Tag Archives: buyer’s market

Mortgage Rates & Refis

Posted on by

TheStreet.com quoted me in Mortgage Rates Expected to Rise and Push Down Refinancing Levels. It reads, in part,

Mortgage rates will continue their upward climb in 2017 as the economy demonstrates additional growth and inflation, but this will of course dampen the enthusiasm for homeowners who have sought to refinance their mortgages up until early this year.

The levels of refinancing will definitely “take a hit relative to 2016,” said Greg McBride, chief financial analyst for Bankrate, a New York-based financial content company.”

A survey conducted by RateWatch found that 56.57% of the 400 financial institutions polled said it is unlikely mortgage rates will fall and unlikely there will be an increase in refinancing in 2017. RateWatch, a Fort Atkinson, Wis.-based premier banking data and analytics service owned by TheStreet, Inc., surveyed the majority of banks, credit unions, and other financial institutions in the U.S. between December 16 and December 29, 2016 on how the Donald Trump presidency will affect the banking industry. The survey found that 35.71% said an increase in refinancing levels is very unlikely, while 6.29% said such an increase is somewhat likely, 1.14% said one would be likely and 0.29% said it would be very likely.

Mortgage rates, which are tied to the 10-year Treasury note, are predicted to fluctuate between 4% to 4.5% in 2017 “with a brief trip below 4% in the event of a market sell-off or economic stumble,” McBride said.

The 4% threshold is critical for homeowners, because when mortgage rates fall below this benchmark level, more consumers are in a position to refinance “profitably,” which is why 2016 experienced a “surge in activity,” McBride said.

When rates rise about the 4% level, the number of homeowners who opt to refinance declines dramatically and “refinancing levels will be notably lower in 2017,” he said.

The mortgages in the 3% range gave many homeowners the opportunity to refinance last year, some for the second time, as many consumers also chose to refinance their mortgages during the 2013 to 2015 period.

As the economy expands and workers are experiencing pay increases, the number of home sales should also rise in 2017.

“People who are working and receiving a pay increase will buy a house whether mortgage rates are 4% or 4.5%,” McBride said. “They may buy a different house, but they will still buy a house.”

Refinancing activity is likely to continue ramping up in January rather than later in the year as the “recent dip in rates allows procrastinators to act before rates continue their movement up,” said Jonathan Smoke, chief economist for Realtor.com, a Santa Clara, Calif.-based real estate company. “As interest rates resume their ascent and get closer to 4.5% on the 30-year mortgage, the number of households who can benefit from refinancing will diminish. That’s why we expect lenders to shift their focus to the purchase market this year.”

Economic growth resulted in interest rates rising before the election and in its aftermath. The rates rose because of the expectation from the financial markets of expanding fiscal policies leading to additional growth and inflationary pressures, Smoke said.

Mortgage rates will continue to rise in 2017 as a result of more people being employed, and this economic backdrop will favor the buyer’s market instead of the refinancing market. Current data from the Mortgage Bankers Association already demonstrates that refinancing activity has declined compared to 2016 due to higher interest rates, Smoke said.

“Rates have eased a bit since the start of the year as evidence of a substantial shift in inflation remains limited and the financial markets oversold bonds in December,” he added.

*     *     *

Borrowers should be concerned with increased interest rate volatility in 2017, said David Reiss, a professor at the Brooklyn Law School. The Trump administration has been sending out mixed signals, which may lead bond investors and lenders to change their outlook more frequently than in the past.

“Borrowers should focus on locking in attractive interest rates quickly and working closely with their lender to ensure that the loan closes before the interest rate lock expires,” he said. “While there is no clear consensus on why rates went lower after the new year, Trump has not set forth a clear plan as to how he will achieve those goals and Congress has not signaled that it is fully on board with them. This leaves investors less confident that Trump will make good on those positions, particularly in the short-term.”

Buyer’s or Seller’s Market?

Posted on by

puppy-tug-of-war

GoodCall.com quoted me in Is This a Buyer’s, Seller’s, or Balanced Housing Market? It reads, in part,

When buying or selling a home, everyone wants the most advantageous situation. Both buyers and sellers want “the best price,” but this definition varies: Home buyers want to purchase the desired property at a good deal, while sellers want to receive their asking price. But how does the housing market determine who wins this tug of war? Is this a buyer’s housing market, a seller’s market, or a balanced market?

What are the signs of each housing market, and how does each affect buyers and sellers?

WHAT TYPE OF MARKET ARE WE CURRENTLY IN?

Eric D. Berman, director of communications at the Massachusetts Association of Realtors, tells GoodCall that the country is currently in a seller’s market. “We have near record-low inventory, which means the market benefits sellers,” Berman says.

Adam DeSanctis, economic issues media manager at the National Association of Realtors, agrees that most of the country is in a seller’s market. So what does this mean? “Given the imbalances in demand in relation to supply in most of the country, homes are selling quicker than a year ago and prices continue to rise,” DeSanctis explains.

While a balanced market would usually have a six-month supply, DeSanctis says the last time this happened was in June 2012. “Furthermore, total housing inventory has decreased year-over-year for 16 straight months.”

*     *     *

FACTORS INDEPENDENT OF THE MARKET

Whether it’s a buyer’s, seller’s or balanced market, experts agree that some decisions should be made independently of the housing supply. Berman warns that consumers should not take on more debt than can afford – the monthly payment should always be an amount they’re comfortable paying. “On the other hand, sellers should understand there price is not the only factor when it comes to selling a home, and the highest offer may not always be the best offer,” Berman says.

David Reiss, professor of law and academic program director at the Center for Urban Business Entrepreneurship at the Brooklyn Law School in New York, agrees that buying or selling a home is a personal decision.

“Does a new home work for you and your family in terms of its size, its cost, and the length of time you expect to live in it?  Does selling make sense in terms of changes in your family, your work expectations, your retirement plans?” Reiss says these are the types of questions that will produce the best answers. “But if you try to ride a wave in the market, you may set yourself up for a lot of disappointment.”