Low Rates Keep Buyers in Summer Market – Industry Outlook

By July 9, 2019Industry Outlook

Low Rates Keep Buyers in Summer Market – Based on Freddie Mac reports, mortgage rates are barely budging, keeping borrowing costs low for summertime home shoppers. Mortgage rates continue to hover near their 2016 averages. “We’re seeing a tug of war happen as the fixed-income market flashes warning signs while the equities market continues to march higher with optimism,” says Sam Khater, Freddie Mac’s chief economist. “The data suggests the economy is weakening but is still on very solid ground, with high consumer confidence and a strong labor market. Closer to home, the housing market continues to slowly improve and gain momentum as we head into the second half of the year, which is good news and should keep the economy growing.”

® REALTOR® Magazine

8.2M Could Have Lower Mortgage Payments – According to Black Knight, a mortgage software and analytics firm, mortgage rates are dropping, giving millions of homeowners an opportunity to lower their monthly payments. An estimated 8.2 million borrowers could refinance and potentially lower their monthly payments by at least 75 basis points. This marks the largest percentage of homeowners who stand to benefit from lower mortgage rates since the end of 2016. The average borrower stands to save about $266 per month on their mortgage by refinancing, according to Black Knight. Refinancing can lower monthly payments and also provide access to money for homeowners who have substantial home equity. About 44 million borrowers have at least 20% equity in their homes. The average amount available to access is $136,000, Black Knight reports.

Greater Affordability Revives Pending Home Sales – Based on reports from the National Association of REALTORS®, pending home sales bounced back in May from a dip the previous month, a sign that home buyers are returning to the market as lower borrowing costs improve affordability. Three of the four major U.S. regions saw an increase in pending home sales last month. NAR’s Pending Home Sales Index, a forward-looking indicator based on contract signings, rose 1.1% to a reading of 105.4 in May. Year over year, however, contract signings are down 0.7%. “Rates of 4% and in some cases, even lower create extremely attractive conditions for consumers,” says NAR Chief Economist Lawrence Yun. “Buyers, for good reason, are anxious to purchase and lock in at these rates.” Consumer confidence about home buying is increasing, which likely will translate to more sales over the coming weeks, Yun says. “The Federal Reserve may cut interest rates one more time this year, but there is no guarantee mortgage rates will fall from these already historically low points,” Yun says. “Job creation and a rise in inventory will nonetheless drive more buyers to enter the market.” The need for more inventory is only growing greater, Yun says. “Home builders have not ramped up construction to the extent that is needed,” he says.

Survey: Potential Gen Z Buyers Prefer Diverse Neighborhoods – According to a survey from Homes.com, Generation Z, the youngest potential home buyers, show a preference for buying homes in culturally diverse neighborhoods. It’s the first generation in American history to show such a strong diversity preference. The real estate website surveyed more than 1,000 young adults ages 18 to 24 years old to examine their homebuying preferences. Fifty-eight percent of potential Gen Z home buyers say they prefer a diverse community compared to 12% who prefer a homogeneous neighborhood, the survey shows. Their timeline: 14% expect to purchase a home between the ages of 18 to 24; 48% say they intend to buy when they are 25 to 29 years old; and 25% plan to buy between ages 30 to 34. The timeline follows a similar pattern to Generation X and baby boomers, the survey notes. The top motivators for them to buy is a “place to call home” and for investment value.

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