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Rates To Remain Low Despite Increases

Mortgage rates have recently started to increase again, after hovering at or just above record lows for months. And with most economists predicting the economy will boom – as more Americans are vaccinated and COVID-related restrictions are lifted – there is an expectation that they’ll climb even higher. But despite those expectations, Fannie Mae’s Economic and Strategic Research Group says it shouldn’t be a major concern. “At the moment, economists’ eyes are on interest rates given the size of the recent increases to Treasury and mortgage rates and the short time period over which those changes occurred,” Doug Duncan, Fannie Mae’s senior vice president and chief economist, said. “Perspective is helpful here: While we forecast some continued upward movement, mortgage rates remain historically low, as they are still 0.8 percentage points below the 2019 average.” In other words, though rates have increased, they are still low when compared to what’s been typical in years past. Fannie Mae expects any upcoming rate increases won’t affect housing activity in the near term, though they do expect refinance demand to dip. (source)

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New Home Sales Tumble Into Spring

The latest New Residential Sales Report from the U.S. Census Bureau and the Department of Housing and Urban Development shows sales of new homes fell 18.2 percent in February. The decline, which was significant – and more than economists expected, was caused by a few different factors. Harsh winter weather certainly played a role in slowing sales during the month. But sales were also hindered by rising lumber costs and material shortages, which caused construction delays and affected supply. Demand, on the other hand, remains high. For one, new-home sales are still 8.2 percent above last year’s pre-pandemic pace. Additionally, the report found the number of new homes sold before construction was up 20 percent year-over-year – a good indication that home building delays, rather than a lack of interest from buyers, drove the sales decline. Also in the report, the median sales price of new homes sold in February was $349,400. The average sales price was $416,000. (source)

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Demand For Home Loans Up 26% Over Last Year

According to the Mortgage Bankers Association’s Weekly Applications Survey, demand for loans to buy homes was up 3 percent last week from the week before. The improvement puts the MBA’s Purchase Index 26 percent above where it was during the same week one year ago. Joel Kan, MBA’s associate vice president of economic and industry forecasting, says demand for purchase loans has been rising. “Purchase applications were strong over the week driven both by households seeking more living space and younger households looking to enter homeownership,” Kan said. “The purchase index increased for the fourth consecutive week and was up 26 percent from last year’s pace. The average purchase loan balance increased again, both by quickening home-price growth and a rise in higher-balance conventional applications.” Also in the report, average mortgage rates were up across all loan categories. The rate increase caused a drop in refinance demand, which was down 5 percent. The MBA’s weekly survey has been conducted since 1990 and covers 75 percent of all retail residential mortgage applications. (source)

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The Best Strategies For Winning A Bidding War

In a today’s market, buyers have to compete for available homes. That means, finding ways to make your offer stand out from others. Put simply, you can’t expect to win a bidding war, if you aren’t prepared to offer more than the next buyer. However, it’s not just a matter of offering more money – though that’s certainly part of it. There are other strategies as well, like waiving contingencies or promising a faster close. How you approach making your offer can be the difference between disappointment and purchasing your dream home. So what’s the best strategy for winning a bidding war? Well, according to one recent analysis an all-cash offer improves a buyer’s chances by 290 percent. This isn’t surprising. It also isn’t an option for most home buyers. The second most effective strategy was waiving the financing contingency, which protects the buyer in case they aren’t able to secure a mortgage in time. But while it may improve your chances by 66 percent, it has its risks, including losing your earnest money deposit. Other popular strategies – including escalation clauses and waiving the inspection – are less risky but also less effective. Mostly, though, that’s due to the fact that they’re more common in a seller’s market, where buyers are trying to outmaneuver each other. (source)

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Typical House Sells In 20 Days In February

The typical home for sale was on the market just 20 days in February, according to new data released by the National Association of Realtors. That’s a record low and down from 36 days last year at the same time. But while elevated demand from buyers plays a role, too few homes for sale is the chief reason homes are selling so quickly. The NAR’s report shows that – while the number of homes for sale did improve month-over-month – nationally, it’s down nearly 30 percent from where it was one year ago. According to Lawrence Yun, NAR’s chief economist, low inventory is also contributing to declining home sales. In fact, February sales of existing homes fell 6.6 percent from January. “Despite the drop in home sales for February – which I would attribute to historically low inventory – the market is still outperforming pre-pandemic levels,” Yun said. It’s true. Despite slowing in February, sales are still 9.1 percent higher than last year. And with expectations that both inventory and the economy will improve as the year goes on, there’s hope that home sales and listings will too. (source)

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Home Building Halts, But Is The Setback Temporary?

New data released by the U.S. Census Bureau and the Department of Housing and Urban Development shows the number of new homes that began construction in February was 10.3 percent lower than the month before. The decline marked the second consecutive month home building slowed. In a housing market starved for additional inventory, this may seem like discouraging news. After all, if home building slows and the number of homes for sale doesn’t pick up, prices will continue to spike, affordability will suffer, and hopeful home buyers will have a harder time finding homes to buy. Fortunately, the numbers may be deceiving. How so? Well, for one, bitter cold and winter storms affected much of the country in February. And more than just typical winter weather in states accustomed to a February freeze, the storms and cold reached into Texas and much of the South. Because this likely caused home builders to pause construction, economists expect the setback will be temporary and new residential construction will rebound in the months ahead. (source)

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36% Of Homes Sold Above List Price In February

The price a home is listed for isn’t necessarily the price its buyer will pay. That’s especially true when the number of homes for sale is low, as it is now. In short, when there are fewer homes for sale it makes competition among buyers more likely. And when there’s competition, there are bidding wars. So how common is it these days that a prospective home buyer will have to offer more than the homeowner is asking in an effort to beat offers from other buyers? Well, according to new numbers from one recent analysis, it’s more common than ever before. In fact, in February, 36 percent of the homes sold during the month went for more than their asking price – a record high. That means, if you’re a home buyer looking at listings and calculating what you can afford, you should also calculate how affordable those homes would be if the price were to go up. The good news, though, is that market conditions are expected to change in the coming months. As more homes are listed for sale this spring and summer, the market will be better balanced and the share of homes sold above their list price should come down. (source)

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Mortgage Rates Up Slightly In Weekly Survey

According to the Mortgage Bankers Association’s Weekly Applications Survey, average mortgage rates were up slightly last week from the week before, with increases seen for 30-year fixed-rate loans with conforming loan balances, loans backed by the Federal Housing Administration, and 15-year fixed-rate loans. Jumbo loans were flat from one week earlier. But though rates are now at their highest point since last June, demand for home purchase loans continues to rise. Last week, it was up 2 percent week-over-week pushing it 5 percent higher than last year. At the same time, higher rates have hurt refinance demand, which fell 4 percent from the week before. Joel Kan, MBA’s associate vice president of economic and industry forecasting, says there are a few factors helping drive buyer demand. “The purchase market helped offset the slump in refinances,” Kan said. “Activity was up 5 percent from a year ago, as the recovering job market and demographic factors drive demand, despite ongoing supply and affordability constraints.” The MBA’s weekly survey has been conducted since 1990 and covers 75 percent of all retail residential mortgage applications. (source)

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Builder Confidence Still High Despite Lumber Prices

When there’s a lack of homes for sale, new home construction plays an important role in balancing the market. Not only does building more new homes help provide buyers with options, it also helps keep price increases from spiking. That’s why the National Association of Home Builders conducts a monthly survey to gauge how confident home builders are in the market for new homes. If builders are optimistic, it’s good news for prospective home buyers, since it likely means more new homes – and a better balanced market – are on the way. The NAHB’s survey is scored on a scale where any number above 50 indicates more builders view conditions as good than poor. In March, the survey fell two points to 82, mostly due to concerns over the cost of lumber. Lumber prices have risen nearly 200 percent over the past year and the added costs have made it more difficult for builders to build homes affordably. However, despite the supply-side issues, high buyer demand has kept confidence near all-time highs. In fact, the index is currently just eight points below its record high of 90, reached last November. (source)

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Lenders See Stable Credit, Higher Demand Ahead

Each quarter, Fannie Mae asks senior mortgage executives for their views on the upcoming mortgage market. Their Mortgage Lender Sentiment Survey can be a good predictor of what’s ahead for housing. So what are mortgage execs saying about the coming spring and summer market? Well, for starters, they expect access to credit to remain stable. After tightening last spring, credit standards have eased over the past year and are now at pre-COVID levels. That means, qualified buyers should feel confident in their ability to be approved for a loan. Lenders also expect buyer demand to remain high this year. In fact, the survey found “demand expectations over the next three months rose significantly across all loan types from last last quarter and remained similar to the levels seen in Q1 2020.” In short, lenders are expecting a hot purchase market. However, though optimistic about demand from buyers, lenders aren’t as confident in refinance activity. With mortgage rates expected to increase from all-time lows, they predict there will be fewer homeowners looking to refinance as the year progresses. (source)