Refinance Activity Surges Despite Rising Mortgage Rates – Purchase Applications Fall

Last week, the interest rates for 30-year fixed-rate mortgages climbed past the 7 percent mark. Despite this increase, as the chart below illustrates, there was a significant 10 percent increase in refinancing applications. This is in sharp contrast to a 5 percent decline in purchase applications. The growth in the refinancing segment is notable, representing 33.3 percent of the total application volume, up from 30.3 percent the previous week. This surge in refinancing interest is particularly intriguing, given the highest reported 30-year mortgage rates in over a month, at 7.01 percent.

Joel Kan, MBA’s Vice President and Deputy Chief Economist, attributed the rising rates to the Federal Reserve’s cautious stance on adjusting policy amidst persistent inflation and resilient economic indicators, including strong employment data. Despite the unfavorable rate environment, the demand for refinancing, especially VA refinancing, remained robust.

Other notable trends include a decrease in average loan sizes, with purchase loan sizes—often viewed as a proxy for home prices—dropping to $449,400 from $453,000. Additionally, there was a shift in the composition of mortgage applications, with increases in FHA and VA loan shares.

So, what explains the rising number of homeowners refinancing their mortgages even with rising mortgage interest rates? There are numerous reports indicating that many homeowners across the country are becoming cash-strapped and having a difficult time paying bills, thus resorting to pulling out equity from their homes, even if it means accepting a higher interest rate. I’ve also observed reports indicating that consumer credit card debt is at historically high levels, with interest rates on this debt being astronomical. This situation is prompting people to refinance their home loans again, even at higher rates, because even though their mortgage may be at a higher rate, it still appears to be a bargain compared to the 27 or 28% on a credit card. I haven’t seen enough verifiable data to confirm if either of these situations is true, but both are plausible.


Refinance Index vs 30 Yr Fixed Mortgage Chart

(click on image for live, interactive chart)

Refinance Index vs 30 Yr Fixed Mortgage ChartHous

Interest Rate Insights: Traci Everman Unveils the Latest Shifts

The ebb and flow of St. Louis’s real estate market are linked to the broader economic currents, and recent weeks have witnessed a significant uptick in mortgage interest rates.  In the video below, Traci Everman, Senior Mortgage Banker with Flat Branch Home Loans, does a fantastic job of explaining what is happening and why.  Below the video are some highlights and a recap.


Here are are few highlights of what Traci’s covers in the video:

Recent Economic Impacts on Mortgage Rates:

  • Economic reports released over the past day have precipitated a downturn in the bond market and a subsequent rise in interest rates. This movement stems from inflationary pressures, which erode the value of long-term investments like mortgage-backed securities.

Analyzing PCE Inflation and Jobs Reports:

  • Key economic indicators such as the PCE report, which reflects inflation sans food and energy costs, revealed a 0.3% increase, signaling a direction contrary to the market’s desires. Furthermore, the employment data, despite being a bearer of good tidings on job creations, did not spell out positive news for the bond market.

Current State of Mortgage-Backed Securities:

  • Currently, the mortgage-backed securities market is taking a hit, down 88 basis points, leading to a predicted quarter percent increase in interest rates between yesterday and today. This fluctuation reminds us of the volatility that peaked in October 2023.

How Recent Trends May Affect Future Rates:

  • The Federal Reserve’s stance and upcoming meetings are pivotal. While rate cuts were anticipated, the outcome was status quo, leaving predictions for future rate cuts in 2024 uncertain. Inflation, driven by rising oil prices and other factors such as soaring auto insurance premiums, continues to play a crucial role.

Conclusion: Staying Informed on Market Changes:
As Traci Everman sums up the market update, it’s clear that keeping a close eye on inflation and Fed decisions is crucial for anyone involved in real estate. With potential rate cuts on the horizon, the coming quarters could be crucial for buyers and sellers in St. Louis.

For a more detailed dive into what this means for your home buying or selling decisions, stay connected with St. Louis Real Estate News.  Stay informed.

Recent Drop in Mortgage Rates: A Turning Point for the St. Louis Real Estate Market?

As we observed yesterday, there’s been a significant shift in the mortgage landscape. The interest rate for a 30-year fixed-rate conventional mortgage fell to 6.62%, the lowest since May 12, 2023, when it stood at 6.55%. This decrease might signal a turning point in the housing market, especially considering the erratic rate movements we’ve seen over the past several months.

More encouraging news comes from the FHA sector, where the 30-year fixed-rate dropped to 6.13%, marking its lowest since May 11, 2023, when it was 6.12%. These recent figures hint at a trend that could reignite buyer interest and energize market activity, a positive shift from the higher rates experienced recently.

This change in mortgage rates is particularly significant!  For prospective buyers, this dip in rates opens a more favorable door, potentially making homeownership more attainable than in the recent past. Sellers have reasons to be optimistic too, as lower rates could lead to increased market interest and activity.

Below is a chart illustrating the history of mortgage interest rates. This visual representation provides a clearer perspective on the recent changes and what they mean for our market.


Mortgage Interest Rates (interactive chart)

(click on chart for live, interactive chart)

Mortgage Interest Rates (interactive chart)

 

 

Analyzing Jerome Powell’s Latest Press Conference: Implications for Mortgage Rates and the St. Louis Real Estate Market

Federal Reserve Chair Jerome Powell’s press conference yesterday, along with the Federal Open Market Committee (FOMC) statement, provide crucial insights into the Fed’s economic outlook and monetary policy. These insights are pivotal for understanding the trajectory of mortgage rates and the St. Louis real estate market.

Powell’s Press Conference Highlights

  • Economic Activity and Rate Adjustments: Powell noted, “We have raised our policy interest rate by 5-1/4 percentage points… Our actions have moved our policy rate well into restrictive territory.”
  • Housing Sector Observations: He remarked, “After picking up somewhat over the summer, activity in the housing sector has flattened out… largely reflecting higher mortgage rates.”

Key Takeaways from the FOMC Statement

  • Economic and Inflation Outlook: The FOMC stated, “Recent indicators suggest that growth of economic activity has slowed… Inflation has eased over the past year but remains elevated.”
  • Banking System Resilience: The statement highlighted, “The U.S. banking system is sound and resilient. Tighter financial and credit conditions… are likely to weigh on economic activity.”

Anticipated Interest Rate Movements

  • Future Rate Decisions: The FOMC announced, “The Committee decided to maintain the target range for the federal funds rate at 5-1/4 to 5-1/2 percent.”
  • Monetary Policy Considerations: “In determining the extent of any additional policy firming… the Committee will take into account the cumulative tightening of monetary policy,” indicating a measured approach to future rate changes.

Implications for Mortgage Rates and St. Louis Real Estate

  • Mortgage Rate Trends: Combining Powell’s remarks with the FOMC statement suggests a period of careful assessment in rate adjustments. This could lead to stabilization or moderate fluctuation in mortgage rates.
  • Market Dynamics in St. Louis: Stable or gradually adjusting mortgage rates, alongside ongoing economic and inflation monitoring, could result in a balanced real estate market. Buyers and sellers in St. Louis may experience a period of relative predictability and sustained market activity.

Conclusion
The integrated perspectives from Jerome Powell’s press conference and the FOMC statement offer a detailed view of the Federal Reserve’s stance on economic conditions and monetary policy. For the St. Louis real estate market, these developments suggest a period of cautious optimism, with potential stability in mortgage rates and a balanced market environment. Real estate stakeholders should consider these insights in their market strategies and decision-making processes.


Mortgage Interest Rates Show Promising Decrease, Offering Hope in the Housing Market

As of yesterday, the mortgage landscape has seen a notable shift, with the interest rate for a 30-year fixed-rate conventional mortgage dropping to 7.13%, marking the lowest point since September 1, 2023, when it was 7.08%. This recent decrease offers a glimmer of hope in the housing market, especially considering the turbulent fluctuations witnessed over the past months.

Equally promising is the rate for 30-year fixed-rate FHA loans, which as of yesterday stood at 6.5%, again the lowest since September 1, 2023, when it recorded a rate of 6.45%. These latest figures suggest a trend that could lead to revitalizing buyer interest and market activity, a welcome change from the higher rates experienced in the recent past.

This positive turn in mortgage rates is particularly significant for markets like St. Louis, where the real estate dynamics are closely tied to these financial trends. For buyers, the dip in rates presents a more favorable scenario, potentially making home ownership more accessible than it has been in recent times. Sellers, too, might find reasons to be optimistic, as lower rates could translate to increased market interest and activity.

The chart below illustrates the history of mortgage interest rates, offering a clearer perspective on the recent changes and their implications.


Mortgage Interest Rates (interactive chart)

(click on chart for live, interactive chart)

Mortgage Interest Rates

The real estate market has always been sensitive to interest rate changes, and the current shift could be the beginning of a more encouraging phase. Whether this trend will continue remains to be seen, but for now, it offers a much-needed respite and a reason for cautious optimism in the housing market.

 

 

Interest Rates Hit Two-Month Low, Easing from 23-Year High

The 30-year fixed mortgage interest rate has experienced a significant drop, reaching 7.4% – the lowest since September 20th, nearly two months ago. This shift provides a much-needed reprieve in the housing market, particularly following the rate’s surge to 8.03% on October 19th, a peak unseen since August 7, 2000, 23 years ago.

The October high had introduced uncertainty and slowed down the real estate market, impacting buyer affordability and seller activity. The recent decline to 7.4%, though still high historically, is a positive sign, potentially reinvigorating interest and activity in the housing market.

This change in rates is key for real estate professionals and buyers in areas like St. Louis. It presents an opportunity for buyers to reconsider their purchasing plans and for sellers to anticipate increased market interest. The future trajectory of interest rates remains a point of keen observation for the real estate market.


Mortgage Interest Rates

(click on chart for live, interactive chart)

Mortgage Interest Rates

 

 

St. Louis Ranks 9th Lowest for Average Down Payments among Top 50 U.S. Metros

In the world of real estate, down payments have emerged as a significant financial factor for homebuyers across the United States, and St. Louis is no exception. A recent report from LendingTree sheds light on the dynamics of down payments, and it’s essential for prospective buyers and sellers in St. Louis to understand how the local market fares in this regard.

St. Louis Down Payment Statistics:

  • St. Louis ranks 42nd out of the nation’s 50 largest metropolitan areas in terms of average down payments. This ranking places it 9th in terms of the lowest down payment amount in the 50 largest metros.
  • The average down payment in St. Louis comes in at $56,251. While this figure may not reach the heights seen in some of the more expensive coastal cities, it’s still a substantial amount.

Down Payment as a Percentage of Income:

  • One critical metric to assess affordability is the down payment as a percentage of the average annual household income. In St. Louis, the average down payment represents approximately 54.87% of the area’s average annual household income.

Challenges and Opportunities:

  • For many homebuyers in St. Louis, coming up with a down payment that accounts for over half of their annual household income can present challenges. It may require careful financial planning and discipline to accumulate the necessary funds.
  • On the positive side, St. Louis fares better than several major metros where down payments exceed 100% of the average household income.

Tips for St. Louis Homebuyers:

  • Prospective buyers in St. Louis should explore various options for coming up with a down payment, such as saving over time or investigating loan programs that require lower upfront cash.
  • Additionally, buyers should stay informed about down payment assistance programs available in the St. Louis area that can help make homeownership more accessible.


 

In summary, while St. Louis may not have the highest average down payments in the nation, it’s essential for local homebuyers to be aware of the financial aspects of purchasing a home. Understanding how down payments align with income and local market conditions is key to making informed decisions in the St. Louis real estate market. Stay tuned to StLouisRealEstateNews.com for more insights into the St. Louis real estate landscape.

Mortgage Rates Take a Slight Dip Amidst Steady Federal Reserve Rates

In the ever-evolving landscape of the housing market, prospective homeowners and investors alike keep a close eye on mortgage interest rates. Today, there was a modest decrease in the 30-year fixed-rate mortgage interest rate, now hovering between 7.5% and 7.6%. This shift comes in the wake of the Federal Reserve’s recent decision to maintain the Overnight Federal Funds Rate at a range of 5.25% to 5.50%.

This current rate represents a slight relief from the recent peak in , yet it remains a figure that echoes the rates of over two decades ago. To put this into perspective, the last time mortgage interest rates soared to such heights was in late 2000, a reality that today’s borrowers may find daunting.

The first chart below illustrates the trajectory of mortgage rates over the last several years while the chart below it is a long-term look at rates going all the back t0 1971.

Despite the Federal Reserve’s pause in rate hikes, as noted in their latest meeting, the market has responded with a cautious optimism that is reflected in today’s slight rate reduction. Federal Reserve Chairman Jerome Powell has been clear that this holding pattern does not signal an end to the tightening cycle, but rather a strategic pause, with the central bank retaining the option to adjust rates if inflation trends shift.

For homebuyers, this dip presents a nuanced opportunity. While rates are not at the historic lows seen in recent years, any decrease can translate to significant savings over the life of a mortgage. It’s a reminder that in the world of real estate financing, timing, and vigilance are everything.

As we continue to navigate through these turbulent economic waters, stay tuned for updates on interest rate trends and their implications for the real estate market. Whether you’re looking to buy, sell, or simply stay informed, understanding the dynamics of mortgage rates is key to making empowered decisions.


Mortgage Interest Rates (MND Chart)

(click on chart for live, interactive chart)
Mortgage Interest Rates (MND Chart)

Mortgage Interest Rates – 1971-Present – 30 Year Fixed-Rate

(click on chart for live, interactive chart)Mortgage Interest Rates - 1971-Present - 30 Year Fixed-Rate

 

30-Year Fixed Rate Mortgage Interest Rate Hits Highest Level Today In Over 20 Years

Interest rates for a 30 year fixed-rate mortgage hit 7.49% today as reported by Mortgage News Daily, marking the highest rate we’ve seen on this type of mortgage in over 20 years.  The MND chart below only goes back to 2009 but the bottom chart, from the St Louis Fed Reserve goes all the way back to 1971.  As the charts show, the last time mortgage interest rates were at these levels was over 20 years ago in late 2000.


Mortgage Interest Rates (MND Chart)

(click on chart for live, interactive chart)
Mortgage Interest Rates (MND Chart)

Mortgage Interest Rates – 1971-Present – 30 Year Fixed-Rate

(click on chart for live, interactive chart)Mortgage Interest Rates - 1971-Present - 30 Year Fixed-Rate

 

St Louis Mortgage Interest Rates Hit Highest Level in over 21 years

As the chart below illustrates, mortgage interest rates on a 30-year fixed rate mortgage hit 7.125% yesterday, the highest rate since April 5, 2002 when the rates were at 7.13%.

If you go back far enough in history, you’ll feel better about todays’ rates…

There is probably very little comfort in this for current home buyers but while we are experiencing the highest mortgage rates in over two decades, if we go back a couple of more decades or so in history we’ll see the current rates aren’t so bad.  As the bottom chart below illustrates, over the 52-year period depicted on the chart, about 55% of the time mortgage interest rates were higher than they are now.  If you’re in your 20’s or 30’s you likely don’t care and still think the rates suck since they are about double what they have been since you have paid attention to them.  If you’re a baby-boomer like me, it’s a walk down memory lane LOL.

Mortgage Interest Rates Based Upon the MND Rate Index

(click on chart for live, interactive chart)

Mortgage Interest Rates Based Upon the MND Rate Index

30-Year Fixed Rate Mortgage Interest Rates 1971-Present

(click on chart for live, interactive chart)

30-Year Fixed Rate Mortgage Interest Rates 1971-Present

 

St Louis Mortgage Interest Rates Stuck In the 7 Percent Range

As the chart below illustrates, since returning to 7% around the third week in May, the interest rate has pretty well stayed at the 7% level for a 30-year fixed rate mortgage with the rates for a 15-year fixed rate mortgage about 1/2% better.

Historically-speaking, it’s not that bad….

This won’t necessarily make you feel better if you are a home buyer today but, if we look at the bigger picture (like the bottom chart that goes back to 1971) we’ll see that our current mortgage interest rates are not as bad as they seem, historically speaking. .  In fact, over the 52-year period depicted on the chart, about 60% of the time mortgage interest rates were higher than they are now.  If you’re in your 20’s or 30’s you likely don’t care and still think the rates suck since they are about double what they have been since you have paid attention to them.  If you’re a baby-boomer like me, it’s a walk down memory lane LOL.

Mortgage Interest Rates Based Upon the MND Rate Index

(click on chart for live, interactive chart)

Mortgage Interest Rates Based Upon the MND Rate Index

30-Year Fixed Rate Mortgage Interest Rates 1971-Present

(click on chart for live, interactive chart)

30-Year Fixed Rate Mortgage Interest Rates 1971-Present

 

St Louis Home Mortgage Originations Drop To Lowest Level In Over 23 Years

This might not come as a surprise, given that St. Louis home sales experienced a nearly 20% decline in the past 12 months compared to the previous year, coupled with 30-year fixed-rate loan interest rates approaching 7%. However, mortgage loan originations in St. Louis during the first quarter of this year have reached their lowest level since ATTOM Data began tracking them in the first quarter of 2000. As depicted in the chart below, both home purchase mortgages and total mortgage originations (including purchases and refinances) hit record lows in the first quarter of this year.

During the first quarter, the St. Louis MSA recorded 4,733 mortgage originations, marking a 45% decrease from the previous quarter’s 8,666 originations, and a 54% decrease compared to the same quarter in the previous year when 10,410 mortgages were originated for home purchases

St Louis MSA Mortgage Originations Q1 2000 – Q1 2023 (Chart)

St Louis MSA Mortgage Originations Q1 2000 - Q1 2023 (Chart)

A new twist on lending…The cost of a home loan will go down for bad credit scores and increase for good credit scores…

The headline of this article is not clickbait nor sensationalism. In fact, it’s based on something that’s about to happen. Fannie Mae, which, along with Freddie-Mac, is involved in almost two-thirds of the home loans in the United States, is set to release a new Loan Level Price Adjustment Matrix (LLPA) on May 1, 2023. The LLPA is used by lenders to determine the cost (interest rate) of a loan for a borrower, and it’s not entirely new, as there’s an existing one already in effect. The new LLPA is similar to the current one, as it also charges varying amounts based on the loan to value (LTV) and credit score.

What’s different in the new LLPA is that the cost is going up for borrowers with better credit and going down for borrowers with a lower credit score. To explain briefly how LLPA works, the higher the percentage of the purchase price a borrower is borrowing, the higher the fee. This percentage is known as the “LTV.” It makes sense that a loan where the borrower made a smaller down payment (e.g., 3%) has more risk associated with it than a loan where the borrower made a 20% down payment. Furthermore, the higher the credit score a borrower has, the lower the fee will be. This is because credit scores are based on past payment performance, and it’s logical that there’s less risk to a lender for a mortgage where the borrower has a higher credit score.

Borrowers with a higher credit score will still get better rates:

It’s essential to point out that Fannie Mae hasn’t entirely lost its mind by charging higher-risk borrowers less than it’s charging lower risk borrowers. For instance, a borrower with a 740 credit score borrowing 95% or more of the purchase price will be charged a 0.125% LLPA fee come May 1st, while a borrower with a 630 credit score borrowing the same amount will pay a cost of 1.75%. So, the borrower with the worst credit score will pay an LLPA fee approximately 14 times higher than a borrower with the best credit score.

So what’s the big deal then, what’s different?

The headlines surrounding this change relate to how Fannie Mae has adjusted its current pricing. The change appears to punish better credit risk borrowers and reward higher risk borrowers. For example, a borrower making a 20% down payment with a high credit score will be charged higher rates come May 1st. In contrast, a borrower with the same down-payment but a lower credit score will get charged a lower rate than the current one. Currently, a borrower with a 740 credit score is charged a 0.50% LLPA fee, but beginning May 1st, that charge will go up to 0.875%. However, a borrower with a credit score of 639 currently is charged 3.0%, and on May 1st, that will drop to 2.75%.

Some high credit, strong borrowers will benefit, but overall the winners are borrowers with the worst credit scores…

Continue reading “A new twist on lending…The cost of a home loan will go down for bad credit scores and increase for good credit scores…

St Louis Home Loan Originations Fall to a 12-Year Low

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.

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St Louis Mortgage Originations In St Louis – Q4- 2022

(click on chart for Live, Interactive chart)

St Louis Mortgage Originations In St Louis - Q4- 2022

 

FHA Loans Just Became A Little More Affordable

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)FHA Annual Mortgage Insurance Premium (MIP) - Current Rates vs. New Rates

 

 

Lending Limits Increase on Fannie-Mae and FHA Loans

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.

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Mortgage Interest Rates Remain Lower For Two Weeks Now

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.

Mortgage Interest Rates Based Upon the MND Rate Index

(click on chart for live, interactive chart)Mortgage Interest Rates Based Upon the MND Rate Index

30-Year Fixed Rate Mortgage Interest Rates 1970-Present

(click on chart for live, interactive chart)

30-Year Fixed Rate Mortgage Interest Rates 1970-Present

 

Mortgage Interest Rates Top 7 Percent for first time in over 20 years

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)

Mortgage Interest Rates Based Upon the MND Rate Index

30-Year Fixed Rate Mortgage Interest Rates 1970-Present

(click on chart for live, interactive chart)

30-Year Fixed Rate Mortgage Interest Rates 1970-Present

St Louis 5-County Core Home Prices and Sales – Past 25 Months

(click on chart for live, interactive chart)

St Louis 5-County Core Home Prices and Sales - Past 25 Months

Yesterday’s Headlines Say Interest Rates Are Below 5 Percent – Why They Were Wrong

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

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Continue reading “Yesterday’s Headlines Say Interest Rates Are Below 5 Percent – Why They Were Wrong

Mortgage Interest Rates Ease Back to May Levels

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.

Mortgage Interest Rates

(click on chart for live, interactive chart)

Mortgage Interest Rates

Mortgage Rates Fall Slightly to Lowest Level In Two Weeks

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!

Mortgage Interest Rates – 30 and 15-Year  Conventional Loans, FHA Jumbo and and 5/1 ARM LoansMortgage Interest Rates - 30 and 15-Year  Conventional Loans, FHA Jumbo and and 5/1 ARM Loans

Mortgage Rates Hit Highest Level In Over 13 Years

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)

Mortgage Interest Rates - 2000-Present- 30-year fixed rate mortgage

St Louis Home Saw Second-Largest Decrease In Home Loan Originations Of Metro Areas In The U.S.

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.

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Mortgage Interest Rates Fall For Third Consecutive Week (albeit slightly)

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)



Mortgage Interest Rates Fall For Two Consecutive Weeks

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)

Mortgage Interest Rates - 30 and 15-Year  Conventional Loans and 5/1 ARM Loan

 

Typical St Louis Home Price Increased Nearly 11 Percent In Past Year – Payment On The Home Increased 25%

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?

Continue reading “Typical St Louis Home Price Increased Nearly 11 Percent In Past Year – Payment On The Home Increased 25%

Mortgage Rates Have Increased Significantly This Year

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.

Continue reading “Mortgage Rates Have Increased Significantly This Year

The House Payment on a Typical St Louis Home has increased just over 5% in 14 years

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!

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The Cost of a St Louis Home Comparison 2007 - 2021

Mortgage Interest Rates Decline After Peaking In Spring

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)

Mortgage Interest Rates - 30 Years Conforming Conventional Loan -Past 12 Month Period

 

About Half of Consumers Surveyed Think Home Prices and Interest Rates are Going Up

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.

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Continue reading “About Half of Consumers Surveyed Think Home Prices and Interest Rates are Going Up