According to the National Association of Home Builders/Wells Fargo Housing Opportunity Index (HOI), 40.5% of new and existing homes sold between the beginning of April and end of June were affordable to families earning the U.S. median income of $96,300. This is down from 45.6% posted in the first quarter of this year, and the second-lowest reading since NAHB began tracking affordability on a consistent basis in 2012.
Previous results
As another reminder of ongoing housing affordability challenges, the second quarter 2023 HOI reading remains lower than the second quarter 2022 score of 42.8%.
The HOI shows that the national median home price increased to $388,000 in the second quarter, up from $365,000 in the previous quarter. Meanwhile, average mortgage rates were 6.59% in the second quarter, up from 6.46% in the first quarter.
Regional data
The top five most-affordable major housing markets in the second quarter of 2023 were:
Lansing-East Lansing, Michigan
Scranton-Wilkes-Barre, Pennsylvania
Harrisburg-Carlisle, Pennsylvania
Indianapolis-Carmel-Anderson, Indiana
Pittsburgh, Pennsylvania
The top five least-affordable major housing markets were all located in California:
Los Angeles-Long Beach-Glendale, California
Anaheim-Santa Ana-Irvine, California
San Diego-Chula Vista-Carlsbad, California
Oxnard-Thousand Oaks-Ventura, California
San Francisco-San Mateo-Redwood City, California
NAHB’s take on the data
“While builders continue to face a number of affordability challenges, including a shortage of distribution transformers, elevated construction costs and a lack of skilled workers, they remain cautiously optimistic about market conditions,” says NAHB Chairman Alicia Huey. “A lack of existing inventory is fueling demand for new construction, and mortgage rates are expected to stabilize in the weeks and months ahead as the Federal Reserve nears the end of its tightening cycle.”
“Rising mortgage rates in 2023 that peaked near 7% recently have been a major factor in declining affordability conditions,” says NAHB Chief Economist Robert Dietz. “Given the Fed’s limited ability to address rising construction costs, the best way to satisfy unmet demand and ease the nation’s housing affordability crisis is to enact policies that will allow builders to construct more homes.”
The mortgage industry continues to be battered by negative headlines amid the slow in demand, the challenges of housing supply, and rising interest rates. It’s no secret that refinance (refi) volumes dropped off a cliff, and the number of homebuyers in the market has shrunk since 2022. That leaves you with a small pool of prospects in a sea that used to be teeming with more volume than you could handle. The change of pace is probably off-putting in more ways than one, but a slowdown in refi and loan volume can mean a chance to build a new pipeline of revenue through the non-qualified mortgage (non-QM) market.
As a purchase product, non-QM can be a great addition to your options when it comes to serving homebuyers. Not only does it allow you to expand your pool of prospects, but it also gives you an opportunity to replace lost volume and potentially stave off that revenue compression we are seeing across the industry.
Evolving with non-QM expertise
The first step to taking advantage of this sector is continuing education on non-QM loans and their unique features. As more borrowers fall outside the conventional lending parameters, the demand for non-QM loans increases. It’s crucial to start educating yourself, your team, and your clients about non-QM loans.
In the non-QM market, there’s a myriad of product offerings tailored to serve various borrower demographics. For instance, self-employed individuals have long been underserved by traditional lenders due to income documentation requirements. We often hear stories of self-employed borrowers who get rejected by their bank because the bank doesn’t understand how to qualify their situation. Non-QM bank statement products, which verify income based on bank statements rather than tax returns, can serve this population effectively.
Education is not to be confused with complexity. These loans are not as complicated or as time-consuming as you may think. The reality is that when you work with non-QM professionals, you will find that these loans can be done as seamlessly as Agency loans. Experience will only make the process faster.
Selecting the right non-QM partners
The non-QM world is different from the conventional mortgage space, so it’s essential to have reliable partners by your side. Plugging numbers into a black box and getting a yes or no answer is not how non-QM works. As I mentioned, though, choosing a trusted and experienced lender who specializes in non-QM loans can make the difference between a deal that closes and one that doesn’t. These professionals have navigated the non-QM landscape many times over and can guide you through it, identifying and answering pertinent questions that can impact your borrower’s chances of loan approval and providing support when needed.
Non-QM as the solution to the refi vacuum
With the refi market having dried up, it’s clear that the future for originators lies in diversifying their portfolio of loan products. Non-QM loans are not just a stopgap but a long-term strategy that can redefine your business model. These loans cater to an untapped audience and can sustainably replace the volume lost to refinancing.
The shift to non-QM may seem daunting, but by marketing yourself as a non-QM expert, partnering with trustworthy lenders, and leveraging a variety of non-QM products, you can not only survive in this new landscape but also thrive. The market always moves, and the most successful originators move with it.
Tom Hutchens is the executive vice president of production for Angel Oak Mortgage Solutions.
This column does not necessarily reflect the opinion of HousingWire’s editorial department and its owners.
To contact the author of this story: Tom Hutchens at [email protected]
To contact the editor responsible for this story: Tracey Velt at [email protected]
Borrowers commonly ask, “How soon can I get a HELOC after purchasing a house?”
And the answer is simple answer: You can apply for a home equity line of credit (HELOC) the minute you close on your house purchase, without any legal or regulatory waiting time.
However, there are practical issues that mean many recent homeowners cannot apply that quickly. And in this article, we’ll explore those issues so you’ll know when you can get a HELOC.
Check your home equity loan options. Start here
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How soon can I get a HELOC or home equity loan?
So, what stops some recent homeowners from getting a HELOC (or its big brother, the home equity loan, aka HELoan) straight after closing? It’s something called the “combined loan-to-value ratio” (CLTV).
People who’ve owned their homes for several years or for decades are rarely affected by this. But those who have more recently become homeowners can find it an unsurmountable obstacle to home equity borrowing.
“The average U.S. homeowner now has more than $274,000 in equity — up significantly from $182,000 before the pandemic.” — Selma Hepp, Chief Economist for CoreLogic, June 2023
“Combined loan-to-value ratio”
HELOCs and HELoans are both forms of second mortgages. And that means they’re secured on your home.
But lenders of mortgages and second mortgages have strict rules about the proportion of a home’s market value that can be secured borrowing.
Often, a HELoan lender requires an 80% CLTV. That means all your borrowing secured by your home — your first (main) mortgage plus any second mortgage(s) — can’t exceed 80% of the home’s market value.
Home equity is the inverse of CLTV. It’s the amount by which your home’s value exceeds your mortgage balance. So, an 80% CLTV means a 20% equity stake. And a 90% CLTV means you have 10% equity.
How do you calculate how much equity you have?
Suppose you’re buying your home now and it’s worth $400,000. And let’s assume you’re making a 20% down payment.
That down payment would be $80,000 ($400,000 x 20% = $80,000). So, your mortgage balance would be $320,000 ($400,000-$80,000 or 20% = $320,000).
So, you’d have 20% equity, which means an 80% CLTV.
Example of how your CLTV might move
Of course, rising home prices would mean your home’s market value increases. And your mortgage payments will (slowly at first) reduce your mortgage balance.
Naturally, those will change your CLTV. Indeed, there are times when it could change daily.
Let’s continue with our earlier example. Suppose home prices increased 20% during your first year of owning the home. The home’s value would increase to $480,000 ($400,000 + 20% = $480,000).
And your mortgage balance would reduce by perhaps $3,750 that year as a result of your monthly payments. Read about amortization to discover why most of your monthly payments in the earlier years of your mortgage go on interest.
So, your CLTV would be calculated based on a home value of $480,000 and a mortgage balance of $316,250. That’s $316,250 ÷ $480,000 = 65.9% CLTV. Looked at another way, your home equity would be 34.1% (65.9% + 34.1% = 100% of your home’s value).
In those circumstances, you could borrow a HELoan or HELOC that would take your CLTV up from 65.9% to the 80% cap. That’s 14.1% of your home’s market value (80% – 65.9% = 14.1%).
We know that the value is $480,000. And 14.1% of that is $67,680, which is the amount you could borrow. ($480,000 x 14.1% = $67,680).
Check your home equity loan options. Start here
How soon can I get a HELOC? It mostly depends on how quickly home prices are rising
You witnessed home prices rising as a nationwide average at more than 20% a year for a while. But more recently, they’ve been rising much more slowly. For example, according to the Federal Housing Finance Agency house price index, they increased by 3.1% during the year ending April 2023.
Naturally, the slower home prices rise, the longer it will take for you to build equity in your home. And, to answer our original question, “How soon can I get a HELOC?”, that will take longer, too.
It’s not always an 80% CLTV cap
One more thing on this topic. Most HELoan lenders prefer an 80% CLTV. But you might find one that’s a bit more flexible; 85% CLTVs are fairly common.
However, HELOC lenders tend to be easier going. And you might be able to find one of these lines of credit with a CLTV as high as 90%.
How soon can I get a HELOC after applying for one?
The closing process on a HELOC varies widely depending on your lender’s requirements, how busy it is, and the complexity of your case.
You’d be very lucky for it to take less than 15 days but unlucky for it to take much more than 45 days. That’s roughly two-to-six weeks from your making your application to your getting your money.
It’s mostly similar for home equity loans. But it may be rarer to close in 15 days and less unusual to do so in more than 45 days.
Check your HELOC or home equity loan options. Start here
What is a HELOC?
Think of a HELOC as the mortgage version of a credit card.
It’s like a card because you’re given a credit limit and can borrow, repay and borrow and repay again as often as you want up to that limit. And you pay interest (mostly at a variable rate) each month only on your then current balance.
However, a HELOC is better than a credit card for a few reasons. Most importantly, its interest rate is likely to be a fraction of a card’s.
And you’re under no obligation to pay back any of your balance until you’re ready to do so. Your minimum payment is purely the interest for that month.
Pick the right time
Another difference from a card is that your HELOC is time limited. You can largely choose how long you want it to last, up to 30 years. But the account will end one day. And you will eventually have to zero the balance.
To make sure you can do that comfortably, HELOCs are divided into two phases. During the first, the “draw period,” you can borrow up to your credit limit at will. But then you enter the repayment period.
And then you can’t borrow any more. Instead, you must repay the loan (including new interest) in equal monthly installments. If that’s an issue at the time, you may be able to refinance your HELOC.
As we said, you largely get to choose how long your draw and repayment periods last. Each commonly exists for five or 10 years, but 15 years isn’t unknown. So, altogether, you could have your HELOC for up to 30 years.
To keep down borrowing costs, you should choose the shortest period that you’re confident you can comfortably manage. But affordability must be your first priority. So take as long as you need.
If you’re wondering if it’s a good idea to get a HELOC, you must have enough equity in your home to meet the lender’s requirements. And you’ll likely need a credit score of 620 or better, an existing debt burden that’s not too onerous, and a steady source of income.
What is a home equity loan?
A HELoan is much easier to get your head around than a HELOC. There are no draw and repayment periods: it’s a straightforward installment loan, typically with a fixed interest rate.
In other words, you get a lump sum on closing. And you repay it in equal monthly installments. So, budgeting for one of these couldn’t be more simple.
Verify your home equity loan options. Start here
They typically have loan terms ranging from 10 to 30 years. You can deduct interest paid on this loan type, but only when using funds to buy or build a property or “substantially improve” a property you already own.
Pros and cons of tapping home equity
Here are some important pros and cons of tapping your home equity:
Pros
Home equity products are among the least costly forms of borrowing
These are “any-purpose” loans, meaning you can use the money any way you want
You may get tax deductions if you use home equity borrowing to improve your home
Tapping home equity means you don’t have to refinance your entire mortgage. After recent rate rises, you’ll probably want to leave your main mortgage’s low rate in place
Pick the HELoan or HELOC term that you find affordable: usually, from five-to-30 years
Choose between the predictable HELoan and the flexible HELOC
Cons
HELoans and HELOCs are second mortgages. So, your home is at risk if you fail to keep up payments
People with uber-high credit scores may be able to find personal loans with rates that rival home equity products. Grab one if you can (see Con 1). But very few qualify for such low rates
Find your lowest HELOC rate. Start here
The bottom line
The average American homeowner has $274,000 in equity as of the Q1 2023, according to CoreLogic. Tapping a HELOC or HELoan are among the least costly ways of borrowing.
Most of those average homeowners would see their applications approved because it’s not hard to qualify for a HELOC or HELoan. They could get their money in roughly two-to-six weeks.
However, those who became homeowners in recent years may have to wait to qualify. That’s because they need enough home equity to secure their new borrowing while leaving an equity cushion to protect their existing first mortgage.
If you’re ready to tap your home equity, let us help. We’ll introduce you to lenders that can offer you competitive quotes.
Time to make a move? Let us find the right mortgage for you
Another four banks failed and fell into the hands of the FDIC last Friday, bringing the 2009 tally to 13 in just one and a half months.
The cost of the four failures carried a tab of nearly $350 million, further depleting the FDIC’s Deposit Insurance Fund (DIF), which fell to $34.6 billion as of the end of the third quarter, down from $45.6 billion a quarter earlier.
The latest failures included Pinnacle Bank of Oregon, Corn Belt Bank and Trust Co., Riverside Bank of the Gulf Coast, and Sherman County Bank.
While not notable names, the volume of bank failures alone may put the FDIC in a precarious position, despite doubling premiums in mid-December to bolster its reserves.
The FDIC recently raised estimates for the cost of bank failures to more than $40 billion through 2013.
Last week, RBC analyst Gerard Cassidy told Bloomberg he expected 1,000 bank failures over the next 3-5 years (just 40 were seized between 2003-2008).
He previously estimated a number closer to 300, highlighting the severity of the ongoing mortgage crisis, which seems to be constantly deteriorating.
RBC uses the so-called Texas ratio to determine the health of banking institutions.
In the past, banks have failed when their ratio climbs above 100 percent, that is, when dividing the value of their non-performing loans by the sum of their tangible capital and loan loss reverses reaches 1:1.
Two of the nation’s largest 50 banks, Sterling Financial Corp. and Colonial BancGroup., have ratios in excess of 50 percent.
Bank of America has a Texas ratio of 21.6 percent, and Citigroup is close behind at 18.4 percent, while Chase is sitting pretty at just 5.6 percent.
As of September 30, the FDIC identified 171 problem thrifts, up from 117 at the end of the second quarter. And it’s sure to keep rising.
Known for its views, Wyoming offers so much more on top of Yellowstone National Park. With an overall cost of living slightly below the national average in the state’s larger cities and plenty of small-town living for the taking, Wyoming is an affordable place to call home.
There’s no shortage of wide open spaces, but there are also plenty of opportunities for work, a low crime rate and more outdoor activities than you can list off the top of your head.
If it’s time to live somewhere a bit more relaxing, with the ability to hike, ski and explore nature on a whim, Wyoming is for you. To make sure you can afford it, tally up average prices in the key areas that create a cost of living in Wyoming. It gives you a clear picture of what you can expect in everything from apartment rent to the taxes you’ll pay.
Learn more about what it costs to live in Wyoming by looking at:
Wyoming housing prices
Lacking a ton of big cities, most of the best places to live in Wyoming are a little smaller, a little more laid-back and a little less expensive. Nowhere is far from stunning views and outdoor activities, either. Picking Wyoming as the place to call home pretty much opens the door to a totally unique adventure, all without leaving the country.
Casper
With a quaint, historic downtown area and plenty of excellent fishing, Casper, once a stop on the Oregon Trail, is now Wyoming’s second-largest city. Housing prices here are 15.7 percent below the national average. It’s similar to Laramie, but Casper is seeing more growth.
Up 46 percent over last year, one-bedroom apartments in Casper average out at $1,091 per month. Two-bedroom apartments are rising more slowly in price, up only 12 percent over last year. Expect rents for these units to average out at $1,229 per month.
Home prices in Casper are only slightly more than in Laramie, as well, averaging out at $363,157.
Cheyenne
Cheyenne is Wyoming’s largest city, and with this distinction comes the state’s highest home prices. Also the state capital, Cheyenne has an Old West feel, complete with the world’s largest rodeo. It’s also a great family-oriented city with plenty of parks, museums and all-ages fun.
Though living here costs a little more, housing prices are still 7.3 percent below the national average. Apartments are still within an affordable range, as well, not really changing much over last year. One-beds, with an average monthly rent of $800, actually dropped a percent over last year, and two-beds, at an average of $880 per month, only went up by a single percent.
For those who’re thinking of buying in Cheyenne, the average home price is currently $392,483.
Laramie
Aside from the cost of living, college is on the mind of almost every Laramie resident. Home to the University of Wyoming, football is a huge pastime here. The whole town even closes down for certain games. With a high value on fun and family and the Snowy Range ski area nearby, Laramie is a great and affordable community. Housing prices are 16.6 percent below the national average.
What this means for those looking for a place to live is there are plenty of low-cost options. An average two-bedroom apartment in Laramie is $950. Not only that, but home prices are averaging out at $348,038, which isn’t too bad for those looking to buy.
Wyoming food prices
Another cost of living in Wyoming is food. Big game like elk and bison are big winners in Wyoming, along with trout fished fresh out of crystal clear water. Even though these favorite foods are local, they’re not always the cheapest thing in the store. As a result, the average Wyoming resident spends between $267 and $300 per month on groceries and has higher-than-average food prices.
Casper is 3.2 percent above the national average
Laramie is 3.3 percent above the national average
Cheyenne is 8.5 percent above the national average
What this means for individual products you may have on your own grocery list varies by the city, as well. Steak in Cheyenne, for example, is around $16.34 but can get as low as $10.68 in Casper. Other items, like lettuce, cost almost the same no matter where you are. A head of lettuce is $1.78 in Casper and Laramie, but just a penny more in Cheyenne.
Food pricing also makes a difference when it comes to date night. A three-course meal for two is only $35 in Casper. It’s actually also the exact same average price in Laramie. But, you’ll pay 46 percent more in Cheyenne when the bill comes to you for $65.
Wyoming utility prices
Wyoming boasts some low utility bills when compared to other states in the country.
Cheyenne is 19.3 percent below the national average
Laramie is 16.6 percent below the national average
Casper is 11.9 percent below the national average
These percentages translate to energy bills that are on the more reasonable side of your general expenses list. Cheyenne and Laramie have identical energy bill averages at $125.83 per month, while Casper is only a little higher at $141.44 per month.
Energy bills in Wyoming do get a little bit of a break thanks to the state’s capacity to produce wind power. As of 2021, 22 percent of the state’s electricity came primarily from the wind. Concentrated in the southeastern corner of Wyoming, this is where regularly blowing winds get funneled through mountain passes onto the high prairie. From there, farms capture the wind and put it to good use.
Wyoming transportation prices
Not a highly walkable state when you’re within city limits, you’ll most likely get around in Wyoming by car. All the cities on our list do have the added bonus of being bike-friendly, as well. Laramie has the highest bike score of 74, and Casper’s and Cheyenne’s scores are in the 50s.
With increased dependence on owning your own vehicle and a lack of public transportation everywhere you go, overall transportation prices in Wyoming vary by a lot.
Casper is 16.9 percent below the national average
Cheyenne is 8.4 percent below the national average
Laramie is 33.3 percent above the national average
Laramie is also the only city on the list that is without a public transit system.
Casper Area Transit
Consisting of six color-coded bus lines, the Casper Area Transit system runs through Casper, Mills and Evansville. A one-way fare is $1, and monthly passes are available for $30.
No busses run on Sundays, and the purple and orange lines don’t run on Saturdays. It’s also worth noting that bus service stops on the early side, concluding at 6:30 p.m. during the week and at 3:30 p.m. on active lines on Saturday.
Cheyenne Transit Program
Fixed-route bus service is currently on hold with the Cheyenne Transit Program. Those needing a ride are able to schedule a trip using the Cheyenne Transit app. Even though this is a more unconventional system at the moment, a single-way fare is still $1.50. No passes are available.
Service runs Monday-Saturday only, ending at 7 p.m. on weekdays and 5 p.m. on Saturdays.
Wyoming healthcare prices
Healthcare prices average out a little higher than other elements composing the cost of living in Wyoming. While still close to the national average, there’s not as much difference between the cities as in other areas.
Cheyenne is 6.1 percent below the national average
Casper is 0.8 percent below the national average
Laramie is 1.1 percent above the national average
Since healthcare prices include a variety of medical visits and all your prescriptions, too, it’s easier to understand how these numbers impact cost by looking at what specific services would cost.
The most expensive city to see the doctor in is Laramie, with an average visit cost of $120.66. The most expensive city to get your eyes checked in is Casper, where an average visit will cost you $178.80. For the dentist, who you should visit every six months, an average visit costs the most in Cheyenne at $110. Each city grabs the highest-priced medical visit at some point.
Wyoming goods and service prices
Although all the hiking and outdoor activities in Wyoming will keep you pretty busy, there are certain ‘extras’ you most likely include in your budget each month. These are goods and services, the non-essentials you want to have, but don’t have to have. If your budget ever became tight, these would be the items you’d start removing until you bounced back.
Thankfully, Wyoming averages for goods and services, all combined, sit on the lower end.
Cheyenne is 7.6 percent below the national average
Casper is 3.2 percent below the national average
Laramie is 2.4 percent below the national average
All these cities are pretty close together, overall, but you may notice bigger price differentials when you drill down to those specific goods and services unique to your list. Here are how a few common ones to look at.
At least you’ll get a pretty consistent price when it comes to a six-pack or a burger out with friends. The other goods and services seem to run a much wider gap between the least expensive option, Cheyenne, and the most expensive, Casper. Of course, Laramie does take its top spot back when it comes to burgers and brew.
The average vet expenses may seem on the high side, but it costs a lot to take care of the smaller members of the family. This is also true when it comes to childcare. This potentially jaw-dropping expense possibly isn’t on your radar yet, but get ready. There’s often a little sticker shock attached to this particular good and service. In Laramie, for example, it’s $1,258.33 a month for a full-day, private preschool. Yikes!
Taxes in Wyoming
The cost of living in Wyoming gets even sweeter by the fact that there’s no individual income tax. Sales tax is also not that bad. The state imposes a 4 percent sales tax rate and allows localities to add up to 2 percent more.
The most you’ll pay in sales tax, in any given area, is 6 percent, which is the case in both Laramie and Cheyenne. Here, for every $1,000 you spend shopping, $60 goes right to taxes.
Casper’s local sales tax of 5 percent sits closer to the state-wide average of 5.22 percent.
How much do I need to earn to live in Wyoming?
Calculating what you need to live comfortably in Wyoming starts with being able to afford rent. It doesn’t matter what your overall cost of living is, if you can’t afford a home, you’re in trouble. Since most experts suggest you should spend no more than 30 percent on your rent, it’s easy to calculate what you can and can’t cover.
The average two-bedroom apartment in Wyoming costs $1,071 per month. That means a year of rent would be $12,852. If that’s 30 percent of your annual salary, you must make at least $42,840 to live comfortably.
This is quite possible, given that the average annual salary in Wyoming is almost $10,000 higher at $52,110.
Even with these estimates, though, it’s best to do some math with your own budget using our rent calculator.
Living in Wyoming
With a more affordable cost of living and plenty of open space, Wyoming is the place for you if you’re in need of a laid-back lifestyle. Without the bustle of highly urbanized areas, you’re free to take in all the natural beauty the state has to offer and get outside for all sorts of activities. If the peace and quiet are calling your name, it’s time to see if Wyoming fits into your budget.
The Cost of Living Index comes from coli.org.
The rent information included in this summary is based on a calculation of multifamily rental property inventory on Rent. as of June 2022.
Rent prices are for illustrative purposes only. This information does not constitute a pricing guarantee or financial advice related to the rental market.
In a city renowned for its glamor and extravagance, luxury living reaches new heights, enticing potential homebuyers with an array of exquisite features that redefine modern sophistication. If you’re thinking about moving to the city and you’re in the market to buy a luxury home in Los Angeles, you’ll find this city offers a wealth of luxurious properties that seamlessly blend elegance, comfort, and functionality.
But what are the most sought-after luxury home features in the Los Angeles housing market? From views of the iconic skyline to the seamless integration of smart technologies, the City of Angels boasts an array of luxury home features that elevate homes to unparalleled heights. In this Redfin article, we unveil the most coveted home features in Los Angeles, providing an exclusive glimpse into the world of high-end living that awaits.
Top neighborhoods with luxury home features in Los Angeles
While Los Angeles already has a high median sale price, coming in at nearly one million in June, almost $500K higher than the national median, there are several neighborhoods renowned for their luxury homes and exceptional features where homebuyers are willing to pay premium prices.
North of Montana tops the list with a median sale price of nearly five million in June 2023. With tree-lined streets and a serene atmosphere, these residences often feature traditional or Mediterranean-inspired designs, spacious interiors, upscale finishes, and well-manicured yards. The neighborhood offers a refined, upscale living experience in a prestigious enclave.
Venice saw a median sale price of over two million. Homes in Venice exude eclectic charm, ranging from beachside villas to contemporary designs, often featuring modern amenities, open layouts, and outdoor spaces. Artistic flair, diverse architecture, and a vibrant community atmosphere define Venice’s unique residential landscape.
Luxury homes in Ocean Park, epitomize coastal living, and with a median sale price of almost $1.9 million, these residences showcase a fusion of contemporary design and beachside charm. Expansive windows, high-end finishes, and proximity to the ocean create a harmonious blend of upscale comfort and the laid-back vibe of the neighborhood.
Mar Vista, known for its blend of modernity and neighborhood charm, showcases a blend of modern style and casual elegance. These residences often feature open layouts, high-end finishes, and inviting outdoor areas. Mar Vista’s neighborhood charm combined with upscale living creates a unique and appealing residential experience in the heart of Los Angeles. Homes in Mar Vista are also set at premium prices, with a median sale price of almost $1.8 million.
Lastly, with a median sale price of almost $1.6 million, Sunset Park offers upscale living in a laid-back coastal setting. Characterized by a mix of architectural styles, these residences boast modern amenities, stylish interiors, and inviting outdoor spaces.
1. Smart home technology
Luxury homes are typically equipped with smart home technology to enhance convenience, comfort, and security, and luxury homes in Los Angeles are no exception.
Luxury homes will usually have smart home features like Nest control, a dual-zone climate management adjustable via phone or central systems, showcasing a seamless blend of comfort and innovation. The incorporation of Cat 5 Ethernet connectivity ensures high-speed communication, meeting the demands of present-day digital requirements and enabling efficient data exchange, streaming, and connectivity. You’ll also find enhanced security solutions, such as SimpliSafe and Ring capabilities, to offer peace of mind for homeowners. These technologies create a futuristic, efficient, and comfortable living experience that redefines the way you interact with your home.
2. Modern and contemporary style
Modern and contemporary design is popular among luxury homes in Los Angeles as it offers a harmonious blend of form, function, and visual appeal.
Picture a home that seamlessly blends modern and contemporary styles. Its exterior showcases clean lines, with a mix of materials such as glass, metal, and wood creating a dynamic facade. As you step inside, you’re welcomed by an open floor plan, emphasizing spaciousness and fluidity. Neutral color palettes dominate, punctuated by vibrant accents. Large windows invite abundant natural light, and smart technology seamlessly integrates into the design. Throughout the space, you’ll find a mix of textures, from smooth surfaces to tactile fabrics. Sleek lines, recessed lighting, trendy materials like Quartz and LVP, and minimalist design create an ambiance of refined elegance.
3. Floor-to-ceiling windows
Floor-to-ceiling windows are a growing luxury trend, meeting the rising demand for ample natural light. Luxury residences commonly feature expansive glass windows and doors, welcoming ample sunlight, and offering captivating views, harmonizing with the surroundings by embracing nature’s beauty indoors.
Beyond its aesthetic appeal, this design element transforms living spaces into inviting spaces, fostering a connection with the outdoors. The interplay of sunlight and architectural design blurs indoor-outdoor boundaries, creating an environment that enhances the visual allure of interior spaces.
4. En-suite bathrooms
The desirability of en-suite bathrooms in most or all rooms reflects a premium standard of luxury living. This feature offers unparalleled privacy and convenience, catering to the personal needs and preferences of each occupant. Luxury homeowners value this feature for its capacity to enhance comfort and accommodate guests with an upscale experience akin to a private retreat.
Luxury homes in Los Angeles typically have elaborate glass showers or open areas near soaking tubs that provide a spa-like experience. You’ll also find high-end materials such as marble or granite countertops, exquisite tile work, and premium fixtures. Features such as spacious walk-in showers with multiple shower heads, soaking tubs, heated floors, and smart technology for lighting and temperature control are often included to enhance the experience.
5. Backyard oasis
In the bustling landscape of Los Angeles, homeowners prize the “backyard oasis” as an escape from the city’s energy. With features like artificial grass, a cabana, and a pristine pool and spa, homeowners and their guests can forget their daily stresses and relax. A pergola adds an inviting touch, while a dry sauna and ice bath elevates the wellness experience. With LA’s pleasant year-round climate, a backyard oasis is the perfect place for homeowners to create their own personal sanctuary within the privacy of their backyard.
6. Open floor concept
Open floor concept typically merges the kitchen, living room, and dining area into one expansive area. This layout enhances the sense of openness, encourages natural light to flow freely, and fosters a more social and interactive environment. Open floor plans are known for their versatility, enabling easy movement and facilitating communication between family members and guests. They have become popular due to their modern and spacious feel, allowing for creative interior design and adaptable use of space.
The allure of the open floor concept, complemented by expansive sliding glass cantina doors leading to the backyard, is a top luxury home feature in Los Angeles. This design blurs the boundaries between indoor and outdoor spaces, capitalizing on the city’s mild climate and creating an effortless connection with nature. The doors create an expansive, light-filled ambiance, while the fluid transition enhances the sense of space.
7. Garage conversion
Customizing a garage gives homeowners the opportunity to tailor the space to their desire, whether that’s creating a private gym, a home theater, an art studio, or an ADU. Repurposing the garage allows homeowners to optimize their property’s functionality and aesthetics, often adding unique features like custom cabinetry, high-end finishes, and integrated technology.
If you’re planning to buy a home in LA, a local Redfin Premier agent will provide invaluable insights into the market, including an in-depth understanding of the neighborhoods, pricing trends, and available luxury properties. Their expertise ensures you find a home with the perfect blend of desired amenities. Or, if you plan to list your luxury property, a Redfin agent can guide you in making informed decisions to maximize its appeal and value, tailoring it to attract the most discerning buyers.
A landslide struck Laguna Beach’s Bluebird Canyon in 1978 — smashing cars, buckling streets and destroying 24 homes. An adjacent swath of earth broke loose in 2005, wiping out 12 more homes.
That wasn’t enough to keep Scott Tenney away. In 2010, Tenney and his wife, Mariella Simon, bought a 15-acre hillside ranch near the disaster area despite the listing warning that the property was on the site of an ancient landslide.
“We knew we’d have to do a bit of terracing and retaining, but California is what it is,” Tenney said. “It’s a dynamic place not just culturally, but geologically.”
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From an outside perspective, his might seem a confounding decision. But in Southern California it’s an extremely common one, because that geological diversity, as Tenney calls it, is not just the danger. It’s the allure.
Elevation has long been aspirational here — an escape from the urban flats.
Since settlers first started pouring in from the relative flatness of the East Coast and Midwest, they were captivated by California’s vertiginous landscape. Plein air painters flocked to capture the light of the arroyos. Health seekers sought the clean air of the San Gabriel foothills. Folk rockers found inspiration in Laurel and Topanga canyons. And the moneyed elite started building their houses higher and higher above the basin, forever seeking the trophy perch with the show-off view.
But that perch has always come at the risk of catastrophe. Homes slide into a gulch in Palos Verdes. Fires roar over the Malibu hills. A debris flow kills 23 people and destroys 130 homes in Montecito. Heavy snow traps thousands in the San Bernardino Mountains. And winter storms pull fragile bluffs into a rising sea.
These natural disasters so often occur where the tectonic plates collided and folded into beautiful vistas.
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While other regions may face only one main disaster threat — tornadoes in the Midwest, hurricanes on the Gulf and East coasts — California’s extreme topography brings siege from all sides: the ocean, the trees and brush, the sky above and the ground below. And oftentimes, the most attractive areas are some of the most dangerous.
A land of disasters
More and more people are crowding into the Wildland Urban Interface — the zone of transition between unoccupied land and human development. It’s where properties mingle with undeveloped (and often steep) land, and it’s uniquely susceptible to natural disasters.
According to the U.S. Fire Administration, this area grows by 2 million acres a year as people fan out to the edges of wilderness in search of affordable houses, more space or simply a break from life in the city. And California holds more homes in this dangerous zone than any other state in the country.
And prices keep soaring. It doesn’t matter if a house sits on stilts on the side of a cliff, if it’s a landslide complex slowly sliding toward the sea, or if it’s predicted to be knee-deep in water in a couple of generations — there will always be a buyer.
As Californians flock to risky areas, disasters take a greater toll. Over the last decade, the state has experienced 20 disasters that each cost at least $1 billion in damage from flooding, wildfire and extreme heat. Those 20 alone combined for 783 deaths, according to National Centers for Environmental Information.
According to the real estate listing database Redfin, the trend is nationwide. Last year, the country’s most flood-prone, heat-prone and fire-prone counties all saw more people move in than out. Redfin researcher Sheharyar Bokhari blames one primary factor: the housing affordability crisis.
“L.A. and most other coastal cities are expensive. With remote work becoming more of an option, people are finding they can have more space and finally afford a home if they move to riskier areas,” he said.
Bokhari said another L.A.-specific factor is development — mainly that there’s not as much being built in the city compared to the more rural areas surrounding it.
He points to the Inland Empire, which is typically more affordable than L.A. County. In Riverside County, roughly 600,000 homes face a high risk of wildfire, the most of any of the 306 high-fire-risk counties in the country. Despite that, the county’s population grew by 40,000 over the last two years.
Even if experts — and common sense — say to stay away from certain areas, Bokhari said that won’t likely happen because local governments aren’t incentivized to push people out.
“These disaster-prone cities need revenue and people paying taxes,” he said. “They just claim that they’ll be more resilient and take more safety measures going forward,” he said.
Where else would I go?
Since moving onto the ancient landslide zone, Tenney and his wife founded Bluebird Canyon Farms, which offers workshops and grows food for local markets. His time is split between that and taming the erosion-prone land beneath the farm.
To combat sliding land, Tenney installed a gravity wall, 200 feet long and 9 feet tall, to retain the hillside. In addition to grading the terrain to make the slopes gentler, he added powerful drainage systems and timber-and-concrete cribbing to keep structures in place.
The work never stops, and Tenney keeps a monthly schedule to keep up with tasks. Clear brush in spring. Clean storm drains in September. Inspect terracing every few months.
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“You can run but you can’t hide,” he said, adding that urban centers such as L.A. have their own laundry lists of things to worry about: crime, homelessness, etc. “You won’t experience a wildfire in downtown L.A., but there are plenty of other things to be concerned with.”
Cribbing systems used by Tenney have become commonplace in Portuguese Bend, a small coastal community on the Palos Verdes Peninsula situated on a slow-moving landslide complex. Land moves up to 8 feet a year, and at that rate residents would rather ride the sliding earth toward the sea than sell and move somewhere else.
“I’ll be here until I can’t be here anymore. I’ll slide away with the land,” Claudia Gutierrez told The Times in July after a nearby landslide in Rolling Hills Estates sent a handful of homes careening down a canyon.
You’d think the real estate market in disaster-prone areas would eventually slow down, but there are no deals to be found for house hunters. Longtime residents often stay put post-disaster, and incoming residents consistently pay a premium to live in a scenic, though potentially dangerous, area.
In cities tucked among the foothills of the Verdugo and San Gabriel mountains such as Altadena and La Cañada Flintridge, buying in a high-fire-risk zone might be ever-so-slightly cheaper than buying in a safer place. And buyers pounce.
“My clients try to choose low-fire-risk zones, but if the house in the fire zone is the right price, that is more important,” said Brent Chang of Compass.
When Lisa and Michael McKean got home to Malibu Park from their honeymoon on Nov. 8, 2018, they were so exhausted that they went straight to sleep. The newlyweds didn’t even bother unpacking their suitcases of swimsuits still wet with Caribbean saltwater.
When they woke up, Lisa looked out her back window and saw a 10,000-foot cloud of billowing black smoke.
The Woolsey fire was ravaging the Malibu hills.
The pair grabbed their still-packed suitcases and fled to the Zuma Beach parking lot, where they spent the day surrounded by horses, dogs, cats and neighbors all wondering if their homes would survive.
Theirs, built a year earlier, did not.
“The entire neighborhood burned,” Lisa said. “Everything was black, scorched earth.”
Devastated, the pair spent six months crunching numbers on the cost of rebuilding versus moving. The home that was destroyed had taken four years to approve and three years to build. Their next one could take even longer.
Despite the damage, and despite the ceaseless, inescapable risk of a future fire, they ultimately decided to stay and rebuild.
Cheryl Calvert has lived in Malibu since 1985 and has adapted to a life of fire. To her, the flames are nearly routine.
“Once you make it through your first one, you realize it’s manageable. But you have to plan ahead,” Calvert said.
She keeps two bags packed at all times: one full of goggles and N95 masks and one with dog supplies.
Calvert has experienced plenty of fires during her time in the coastal community, but the worst was the Corral fire in 2007. She was in the driveway as the flames arrived, and she sprayed the corner of her wooden home with a hose as it ignited. Her guesthouse and garage burned down, but the house was saved.
She never considered leaving. Instead, she became more prepared, installing an extra water tank and leaving a pair of shoes by the front door at all times for quick escapes.
“We have to do crazy things, but it’s only crazy for an hour or two every five or 10 years,” she said.
She ran down the usual list of reasons why people move to Malibu: the beautiful landscape, the ocean breeze, the sweeping views. But she said the main reason her and so many of her neighbors stay is because of the community.
“We’re all living near like-minded people who are willing to risk themselves for each other,” she said. “It’s a bunch of hippies. Rich hippies.”
The psychology of staying
A life among the trees, coasts and cliffs is often what lures Californians to disaster-prone communities, but according to experts, the factors that make them stay after a disaster strikes are much more complicated.
Age, race and class can all indicate whether someone is more or less likely to move after experiencing a disaster. For example, Zhen Cong, professor of environmental health sciences at the University of Alabama at Birmingham, found that in the wake of tornados, the middle class might be the most inclined to move since the upper class has the resources to stay and rebuild, while the lower class is often trapped and has no other choice but to stay.
Other relocation factors include the level of damage to the home and whether the person owns the place or rents. But often the most important factor is one that can’t be easily quantified: “People who have a strong sense of place and a strong sense of community are less likely to move,” Cong said.
Ironically, some disasters can even encourage people who otherwise would have left to stay.
In studying post-tornado relocation decisions across the country, Cong found that after a disaster, people increase their disaster preparedness. Part of that includes gathering supplies, but it also includes social engagement: talking to neighbors, sharing information on social media and attending meetings. That engagement, which might not happen if a tornado doesn’t strike, brings a greater sense of community, leading people to stay in that community.
Anamaria Bukvic, an assistant professor at Virginia Tech who studies coastal hazards and population displacement, found that after Hurricane Sandy struck the East Coast in 2012, non-geophysical factors mattered the most in deciding whether to stay or leave. For example, confidence in adapting to future disasters was a more relevant indicator if someone would stay than how close they lived to the ocean.
“The experience of flooding can be emotionally disturbing and traumatic,” Bukvic said. “When facing problems, some people try to avoid them. Others try to resolve them.”
She added that confidence in government plays a major role as well. If a person believes the government responded well to the disaster and will keep them safe during the next disaster, they’re more likely to stay.
That’s something that Malibu Mayor Bruce Silverstein thinks about when overseeing the city’s disaster response plan. Although L.A. County is responsible for physically fighting the fires that plague the area, Malibu has instituted a free service in which residents can request a fire-hardening expert to inspect their property to better prepare them for the next blaze.
The city also outlaws certain types of vegetation susceptible to fire and tries to prevent excessive population growth in order to make evacuation from hills and canyons easier during emergencies. It’s the main reason accessory dwelling units (ADUs) are harder to build in Malibu than L.A.
“Unlike L.A., we don’t have standards that encourage growth,” Silverstein said. “We maintain the status quo and try to keep space between properties so if one catches on fire, it doesn’t extend to the neighbors.”
Michael Dyer, a former Santa Barbara County fire chief who now serves as public safety director for Calabasas, said safety became a top priority for the city after Woolsey, energizing the community into forming multiple volunteer commissions that plan for disaster preparedness.
“We have to provide that service as a government,” Dyer said while monitoring a brush fire in Topanga from his front porch. “No one has forgotten Woolsey yet. And as long as I’m here, we won’t.”
No simple fix
As the climate crisis worsens and the Wildland Urban Interface grows in size, experts are eyeing ways to mitigate the effects of natural disasters to save both the environment and human lives.
L.A. is currently considering an ordinance that would limit development in the Santa Monica Mountains. Using recent wildfires and the Rolling Hills Estates landslide as examples, supporters said the measure would make it harder to build mansions and large hillside homes as a way to limit damage caused by disasters, as well as protect open space and wildlife.
In addition, national insurers such as State Farm and Allstate are no longer selling insurance policies in wildfire-prone areas after a series of catastrophic fires raised premiums. Without insurance, people might be disincentivized from buying and building homes in risky areas.
Redfin is also tinkering with a way to warn people of a home’s potential dangers. The company conducted an experiment in which it showed a listing’s flood risk score to certain users but not others and found that those who were shown the scores were less likely to bid on the home.
The scores have since expanded to show risk for fire, heat, drought and storms.
In the meantime, Californians continue to build, and rebuild, in disaster-prone areas. Lisa and Michael McKean, whose home burned down in 2018, moved back into Malibu Park in 2021.
As neighbors slowly filter back into the neighborhood, they walk around to measure progress and congratulate those who have returned.
“We used to hate cement trucks and jackhammers, but now we celebrate them,” Michael said. “The cheery sound of construction.”
The Federal Reserve’s recent interest-rate hikes may be affecting your wallet more than you think.
The Fed funds rate influences mortgage, credit-card, and auto-loan rates.
This means when the bank hikes rates, it becomes pricier to get a car loan or pay off credit cards.
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waged a war on inflation for over a year, and while price growth has been slowing amid the central bank’s interest-rate hikes, those hikes could be hitting your wallet.
Michelle Bowman, a Federal Reserve governor, recently said that multiple interest-rate hikes might be in store to bring inflation down to target levels, after 11 hikes in the past 12 meetings. But for many Americans, what do these rate hikes even mean, and how do they affect adults buying a home or paying off credit-card bills?
The Fed funds rate, with a target range now at 5.25% to 5.5%, is the rate at which banks and credit unions borrow and lend excess reserves to one another overnight, set by the Federal Open Market Committee. While the Fed rate itself is mostly directly relevant to banks, it acts as a benchmark for most interest rates that matter to consumers and businesses, including mortgage and credit-card rates.
From April 2020 to March 2022, the Fed funds rate was in the 0% to 0.25% range, which was implemented to stimulate economic growth and inflation after the start of the pandemic.
But to get the economy in a stabler position after inflation began to take off in 2021, the Fed hiked rates to increase the cost of credit, making loans more expensive. With higher borrowing costs, banks, consumers, and businesses may borrow less money. Because less money circulates throughout the economy, inflation — and the economy at large — tends to cool.
The rate also influences the market, as hikes often lead to drops in the stock market as investors become wary about businesses’ ability to expand profitably in an era when loans are more expensive.
Bank prime loan rates, the interest rates banks charge creditworthy customers, are typically about 3 percentage points higher than the Fed funds rate. The prime rate is the basis for mortgages, personal loans, and other major consumer loans.
Take auto loans as an example. Interest rates for two-year auto loans tend to be slightly higher than the prime rate, meaning auto loans have been between 3 and 5 percentage points above the Fed funds rate. As the Fed hiked interest rates, auto loans jumped from a pandemic low of 4.6% in October 2021 to a 2023 high of 7.5%. More than 14% of drivers couldn’t secure a car loan in June, according to the Federal Reserve, as lenders worried about rising balances and higher delinquency rates — while high interest rates and monthly car payments hurt consumers’ wallets.
Auto loans are now at about their highest point since 2007, in line with the Fed funds rate. They also remained rather stagnant during the Fed’s zero-interest-rate policy.
Credit-card rates, though much higher than the prime rate, have a similar shape. Amid the Fed’s rate hikes, credit-card rates have increased roughly 6% since January 2022, while the Fed funds rate has risen over 5%. Likewise, as the Fed kept rates near 0% at the start of the pandemic, credit-card rates stayed roughly constant. An analysis by WalletHub found the most recent 25-basis-point rate hike could cost credit-card users about $1.72 billion in additional interest charges over the next year.
In the short term, the Fed funds rate also affects Treasury yields, or the interest rate the government pays on its debt obligations. These yields influence how much consumers pay on real estate and equipment, as they set a baseline for other interest rates. These yields are determined by economic stability, interest rates, and geopolitical conditions.
The two-year Treasury yield is nearly identical to the Fed funds rate. During the height of the pandemic, both curves had a similar shape, with the Fed funds rate lagging slightly.
The 10-year Treasury yield less closely parallels the Fed funds rate but still has a relatively similar pattern. Over the past few years, the 10-year Treasury yield fell and rose roughly in line with the Fed funds rate, which suggests the long-term economic outlook is more or less improving.
Ten-year Treasury yields serve as a proxy for fixed-rate mortgages, which have trended about 2% to 4% higher than the Fed funds rate over the past decade. Mortgage rates typically move with shifts in 10-year Treasury yields. The 30-year fixed mortgage rate also changes with inflation — Fed rate hikes are done to slow inflation.
This means if you’re looking to purchase a home, a rise in the Fed funds rate indirectly pushes mortgage rates up, as the 30-year fixed mortgage rate hovers just below 7%. Those looking for a new home now have less purchasing power because of the Fed decisions and inflation. A WalletHub analysis found homebuyers with a 30-year fixed-rate mortgage would pay $11,160 more over the course of the loan than if they secured the loan before July, under the condition that the average home loan is $426,100.
For those looking to save money, certificate-of-deposit rates are another metric closely tied to the Fed funds rate. Ninety-day CD rates track almost identically to the Fed funds rate, meaning these CDs have paid higher interest rates as the Fed hikes rates.
Large corporations also are directly affected by higher interest rates, as the cost of borrowing money also follows the Fed funds rate. The yield on corporate bonds, which are issued by corporations to raise financing, has somewhat mirrored the dips and spikes of the Fed funds rate, particularly with companies that have the highest credit rating from Moody’s. This suggests that as the Fed raises rates, investors get bigger returns on corporate bonds. However, those higher rates for corporate borrowing could lead businesses to curtail investments in their operations.
All this is to say, the Fed’s decision to hike rates 11 times in the past 12 meetings may not yet show up at the grocery checkout, though such hikes have major effects on paying off credit-card debt, buying a home, and purchasing a new car.
A new survey from TD Bank revealed that a large percentage of recent home buyers needed mortgage insurance to get the deal done.
The bank surveyed 2,000 Americans who purchased a home over the past 10 years and found that 37% financed their homes with the help of mortgage insurance.
If we consider just the past two years, the number was even greater, with 43% relying on MI to close their loan.
In other words, nearly half of recent borrowers are unable or unwilling to put down 20% when purchasing a home, which makes the cost of homeownership a lot costlier.
Are Home Prices Too High?
It’s kind of a testament to how expensive homes are these days, despite mortgage rates and corresponding monthly mortgage payments being somewhat affordable to many.
While the Fed has been able to drive down interest rates via efforts such as QE3, they haven’t been able to make the issue of large down payments magically disappear.
Yes, there are options for those with little cash set aside, such as FHA loans, which only require a 3.5% down payment, and conventional loans, which only require five percent down.
There is even 100% financing still floating around, thanks to the Rural Housing Service’s popular USDA loan.
But the down payment continues to be an issue for most Americans looking to buy a home, mainly because we have a tough time saving money. No wonder the typical renter needs an FHA loan in order to buy a house.
Unfortunately, we can’t turn back now because things have only really gotten better thanks to recovering home prices that are reaching new all-time highs in many areas nationwide.
This has allowed millions of homeowners to get their heads above water again, which is great.
However, it has also burdened future would-be home buyers, who must now contend with even higher home prices, and not necessarily any more income to come to the table with. Nor any more savings.
TD Bank Is Pitching Their No-MI Loan
Now it should be noted that TD Bank is making both an argument against FHA loans because most require mortgage insurance for the life of the loan now (and it’s expensive), and PMI, simply because it’s another monthly cost to worry about.
And they’re doing it because they recently launched their Right Step mortgage program, which only requires a 3% down payment without MI.
It’s a big deal because Fannie Mae just reduced their max loan-to-value to 95% from 97%. So they’re really one of the few places where you can get a low down payment loan these days without paying mortgage insurance.
But what some people may not understand is that just because there’s no MI doesn’t mean you’re not paying for it. It’s just built into the interest rate. So instead of getting a 4% rate on your 30-year fixed, you might be stuck with a rate of 4.5% or higher. Same goes for lender-paid MI.
That’s the tradeoff. And the problem with taking a higher interest rate on your loan is that it stays with you until you sell, refinance, or pay off the loan.
On the other hand, PMI can be removed once your LTV reaches 80%, which can happen sooner rather than later if home prices keep rising, or if you pay your mortgage down early.
So whether you “need” MI or not, you’re still paying for it whenever you come in with less than 20% down. You just may not realize it.
[CORRECTION: The story has been updated from an earlier version. The MBA announced $3.39 trillion in mortgage originations, and not $3.9 trillion.]
The Mortgage Bankers Association on Tuesday released revised estimates for the third and fourth quarter of 2020 and predicted record purchase volume for 2021. Although the MBA expects decreased refinancings in 2021 and a decline in overall origination to around $2.56 trillion, that would still be the second-highest origination total in the last 15 years.
The rebounding economy is likely to mean higher mortgage rates, with the MBA forecasting 2.9% by the end of 2020, rising to 3.3% by Q4 2021.
The MBA is forecasting a rise in purchase originations to $1.59 trillion, which would break the previous record of $1.51 trillion set in 2005. However, the MBA sees refinances decreasing to $971 billion.
“The housing market has seen a meaningful rebound since the onset of the pandemic,” said Mike Fratantoni, MBA chief economist. “Record-low mortgage rates have led to a surge in borrower demand for refinances and home purchases.”
For 2020, the MBA is estimating $3.39 trillion in mortgage originations – the highest since 2003 and a 50% increase from 2019.
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That includes an expected 91.5% jump in refinance originations to $1.97 trillion – also the highest since 2003 – and a forecasted 16% rise in purchase originations to $1.42 trillion, the highest since 2005.
Back in October, the MBA estimated total mortgage originations of $3.175 for 2020.
The median price of new homes in 3Q20 was reported at $330,600. That is expected to rise to $339,000 in 4Q20. However, existing-home price averages are expected to drop again in 4Q20, from $297,200 to $294,900. This continues the downward trend from 2Q20, when existing home price averages were at $309,200.
Other 2021 expectations from MBA include a growth rate of 3%, an unemployment rate of 5% by the end of the year, and an increasing 10-year treasury yield to 1.4% by Q4.