After months of upward trends, home mortgage rates have retreated somewhat and are currently at an average of 4.39 percent for a 30-year fixed loan, lower than levels in June. However, after two benchmark rate hikes already this year, two more are signaled by the Federal Reserve and are expected by top analysts for 2018, meaning current mortgage rates most likely could increase again. 

In ValueInsured’s latest Modern Homebuyer Survey, over 3 in 4 Americans (76%) believe mortgage interest rates will continue to go up in 2018. Nearly 6 in 10 (59%) predict an average 30-year fixed rate will reach 5% by the beginning of 2019, and 13% Americans expect to see 6% 30-year mortgages by the end of 2019.

A realtor we know recently said this: “All homebuyers have buyer’s remorse at some point during the pre-closing escrow period. I never not hear from a buyer after contract signing and before the home closing, some wonder if they paid too much, others may ask if I read a recent article about the market potentially turning.” In a survey conducted last year, Trulia found nearly half of all Americans have buyer’s remorse about the home they bought.

Now, with stakes ever higher in this expensive market, where home payments in some areas are swallowing up 45% of local median income, expectation of buyer’s remorse is high.

You may have noticed many more reports about rising debt, delinquencies, inflation and risk of an associated recession.  Curious ourselves, we thought we'd put things into context (you have to be concerned with fake news, right)?  And it was interesting. 

If you just follow housing, you may have positive or negative feelings about the market trends, but to get the full picture, you cannot isolate just that one expenditure.  You have to look at similar debts like student loans, car loans and credit cards (and rising delinquencies).  Put together, we are now at similar debt levels as 10- years ago.  So, when a buyer is thinking about buying a home, they are also thinking about all of these other debts and expenses. 

And then there is inflation.  It has been whispered about for a while, but it may become a roar in the near future. This is a great article on why you should keep an eye on it (just ignore the sales pitch at the end).

Since its inception in Spring 2016, ValueInsured’s quarterly Modern Homebuyer Survey has reported shifts in homebuyer attitudes and confidence; however, one thing has remained constant: Millennials’ strong desire to own home, currently at 77%. At the same time, Millennial homeownership is now at the lowest level – at 35.3% – since the U.S. Census began tracking homeownership by age groups in 1982.

While Millennials enjoy strong employment in this robust economy, many are not saving enough of their paychecks for a home. Today, Millennial homeowner hopefuls are paying for $5 coffees (sometimes three of these daily) and $900 cell phones. According to a recent study, 53% of Millennials spent recently on an Uber or taxi ride, and 73% on a music, sporting or other live entertainment event. 79% spent to dine at a hot restaurant in town. So, it is not surprising that according to the latest Q2 ValueInsured Survey, 72% of all millennials who wish to buy a home save less than $250 a month. 

Home buying has become intensely competitive in some of the nation’s top markets. Over 1 in 3 homebuyers made an offer on a home last year sight unseen, while home sellers are expecting shorter closing windows and more lenient closing terms. None of these is news. Now, we have another new data point.

According to ValueInsured’s latest Q2 2018 Modern Homebuyer Survey, 21% of all surveyed homebuyers have experienced a failed sale transaction due to what they consider to be “unrealistic seller’s demands,” including waiving contingencies, cash-only offers, and fast closing. 26% of millennial first-time homebuyers and 30% existing starter-home buyers surveyed report to have experienced these sellers’ demands that they believe to have derailed a potential sale.

MBA Insights interview with Joe Melendez, co-founder and CEO of ValueInsured, Dallas, a provider of down payment protection.

In the past two weeks, several housing headlines caught the eyes of many. MarketWatch printed “Thinking of selling your home? Do it before 2020, economists say”. Citing housing experts, Zillow released a Home Price Expectation Survey where it is predicted that the Next recession will begin in 2020. CoreLogic reported “More than half of US housing markets were overvalued in April”. Chief economist of NAR warned the current run-up in home prices is not sustainable, which is then echoed by a separate study and yet another bearish headline of unsustainable home price gains by Black Knight.

Not trying to be a downer here, but these chorus of consistent headlines are the elephant in the room and hard to ignore. So let’s address it.

Borrower confidence can be enhanced by creating a safety net to guard against the unexpected.

By Joe Melendez, CEO ValueInsured

Homeowners now have a new reason to refinance, and it may just be the secret weapon the mortgage industry needs to survive this alarming refi drought. Home prices have reached record-high in many top metros, but if you have paid attention to any local realtors, to CoreLogic, or to housing experts and economists here, here, and here, many of these markets are overvalued and are expected to correct. In ValueInsured’s latest quarterly survey, 68% Americans believe a housing correction will happen within 2 years. Interestingly, the consumer survey was conducted before releases of the Zillow and Wall Street Journal economist panel reports, but their prediction timeline mirrors those of the experts’.
 
Historically, homeowners’ choice when faced with a potential correction is to sell (but then where would they live?), or to stay put and risk watching their home value depreciate in the near future. Those are hardly good options and the bottom line is, the homeowner themselves have little to no control.
 
Now, they have a third option…

Hosted by Chuck Jaffe, Senior Columnist for MarketWatch with Joe Melendez, CEO ValueInsured

The CEO of ValueInsured, Joe Melendez, appeared on the daily talk show The Money Life Show to discuss findings from the ValueInsured Modern Homebuyer Survey.  Hosted by Senior Contributor for MarketWatch Chuck Jaffe, Joe was asked about today's homebuyers and their motivations.  

It is quite a conundrum for millennials in this housing market. Majority who wish to own cannot afford to buy. Of the few who could, over 8 in 10 wish they bought a different home and want to move. 74% of them say now would be a good time to sell, but they can’t because prices to buy another home is too high, so they wait and try to time the market. It appears that for millennials, once you finally achieve the American Dream, there’s an obstacle course right around the corner, just in case you thought you could catch a breath.

This was an interview originally recorded on The Jon Sanchez Show - May 22, 2018 

Jon Sanchez:  All right. Let me tell you what we have lined up tonight. Got a great show lined up. We're, we're fascinated about having this guest on. His name is Joe Melendez. He's the CEO of a company called ValueInsured. If you want to look up more information before he joins us after the first break, ValueInsured.com. Now what his organization does is somewhat revolutionary. I am not aware of anybody else that does this. Maybe there's some other competitors out there, but as you will learn among many other things, but the primary reason we're having him on is, his company ValueInsured will insure your down payment.  Now, let me repeat that. His company will insure your down payment, so we all know of course, after the financial crisis, right? People said I had to short sell my house or foreclose on my house, got foreclosed on, etc. Cory, correct me if I'm wrong, as a real estate broker, you probably didn't get too many people saying "geez, you know, my house was worth X at the peak and I had a short sale" or you know lost it and it's then worth Y. They're saying, "hey, you know what? It's that down payment that I put into that house that's gone." That seems to be the part of it that hurts people the most from a psychological standpoint. 

Cory Edge:  Well I think so. And if you remember back to those days, that was one of those quirks, there were zero down loans. There were loans that not only were the zero down but you got money at closing. Yes. So nobody had skin in the game and so they felt that hurt a little bit but not enough. So now they're back to the down payment. Exactly. which is a perfect. And you know, we have a million questions for how you insure people's down payments. Yes. But if it works and if it's a good system, it makes sense because that is the pain that people feel. That's right because that's real money that they used.

A different picture of the housing market is presented by data from an April survey of just over 1,000 Americans. In contrast to more upbeat recent reports, including from Freddie Mac as reported here last week, the ValueInsured Housing Confidence Index for the second quarter dropped almost five points to its lowest level since the inception of the index in Q1 2016.

Potential homebuyers are less convinced that now is the right time to take a step onto the property ladder despite strongly believing in homeownership.

While 79% of non-homeowners say they still desire owning their own home, 67% say the market is currently unhealthy; and only 52% believe that owning a home is a “secure and smart investment”.

High home prices, unaffordability cause confidence in housing health to drop to lowest levels in nine quarters since inception of ValueInsured’s Modern Homebuyer Survey

The desire to own a home remains high, currently at 79 percent among non-homeowners, however; 67 percent believe the American housing market is unhealthy, according to the latest ValueInsured quarterly Modern Homebuyer Survey. In addition, the number of people who believe buying a home today is a secure and smart investment dropped to 52 percent. Despite reports of a strong sellers’ market, the decline in confidence is significant across the board among homeowners and non-homeowners alike.

View the complete slideshow at National Mortgage News

Despite consumer demand for housing remaining high, homebuyers' confidence in their ability to save enough for a down payment fell in the first quarter, with some feeling less positive than others.

Millennials in particular saw declining confidence toward down payment affordability, with only 35% of millennial first-time homebuyers claiming they can afford a down payment, according to ValueInsured, a Dallas-based down payment insurance company. This is down nine percentage points from a year ago.

Despite an active Spring buying season, only 61% of homeowners say that the housing market is heading in a good direction “for people like me.”  But why?  Regardless of other positive or negative news surrounding market excitement or that it is a great time to buy or sell, first-time and upgrade buyers are still viewing the market with trepidation highlighted by a few key areas.  This and other findings will be released next week as part of our latest housing sentiment survey - the quarterly ValueInsured Modern Homebuyer Survey.   

Anyone who has come across a “Home Buying for Dummies” or “Investment 101” type book or website should be able to recite this golden rule: don’t try to time the market. While applicable to most investors, this is likely truer for homebuyers, who need a place to live and probably shouldn’t wait. Increasingly, however, they appear to be deviating from the advice.

Perhaps the real surprise – homebuyers are not alone. Homeowners are also growing concerned with timing the market, according to ValueInsured’s latest Modern Homebuyer Survey…

According to ValueInsured’s Q1 2018 Modern Homebuyer Survey, 62% of interested first-time homebuyers – including 65% of Millennials – who plan to buy “in the near future” are concerned they cannot afford a down payment on a home they would like to live in.

But if you think the affordability challenge is exclusive to non-homeowners who wish to enter the elusive homeownership rank, think again. According to ValueInsured’s latest survey on American homebuyers’ confidence and sentiments, even existing homeowners are not immune.

We admit it, this headline may be a bit sensational; but if you consider the latest homebuyer reports, it may not be that far-fetched after all. 

In 2017, 35% of all homebuyers made an offer on a home sight unseen, according to a Redfin report. The fear of missing out in some hot housing markets seem to have turned more otherwise rational, responsible Americans into risky homebuyers. Throw in sales contracts that also waive home inspections in order to win bidding wars, then yes, in essence, a sizeable number of desperate homebuyers have now been reduced to pretty much buying blind.

But that’s not the whole story. The latest ValueInsured Modern Homebuyer Survey revealed that some homebuyers are also planning a purchase without having basic understanding of new tax laws, interest rate trends and how home value in the areas where they are shopping could potentially be affected.

Some experts have theorized that recent years of record-low mortgage rates contributed to reluctance to sell, as homeowners do not want to give up their newly refinanced low mortgages. This is certainly a factor, yet might not be as influential as previously assumed. ValueInsured found in its Modern Homebuyer Survey that only 18% of interested, but hesitant, sellers point to their low mortgage payment as a key reason they are putting off selling. On the other hand, 57% say they are not selling because they are concerned with buying high in today’s low-inventory, inflated market. Chicken, meet egg.

Paramount Residential Mortgage Group, Inc (PRMG) rolls out their PRMG Plus Down Payment Protection program.  When it comes to putting borrowers first, PRMG has got you covered. 

Where title insurance, private mortgage insurance and homeowner’s insurance each make lending more secure for the lenders, only PRMG Plus covers borrowers regardless of what happens in the housing market.

“PRMG understands that buying a home can be a big step for any borrower and that it takes a long time for a borrower to accumulate the necessary down payment to buy a home.  As such, we are pleased to be able to offer PRMG +Plus to them. This is just one more way PRMG looks out for our borrowers, by providing them with the option to protect their initial down payment should they not be able to recoup it when they sell.  This option gives them peace of mind as they invest into their new home, knowing that their down payment is safe, regardless of what happens in the housing market”, said Lara Rausch, PRMG Vice President of Products and Training.

Gender disparity in homeownership is not news. Latest available reports in 2016 showed female-owned homes are on average valued less than male-owned homes, and appreciate at a lower rate. Some suggested income disparity correlates with homeownership disparity – makes sense.

The latest ValueInsured Modern Homebuyer Survey found a gender gap might exist not only where home values and ownership are concerned, but in homebuyer psychology and housing confidence as well - with female homebuyers’ pessimism jarring in some measures

Many lenders over the past few years have found themselves caught up in a "race-to-the-bottom" where technology and the "lowest rates" were king.  This is a side-effect of a booming refi market that finally appears to be drying up.  So what do lenders do now? 

This WSJ article details some efforts many are taking at least at a high-level.  Some are scrambling with more "exotic" loans types while others are repositioning themselves to get back to a traditional purchase operation.  The challenge is that the infrastructure now in place - from systems, to 3rd party lead generation, to even the types of loan officers in place - are still in the quick and easy refi mode. 

Last week, the housing industry celebrated a latest NAR report that Millennials are finally making a move into housing, surpassing Baby Boomers as the largest generational segment of homebuyers, and responsible for 36% of home purchases in 2017.

But upon further inspection, and as both NAR and National Mortgage News astutely called out, Millennials are still underperforming as homebuyers to their full potential. After all, when you represent the largest population segment in the country and are in prime life stage for marriage and family formation, it is not too hard to overtake Baby Boomers, many of whom are downsizing, shifting to rentals, or moving in with their family. Homeownership rate among Americans under age 35 is currently at 36% (not to be confused with Millennials’ home purchase share, which is also 36%) according to the latest U.S. Census report. It is a substantial drop from the same age group’s homeownership rate pre-2008 housing crisis, at 43%. In other words, the housing industry has lost 1 out of every 6 under-35 homebuyers in the past decade.

The good news: Millennials’ desire to become homeowners remains high. In the latest ValueInsured Modern Homebuyer Survey, conducted in February, 77% of all American Millennials who do not currently own a home want to become homeowners, and 72% who don’t own a home believe owning is better than renting. The less good news: as home prices heat up, Millennials’ enthusiasm to buy now and their confidence in buying as a smart investment have gradually dropped over the past year.

A new banking bill won’t just impact the big banks like Chase and Wells Fargo — if it becomes law, it will impact most Americans too.

The Senate approved a bill last week that will roll back some aspects of the Dodd-Frank banking reform bill, which was passed in 2010 after the financial crisis. It will make many small and midsize banks exempt from parts of Dodd-Frank. The bill was sponsored by Mike Crapo, a Republican senator from Idaho. It will now move to the House, where it could be amended further. 

While they worry about affording the down payment, a survey of homeowners and buyers finds Millennial first-timers more eager to buy a house. The homeowners they might buy from, however, aren't so sure they can themselves.

According to ValueInsured’s latest quarterly results, 7% of all millennials first-time homebuyers, if given the option to choose, hope to put down zero percent down; another 26% ideally wish to put down 3-5%. In other words, 1 in 3 (33%) believe their ideal down payment is up to 5%. Most cite the eagerness to buy immediately as their motive, and express an understanding that they could potentially be paying a higher interest rate and will pay higher monthly mortgage payment after having a lower down payment commitment. To 1 in 3 next-gen homebuyers, that is considered the ideal trade off.

American Financial Network, Inc. (AFN) today introduced AFN Protection+, an innovative mortgage product that protects a homebuyer’s down payment and is available immediately on all applicable AFN mortgages. AFN Protection+ will include +Plus SM down payment protection by ValueInsured SM embedded directly into homebuyers’ mortgages.