HELOCs are Coming Back - Industry Outlook

By Troy Van Every | August 29, 2022 | Mortgage

Mortgage Rates Settle In the 5% Range

According to Freddie Mac reports, mortgage rates appear to be settling in the 5% range after recent dramatic climbs that shocked home buyers. However, “home sales may soon stabilize since mortgage rates have fallen to near 5%, thereby giving an additional boost of purchasing power to home buyers,” says Lawrence Yun, chief economist for the National Association of REALTORS®. Inflation appears to have peaked, which has stopped the rapid increase in mortgage rates, says Sam Khater, Freddie Mac’s chief economist. “The market continues to absorb the cumulative impact of the large price and rate increases that led to a plunge in affordability,” Khater says. “As a result, over the rest of the year, purchase demand likely will continue to drag, supply will modestly increase, and home price growth will decelerate.”

Source and link to the full article: Mortgage Rates Settle In the 5% Range | Realtor Magazine

Homebuilders say U.S. is in a ‘housing recession’

Based on The National Association of Home Builders/Wells Fargo Housing Market Index, builder sentiment in the market for single-family homes fell into negative territory recently, as builders and buyers struggle with higher costs. Builder sentiment dropped 6 points to 49 this month, its eighth straight monthly decline. Anything above 50 is considered positive. The index has not been in negative territory since a very brief plunge at the start of the Covid pandemic. Before that, it had not been negative since June 2014. “Tighter monetary policy from the Federal Reserve and persistently elevated construction costs have brought on a housing recession,” said NAHB Chief Economist Robert Dietz.

Source and link to the full article: U.S. is in housing recession, homebuilders say (cnbc.com)

Double-Digit Home Price Gains in Q2 Erode Affordability Even More

According to the National Association of REALTORS®’ latest quarterly report, despite a slowdown in home sales, home prices continue to soar. Eighty percent of 185 major metro markets across the country posted double-digit annual price appreciation in median single-family existing-home sales prices. Nationwide, the median single-family existing-home price climbed 14.2% annually, reaching $413,500 in the second quarter. That marks the first time that the median home price has surpassed $400,000, NAR reports. Higher home prices and higher mortgage rates chipped away at housing affordability in the second quarter. Housing affordability declined as monthly mortgage payments on a typical single-family home (with a 20% down payment) surged by nearly a third quarter over quarter to $1,841. That’s an increase of $444 compared to the first quarter and is up by $612, or 50% compared to one year ago, according to NAR’s report. “Home prices have increased at a pace that far exceeds wage gains, especially for low- and middle-income workers,” says NAR Chief Economist Lawrence Yun.

Source and link to the full article: Double-Digit Home Price Gains in Q2 Erode Affordability Even More | Realtor Magazine

HELOCs are Coming Back

Based on Freddie Mac’s recent weekly Primary Mortgage Market Survey, a combination of fast-rising home values and the fact that nearly two-thirds of borrowers with at least some home equity have mortgage rates below 4% and would not benefit from refinancing, is helping to propel a resurgent market for home-equity lines of credit (HELOCs). HELOCs allow homeowners to tap the equity in their home without incurring a much higher first-lien mortgage via a cash-out refinancing. The interest rate for a 30-year, fixed-rate mortgage averaged 5.22% as of August 11th. The Federal Reserve Bank of New York’s second-quarter 2022 Household Debt and Credit Report shows that limits on HELOCs jumped by $18 billion in the second quarter of this year, “the first substantial increase in HELOC limits since 2011,” and an indicator of an increase in new originations. HELOC balances stood at $319 billion for the second quar   ter, according to the Federal Reserve report.

Source and link to the full article: HELOCs are now "raging back" - HousingWire