The general consensus is that interest rates are going up this year - perhaps quite a bit. Interestingly, this appears to be something existing homeowners are a lot more in tune with. One would think homeowner hopefuls – Americans who are in the market for a home and desire to buy in the near future – would also be more aware of upcoming rate increases, after all it could have certain implications on their budget and buying timeline. However, according to ValueInsured’s latest quarterly Modern Homebuyer Survey, non-homeowners who wish to buy in the next three year report to have a lower awareness of upcoming rate hikes, or they are more optimistic that a rate hike way not happen.
While both have been effective wealth builders for Americans over the long term, neither stock nor home prices has historically gone up in an ascending straight line. The events in the past week were once again a reminder. As if flipping a switch, a strong equities market turned into a volatile, uncertain market overnight.
The same could happen to the housing industry. Up until now, the bullish stock and housing market were both in large part propelled by historically low interest rates. With more rate hikes on the horizon, the stock market got spooked. One could argue rising interest rates should have even stronger effects on the real estate market, after all, home prices are already high and considered "overvalued" in many major markets; rising interest rates could further strain affordability issues already plaguing homebuyers.
Most of us have heard this data point: more Millennials are now living at home with their parents than in any other living arrangements, or in any other time in modern history. Last year, the US Census estimated that one in three Millennials – or 24 million 18- to 34-year-olds – live in their parents’ home.
It’s fair to say Millennials’ parents have been generous with them. And that generosity extends beyond sharing their home well into a child’s adulthood. Sometimes, parents help their adult child buy a home by providing financial assistance. In ValueInsured’s latest (Q4 2017) Modern Homebuyer Survey, 17% of all surveyed Millennial homebuyers say they plan to rely on a loan or a gift from family member(s) to fund the majority of their down payment. It was recently reported that nearly 1 in 4 (23%) of all purchase loan originations in the U.S. now require a non-spouse co-borrower(s)’ – in most cases a parent’s – credit to afford the loan approved.
Earlier this week, a “rare bear” who caught national attention by accurately predicting the last housing crash in 2005 returned to the headlines. The famed money manager sounded the alarm that current housing "valuation extreme" looks a lot like it is 2005 all over. And he used the b-word, cautioning homebuyers are again in denial of a bubble just as they did before 2007.
There are no doubt both many bear and bull economists right now, each with their own opinions on the subject. But, to the non-economist homebuyers, this is all just more conflicting noise that impacts their confidence and decision making.
Last month, Fannie Mae – a perennially reliable source we trust – found a 5 percent-point drop in Americans’ home buying confidence from a month prior, and an 8 percent-point drop from a year ago. At the same time, reported sentiment of “now as a good time to sell a home” shot up 21 percentage points year-over-year.
We are also hearing more about emerging housing trends that some might consider unconventional: dramatic increase in second units of housing built in a relative’s backyard, rising desirability of living in a trailer park. These – along with tiny homes, among other new home-buying trends – may be results of decreasing housing affordability, but do they indicate the market is unhealthy?
It’s a popular time for new year resolution, so how about a little self-assessment of the mortgage industry? We have always wondered what homebuyers think of mortgage lending, so we asked 1,019 of them for some feedback in the latest ValueInsured Modern Homebuyer Survey.
Spoiler alert: it’s not unilaterally glowing, but when homebuyers speak up, and when we listen, it could help inform the long-term success of any lender.
Welcome to 2018 and Happy New Year!
What a fantastic year we had in housing for 2017 (unless you were a buyer). Interest rates stayed low (then began to rise toward the end), home prices broke record for many major markets (but according to CoreLogic, many are overvalued), and the mortgage industry had a good year in spite of lower refinance activities (however, profit margins are narrowing)…So, it was a good housing year, but not without many caveats.