Home Buyers Not Fazed By Rising Rates
Home sales posted a strong increase in November, on a seasonally-adjusted, annualized basis, according to the National Association of REALTORS®.
Rates are rising, but that hasn’t stopped buyers from moving forward with their home buying goals.
The November Existing Home Sales Report is more revealing than any in recent memory: it’s the first that takes into account skyrocketing mortgage rates following the historic U.S. presidential election.
It hints that home buyers are unfazed by rising rates, or that they are moving fast before higher rates take effect in 2017.
5.61 million existing homes sold on a seasonally-adjusted, annualized basis last month, a 0.7% increase from the month prior.
That’s good for the housing market, bad for the buyer.
Ever-increasing sales are eating up home supply, which is at its worst level in 11 months.
Home buyers could have an awfully hard time finding a home to buy in 2017.
Click to see today’s rates (Dec 23rd, 2016)
Supply Utterly Fails To Keep Pace With Buyer Demand
The National Association of REALTORS® (NAR) released its November 2016 Existing Home Sales report, which showed 5.61 million homes sold on a seasonally-adjusted, annualized basis.
An “existing home” is a pre-owned house that is being sold again and does not include newly constructed homes.
November’s reading is stronger than any in nearly 10 years. Only in February 2007 was there a higher rate of sales.
The one factor holding sales back now, though, is ultra-low inventory. As recently as 2012, home supply eclipsed six months, the inflection point between a “buyer’s market” and “seller’s market”.
Existing Home Supply fell to 4.0 months nationwide in November.
There are now under 2 million homes for sale in the U.S. That is down nine percent from a year ago, when inventory was already tight.
Low home supply is driving up prices. NAR reports that year-over-year home values have risen 57 months in a row, up seven percent since last year.
That could be good news. Higher prices could entice homeowners to sell, increasing inventory and tempering prices.
At least, that’s the hope. For now, homes remain scarce.
Click to see today’s rates (Dec 23rd, 2016)
Buyers Scramble To Find Homes
Mortgage rates are rising, and it’s lighting a fire under home buyers.
First-time and repeat buyers alike realize it’s now time to buy before rates price them out of the home they really want.
November’s home supply reading is evidence of the trend.
Supply reached lows seen only twice before in the past 10 years. There is now just a 4-month inventory of homes.
At this rate, homes would be “sold out” by March 2017. Fortunately, prices are rising, which is enticing more homeowners to put their homes on-market.
When they do, buyers snatch them up.
The NAR reports that the average home stays on the market just 43 days, down from 54 days a year ago. Homes are now selling twice as fast as in 2012, when the typical home took more than 80 days to sell.
If you are a buyer, no doubt you’ve noticed the tough competition. Your “ammunition”, then, is to secure a pre-approval from a lender. Sellers often won’t consider an offer without knowing the buyer is approved for financing. And, your real estate agent may require a pre-approval or pre-qualification letter even before you start viewing homes.
A pre-approval is better than a pre-qualification, because it is a complete, finalized approval, minus the property itself. It is based on the lender’s review of your documentation, such as bank statements, pay stubs, and tax returns.
A pre-qualification, though, is only the lender’s best estimate that you will be approved based on information given verbally. It’s not uncommon for mortgage applicants to accidentally overestimate their income when speaking to the lender.
Tax write-offs, a side business, or alimony and child support can diminish, on paper, perceived income. Sometimes buyers are not approved for as much home as they thought.
Prepared buyers are more likely to buy the home they want when it becomes available.
Click to see today’s rates (Dec 23rd, 2016)
First-Time Buyers Return To The Market
First-time home buyers are entering the housing market in waves.
Low mortgage rates and low-downpayment programs — plus skyrocketing rent payments — are enticing “on-the-fence” home buyers.
First-time buyers made up 32 percent of sales in November, one of the highest readings since 2012.
Easing mortgage standards are helping this segment of home buyers.
More than 76% of home buyers get approved, and complete their home purchase within 90 days, according to mortgage software firm Ellie Mae.
That’s up from just sixty-eight percent in 2015.
That’s significant. First-time buyers, once turned down, often think they can’t be approved elsewhere. That’s not the case.
In fact, lender overlays make some applicants ineligible at one lender, but completely acceptable at another.
Overlays are additional rules that specific lenders add to “by-the-book” guidelines. For instance, FHA guidelines state a borrower needs a minimum 580 credit score to qualify, whereas a lender may up its minimum score to 640.
But home buyers often don’t realize that the lender across the street — or online — may accept a much lower FICO.
Lenders are constantly loosening their guidelines, and it’s showing up in NAR’s Existing Home Sales report.
There have been few better times than now to be in the market to buy a home.
Click to see today’s rates (Dec 23rd, 2016)
5 Low-Downpayment Programs For First-Time Home Buyers
Mortgage rates alone are not enough to extend an opportunity to buyers. The more important piece is actually available mortgage programs.
Today’s market offers first-time home buyer down payment flexibility, the likes of which hasn’t been seen in nine years.
Even mainstays of affordable housing, such as FHA loans, have made it even easier to buy. Mortgage insurance premiums were reduced last year. And, more lenders are offering these loans at the FHA-suggested 580 minimum score.
Conventional lenders have eased downpayment requirements. The minimum down for loans backed by Fannie Mae and Freddie Mac is now 3%. The Conventional 97 mortgage and the HomeReadyTM loan are both lenient about the amount of money you need upfront.
The USDA home loan goes further than even FHA and conventional loans: it requires zero downpayment. And, closing costs can come from a gift or even a seller contribution.
Another zero-down loan comes from the U.S. Department of Veterans Affairs. The VA loan is a veteran-only mortgage for which current and former military service members earn eligibility with as little as 90 days of active service.
These mortgage programs and others are even more affordable because of today’s record-breaking mortgage rates. Home sales are rising, with little question that today’s home buying environment is one of the best in history.
What Are Today’s Mortgage Rates?
The U.S. housing market is advancing into 2017. It’s an excellent time to buy a home, and the first step is getting a rate quote for your home mortgage.
Get today’s live mortgage rates now. Your social security number is not required to get started, and all quotes come with access to your live mortgage credit scores.
Click to see today’s rates (Dec 23rd, 2016)
The information contained on The Mortgage Reports website is for informational purposes only and is not an advertisement for products offered by Full Beaker. The views and opinions expressed herein are those of the author and do not reflect the policy or position of Full Beaker, its officers, parent, or affiliates.
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