Bump in Contract Signings Point to Future Housing Gains – Industry Outlook

By October 31, 2018Industry Outlook

Mortgage Rates Are Back on the Rise – According to the latest reports from Freddie Mac, borrowers are facing rising mortgage rates again, after a slight pause from increases the week before. “Despite volatility in the stock market, the 30-year fixed-rate mortgage inched forward just 1 basis point to 4.86 percent,” says Sam Khater, Freddie Mac’s chief economist. “We expect rates to continue to rise, which will put downward pressure on homebuying activity. While higher borrowing costs will keep some people out of the market, buyers with more flexibility could take advantage of the decreased competition.”

Bump in Contract Signings Points to Future Housing Gains – Based on the National Association of REALTORS® report, pending home sales increased slightly in September, with significant gains in the West and Midwest offsetting more modest growth in other regions. NAR’s Pending Home Sales Index, a forward-looking measure based on contract signings, shows signings inched up 0.5 percent nationwide to a reading of 104.6 in September. NAR Chief Economist Lawrence Yun says the housing market is stabilizing. “This shows that buyers are out there on the sidelines, waiting to jump in once more inventory becomes available and the price is right,” he says. Lower affordability and a lack of moderately priced homes on the market are the two main factors putting a strain on sales, Yun says. Still, affordability is much more favorable when compared to the past few decades.

Nearly 4M to Get a Credit Boost – According to FICO’s (a credit scoring company) recent announcement, many consumers may see their credit scores move higher. FICO, Experian, and Finicity announced a new pilot program that will consider how prospective borrowers manage their cash that could move credit scores higher. Credit scores are a critical component when qualifying for a mortgage and getting the lowest rates. The program, called UltraFICO score, aims to help people who have dings on their credit histories to also have their banking activity factored into their score. For example, this could include how long accounts have been open and any evidence of savings on the consumer’s part. Consumers who have credit scores in the lower numbers, such as the upper 500s to lower 600s or who have limited history or previous financial problems will likely benefit the most. Some of their scores could go higher under the new system, David Shellenberger, the senior director of scores and predictive analytics at FICO, told CNBC. Nearly 4 million consumers could potentially see an increase of 20 points or more in their FICO score, he says.

Delayed Homeownership to Hamper Millennials’ Retirement – Based on several financial expert studies, there is growing concern with how millennials’ lack of homeownership will impact them financially when they retire. “Homeownership is one of the touchstones of being prepared for retirement,” Tamera Sims, research scientist at the Stanford Center on Longevity, told CNBC. “Buying a home at age 50 or 60 isn’t going to do you much good in funding a 30-year retirement.” But young adults are “not able to hit the housing market at the same age as their parents,” Sims says. Researchers found homeownership is falling the most among people under the age of 30 compared to previous generations. The homeownership rate among early millennials (those born between 1980 and 1984) at age 30 is 35.8 percent, according to the Stanford Center on Longevity.

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