Analyzing the borrower-level National Mortgage Database, it becomes clear that Millennials and Gen Xers have benefited most from the low-rate environment, with average rates around 4%. Millennials, who entered the market en masse during the low-rate period of 2020-2021, secured favorable rates primarily through purchases, while Gen Xers capitalized on refinancing opportunities. In contrast, Gen Z, stepping into the market more recently, faces the highest average rates at 4.9%, with many having purchased homes during the higher rate periods of 2022 and 2023. This generational disparity in mortgage rates suggests that while refinance opportunities remain slim, should rates decline, there could be significant refinancing activity, especially among Gen Xers and Millennials.
Percentage of Homeowners with Mortgages at Various Rate Levels
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.
One of the issues receiving significant attention following the announcement of the REALTOR® commission suit settlement is the topic of buyer commissions, specifically regarding whether a buyer has to pay them and how lenders will treat the commissions.
In a recent letter to the Federal Housing Finance Agency (FHFA), Federal Housing Administration (FHA), Fannie Mae, and Freddie Mac, NAR and MBA sought confirmation on the treatment of buyer agent commissions following a proposed settlement agreement in the Burnett et al and Moehrl et al cases.
What does this mean for homebuyers? Under the settlement, cooperative commissions will no longer be displayed on Multiple Listing Services (MLS), but listing brokers and sellers will still be able to offer compensation for buyer broker services through other means. Additionally, the settlement does not prohibit home sellers from paying buyer agent commissions directly.
NAR and MBA believe that FHA and Government-Sponsored Enterprise (GSE) policies should continue to exclude seller or listing agent payments of buyer agents’ commissions from Interested Party Contributions (IPCs). IPCs are concessions from the seller to the buyer for items traditionally paid by the buyer, such as loan closing costs or rate buy-downs. Maintaining this practice is essential to ensure that the flow of mortgage capital to homebuyers remains uninterrupted.
As a homeowner or potential buyer, it’s important to stay informed about these developments and how they may impact your buying or selling process. NAR and MBA have requested confirmation from the FHFA, FHA, Fannie Mae, and Freddie Mac as soon as possible to prevent any confusion and potential disruptions that may cost you money or even jeopardize your home purchase.
The MBA and NAR Letter
(click to view entire letter)
Traci Casper, NAR President
In a recent interview with CNBC, Traci Casper, the President of the National Association of Realtors (NAR), shared her views on the current state of the housing market and the implications of recent commission lawsuits. Her remarks provide an insight into the challenges and changes shaping the real estate industry, particularly relevant for the St. Louis market.
Casper highlighted the impact of fluctuating mortgage rates on the housing market, mentioning, “We do have still such a pent-up buyer pool that’s just been waiting on the sidelines… we are starting to feel them come back in.” This observation reflects the interconnectedness of mortgage rates and buyer activity, a significant factor in real estate market dynamics.
Regarding the commission lawsuits, Casper spoke about the potential effects on buyers and sellers. She explained, “Our buyers are already struggling to come up with a down payment… We don’t want to see is the marginalization of those buyers.” This statement is in line with the NAR’s consistent message suggesting that lower-income buyers might be negatively impacted if sellers stop paying buyer agent commissions. I counter Casper’s position, highlighting the disagreement within the industry. Many argue that buyers are indirectly paying the commission since it is generally factored into the home’s selling price. If the payment structure shifts to where buyers directly pay the commission, this could lead to a decrease in the seller’s price, as they would no longer bear this cost. This change might not increase the overall cost to the buyer, but it could affect sellers’ pricing strategies. Additionally, I believe that lenders will adapt to these changes. Institutions like Fannie Mae, Freddie Mac, FHA, and VA are likely to revise their policies to allow commissions paid by buyers to be included in closing costs, counted as part of the down payment, or financed.
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)
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.
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)
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.
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.
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 – 1971-Present – 30 Year Fixed-Rate
(click on chart for live, interactive chart)
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)
30-Year Fixed Rate Mortgage Interest Rates 1971-Present
(click on chart for live, interactive chart)
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)
30-Year Fixed Rate Mortgage Interest Rates 1971-Present
(click on chart for live, interactive chart)
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…
As the chart below illustrates, yesterday, mortgage interest rates on a 30-year fixed rate conventional mortgage increased slightly to 6.27% after dropping to 6.13% last Thursday, the lowest level in over 3 months.
Historically-speaking, it’s not that bad….
Granted, no one really wants to hear this, 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 aren’t that high. In fact, over the 52-year period depicted on the chart, about 70% 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)
30-Year Fixed Rate Mortgage Interest Rates 1971-Present
(click on chart for live, interactive chart)
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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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)
30-Year Fixed Rate Mortgage Interest Rates 1970-Present
(click on chart for live, interactive chart)
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
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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)
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)
There have been a lot of reports over the past month about rising interest rates (mortgage rates on a 30-year fixed-rate mortgage hit 5.27% last week) as well as rising inflation rates (8.5% in March) and the effect these things will have on the housing market. It’s no doubt they will have some affect on home prices and sales and I have been watching the data on St Louis home prices and sales closely and so far there does not appear to be much impact.
St Louis home sales increase in April from March…
There are two ways we analyze home sales at MORE, REALTORS®; the traditional manner, which is what almost all public reports are based upon, closed sales (which are really indicative of what the market was like 1-2 months previously since that is when the contracts were typically written) and then by use of our STL Real Estate Trends Report, which gives us a better idea of the current activity. Our trends report shows the number of new contracts written on listings, so current sales activity as well as the number of new listings entering the market. The good news is, when looking at St Louis home sales activity for April, both closed sales and newly written contracts increased from the month before.
As our chart below shows, there were 2,134 homes sold in St Louis (5-county core market) during April, a 6.4% increase from March when there were 2,005 homes sold. As the STL Real Estate Trends Report shows, there were 3,279 new contracts written on homes during April in the St Louis 5-county core market, an increase of 5% from the prior month when there were 3,124 contracts written.
Continue reading “St Louis Home Sales Doing Well In Spite of Rising Interest Rates & Inflation“
This week it was announced that the U.S. inflation rate in March had increased to a staggering 8.5% the highest rate in over 40 years as illustrated by the chart below. The last time the inflation rate was higher than this was in December 1981 when it hit 8.9%. The “inflation rate” that I’m referring to, and is the most commonly reported, is based upon the Consumer Price Index for All Urban Consumers (CPI-U): U. S. city average. One of the categories included in the CPI-U is “shelter”. The report shows the shelter inflation rate at 5% which, on the surface sounds low however, the median price of homes sold in St Louis in March was $250,000 an increase of just over 4% from March 2021 when the median sold price was $240,000.
What does an inflation rate of 8.5% mean for the real estate market?
With everything going on in our economy, country and world now I think it’s literally impossible to predict what is going to happen on any front with any level of accuracy however, a good guide would be what has happened in the past during similar times. With this in mind, lets look at what the market looked like the last time inflation was at this level, December 1981:
- Mortgage interest-rates on a 30-year fixed mortgage were an average of 17%-18% (see chart below)
- The inflation rate actually reached a peak of 14.4% in March of 1980
- St Louis home prices peaked during the 1st quarter of 1979 then declined until bottoming-out during the 2nd quarter of 1981 (see chart at bottom)
Mortgage interest rates were at 3.69% for a 30-year fixed-rate loan as of this past Thursday, February 10, 2022., according to Freddie Mac’s Primary Mortgage Market Survey®. As the chart below illustrates, mortgage interest rates hit a low of 2.77% in August of 2021 and have pretty much been trending upward since.
Within the last few days, there have been a lot of reports in the media projecting mortgage interest rates to go higher this year. A lot of it is based on the current inflation rates which are not good so if the economy and rate of inflation improve, so would mortgage rates but time will tell. Personally, as of today and subject to any new major disruptions, I think rates in 2022 will stay in the mid 3% range and climb to the upper 3’s, perhaps 3.9% but could very well go over 4% if the Federal Reserve raises rates as much as is currently rumored now.
Mortgage Interest Rates – 30 Year Conventional Loan
(click on chart for live, interactive chart)
Mortgage interest rates were at 2.65% for a 30-year fixed-rate loan at the beginning of this year, according to Freddie Mac’s Primary Mortgage Market Survey® and rose through the late winter months and started the spring housing season with rates hitting 3.18% on April 1st. This rate was the highest rate since June, 2020 when rates hit 3.21% and was the highest level for interest rates in 2021. This past week, according to the same market survey, the 30 -year fixed-rate mortgage interest rate hit 3.09%, the highest level in six-months, but still below the peak rate for the year of 3.18%.
As the chart below illustrates, mortgage interest rates for a 30-year fixed-rate mortgage have spent most of the time this year between about 2.75% and 3.0%. This is a pretty narrow fluctuation range and, even at the high of the range, or at the peak rate of 3.18% for this year, is still historically very attractive as evidence by the second chart below, one that shows mortgage interest rates for the past 10-years.
Mortgage Interest Rates – 30 Years Conforming Conventional Loan -Past 12 Months
(click on chart for live, interactive chart and other loan types)
Mortgage Interest Rates – 30 Years Conforming Conventional Loan -Past 10 Years
(click on chart for live, interactive chart and other loan types)
Lately, I’ve noticed several articles questioning whether the kind of crazy real estate market we’ve in for a while now is reminiscent of the early 2000’s which lead to a housing bubble that eventually burst in 2008. Granted, even in St Louis where we tend to not see the market extremes one way or the other like the coasts do, one could get the idea that maybe we’re headed that way with buyer’s fighting over new listings and bidding wars that have homes often selling for over the list price. However, in my humble opinion, this market is very different than the 2000 – 2007 market and we are not headed to a crash at this point.
Before I go further…my disclaimer…
I’m not an economist and I didn’t even stay at a Holiday Inn Express last night, I’m just a long-time real estate industry data junkie who has ridden the real estate roller coaster for 40+ years and have some thoughts on the current state of the market. While my comments may apply outside of our local market, my focus and commentary are on the St Louis housing market.
What’s different now from before…
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Continue reading “Why St Louis Is Not Headed Toward Another Housing Market Bubble or Crash“
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.
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Mortgage Interest Rates – 30 Year Fixed-Rate
(click on chart for live, interactive chart)
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
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In response to the coronavirus pandemic, the U.S. Dept. of Housing and Urban Development (HUD), as well as the Federal Housing Finance Agency (FHFA) (which oversees Fannie Mae and Freddie Mac), directed their loan servicers to suspect foreclosures and evictions for at least 60 days to help those people affected.
In a statement, Mark Calabria, the Director of the FHFA, said that borrowers affected by the coronavirus who are having difficulty paying their mortgages should reach out to the mortgage servicers as soon as possible.
HUD Secretary Ben Carson said that “The halting of all foreclosure actions and evictions for the next 60 days will provide homeowners with some peace of mind during these trying times,”
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.
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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.
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Continue reading “Mortgage Interest Rates….How low can they go??“
