Borrower is experiencing a financial hardship negatively impacting their ability to make on-time Mortgage Payments due to the COVID-19 National Emergency and makes a request for a forbearance, the Mortgagee must offer the Borrower a forbearance, which allows for one or more periods of reduced or suspended payments without specific terms of repayment. - The initial forbearance period may be up to 6 months. If needed, an
additional forbearance period of up to 6 months may be requested by
the Borrower and must be approved by the Mortgagee.
The term of either the initial or the extended forbearance may be
shortened at the Borrower’s request
.
(B) COVID-19 National Emergency Standalone Partial Claim
The Mortgagee must waive all Late Charges, fees, and penalties, if
any, as long as the Borrower is on a Forbearance Plan.
- (A) Forbearance for Borrowers Affected by the COVID-19
For any homeowners with an FHA loan that are struggling to make their house payments, they should contact their loan servicer to see if they are eligible for relief under this plan.
The typical median-priced existing home sold for $233,000 in February 2019 and a year later, as the chart below shows, in February 2020 the typical median-priced home sold for $235,000, an increase of just under 1%. Here’s the beauty though, thanks to interest rates dropping from an average of 4.41% a year ago to 3.29% today, even with the slight increase in price, the typical St Charles County home costs less today than a year ago! Not just by a little either as the payment on the median price a year ago (no money down) would have been $1,178.18 at the current rates at the time, the payment today, at the higher price but lower rates would be just $1,019.15, a savings of $159.03/month or 13.5%! Oh, and just to show the “compound effect” of this, over the life of the loan, you will save $55,249 in interest.
So, what are you waiting for? Buy a house!
Mortgage interest rates hit a record low this week with an average interest rate of 3.29% on a 30-year fixed-rate mortgage according to the Freddie Mac Primary Mortgage Market Survey. As the chart below shows, interest rates came close to this level at the end of 2012 but then quickly shot up to over 4.5% shortly after.
Now is the time to buy or at least refinance!
Anyone that has been thinking of buying a home should, if able, shift into high geat and find one now to take advantage of the low rates and the increased buying power that comes with it. The first step would be to get yourself pre-approved and, for that, I would recommend Michael McCarthy with Flat Branch Home Loans…he’s great and our firm does a lot of business with him. You can find his info at STLBestLender.com. If you a homeowner with a mortgage and no plans to move, I would also suggest you get in touch with Mike to see how much money you can save by refinancing your existing mortgage at a lower rate.
Mortgage Interest Rates – 30 Year Fixed-Rate
(click on chart for live, interactive chart)
For quite a while now we have enjoyed the positive effects on the real estate market from low mortgage rates but it looks like it’s going to get even better! Yesterday’s announcement by the Fed of the emergency step of lowering the benchmark U.S. interest rate by one-half of one percent, in an effort to offset the negative effect tot eh financial markets from the coronavirus will likely lead to even lower mortgage interest rates.
What’s the connection between the federal funds rate and mortgage interest rates? This is something often asked not only by homebuyers but is even within the real estate community as since the Federal Reserve doesn’t “set” mortgage rates, the connection is not always clear. I’m not an expert in this area by no means, but I have a decent understanding of it and will share it from the perspective of the most popular home mortgage, the 30-year fixed-rate mortgage. First, we have to understand where the money for those mortgages comes from. It comes from investors, investors that compare an investment in 30-year mortgages to other comparable investments. One of those comparable investments would be the 30-year treasury.
Continue reading “Mortgage Interest Rates….How low can they go??“
As you may have noticed, I’ve been pretty optimistic about the outlook for the real estate market this year however, that is not always the case as I call it like I see it. The reason for my optimism is based upon what a true data geek like myself would base it upon, data! So, what’s the data that has me believing 2020 will be a good year for the housing market in St Louis and beyond? Several things:
- As I have been reporting here for the past couple of years now, mortgage delinquency and foreclosure rates have continued to decline which show the strength of the economy as a whole as well as the housing industry.
- As the US Economic Indicators charts below show, since peaking around 2010, the unemployment rate, 30-year mortgage rate and mortgage delinquency rates have all steadily declines to either record lows or at least the lowest rate in recent history.
- As the St Louis unemployment, home prices and rent chart below shows, unemployment in St Louis has fallen to the lowest level in decades and the relationship between home prices and rents show home prices lagging behind rents indicating that we’ll likely see continued, good housing appreciation rates.
- As the 30-year fixed rate mortgage chart below shows, mortgage rates are at near record low rates giving buyers much more buying power. In my market update video I shared here a day or two ago I illustrate just how much more buying power this translates into.
- As I reported last week, St Louis home sales last year managed to top the prior year slightly, in spite of the low-inventory market we have been stuck in. This shows the demand that is out there.
- As I reported earlier this week, the home sales trend for 2020 in St Louis is in positive territory has well.
The maximum loan amount for an FHA-Insured home loan on January 1, 2020, will increase from $314.827 to $331,760 for a single-family home purchased in the St Louis metro area. FHA insured home loans have lower credit standards than a typical conventional loan, require a downpayment of just 3.5% and allow all of the purchasers closing costs to be paid by the seller (up to a limit) thereby extending the opportunity of homeownership to a wider audience.
Below are all of the FHA Mortgage Limits for the St Louis MSA for 2020:
- One-Family dwellings – $331,760
- Two-Family dwellings – $424,800
- Three-Family dwellings – $513,450
- Four-Family dwellings – $638,100
To find out more about FHA home loans, or to get pre-approved for an FHA home loan click on the button below to connect with Mike McCarthy.
Buying a home for veterans will get a little easier come January 1, 2020, especially those veterans moving up to a more expensive home, as a result of the Blue Water Navy Veterans Act of 2019 signed into law by President Trump in June 2019. The primary focus of the Act was to provide disability benefits to veterans who served in Vietnam, it also made significant changes to the VA Home Loan benefit available to all veterans. The VA home loan changes go into effect on January 1, 2020. Below are highlights of the changes to the VA home loan benefit:
- Conforming Loan Limits – There will no longer be a limit, or cap, on the amount for a no-downpayment home loan to a veteran.
- VA funding fee increase – The VA charges a funding fee to support the VA home loan program. The fee is currently 0.15% for Veterans and Servicemembers and on January 1st will increase to 0.30%.
- Purple Heart – The VA funding fee will be waived for active Servicemembers who have earned a Purple Heart.
- Native America Direct Loan – As of January 1st, the existing cap of $80,000 will be removed for Veterans using their entitlement for a VA Native American Direct loan to purchase (or build) a home on Federal trust land.
To find out more about the changes to the VA home loan program, click on the button below to connect with Mike McCarthy,
