Some of the volatility with new listings data has also hit the active listings data. Two weeks ago, active listings grew by 343; this week, active listings grew by 9,470. The average of the two weeks is 4,906.As I have stressed, weakness in demand can lead to inventory growth over time, it’s just that in 2023, the growth is much slower than what we saw in 2022. My happy zone for active listings growth is between 11,000-17,000 weekly but this year inventory growth has just been too slow.
According to Altos Research:
Weekly inventory change: (Sept. 1-Sept. 8): Inventory rose from 509,156 to 518,626
Same week last year (Sept. 2-Sept. 9): Inventory rose from 547,222 to 552,042
The inventory bottom for 2022 was 240,194
The inventory peak for 2023 so far is 518,626
For context, active listings for this week in 2015 were 1,201,196
One of the data lines I will incorporate weekly going forward is the price cut percentage. Historically, one-third of all homes have price cuts year-round. For last week, price cuts are lower than last year by 4%. However, the housing market still has affordability issues and we are seeing higher price cuts than in 2015-2017. Back then, we were running at 33%; while in 2018 and 2019, it was 36%.
2021 28%
2022 41%
2023 37%
New listing data should be calmer now
As we have discussed, the data has been extreme lately — you can see it in the weekly data below. Now that we have gotten past Labor Day and the start of school, we can keep an eye on whether we have a new trend up or down in the new listings data. I had been anticipating some flat-to-positive year-over-year data in new listings this year in the second half of the year. However, we haven’t gotten that data just yet.
Aug. 18: 60,295
Aug. 25: 55,291
Sept. 1: 60,004
Sept. 8: 50,212
Sept. 15: 61,852
Mortgage rates and the bond market
Mortgage Rates rose slightly from 7.22% to 7.29% last week, but we are having an epic battle on the 10-year yield. A few weeks ago, after the 10-year yield closed above my peak forecast level of 4.25%, my only attention was on the 4.34% level — which was the intraday high in 2022.
So far, since that time, the 10-year yield has attempted to break over this level several times and it’s been rejected every time. It is critical to stay below 4.34% because if that level breaks, we can see more bond market selling and higher mortgage rates. However, sticking with my 2023 forecast, we are at the peak levels of 2023, so I believe the upside in higher yields is limited unless the economy outperforms.
Purchase application data
Purchase application data was 1% higher last week, making the year-to-date count 16 positive, 18 negative prints and one flat week. If we start from Nov. 9, 2022, it’s been 23 positive prints versus 18 negative prints and one flat week.
Higher rates have slowed demand and sent purchase apps back to 1995 levels. When mortgage rates fell from 7.37% back down to 5.99% late last year, we had three months of solid positive growth, but after that, rates were too high to promote growth in this data line. Since rates have been above 7%, the data has gotten slower. While home sales aren’t crashing like last year, they’re not growing either.
The week ahead: Housing reports on the docket
Coming up this week we have the builder’s confidence data — which has been slipping lately — housing starts and the existing home sales report. The Leading Economic Index is also coming out this week and has been in a recessionary downtrend for a long time. On Monday’s HousingWire Daily podcast, I will be outlining how close we are to a recession, and what to look for over the next 12 months.
The U.S. government is seeking to sell $13 billion worth of mortgage bonds amassed after the failures of both Silicon Valley Bank (SVB) and Signature Bank earlier this year.
First reported this week by Bloomberg News, the bonds in question are part of $114 billion in assets the Federal Deposit Insurance Corporation (FDIC) recovered when it assumed control over both banks earlier in the year.
The bonds are secured by “long-term, low-rate” loans made primarily to developers of low-income multifamily apartment complexes.
To aid the impending sales, the FDIC has reportedly considered alternatives to cutting bond prices up to and including repackaging the associated debt into new securities, Bloomberg reported. BlackRock Financial Market Advisory had preliminary conversations with investors about the bonds, the report said, citing unnamed sources.
In April, the FDIC decided to sell a portfolio of $114 billion in MBS it obtained after seizing control of the banks, retaining Blackrock to conduct the sale. In March, First Citizens Bank & Trust Company announced its intent to acquire all of SVB’s deposits and loans that were moved to an FDIC-created bridge bank after the collapse.
In the list of things you want to be doing around the holidays, fending off scam artists has to be at the bottom. And yet, the holidays can be a prime time for scammers hoping to take advantage of the busy season. One fraudulent transaction is easily overlooked in a bank statement full of gift purchases, and there may not be time to dispute suspicious charges when you’re hosting out-of-town guests.
Research-based advisory firm Javelin Strategy & Research defines an identity fraud scam as a tactic that a criminal uses to steal someone’s personal information for the purpose of illegal financial gain. Consumers lost $43 billion in 2022 to these scams, according to Javelin’s 2023 Identity Fraud Study.
If there’s good news, it’s that there were fewer reported victims of identity fraud in 2022 as compared with 2021, with a 17% decrease in the amount of money lost to scams. The bad news is that scammers have become more sophisticated in their methods and have a new tool in their arsenal: artificial intelligence. AI programs can be used to generate scam emails, text messages or audio recordings that mimic the speech of loved ones.
An awareness of scammers’ latest tools and tactics is a potent defense against identity fraud. Here are five credit card scams to watch out for this holiday season.
1. The Amazon scam
Amazon will be the go-to holiday shopping destination for many people. But as our inboxes fill with order confirmation emails and delivery updates, be cautious about messages that claim to be from Amazon. Scammers may contact you by email, text or phone in an attempt to steal your credit card information. They may say that you need to update your payment method to prevent your Prime membership from expiring, or that your Amazon account will be deleted unless you verify your account by providing payment details.
How to fight it: If you’re unsure if an email or text message is legitimate, don’t click on any links in it. Instead, log in to your Amazon account and go to the Message Center, which contains a record of all communications from Amazon. If you’re contacted by phone, don’t provide your credit card information. Amazon won’t ask for payment information by phone. And never input your Amazon payment info on any website except Amazon.com.
2. The romance scam
The holiday season may heighten feelings of loneliness, which can make romance scams particularly effective. After creating a fake profile on a dating website or social media platform, scammers will strike up a relationship with their victims before making a plea for money. Common reasons for needing money include medical or legal bills or funding for an investment opportunity. The 2023 Consumer Impact Report from the Identity Theft Resource Center, a nonprofit that helps victims of identity crimes, noted that romance scams consistently report six-figure losses, highlighting the seriousness of this scam.
How to fight it: If someone you’ve met on a dating website or social media platform asks you for money, research their name and do a Google reverse image search of their profile picture to try to figure out if they’re masquerading behind another’s identity. Investigate any detail that sounds suspicious; you don’t have to automatically accept what someone says as truth.
Don’t give payment details or personal information that could be used to open credit cards to someone you haven’t physically met.
3. The gift card scam
Gift cards make great stocking stuffers or last-minute gifts, but they’re also a favorite target of scammers. The scammer will contact victims by phone, email or text and ask them to purchase gift cards, usually as a form of payment for an outstanding bill or as prepayment for a service they’re offering to render.
For example, a person posing as a computer technician says he can remove a virus from your laptop in exchange for a $100 Amazon gift card. Once the gift card has been bought, the scammer asks for the gift card’s number and PIN. That way, the scammer doesn’t need to expend any effort getting their hands on the actual card.
How to fight it:No legitimate business or government agency accepts gift cards as payment. Whenever you buy gift cards, keep the receipts and take pictures of the card numbers and PINs in case you need to file a report with the gift card company or the Federal Trade Commission.
4. The charity scam
Donations tend to spike between Thanksgiving and Christmas, and some scammers capitalize on the increased spirit of generosity during this time. Pretending to solicit donations on behalf of a charity, scammers will ask for donations by phone, email, text or a crowdsourcing platform. They may prompt you to enter payment information on a bogus website or give it over the phone.
How to fight it:When you’re asked to make a donation, get the charity’s name and the cause it supports. If you aren’t sure whether you’re corresponding with a legitimate charity, take a beat to do more research. Look up the charity’s name on a website that vets nonprofits, like Charity Watch or Charity Navigator.
When making donations, pay with a credit card if possible: The major card issuers have zero-liability policies that offer you financial protection from fraud. Payments made in cash, cryptocurrency or by wire transfer are harder to recoup; if you’re asked to donate in those ways, it could be a sign that you’re dealing with a scammer.
5. The lottery scam
Coming into a windfall of cash during the holidays sounds too good to be true, and it probably is. In this scam, the criminal claims you’ve won a physical or monetary prize, which is yours as long as you remit payment or hand over your payment information to cover a processing fee.
How to fight it: Ask for the name of the company claiming you’ve won the sweepstakes, and contact them to confirm whether you’re a winner or not. Take care, though, to look up the company’s information yourself rather than using a phone number provided to you by the person saying you’ve won.
A real sweepstakes doesn’t require payment; a real prize is, by definition, free and won by chance. You don’t need to send payment or disclose personal information to win a true lottery.
How to minimize damage and recover from a scam
Even the most vigilant among us can fall victim to a scam. However, there are steps you can take to minimize the damage and work toward recovery.
Prevention: Freeze your credit file with the three major credit bureaus: TransUnion, Experian and Equifax. Scammers can’t open a new credit line in your name when a freeze is in place. You might also elect to receive alerts of suspicious account activity on your credit card, or even when any transaction is made.
Mitigation: If you think your credit card has been compromised, place a lock on the card so it can’t be used until you unlock it. Then, call your card issuer — ask for the fraud department, if one exists — and communicate your concerns.
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Many people with good credit scores own at least one credit card, with 82% of all credit card holders boasting credit scores of 680 and higher.
When used responsibly, credit cards can be a great tool for building credit. Here’s a complete guide on how to build credit with a credit card.
Table of contents:
5 Best Ways to Build Credit with a Credit Card
To improve your credit score with a credit card, you need to know how to best use your credit card. Responsible credit card usage is key to boosting your credit—it won’t increase simply because you got a credit card. Here are the five best ways to increase your credit score using a credit card.
1. Pay bills on time
One of the most important parts of having a credit card is paying your credit card bill on time. Payment history is the largest factor in your FICO® score at 35%, which means it can make or break your score.
Get into the habit of paying your bills on time every month and watch your score grow. Setting up automatic payments for a few days before your bill is due can help make sure you never miss a payment and give a cushion of time for the payment to go through.
2. Keep your utilization rate low
Your credit utilization rate, or credit utilization ratio, is the amount of credit you’re using divided by the amount of credit available to you (your credit limit).
Let’s say your credit limit is $500. This is the maximum amount you can spend on your credit card before payments are denied, but that doesn’t mean you should spend that much.
It’s best for your credit score to keep your utilization rate under 30%—under 10% is even better! This is because the amount of money you owe impacts 30% of your FICO score and the lower this number is, the better. But how much can you actually spend with your credit card?
If your credit limit is $500, 30% of that is $150. So, you should aim to never have a balance over $150 on your credit card. Even better, shoot for a balance under $50 (10% of your limit).
3. Don’t overspend
You don’t need to carry a balance on your credit card to improve your credit score. Paying off your balance in full every time, not just making the minimum payment, is the best practice.
Carrying a balance can cost you more in credit card interest and late fees. Plus, it may increase your utilization rate and damage your credit score. Do your best to avoid credit card debt and treat your credit card like a debit card—only spending money you have.
4. Use your card regularly
Using your first credit card requires a delicate balance. You don’t want to spend too much and go over your utilization rate, but if you don’t use it regularly enough, the lender may close your account. Using some of your available credit is one of the best ways to boost your credit.
The solution is to use your card to make regular, small purchases. This could include purchases like:
Gas
Groceries
Small, recurring bills
Inexpensive meals
After a while of making these regular purchases and paying them off on time, your credit card provider will probably increase your credit limit, allowing you to spend more with your card. Until then, using your card for these types of purchases can help you establish responsible credit card habits and keep your credit utilization low.
5. Avoid opening more cards
Every time you apply for a new credit card, the creditor makes a hard inquiry on your credit, which drops your credit score a few points. You’ll be able to earn back those points in the long run, but in most cases, if you apply to a bunch of credit cards at once, those hard inquiries will add up and take a toll on your credit.
For this reason, you should only apply for one credit card at a time and make sure it’s a good match for you. When you’re first building your credit, it’s best to start small with one card and take your time to practice building credit with it before opening more accounts.
How to Use Credit Cards to Start Building Credit
To recap, here’s a step-by-step guide to increasing your credit score with your first credit card.
Apply for a credit card you can qualify for.
Connect your bank account for automatic monthly payments.
Make small purchases to use under 30% of your credit limit (under 10% is better).
Pay your balance in full and on time each month.
Avoid opening new credit cards.
Regularly monitor your credit report.
If you’re not sure what kind of credit card to apply for, here are the types of credit cards you can use to start building credit and the advantages of each.
Unsecured credit card: An unsecured credit card, or standard credit card, is great if you qualify for one. They don’t require a deposit to use and often offer rewards.
Secured credit card: This type of card is great if you can’t get approved for a standard credit card. Secured cards require a deposit but then they work like any other credit card.
Student credit card: If you’re a student, it’s typically easier to qualify for a student card than a standard credit card. These cards can have decent rewards too!
Store credit card: Store credit cards can sometimes be easier to qualify for than standard cards. Be sure to choose one for a store you shop at often or can be used at other places besides the specific store.
Authorized user for a credit card: A family member or friend can add you as an authorized user on their credit card. You’ll be able to make purchases and receive credit score benefits but won’t be responsible for charges.
How to Build Credit without a Credit Card
If you’re not ready for a credit card or can’t get approved for one, here are some ways to build credit without a credit card.
Credit-builder loans
Credit-builder loans are a lot like what they sound like. They’re low-interest rate loans that help borrowers with poor or no credit build credit, and they function differently than your typical loan.
With a standard loan, you receive the money you’re borrowing upfront, but with a credit builder loan, the money is held in a savings or CD account until you pay it off. This makes it very low-risk for the lender, as your payments are also adding your collateral to the savings account.
You make monthly payments, including interest on the loan, and making these payments on time will help build your credit. Once you pay off the loan, you get all the money back and in some cases, interest if it was incurred while your savings collateral was being held.
Rent reporting
The three major credit bureaus, Equifax®, Experian® and TransUnion®, only include rent payment information on your credit report if they receive it. Most landlords don’t report this information, but it could benefit your score if you consistently pay your rent on time.
You can ask your landlord to report your rent payments or find a rent reporting service that will let you submit the information yourself. Ideally, your rent payments should be reported to all three bureaus for maximum impact.
Passbook loans
This type of loan is very similar to credit-builder loans, except it uses the money you already have in your savings or CD account as collateral. Interest rates for passbook or CD loans are typically lower than credit cards or personal loans.
Like credit-builder loans, you build credit as you make payments on the loan each month and can access the money once you’ve paid it off. Check that your bank will report your payments to all three credit bureaus before taking out this type of loan.
Building Credit with a Credit Card FAQ
Have more questions about how to use a credit card to build credit? Check out the answers to these common credit card questions.
When should you pay your credit card bill to build credit?
You should pay your credit card bill by its due date, at the very least. Paying your bill early (before the end of your billing period) or making extra payments if you’re planning to carry a balance may help boost your credit score even more since it will reduce your utilization rate.
How fast does a credit card build credit?
While it may take a while to build credit, you can help establish a baseline credit score if you have an account open and active for 6 to 12 months, to allow your FICO® score to be calculated. You may be able to establish a baseline credit score after 6-12 months of making credit card payments on time. With consistent and responsible credit card usage, you should see a positive impact on your credit over time.
Do you need a credit card to build credit?
No, you don’t need a credit card to build credit. Responsible credit card usage is one of the easiest ways to build credit, but it may not be the right answer for everyone. There are other ways to improve your credit score, like taking out loans, reporting rent and utilities or being added as an authorized user to someone else’s credit card.
A credit card is a great way to start building credit. If you’re looking for more ways to boost your credit score, check out our resources on Credit.com and the features included with ExtraCredit. ExtraCredit is a full- credit score monitoring service that can help you understand what areas of your credit you need to work on to build and maintain your good credit.
My name is Steven Wynands and I’m the co-founder and CEO of Peer Reputation. Over 60,000 real estate agents and brokers use our platform to discover and leverage their professional relationships. This is my personal reflection on what happened over our first 12 months that finally gave me the courage to believe in myself and pursue this project full-time. I hope you find it interesting and that it helps you if you’re going through the same decision.
Facing The Big Decision
I never thought I’d find myself in this position. Saddled with student loans, credit cards, a mortgage, and childcare for two, it would be very irresponsible for me to leave my cushy, government job to pursue my own startup ambitions. I tried to delay this decision as long as possible. I sacrificed sleep so that I could be there for my family and deliver everything my job expected of me. Wishfully, I hoped that the universe would take care of it for me by turning the startup into an overnight success or burying it to the ground. Neither of those things happened, but I did get plenty of signs that helped me make a decision.
Getting Inspired (Again)
I was just one year removed from an unsuccessful real estate startup that spanned two years. I had no intention of jumping into another project, but one afternoon of phone calls changed everything. The first phone call was from a buyer’s agent whose clients were interested in one of my listings. Her call made me uneasy and I wanted to protect my sellers so I made a few more calls of my own.
I reached out to other listing agents who had recently worked with this buyer agent and was surprised by the responses. I wasn’t connected to these other agents in any way yet they openly shared detailed warnings with me about working with this buyer’s agent. They were eager and grateful for the opportunity to protect other agents and consumers from reliving their nightmares and wished there was an easier way to do so. Thankful and inspired, I called up my friend Steve with an idea.
Starting Up, Extra Lean & First Signs from The Universe
I’ve known Steve since middle school. We worked together throughout secondary school as well as college where we studied computer engineer together at Virginia Tech. We continued working together on projects after graduation including the recent unsuccessful real estate startup. At this point we were each raising two small kids and a bit burned out from long nights and weekends so I approached him with a very simple project based on the phone calls I just had that afternoon. We discussed the backstory and basic specs and agreed to meet a few days later to test out my idea.
The basic premise was simple. I wanted to know if other agents were just as eager to share their feedback to protect other agents and consumers too. To test out this idea I created a list of 600 recently sold homes along with the listing and selling agent information, and Steve coded up a test project to request feedback between these cooperating agents. We built this out on Saturday and Sunday and were ready to launch the following Monday.
Immediately after launching our test I was prepared to throw in the towel. I thought the experiment had failed and I was just happy to know that we had only spent a few days on it. It turned out that the only failure was my uninformed expectations and analysis. I showed the results of our testing from that day to my brother who enjoys marketing as a Product Manager for Zappos and he was blown away! He said that we were hugely successful by achieving a 70% total email open rate and 20% email click rate.
I still wasn’t sure exactly what we were building but I knew enough from his reaction that we had to keep on going. The next week we doubled the sample size and tweaked some wording in our emails and achieved an 80% total open rate and 27% click rate! It was very clear that we were building something that people wanted. We just had to keep it going while we figured out exactly what that thing was.
Product? Market? Fits!
Over the next few weeks, we increased our survey sample sizes and maintained high open and click rates. We received over 10,000 responses in our first month! The manual data loads were becoming so overwhelming that we didn’t have time to work on the platform. I buckled down and focused on creating a web scraper to automate the data routines while Steve worked on building out the infrastructure that could house a richer experience.
Four months after conducting our first test we finally had our platform shell in place. We relaunched our feedback platform more broadly in the same local market and watched the results come in immediately. Now that we finally had a user dashboard, agents were registering and interacting directly with us. A thousand agents registered the first month and I knew we had a hit when they were telling us how surprised they were that this kind of platform hadn’t existed before. They were also asking us for more features! We could not believe how smoothly everything was happening! Things were continuing to ramp up based on user demand.
Traction and Scaling
Eight months into our project, things were going very smoothly. Peter joined us as a co-founder and freed us up to be more strategic and engaged with the user community. Our friends saw their friends using our platform from social media and asked if they could help with our startup. We all had fun learning and growing together while watching thousands of feedback and hundreds of new users register every week, but I could feel the transformation of startup project to company taking place.
10 months into the project, I was spending nights and weekends at Steve’s house again. We’d plan and program into the morning hours and then I would sleep just enough that I could drive home safely and spend time with my family. I was also working nights and weekends to deliver on my full-time job and doing 20 real estate transactions on the side. I knew it was time to come out of the startup honeymoon and figure out if this thing was going to last before I burned out again and so we put ourselves through a major test-expansion.
For the first ten months, we only served one market as we built and fine-tuned the platform. We had grown at a compound monthly growth rate of 27%, and we were ready to find out if we could replicate our success nationally. We expanded to a few test markets and were thrilled to see that the email open and click rates stayed high as we increased our registered users 42% over the previous month! Everything was going so well but I couldn’t seem to take the leap of faith and work on this project full-time. This is around the time that the universe sent more signals my way.
Our Users Established Our Product Messaging
As an engineer who got into PropTech and then became a top-producing real estate agent, I’m keenly aware of how sensitive the real estate industry can be. I studied how RedFin pulled its Scouting Report project and how Keller Williams opposed AgentMatch. But I also saw how NAR and Houston Realtors had tried moving forward with ratings, and that the agent performance analysis was enough to propel HomeLight to a $40M Series B. Since our platform was built on top of agent-to-agent ratings, I didn’t feel comfortable taking the full-time plunge yet and thrusting myself into major industry scrutiny. That changed very quickly with one phone call from a real estate agent.
Every week we receive feedback from tens of thousands of real estate agents. We also get lots of phone calls and emails about our platform that I answer personally. After I finished my usual explanation on one of these phone calls, the agent responded, “Oh, it’s about professionalism? That’s awesome.” That was the key. Although our system was built on top of ratings that’s not really what we stood for. I learned from our users that they were actually utilizing it for professionalism and accountability. We finally had a message that we could promote publicly with great confidence and it came just in time for the next big moment.
Coming Out of Stealth Mode (Product Timing & The Parker Principles)
On April 2, 2018, Inman News published The Parker Principles: A Real Estate Manifesto. It was created based on input from agents, brokers, companies, and associations from around the country as a series of principles to make real estate better. It echoed so many tenets of our startup: Quality, professionalism, and accountability in real estate. When I read The Parker Principles I felt like these industry leaders were screaming for the solution our team had built. The universe was clearly telling me to pop out of my shell and so I did. I reached out to Inman News about our platform and they covered us two months later in June. I had outed myself as the real estate agent behind Peer Reputation and there was no going back now.
Something’s Gotta Give
We were about 11 months removed from the weekend project that turned into a full-blown startup and the major Inman Connect real estate conference was coming up in mid-July. I knew we had to keep the momentum going so I took a week off from work and flew out to San Francisco to mingle with the industry I had just revealed myself to.
On the second day of Inman Connect I was standing in the lobby of the Hilton when the COO of Remine, Jonathan Spinetto, said, “Follow me.” He led me through a series of halls and we stopped outside of a suite. When the suite doors opened a few minutes later, MLS executives walked out and I walked into a dim room lit blue by a portable projector and populated with the CEO, COO, and CFO of Remine. Jonathan handed me a display cable and said, “Demo.”
We went over the platform, the processes, team, and potential roadmap. At one point during our discussion I remember that Mark Schacknies, then-CFO and now-CEO, told me, “You need to sleep.” It actually wasn’t the first time I had heard something like that. When Gill South interviewed us for the Inman News article, she told me that I should devote my full attention to the startup. Smart industry folks were telling me that I needed to quit my full-time job and I was finally ready to consider it.
The Tipping Point & Decision
A few weeks after coming back from Inman Connect, my boss called me into his office and asked me, “Do you have outside employment?” I responded openly and honestly and from there my work life began to unravel. My telework was cut in half which meant I spent more time driving through grueling DC area traffic. I wasn’t prepared to scale back on my startup activities when things were going so well so I just continued sleeping less.
I was tired. The startup was going great and the work environment was souring. Why couldn’t I just quit and focus on the startup? The answer was that I wanted to provide a stable environment for my wife and children, and that requires income. I had been so focused on building the platform and acquiring users that I hadn’t considered income until now. Now I was motivated, confident, and ready to take a leap. On October 17th, 2018 Peer Reputation welcomed its first paid subscriber. 10 days later, I quit my job.
Fast Forward
It’s been 9 months since I quit my job and I don’t regret it one bit. Things have not slowed down and continue to look better and better. I’d love to write more about it but, unfortunately, I’m out of time! I’ve got to get back to preparing for some major events. I’m heading to Inman Connect in Las Vegas where we’ve been selected as a finalist for the Inman Innovator Award. I’ll also be pitching onstage at the conference as one of eight selected startups at Tech Connect. If you’re going to the conference as well please swing by our table in Startup Alley to say hi! (I still can’t believe this is all happening!)
Buyers facing high mortgage rates are pulling out of their home-purchase agreements at the highest rate in nearly a year.
Nearly 60,000 home-purchase agreements were canceled nationwide in August, equal to 15.7% of homes that went under contract that month, according to a new report from Redfin.
That rate is up from 14.3% in August 2022 and marks the highest percentage since October 2022, when mortgage rates surpassed 7% for the first time in two decades.
The average interest rate on a 30-year-fixed mortgage was 7.07% in August. Rates last month surged to 7.23%—the highest since 2001 – sending the typical homebuyer’s monthly payment up significantly from last year.
“I’ve seen more homebuyers cancel deals in the last six months than I’ve seen at any point during my 24 years of working in real estate. They’re getting cold feet,” said Jaime Moore, a Redfin Premier real estate agent in Reno, Nevada.
“Buyers get sticker shock when they see their high rate on paper alongside extra expenses for maintenance, repairs and closing costs. Many of them would rather back out, even if it means losing their earnest money. A lot of sellers are also willing to let buyers slip away because they don’t want to concede to repair requests,” Morre said.
Home prices not expected to fall
Home prices are high due to competition among buyers for limited inventory in the market.
The median U.S. home sale price rose 3% year over year to $420,846 in August, the largest annual increase since October 2022.
This price was 2.8% below the May 2022 record of $432,780, and is expected to remain elevated for the foreseeable future.
“The Federal Reserve still has more work to do in its battle against inflation, which means mortgage rates are unlikely to come down anytime soon. As long as rates remain high, homeowners will be reluctant to sell,” Chen Zhao, Redfin economics research lead, said, noting that a lack of homes for sale will keep prices high because it means buyers are competing for limited home supply.
Buyer demand Is below pre-pandemic levels, but no longer in freefall
Pending sales declined 0.6% on a seasonally-adjusted basis to 381,192 in August from the previous month. Compared from a year earlier, pending sales dropped 18.1%.
This figure has been hovering below 400,000 since the end of 2022, compared with nearly 500,000 just before the pandemic.
Pending sales have stabilized as the initial shock of elevated mortgage rates moves further into the rearview mirror, but high housing costs are still keeping many buyers on the sidelines, according to Redfin.
New Listings Tick Up Slightly, But Overall Housing Supply Remains at Record Low
New listings rose 0.8% to 474,239 in August on a seasonally-adjusted basis from July.
It’s the second small uptick on a seasonally-adjusted basis following nearly a year’s worth of declines. Year-over-year new listings were down 14.4%. Most homeowners who feel handcuffed by high rates have already made the decision not to sell, said Zhao.
“New listings have likely bottomed out,” she said. “Many of today’s sellers are putting their homes on the market because they have to, in some cases due to divorce, family emergencies or return-to-office policies.”
Still, the total number of homes for sale hit a record low of 1.3 million in August, falling 1.1% month over month on a seasonally adjusted basis and 20.8% year over year, the largest annual decline since June 2021.
Housing supply is at an all-time low because homeowners feel locked into their low mortgage rates. For many, selling their home and buying a new one would mean taking on a much higher monthly payment, Redfin said.
Nearly $100 billion in option arms are expected to reset in the next two years, with more than half early recasts, a new report released today by Fitch Ratings revealed.
Fitch expects about $29 billion to recast to significantly higher monthly mortgage payments in 2009 and another $67 billion to follow that in 2010.
While some of the loans may be naturally recasting after their initial teaser rate expires, $53 billion of the loans will be doing so because they reached their negative amortization cap, typically set at 110-115 percent of the original loan amount.
An early recast usually takes place if the borrower chooses to make only the minimum payment option each month, which is generally a one percent payment, a deep discount to the fully indexed rate.
To add insult to injury, home price depreciation will put the negative amortization borrower in an even greater hole, surely making many ponder simply walking away.
The only saving grace is the fact that the MTA, the index tied to many of these loans, is just 2.855 percent, down about two percent from a year earlier.
When combined with a standard margin of say 2.50 percent, the fully indexed rate sits below six percent, though Fitch estimates the average payment increase on recasting loans to be 63 percent, or an average increase of $1,053 a month.
“The combined impact of payment shock, negative amortization, declining home prices and restricted availability of mortgage credit may leave many option ARMs’ borrowers unwilling to continue paying their mortgage,” said U.S. RMBS group head Huxley Somerville.
“Also, because of their use as an affordability product, option ARM defaults will likely spread into higher priced neighborhoods, as many borrowers leveraged the very low minimum monthly payment to buy more expensive homes.”
Fitch sees the 90-day plus delinquency rate of 2004-2007 vintage option arm loans more than doubling the current delinquency rate, which ranges between 10 and 24 percent.
Disclaimer: The views and opinions expressed in this article are those of the author only and are not endorsed by Credit.com.
When a consumer wants to start building credit, a logical step to take is to get a credit card. However, credit card issuers want to check your credit and payment history before they approve you for a card. Now, if you’re just starting out with credit, you have no credit history to show for, and are often not eligible for credit cards with higher credit limits and rewards.
How do you then get out of this helpless circle? One option is getting a store card. Store cards are often easy to get approved for, even without having previous credit history. And they can help you get into the credit world, at least for starters.
What Is a Store Card?
Store cards are credit cards made by specific stores or brands, for instance; Costco, Walmart, Amazon, etc. These cards are made to be used for purchases at the store. Store cards often offer perks at the store such as bonus points, in-store discounts, and more.
There are store cards that act as credit cards and can be used in any other store on all purchases, besides the specific store. However, the card benefits will usually be specifically at the store. Compare different credit card offers to see which one works best for you.
How a Store Card Can Help You Build Credit-Easy Approval
Store cards are often thought of as beginner cards. They’re often easy to get approved for, even for someone completely new to credit.
That’s how a store card can help you jump-start your credit journey. If you have zero credit, regular credit cards may not approve you for credit cards because they want to see your payment history first. But store cards may have higher approval odds. Carefully consider one in your credit-building journey.
Downside of a Store Card
Though a store card is easy to get approved for, you most likely won’t get approved for a high credit limit. You can get approved for a limit of as low as a couple hundred dollars with a store card. In addition, the APR will usually be very high on store cards.
Store Cards and Your Credit Score
If you’re a beginner to credit and want to build your credit using a store card, here’s how.
Research store cards that report to at least one credit bureau.
Apply for a store card and if approved, use it to. Simply build your credit history by using and paying the card payments. By doing so, you work toward establishing a positive payment history to help get other credit card types later.
After some time of being with a store card, a good idea is to see how your credit score has been affected. Then you can see if applying for a credit card that is a step up to the next level of building more credit history. See some cards that are geared toward building credit history here.
To sum it up, store cards are great for breaking into credit. After some time, you may become eligible for cards that can help you keep building and establishing your credit. From there, to the premium cards you go!
Store Card Pros and Cons
Store cards have their pros and cons.
Pros
Cons
Easier to get approved for
It’s not considered a real credit card according to FICO
Helps you start building credit
Higher interest rates
Store perks and benefits
Can sometimes only be used at the store/brand
Low credit limits
Alternatives for Building Credit
Building your credit is not limited to getting a store card. There are alternative ways to go about building your credit.
Secured Cards
Secured cards work a little differently than regular credit cards. With a secured card, the card issuer requests a deposit from you, a set amount of money which they hold as collateral in case you fail to make payments. The deposit amount is usually the same as your credit limit (a $500 deposit lends to a $500 credit limit).
Secured cards are generally easier to get approved for and with some cards, you don’t need any previous credit history. So, they’re good as a first card. As long as you make on-time payments, you’ll be helping build your credit history.
Secured Card Pros and Cons
Pros
Cons
They’re easier to get approved for
You must leave a deposit
They help start up your credit
They often don’t earn rewards
Authorized User
Another alternative to store cards is building credit through becoming an authorized user on an existing credit card.
When you’re not in a credit position to get approved for your own credit loan, you can get added as an authorized user on the account of a friend, spouse, family member, acquaintance, or anyone else. Usually, depending on the card issue, only family members are allowed. Verify this with the card issuer/
The primary account holder adds you as an authorized user on the account. Only do this on an account that is in good standing. Once the account is reported to the credit bureaus and to your credit report, the account history of the card becomes yours too.
So, if the primary has had the card open for two years and has made on-time payments all that time, that’s now reflected on your credit report. This can help build your credit history.
Pros and Cons of Becoming an Authorized User
Pros
Cons
It can help your credit
You could have conflicts with the primary cardholder
It’s simple to do and there’s no need to lock up funds
Insofar as home ownership is a key contributing factor to the health of the US economy, the mortgages that back home loans are a positive indicator of the strength of the housing market.
The Federal Housing Administration insures private mortgage lenders against the possibility of default. FHA insured loans are a form of federal assistance. The FHA market share therefore indicates the strength of private versus public mortgage insurance.
The Mortgage Bankers Association releases data on the number of mortgages that they forecast will be originated each quarter. Mortgages originations, shown in dollars, indicates the level of market activity. Divided here between original purchases and refinances provides even greater insight into the types of originations and the condition of the market recovery.
Data Release: http://www.mbaa.org/ResearchandForecasts/ForecastsandCommentary
Delinquency rates on all loans secured by real estate and commercial banks are released by the Board of Governors of the Federal Reserve. Seasonally adjusted, the measure indicates the percentage of borrowers who have been unable to make timely payments on their loans. This measure is reflective of the overall economy and macroeconomic factors like unemployment. This data is released quarterly with the Fed report on “Charge-Off and Delinquency Rates on Loans and Leases at Commercial Banks.”
Is the housing boom already over? Did home prices peak before summer?
Well, a new report from Redfin revealed that competition among home buyers eased in May, which may be an ominous early sign of what’s to come.
The company noted that 69.5% of Redfin real estate agents that wrote an offer last month faced competition from another agent, which while high, was down from 73.3% in April and well below the 2013 high of 79%.
Additionally, the percentage of homes that received multiple offers was nearly at year-ago levels again, when the number was 69.3%.
Meanwhile, 49% of Redfin’s winning offers were above the original asking price, down from 51.9% in April.
Why Is the Housing Market Cooling Again?
If this report was for June, as opposed to May, one could look to the higher mortgage rates as a potential housing market buzz killer.
But these are the May numbers, when mortgage rates were still relatively low for a decent chunk of the month. So the obvious issue is an increase in inventory.
Housing inventory always rises in spring as it’s the start of the traditional home buying/selling season, and that’s exactly what happened this year.
In April, the number of homes for sale increased 6.4% month-over-month, the largest monthly increase since March 2010, when the homebuyer tax credit was phasing out.
At the same time, inventory was down 26% compared to April 2012. Home buyer demand was also down, with home tours and written offers slightly lower in May, per Redfin.
Of course, housing demand is definitely local, with Los Angeles and San Francisco still red-hot in terms of competition, while San Diego and Orange County saw significant month-over-month declines in interest.
And not every major market is seeing home prices go for well above the asking price, despite all the rosy media reports.
While that was the case in a staggering 96.8% of properties in San Francisco, which on average sold for 9.7% above list, just 19% of winning offers went above ask in Chicago.
In some major metros, including Baltimore, Chicago, Los Angeles, and Washington D.C., the average difference between offer price and asking price was actually negative.
Now we’ve got the prospect of even more homes coming to market, coupled with significantly higher mortgage rates.
As I’ve noted in the past week or so, mortgage rates are about 1% higher than they were a month ago, so there’s definitely going to be some kind of effect, though it’s too early to tell what that may be.
Plenty of pundits think housing can recover in the face of higher mortgage rates, even with rates in the 5-6% range.
But others are questioning the entire rally now that rates have begun to tick up, calling the recovery nothing more than a weak attempt to keep home prices inflated.
In any case, competition will remain elevated, even if not at levels seen earlier this year.
Characteristics of a Winning Bid
Wondering what it takes to get your offer accepted? Wonder no longer. Below are the most common attributes of a winning offer in May, per Redfin:
– 68.3% were conventional loans, up from 61.7% in April – 29.4% had a cover letter, up from 28% in April – 11% waived the inspection contingency, up from 8.3% in April – 8.9% waived the financing contingency, up from 7.1% in April
As you can see, government loans have fallen out of favor with prospective home buyers, most likely because of the recent increase in annual FHA mortgage insurance premiums.
Additionally, many FHA loans now require insurance for the life of the loan, which clearly isn’t economical, let alone feasible for many would-be borrowers.
Both FHA and VA loan volume decreased from April to May, accounting for just 8.5% and 6.6% of winning offers, respectively.
Meanwhile, all-cash offers grabbed a 5.5% share of the market, up from 5.1% in April – 16.1% of offers were all-cash in Orange County last month, up from 9.7% a month earlier.
What this all means is that if you’re a seller, you better get on it, as things appear to be trending down. And if you’re a prospective buyer, you might be able to bide your time, though you’ll have to contend with the prospect of rising rates.
Read more: Slowing mortgage market could lead to looser lending.