Housing market is beginning to show signs of affordability returning in November Mortgage Refinance Demand Surged 6%

signs of affordability

First Indications of Affordability Emerged in November

The market is beginning to show signs of affordability returning. As mortgage rates declined in November and rents decreased by the most in at least seven years, the cost of a new mortgage decreased by 4.8%.

According to Zillow’s most recent Market Report, housing market activity has been at its most relaxed since the epidemic started. According to the data, a typical U.S. home’s monthly mortgage payment decreased by around $100 due to falling home values and lower mortgage rates.

It’s “unlikely affordability will significantly improve anytime soon,” according to Zillow, but the news from November is encouraging because it suggests that affordability may stabilize in 2023.

Housing Market Shows Signs of Balancing

The housing market is regaining equilibrium as buyers and sellers are on more equal footing at the current time. Neither buyers nor sellers appear to have the upper hand in negotiations. The November RE/MAX National Housing Report supports that. In the 53 surveyed metro areas, the data showed prices moderating and a 12% decrease in home sales from October’s figures.

The number of new listings fell to its lowest level of the year, down 21.4% from October. Also, houses for sale remain on the market for an average of 39 days. That was a full week more than November 2021 and four more days than October. The median sales price fell to $394,000, a 1.3% decrease from October but a 3.7% increase from November 2021.

According to the report, November’s inventory had a 2.5-month supply, up from 2.3 in October and more than double the 1.2 from a year earlier. The close-to-list price ratio was 98% on average in November, meaning residences typically sold for 2% less than the asking price. The percentage is unchanged from October 2022 and was 101% a year ago.

Mortgage Refinance Demand Surged 6%

While the latest decline in mortgage interest rates did little to increase demand from homebuyers, it prompted some homeowners to explore ways to reduce their monthly payments.

The Mortgage Bankers Association‘s seasonally adjusted index shows that the number of applications to refinance a mortgage increased by 6% last week compared to the week before. However, volume was still 85% lower than it was during the same period the previous year.

The latest data on the housing market show that homebuilders are pulling back the pace of new construction in response to low levels of traffic, and we expect this weakness in demand will persist in 2023, as the U.S. is likely to enter a recession,” said Mike Fratantoni, MBA’s chief economist. “However, if mortgage rates continue to trend down, as we are forecasting, more buyers are likely to return to the market later in the year, as affordability improves with both lower rates and slower home-price growth.

Next week’s potential market-moving reports are:

  • Monday, December 26th – No Report
  • Tuesday, December 27th – US Home Price Index (SAAR)
  • Wednesday, December 28th – Pending Home Sales Index
  • Thursday, December 29th– – Initial and Continuing Jobless Claims
  • Friday, December 30th – Chicago PMI

As your mortgage and real estate professional, I am happy to assist you with any information you may need regarding mortgage or real estate trends. I welcome the opportunity to serve you in any way I possibly can. Please feel free to reach me at (800) 216-1047.

Looking for a flexible financial solution in Los Angeles? Consider a Reverse Mortgage with variable adjustable rates and lines of credit! Learn about the benefits of this unique program today

If you’re an older adult and have lived in your home a long time, you’ve probably at least thought about a reverse mortgage. As long as you live in your home as a primary residence, you could be qualified for a reverse mortgage.

Lenders can offer reverse mortgages, which provide a line of credit you can use as needed. For example, you may get a reverse mortgage offering a line of credit to pay for essential home repairs or maintenance.

Reverse mortgages can also be offered with a variable interest rate, which could be helpful in various ways.  One crucial takeaway about reverse mortgages: you aren’t necessarily obligated to pay anything back toward the balance as long as you maintain living in the home.

How Do Reverse Mortgages Work?

Reverse mortgages are re-paid when you sell the property, move, or pass away. Spouses and partners can be either co-borrowers or eligible non-borrowers.

If one partner or spouse passes away or moves out, the other partner can stay in the home without paying anything.

Interest rates on eligible non-borrowers on reverse mortgages can be either variable or fixed. One thing to remember: interest, fees, and principal balances aren’t paid on a reverse mortgage until the borrower, co-borrower, or eligible non-borrower moves out or passes away.

Variable Interest Rates and Reverse Mortgages

Many reverse mortgages are fixed-rate, meaning they have a set interest rate that won’t change over the loan.  Variable-rate mortgages do change. They are tied to index and margin rates for mortgage lending. That means they can increase or decrease if changes occur in rate benchmarks. 

There are also several different types of reverse mortgages, including:

  • Single-purpose reverse mortgages: A variation of a reverse mortgage that can pay for property taxes and repairs.
  • HECM loans: Home Equity Conversion Mortgages – a government-insured type of reverse mortgage.
  • Proprietary reverse mortgages, also sometimes called jumbo reverse mortgages, can provide a higher amount of loan than HECM loans can offer.

Considering Different Kinds of Reverse Mortgage

According to Investopedia, there are “unscrupulous lenders out there looking to take advantage of borrowers.” This is why speaking with an experienced mortgage broker who understands different reverse mortgage programs, interest rates, and terms is essential. California Platinum Loans is experienced and qualified to discuss reverse mortgages and options with you. Don’t hesitate to contact them and learn more.

Sources:

Kagan, Julia. “Proprietary Reverse Mortgage,” Investopedia, 10 June 2021

Lake, Rebecca. “Interest Rates for Reverse Mortgages,” Investopedia, 11 August 2022

Maximize your mortgage potential with a solid understanding of Loan-to-Value (LTV) ratio. Unlocking the Secret to Mortgage Success.

Unlocking the Secret to Mortgage Success

When you plan to buy a home and need a mortgage, you’ll encounter the loan-to-value ratio (LTV). Lenders use the LTV ratio to assess your risk as a borrower and decide the terms of your mortgage. It’s the percentage of the loan amount compared to the property’s value. For instance, if you want to borrow $200,000 for a $250,000 home, the LTV ratio is 80% ($200,000 / $250,000).

Calculating the LTV Ratio:

To find the LTV ratio, divide the loan amount by the property’s appraised value or the purchase price, whichever is lower. A professional appraiser determines the appraised value.

Imagine a home’s purchase price is $300,000, and its appraised value is $290,000. The LTV ratio uses the lower value: of $290,000.

Loan Amount / (Appraised Value or Purchase Price) = LTV Ratio

If you want to borrow $240,000, the LTV ratio is 82.76% ($240,000 / $290,000).

Why LTV Ratio Matters and Its Benefits:

Knowing your LTV ratio matters because it impacts your mortgage terms. A higher LTV ratio makes the loan riskier for lenders, which could lead to higher interest rates, stricter requirements, or the need for private mortgage insurance (PMI).

To avoid PMI, aim for a down payment of at least 20% of the purchase price, resulting in an LTV ratio of 80% or lower. Some mortgage programs, like FHA and VA loans, allow for smaller down payments and higher LTV ratios.

Additionally, understanding your LTV ratio helps you figure out your home equity. As you make mortgage payments, your LTV ratio drops, and your equity grows. This information is helpful if you plan to refinance or sell your home.

Grasping the loan-to-value ratio is essential when obtaining a mortgage. It helps you comprehend your risk as a borrower and your mortgage terms. To lower your LTV ratio and save money long-term, consider a larger down payment or explore various mortgage programs.