Renting

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Higher mortgage rates hindered application activity during the week ended February 9. The Mortgage Bankers Association (MBA) said its Market Composite Index, a measure of mortgage loan application volume, decreased 2.3 percent on a seasonally adjusted basis from one week earlier although it did gain 2.0 percent on an unadjusted basis.

The Refinance Index was 2,0 percent lower than the prior week and 12.0 percent higher than the same week one year ago. The refinancing share of mortgage applications made up 34.2 percent of the total, down from 35.4 percent the previous week.

The seasonally adjusted Purchase Index decreased 3.0 percent from one week earlier and was 4.0 percent higher before adjustment. The number of applications declined by 12 percent year-over-year.

“Application activity was weaker last week, as mortgage rates moved higher across the board. The 30year fixed mortgage rate was up to 6.87 percent – the highest rate since early December 2023,” said Joel Kan, MBA’s Vice President and Deputy Chief Economist. “Purchase applications remained subdued as elevated rates continue to add to affordability challenges along with still-low existing housing inventory. Refinance applications declined and remained depressed, with rates still higher than a year ago.”

Additional Data from MBA’s Weekly Mortgage Applications Survey 

  • The overall size of mortgage loans increased only slightly from the previous week to an average of $382,000 but the purchase mortgage amount jumped to $441,300 from $434,800.
  • The FHA share of applications increased to 13.4 percent from 13.1 percent and the VA share dipped 1 percentage point to 13.1 percent. The USDA share of total applications was unchanged at 0.4 percent.
  • The conforming mortgage interest rate of 6.87 percent was 7 basis points higher than the prior week and points increased to 0.65 from 0.59.
  • The average rate for jumbo 30-year fixed-rate mortgages (FRM) was 7.00 percent, up from 6.88 percent, with points decreasing to 0.39 from 0.47.
  • The 30-year FRM with FHA guarantees had a rate of 6.68 percent with 0.89 point. The prior week’s rates averaged 6.57 percent with 0.84 point.
  • The average for 15-year FRM jumped 12 basis points to 6.53 percent and points moved to 0.94 from 0.71.
  • The rate for 5/1 adjustable-rate mortgages (ARMs) rose to 6.30 percent from 6.14 percent, with points increasing to 0.6 from 0.48.
  • The ARM share of activity increased to 7.0 percent of total applications from 6.4 percent the prior week.

Source: mortgagenewsdaily.com

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Even though the National Association of Home Builders (NAHB) reported the third consecutive increase in its measure of home builder confidence, actual residential construction activity fell. The residential construction report for January shows both the rate of permitting and housing starts declined from the previous month, the second straight loss for starts.

The U.S. Census Bureau and the Department of Housing and Urban Development said construction began on residential properties at a seasonally adjusted annual rate of 1.331 million units. This was down 14.8 percent from the December rate of 1.562 million. The December rate was, however, a substantial upgrade from the 1.460 million units originally reported. On a year-over-year basis, starts were almost flat, with a decline of 0.7 percent.

Single-family starts fell 4.7 percent to an annual rate of 1.004 million units but that was an improvement of 22.0 percent from the prior January. Multifamily starts, at 314,000 units, were down 35.8 percent from December and 37.9 percent on an annual basis.

On an unadjusted basis, the report says there were 93,700 units started during the month, 68,700 of them single-family houses. The December numbers were 108,800 and 72,300, respectively.

The setback for permitting was more modest. Total authorizations were at an annual rate of 1.470 million, a 1.5 percent dip from 1.493 million in December and an increase of 8.6 percent for the year. The 1.015-million-unit rate for single-family houses marked a 1.6 percent gain for the month and 35.7 percent year-over-year. The permitting rate for multifamily units dropped 9.0 percent and 26.6 percent.

Analysts polled by Econoday overshot the mark for both starts and permits. They projected that starts would be at a rate of 1.470 million units and permits would come in at 1.510 million units.

Before seasonal and annual adjustments, permits were issued at a rate of 112,700, up from 104,900 the prior month. Single-family permits increased from 64,800 to 75,400.

NAHB said its Housing Market Index (HMI) rose another 4 points in February to 48. This is the highest reading since last August and represents a 14-point increase over the last three months. NAHB economist Robert Dietz said “Expectations that mortgage rates will continue to moderate in the coming months, the prospect of future rate cuts by the Federal Reserve later this year, and a protracted lack of existing inventory helped provide a boost to builder sentiment” over the last three months.

He added “Buyer traffic improved at the start of 2024, as even small declines in interest rates produce a disproportionate positive response among likely home purchasers. And while mortgage rates still remain too high for many prospective buyers, we anticipate that due to pent-up demand, many more buyers will enter the marketplace if mortgage rates continue to decline this year.”

The NAHB/Wells Fargo monthly survey of builders gauges their perceptions of current single-family home sales and sales expectations for the next six months as “good,” “fair” or “poor.” The survey also asks builders to rate traffic of prospective buyers as “high to very high,” “average” or “low to very low.” Scores for each component are then used to calculate a seasonally adjusted index where any number over 50 indicates that more builders view conditions as good than poor.

All three of the major HMI indices posted gains in February. The HMI index charting current sales conditions increased 4 points to 52, the component measuring sales expectations in the next six months rose 3 points to 60 and the component gauging traffic of prospective buyers increased 4 points to 33.

Looking at the three-month moving averages for regional HMI scores, the Northeast increased 3 points to 57, the Midwest gained 2 points to 36, the South rose 5 points to 46 and the West registered a 6-point gain to 38.

Those attitudes were not reflected in regional housing starts which declined across the board. They tumbled 20.6 percent in the Northeast compared to December and were 18.8 percent lower than in January 2023. The Midwest suffered a 30.0 percent loss although the region’s starts were up 10.9 percent for the year. The South had declines of 9.7 percent and 4.2 percent from the two earlier periods, while the West dropped by 15.7 percent month-over-month but was 11.4 percent higher than 12 months earlier.

The regional figures for permitting were more upbeat. The Northeast rose 19.4 percent and 4.5 percent for the month and year and the Midwest was up 6.6 percent and 18.0 percent. The South posted a monthly loss of 7.0 percent but was still up 3.9 percent for the year. Permitting in the West was 1.5 percent higher than in December and 16.7 percent above the previous January rate.

The residential construction report estimated that completions were running at a 1.416-million-unit rate in January, down 8.1 percent from the prior month. An estimated 96,300 homes were completed during the month, down from 148,000 in December.

At the end of January there were 1,676 million housing units under construction, 680,000 of them single-family houses, and a backlog of 267,000 permits.

Source: mortgagenewsdaily.com

Apache is functioning normally

Apache is functioning normally

While weekly mortgage rate indices are pointing out the sharp jump from last Wednesday’s levels, daily rates have fallen twice in a row.  The peak was on Tuesday after the Consumer Price Index sent rates to the highest levels in more than 2 months.  Yesterday’s drop left us feeling cautious.  Today’s was more grounded by relevant underlying events.

Specifically, the day’s most important economic data–retail sales–came in weaker than expected. That sounds like a bad thing, and it is if you’re the U.S. economy, but what’s bad for the economy is typically good for rates.  

Retail Sales was far enough below forecasts that the bond market (bonds dictate day to day rate movement) improved immediately and noticeably.  This allowed the average mortgage lender to easily offer moderately lower rates compared to yesterday.

All told, the improvements over the past 2 days have erased roughly half of the increase versus last week, but the average lender remains just above 7% for a top tier conventional 30yr fixed.

Source: mortgagenewsdaily.com

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(Bloomberg) — The New York State Common Retirement Fund plans to restrict its investments in Exxon Mobil Corp. and seven other oil and gas companies after reviewing their efforts to shift to a low-carbon economy.

The pension plan will sell stocks and bonds, worth roughly $26.8 million, in Exxon, Guanghui Energy Company Ltd., Echo Energy Plc, IOG Plc, Oil & Natural Gas Corp., Delek Group Ltd., Dana Gas Co. and Unit Corp., New York State Comptroller Thomas DiNapoli, who oversees the fund’s $260 billion, said in a statement.

The public retirement fund, one of the biggest in the US, said four years ago it would review all of its fossil-fuel holdings as it sought to reduce investment risks linked to climate change. Last year it curbed holdings in 50 companies involved in coal, shale oil and gas, and oil sands, including Pioneer Natural Resources Co. and Hess Corp. 

The retirement fund said Thursday it plans to now focus on investments in utility companies and their efforts to shift away from fossil fuels. It also set a goal to invest $40 billion in sustainable and climate investments by 2035, after meeting an initial target of $20 billion. Those assets include energy storage, resource efficiency and green infrastructure. 

Additionally, the fund said it will boost its investments in climate indexes by 50% to more than $10 billion in the next two years, with a goal to double that by 2035. 

(Adds target for climate investments in fifth paragraph.)

More stories like this are available on bloomberg.com

Source: nationalmortgagenews.com

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Apart from CPI and NFP there are only a handful of other reports that truly deserve to be considered supporting actors in the current bond market drama.  Retail Sales is one of them.  The report has generally been a thorn in the bond market’s side over the past year as it has shown a surprisingly resilient consumer in the face of higher rates. That’s why there was some concern among some bond watchers over today’s forecast of -0.1.  Was this some sort of set-up?  Surely, a consistently stronger data series can do better than -0.1. But it turns out economists were on to something when they agreed on the negative print.  In fact, they could have been a whole lot more negative and still undershot the actual result: -0.8.  

Source: mortgagenewsdaily.com

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Our experts answer readers’ home-buying questions and write unbiased product reviews (here’s how we assess mortgages). In some cases, we receive a commission from our partners; however, our opinions are our own.

Mortgage rates are expected to go down in 2024, but so far this year they’ve been stubbornly elevated.

Average 30-year mortgage rates rose last week and remain a bit higher than last month’s average, according to Zillow data.

Federal Reserve officials have indicated that they may lower the federal funds rate three times this year, which should remove some upward pressure off of mortgage rates and allow them to finally trend down. But we’ll need to see more economic data before we get a clearer picture on when the first rate cut might come.

The Fed wants to be sure that it’s successfully tackled too-high inflation before it starts lowering rates. As inflation continues slowing and the overall economy comes into better balance, officials will likely feel more comfortable cutting rates. 

According to the CME FedWatch Tool, the first Fed cut could come in May or June. This means we could see lower mortgage rates by mid-2024 — right around when the majority of homebuyers are entering the market. 

If you’re planning to buy a home this year, you may want to wait until a little later in the homebuying season to get started. Those who wait until the early fall should enjoy lower rates than those who buy in the spring.

Mortgage Rates Today

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Mortgage Refinance Rates Today

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Mortgage Calculator

Use our free mortgage calculator to see how today’s mortgage rates will affect your monthly and long-term payments.

Mortgage Calculator

$1,161
Your estimated monthly payment

Total paid$418,177
Principal paid$275,520
Interest paid$42,657
  • Paying a 25% higher down payment would save you $8,916.08 on interest charges
  • Lowering the interest rate by 1% would save you $51,562.03
  • Paying an additional $500 each month would reduce the loan length by 146 months

By plugging in different term lengths and interest rates, you’ll see how your monthly payment could change.

Mortgage Rate Projection for 2024

Mortgage rates increased dramatically for most of 2023, though they started trending back down in the final months of the year. As the economy continues to normalize this year, rates should come down even further.

In the last 12 months, the Consumer Price Index rose by 3.4%, a significant slowdown compared to when it peaked at 9.1% in 2022. This is good news for mortgage rates — as inflation slows and the Federal Reserve is able to start cutting the federal funds rate, mortgage rates are expected to trend down as well.

For homeowners looking to leverage their home’s value to cover a big purchase — such as a home renovation — a home equity line of credit (HELOC) may be a good option while we wait for mortgage rates to ease. Check out some of the best HELOC lenders to start your search for the right loan for you.

A HELOC is a line of credit that lets you borrow against the equity in your home. It works similarly to a credit card in that you borrow what you need rather than getting the full amount you’re borrowing in a lump sum. It also lets you tap into the money you have in your home without replacing your entire mortgage, like you’d do with a cash-out refinance.

Current HELOC rates are relatively low compared to other loan options, including credit cards and personal loans. 

When Will House Prices Come Down?

We aren’t likely to see home prices drop anytime soon thanks to extremely limited supply. In fact, they’ll likely rise this year as mortgage rates drop.

Fannie Mae researchers expect prices to increase 3.2% in 2024, while the Mortgage Bankers Association expects a 4.1% increase in 2024.

Lower mortgage rates will bring more buyers onto the market, putting upward pressure on prices. But prices aren’t currently expected to increase as much as they have in recent years. 

Fixed-Rate vs. Adjustable-Rate Mortgage Pros and Cons

Fixed-rate mortgages lock in your rate for the entire life of your loan. Adjustable-rate mortgages lock in your rate for the first few years, then your rate goes up or down periodically.

So how do you choose between a fixed-rate vs. adjustable-rate mortgage?

ARMs typically start with lower rates than fixed-rate mortgages, but ARM rates can go up once your initial introductory period is over. If you plan on moving or refinancing before the rate adjusts, an ARM could be a good deal. But keep in mind that a change in circumstances could prevent you from doing these things, so it’s a good idea to think about whether your budget could handle a higher monthly payment.

Fixed-rate mortgage are a good choice for borrowers who want stability, since your monthly principal and interest payments won’t change throughout the life of the loan (though your mortgage payment could increase if your taxes or insurance go up).

But in exchange for this stability, you’ll take on a higher rate. This might seem like a bad deal right now, but if rates increase further down the road, you might be glad to have a rate locked in. And if rates trend down, you may be able to refinance to snag a lower rate 

How Does an Adjustable-Rate Mortgage Work?

Adjustable-rate mortgages start with an introductory period where your rate will remain fixed for a certain period of time. Once that period is up, it will begin to adjust periodically — typically once per year or once every six months.

How much your rate will change depends on the index that the ARM uses and the margin set by the lender. Lenders choose the index that their ARMs use, and this rate can trend up or down depending on current market conditions.

The margin is the amount of interest a lender charges on top of the index. You should shop around with multiple lenders to see which one offers the lowest margin.

ARMs also come with limits on how much they can change and how high they can go. For example, an ARM might be limited to a 2% increase or decrease every time it adjusts, with a maximum rate of 8%.

Molly Grace

Mortgage Reporter

Source: businessinsider.com

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I had a conversation with a friend the other day about his current housing situation.

In a nutshell, the home he resides in isn’t large enough for his family, nor does it have certain amenities like a swimming pool.

At the same time, he loves his home and the very cheap mortgage attached. Like millions of other Americans, he’s got a 30-year fixed in the low 3% range.

This has created a dilemma for him and many others, who want to move, but can’t make it pencil at today’s rates and asking prices.

But one thought is to rent out his current home and then rent another, as opposed to buying. Or selling for that matter.

It’s Possible to Rent Out Your Current Home and Rent Yourself

One trend that has emerged of late is the ‘rent out and rent’ scheme.

The way it works is relatively simple. If you’re an existing homeowner, you simply rent out your property to someone else and then go rent a different home.

This allows you to keep your low-rate mortgage intact, and it allows you to rent for less than what a new mortgage would cost.

It works because the PITI on the old house is so low, and asking rents are pretty attractive in many markets nationwide.

Sure, there might be a premium for rent on the new property, but it can still be the cheaper option relative to buying a home.

And the homeowner doesn’t need to worry about a large down payment, or losing their original home, which could now be seen as an investment property.

Let’s Look at an Example of Rent Out and Rent

Current monthly PITI: $3,500 per month

Potential rent for existing home: $6,000 per month

Cost to rent a larger home: $7,500 per month

Cost to buy a larger home: $10,000 per month plus $300k down

Cost to rent out and rent: $1,500 per month

As noted, I’ve got a friend considering a rent and rent out arrangement. Somewhat incredibly, the property he has his eye on is literally across the street.

This makes it easier, at least from a moving point of view. He can probably just lug his stuff over on his own, if he’s up for it.

It also allows him to keep an eye on his old property, which can be helpful but also perhaps a bit awkward.

Anyway, the house across the street is larger, has a view, and has a swimming pool. These are all wants and needs.

However, the price tag is a bit higher, we’ll call it $7,500 per month to rent. The good news is his current mortgage payment (full PITI) is just $3,500 a month.

And he can potentially rent his place for $6,000 per month because he got in cheap about a decade ago with that ultra-cheap mortgage rate.

If we do the math, it would cost $1,500 more per month to rent the larger home, using the cash flow on his existing property to offset the increased rent.

But he gets the larger space, the nicer home, the pool, the view, etc.

Perhaps more importantly, he doesn’t need to buy a home at today’s lofty prices and come in with a massive down payment.

Assuming they purchased a similar property, they’d need a $300,000 down payment and the mortgage rate would likely be 6-7% versus their current 3% rate. Ouch!

This Works When Home Prices Are High and Your Existing Payment Is Low

The reason this strategy works right now is because it’s more expensive to buy a home than rent in many places.

You can thank both high mortgage rates and high home prices, which have moved higher in tandem.

As I always say, there isn’t an inverse relationship between home prices and mortgage rates.

They can both go up together, go down together, or sometimes diverge.

This plan also works because many homeowners like my friend got into their current homes when prices and rates were low.

So they essentially have a lot of wiggle room to cash flow if renting out their existing properties, which can then be used toward a new home.

But instead of buying, they can simply pay a little extra in rent to get what they want, while continuing to enjoy appreciation on the old property.

At the same time, any improvements made on the old home benefit them as well. And they can always move back in the future.

For the record, this strategy can also be employed with downsizing. So a pair of empty nesters can rent out their larger home and go rent a smaller one.

In their case, we’re talking lower rent, potentially leading to some additional cash flow without having to commit to a new home purchase.

There Are Pros and Cons to Renting Out and Renting

It’s not without its risks though. When you rent, you’re at the mercy of your landlord. They might want to sell at some point, at which time you’d need to move.

You could also be limited in terms of making improvements or changes to the property.

In addition, you’re now a landlord yourself, which isn’t always a passive job. And the tenants present new risks, such as failure to pay rent.

It’s also possible to find your old home vacant for a month if you’re unable to find a tenant.

So you could be in a situation where you have to float two monthly housing payments. If you’re unable to, well, you’ve got a problem.

But the advantages are there too. You get the property you want/need for a lot less than what it might cost to buy.

And you get to keep your old home, which could be an incredible investment opportunity.

You’ve also got optionality. You can rent for a while then go back to your old home. Or decide after a while to buy something.

You aren’t necessarily locked in beyond the initial rental contracts in place, which might last a year.

It gives you time to determine your next move, assuming you’re not quite sure what you want to do.

Unfortunately, this also speaks to the dearth of for-sale inventory available in the housing market today.

And the incredible position many homeowners are in, thanks to their low-rate fixed mortgages.

Source: thetruthaboutmortgage.com

Apache is functioning normally

If it feels like there’s been an inordinate amount of focus on the Consumer Price Index (CPI) recently, today proved it was justified.  It’s not hard to understand WHY this data should matter.  After all, inflation is the biggest reason that rates moved higher at the pace seen in 2022/2023.  From there, we only need to know that CPI is the biggest market mover among inflation reports and the focus quickly makes sense.

But that’s not the only reason that today was highly consequential.  We were also in the midst of a bit of a correction in rates that took us from the best levels in 8 months to the worst levels in more than a month in the space of 2 days.  In not so many words, the bond/rate market was essentially asking itself if it had been caught flat-footed heading into February.  The jobs report on Friday, Feb 2nd said “yes!”  Now today’s CPI data says “see?!”

So what happened?

It doesn’t sound too interesting at face value.  Core month-over-month inflation came in at 0.4% for January as opposed to the 0.3% seen last month.  Markets expected it to hold steady, on average.  Small monthly changes are very important when it comes to CPI–especially if those changes make a new argument about the momentum of inflation.   Today’s report was in a unique position to make it look like that momentum had been cooling since last September.  Instead, it now looks like it’s rising back toward levels from early 2023.

The bond market (which underlies mortgage rates) reacted immediately and forcefully when the numbers came out. Bonds continued to worsen as the day went on, leading many mortgage lenders to raise rates once or twice during the day.  The net effect is an average 30yr fixed rate that moved well into the 7s after being in the high 6’s yesterday. 

Source: mortgagenewsdaily.com