With mortgage rates still in the mid 6% range, borrowers who received mortgages in April 2023 paid an average of $2,343 a month, up 28% from a year prior.
That’s according to the latest origination data from mortgage tech firm Candor Technology.
Per data from Candor’s underwriting engine, the average buyer in April 2023 received a loan worth about $366,000 at an average APR of 6.5%.
A year ago, the average buyer would have paid $1,830 a month with a $351,297 mortgage at an interest rate of 4.6%.
The average income in April 2022 was $7,333 a month, according to Candor. In April 2023, the average borrower’s income had shot up to $8,550 a month. Still, the average monthly payment to income was 27.4% in April 2024, up from 24.9% a year ago.
“The recent interest rate hike from the Federal Reserve continues to keep the cost of home buying elevated when compared to the same period one year ago,” said Sara Knochel, CEO of data and analytics at Candor. “However, we are also seeing the homebuyer’s average income on the rise as well, which indicates more Americans may be picking up side income sources in order to finance their home purchase.”
The real estate market is kind of strange at the moment.
Everyone expected mortgage rates to jump in 2019, but so far they’ve done the exact opposite.
At the same time, home price appreciation has slowed in much of the country, creating a situation where affordability is actually better than it was a year ago.
To make matters even weirder, negative equity is increasing again, a topic I haven’t discussed for many years.
Refi Candidates Up 75% From November
First those refis – amazingly, the number of homeowners who could both qualify for and benefit from a mortgage refinance rose almost 75% from the 10-year low seen in November 2018, per the latest Black Knight Mortgage Monitor for January 2019.
It also marked a 16% year-over-year increase and the highest number of eligible candidates since January 2018.
There are about 3.27 million homeowners today who could reduce their mortgage rate by at least 0.75%, which would obviously amount of some serious savings monthly and over the life of the loan.
However, the numbers are still down a hefty 30% from late 2017 when 30-year fixed mortgage rates stood below 4%.
Sadly, Black Knight believes the impact will be muted because some 85% of homeowners took out their mortgages more than seven years ago, meaning they’re not likely to refinance.
Still, roughly 250,000 homeowners who took out their mortgages just last year could stand to benefit greatly from a refi, especially those who received rates on the higher end of the spectrum due to bad timing and/or bad credit, etc.
Falling Home Prices?
Now let’s address home prices, which after some really solid years of growth, seem to be getting tested.
It could just be an affordability issue, as new home buyers simply don’t have the ability to purchase real estate at today’s relatively sky-high prices.
Certainly, it’s not for a lack of wanting to buy, nor is it an inventory issue – low supply continues to be a problem.
Despite a limited housing stock and still-low mortgage rates, annual home price appreciation slowed for the 10th straight month in December, per Black Knight.
It fell from a high of 6.8% YoY growth in February 2018 to just 4.6% at the end of 2018, and on a monthly basis in December, the average home price actually declined 0.3%.
The average home price has fallen a combined 0.82% over the past four months, marking a $2,440 loss.
And Black Knight economists expect the same trend in January based on early data collection.
Now the good news – because home price gains have moderated, and even fallen over the past several months, housing affordability has increased.
A prospective home buyer today needs just 22.2% of their median income to purchase the average-priced home with a 20% down payment on a 30-year fixed-rate mortgage.
That’s slightly lower than the post-recession high of 23.4% seen just a few months back, and well below the long-term average of 25% seen in the late 1990s and early pre-bubble 2000s.
Additionally, despite the recent slowdown, annual home price growth is still outpacing its 25-year average of 3.9%, so if anything, the real estate market is simply normalizing after some really hot (unsustainable) years.
Underwater Mortgages Are Back?
That brings us to the issue of negative equity, something I definitely haven’t mentioned on this blog in a long, long time.
It was a hot topic post-housing crisis when something like half of all borrowers with a mortgage owed more than their homes were worth.
That led to a new definition for “underwater” in the dictionary, the advent of underwater mortgage insurance, and the very popular and widely-used HARP refinance program.
Now Corelogic is telling us that the quarterly increase in negative equity during the fourth quarter of 2018 was the first in four years.
Between the third and fourth quarter of 2018, the total number of mortgaged homes in negative equity increased 1.6% to 2.2 million homes, representing 4.2% of all mortgaged properties.
It was the first quarterly increase since the fourth quarter of 2015, and led to some 35,000 properties falling into underwater positions.
Before we ring the alarm bells, if you consider the year-over-year basis, the number of mortgaged properties in negative equity actually fell by a significantly larger 14%, representing some 351,000 homeowners.
And the CoreLogic Home Price Index estimates a 4.5% increase in home prices from December 2018 to the end of 2019, which should lift another 350,000 homeowners above water.
Still hard to believe that millions remain underwater on their mortgages in light of the massive home price gains realized since the recovery got underway. Tells you how bad things got.
Negative equity peaked at a staggering 26% of mortgaged residential properties during the fourth quarter of 2009. It’s been nearly a decade since those very dismal times.
Of all the housing market bugaboos that haunt and frustrate wannabe buyers in this stressed, prime-time selling season of 2023 (Sky-high prices! Rising mortgage rates! Inflation and economic uncertainty!), one challenge still sits at the center of everything: finding a good home to purchase.
America’s been in a severe housing shortage since at least the earliest days of the COVID-19 pandemic, and it affects just about all else. A shortage of inventory leads to frenzied bidding wars, out-of-reach price tags, and market paralysis.
But the situation is changing, at least in some markets. And Realtor.com® decided to find out where. When it comes to home inventory levels in America, it’s both the best of times and the worst of times—it all depends on where you live.
To gain some insight into where things stand going into the crucial summer season, the data team at Realtor.com crunched the numbers to determine the metropolitan areas with the largest increases—and most substantial decreases—in available home inventory.
You can see for yourself in the table below the change in housing inventory in the 100 largest metros.
So what did we find? Well, across the country, inventory is up year over year, by a little more than 20%. But this is largely a function of the incredibly low inventory levels of the past couple of years. There aren’t more sellers coming onto the market. Instead, homes are sitting longer. And even the current bump in year-over-year inventory still puts this year below pre-pandemic levels. Nationally, the number of new listings was down 22.7% in May compared with the previous year
And the data underscores a truth that has become increasingly evident: There’s no single, monolithic housing market. Instead, real estate has become a tapestry of regional markets, each with unique patterns.
In certain regions, particularly in the more affordable pockets of the Midwest and Northeast, inventory remains tight. Despite higher mortgage rates casting a shadow over buyers and sellers alike, homes are selling at a brisk pace, prices continue to rise, and inventory remains relatively low compared with previous years.
Compare that to the West and South, where hot markets like Austin, TX, Nashville, TN, and Sarasota, FL, have seen inventory more than double compared with this time last year. These pandemic-era boomtowns have been on a roller coaster when it comes to pricing, inventory, and demand.
Nick Libert, a real estate agent with EXIT Strategy Realty in Chicago, calls this a “balanced-stagnant market.”
Elevated rates have put the brakes on the overall housing market activity, from the perspective of buyers and sellers, but a bridled demand is still very much present.
“Not a lot of people are moving,” Libert says. “Part of the reason is there’s very little to look at.”
So let’s take a look at the biggest markets to see what’s what in different parts of the country.
We found where inventory is up and down the most in the 100 largest U.S. metros by going through the Realtor.com monthly housing market data to compare inventory in May 2023 with May 2022. We selected just one per state to ensure geographic diversity. (Metros include the main city and surrounding towns, suburbs, and smaller urban areas.)
Where inventory has risen the most
1. Sarasota, FL
May 2023 year-over-year active listings change: +128.1% May 2023 median list price: $549,900
What a difference a year makes.
Located on the southwestern coast of Florida, known for picturesque white-sand beaches and barrier islands along its Gulf of Mexico shoreline, the Sarasota metro experienced the biggest year-over-year jump in inventory. There were nearly 2.3 times the number of active listings, at just shy of 4,600, this May compared with last.
Unsurprisingly, homes are sitting on the market almost twice as long, now taking about 7.5 weeks to sell.
This midsized metro, which serves as the spring training destination for the Baltimore Orioles, is relatively expensive compared with much of Florida. Median list prices are about 9% above the median state price—only Miami is priced higher.
Carissa Pelczynski, a real estate agent at Preferred Shore in Sarasota, says the attitude of many of the out-of-town buyers who were driving prices up during the pandemic has shifted in the past several months.
“People are just more hesitant now,” Pelczynski says.
Also adding to the inventory glut, according to Pelcynski: Too many sellers are pricing their homes as if the market were still as hot as it was a year or two ago. (It’s not.)
2. Nashville, TN
Nashville, TN
(Getty Images)
May 2023 year-over-year active listings change: +124.7% May 2023 median list price: $580,000
Music City is the next stop on our list, with a jump in inventory almost as large as Sarasota’s. This icon of the South is home to the Grand Ole Opry and the Country Music Hall of Fame, and it’s an increasingly popular destination for buyers.
What’s especially notable about Nashville right now is that even as inventory is more than double what it was this time last year, in May the price per square foot hit an all-time high. It surpassed the previous high mark in June 2022.
Homes in Nashville are generally larger than average, with a median size of almost 2,200 square feet. It’s also about 15% more expensive than the national median price per square foot.
A recently listed, 500-square-foot condo just southeast of downtown Nashville and within walking distance of the Cumberland River is around $515,000.This newly constructed, four-bedroom townhome is on the market for about $600,000.
Watch: The Best Cities in the U.S. for Home Sellers Right Now
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3. Austin, TX
May 2023 year-over-year active listings change: +112.5% May 2023 median list price: $583,751
It seems no list of real estate superlatives is complete without Austin. The Lone Star State’s capital city had become one of the hottest markets in the country during the pandemic, with demand—and as a result, prices—exploding. Builders raced to put up homes in the area.
But when mortgage rates rose in 2022, the Austin market was one that cooled the most, with list prices falling 15% from May 2022 to January of this year. Since then, prices have been creeping back up, now at 9% below last year’s peak.
Even as prices are back on the rise, the typical Austin home is on the market for eight long weeks before selling, compared with just two weeks during the spring 2022 pandemic pump peak.
No place on our list has a larger portion of listings that have had a price reduction, with more than 1 in 3 listings having been discounted by the seller.
The number of homes available in the Austin metro is back to pre-pandemic levels, thanks in part to the boom in new construction.
4. New Orleans, LA
New Orleans, LA
(Getty Images)
May 2023 year-over-year active listings change: +81.0% May 2023 median list price: $345,000
The number of homes available in the Big Easy has earned it a place on our list, with an 81% increase.
Worth noting: By this same time last year, New Orleans inventory was already back on the rise. Measuring from the inventory low point, New Orleans has also seen the number of available homes more than double.
The inventory increase hasn’t quite put it back to pre-pandemic levels, but if the upward trajectory continues, New Orleans should reach that milestone in the coming months.
And although list prices in New Orleans haven’t been as swingy as they’ve been in a place like Austin, they have crept back up—and are now less than 1 percentage point shy of the all-time high set in March 2022.
A newly listed, midcentury boathouse on New Orlean’s iconic Lake Pontchartrain can be found for about $375,000.
5. Tulsa, OK
May 2023 year-over-year active listings change: +74.1% May 2023 median list price: $369,450
There are plenty of homes for sale in Tulsa—they just aren’t the more affordably priced properties that buyers are seeking.
“We have so much more inventory right now, and we just have less buyers,” says local real estate agent Tiffany Johnson, of Tiffany Johnson Homes.
It’s a price point game, she says. “You can’t find anything under $150,000, and anything under $300,000 is selling quickly.”
The market has shifted a lot since last year, especially for sellers who now face more competition.
“The buyers who are in the market are very serious. They will make a move quick, but they have so many houses to choose from, so [sellers and agents ] have to be almost perfect,” Johnson says. “They have to find ways to actually market these homes now.”
Rounding out the top 10 metros where the number of homes for sale has increased the most is Raleigh, NC, at 72.7%; Wichita, KS, at 59.8%; Las Vegas, at 57.5%; Greenville, SC, at 57.1%; and Omaha, NE, at 54.4%.
Where inventory is down the most
1. San Jose, CA
May 2023 year-over-year active listings change: -35.3% May 2023 median list price: $1,530,000
Topping the list of places where inventory is tightest is Silicon Valley’s San Jose. The tech hub is one of the most expensive metros in the nation, with a median price tag of $1.5 million.
Posing another hurdle for buyers: The number of homes for sale is still near record lows. The metro area, with more than 2 million people, had fewer than 1,000 homes for sale in May.
Tuan Tran, a Realtor® at Home Page Real Estate in San Jose, sees changes in this unique and wealthy home market amid turbulence in the tech business.
“Now I see a lot of investors holding back,” Tran says, adding that they are waiting to see whether a tech recession runs deeper. “Inflation is still high. Paychecks haven’t gotten much bigger.”
2. Hartford, CT
Hartford, CT
(Getty Images)
May 2023 year-over-year active listings change: -26.0% May 2023 median list price: $424,925
Hartford topped our list of markets that will dominate in 2023, and the low home inventory seems to be proving us right.
Buyers from around the Northeast have poured into the “Insurance Capital of the World,” about 90 minutes southwest of Boston and 2.5 hours northeast of New York City, due to the reasonably priced homes for sale and good jobs available.
The city has the fewest price reductions of any city, with only 1 in 14 listings with a markdown.
In another sign of the market’s strength, Hartford boasts the fastest-selling homes of any place on our list, with the typical home spending just 19 days on the market. That’s less than half the national median time of 43 days in May.
3. Milwaukee, WI
May 2023 year-over-year active listings change: -23.4% May 2023 median list price: $374,950
The housing markets in many traditionally affordable, Midwestern cities, like Milwaukee, have continued to chug along, while other pricier markets have sputtered or stalled.
In May, there were 23% fewer homes for sale than the year before. And the median home in Milwaukee is selling in 29 days, just four days more than the all-time low of 25 days in May 2022.
Another indicator of the overall strength of the Milwaukee market: The relatively small portion of homes that have had a price reduction. Only 1 in 10 is marked down.
For those considering selling in Milwaukee, the metrics suggest a quick sale, likely without a price drop, is still the norm right now. Buyers might want to consider this updated, three-bedroom, two-bathroom Cape Cod for about $225,000.
4. Dayton, OH
Dayton, OH
(Getty Images)
May 2023 year-over-year active listings change: -20.3% May 2023 median list price: $234,950
Dayton, a Rust Belt city bout an hour northeast of Cincinnati, is the most affordable of all the cities on our list, with prices 45% below the national median. The “Gem City” is home to the National Museum of the U.S. Air Force.
In contrast to what we’ve seen in the markets that got hot during the pandemic pump, prices in Dayton have been steady: no big swings up or down, but a rather steady and slight incline.
Dayton’s median listing price per square foot in May was up 6.7% year over year.
Buyers can find big deals in Dayton. This four-bedroom, 2.5-bathroom house on a third of an acre is for sale for $219,000.
5. Chicago, IL
May 2023 year-over-year active listings change: -18.5% May 2023 median list price: $376,000
The Windy City features near-record low inventory right now.
The number of available homes crept up by about 2% from April to May. But aside from the February 2022 nadir in inventory, there haven’t been this few homes on the market in Chicago in recent history. (Realtor.com listing data goes back to mid-2016.)
“Currently, what my buyers are seeing—and my sellers are experiencing—is that the north side of Chicago, along the lakefront, has, by far, the most pronounced drop,” says Libert of EXIT Strategy Realty in Chicago.
The rest of the top 10 metros with the largest decrease in inventory were Washington, DC, at -15.6%; Bakersfield, CA, at -13.2%; Albany, NY, at -13.1%; Allentown, PA, at -12.5%; and Seattle, at -10.8%.
The simplest options strategies, and safest for beginners, include purchasing calls and/or puts — typically called “going long.” For the bearish investor who believes an asset will see price declines over a well-defined period of time, the simplest strategy is to purchase puts on those assets, i.e., pursue a long put strategy.
What Is a Long Put?
The term “Long Put” describes the strategy of buying put options as well as the options contract itself. The investor who purchases a put has purchased the right to sell an underlying security at a specific price over a specific time period. Being the buyer and holder of any options makes you “long” that option contract.
Because the contract in question is a put, the investor is long the put and bullish on the put option as they expect the put options price to rise. The put option holder is bearish on the underlying asset as they expect its price of the asset to go down.
Since the investor has not sold the underlying asset or its options, the investor does not hold a short position.
💡 Recommended: Options Trading Strategies for Beginners
Maximum Loss
In comparison to other options strategies, long puts are low risk due to their limited and well-defined downside. The maximum amount an investor can lose is the premium paid at the initiation of the transaction.
Maximum Loss = Premium Paid
Because different trading platforms have different commission structures, (some may even provide commission-free trading) commissions are typically omitted from profit and loss calculations.
Maximum Profit
The maximum gain for a long put strategy occurs when the underlying asset drops to zero. While this gain is also limited and defined, it is typically far greater than the potential downside. The maximum gain on a long put strategy is defined as the strike price of the put less the premium paid.
Maximum Profit = Strike Price – Premium Paid
Breakeven Price
The breakeven price on a long put strategy occurs at the strike price less the premium. Note that the formula for the maximum gain and the breakeven price is the same but the two formulas are measuring different things.
The breakeven price is the point at which the investor begins to make a profit. As the price drops past breakeven toward zero, hopefully, the investor can realize the maximum gain possible.
Breakeven Price = Strike Price – Premium Paid
Why Investors Use Long Puts
Investors utilize a long put strategy for three main reasons:
• Speculation: The investor identifies an asset they believe will decrease in price over a defined time period. Buying a long put allows the investor to profit from this forecasted price decrease if it happens.
• Hedging: Sometimes an investor already holds an asset like a stock or exchange-traded fund (ETF) and is concerned that the price of the asset may drop in the short term, but still wants to hold the asset for the long term.
By purchasing a long put, the investor can offset any short-term losses through gains on the put and keep control of the underlying asset. For most assets, this hedging strategy provides cheap insurance.
• Combination strategies: For experienced investors, long puts can be part of complicated multi-leg strategies involving the sale or purchase of other options, both calls and puts, to pursue different investment objectives.
Long Put vs Short Put
In contrast, a short put options strategy occurs when the investor sells a put. Being the seller of a put means the options contract seller is obligated by the options contract to sell shares in an underlying security to the option buyer at the buyer’s discretion.
Everything about short puts is the opposite to long puts:
Long Puts
Short Puts
Investor role
Buyer
Seller
Investor responsibility
Right/Discretion
Obligation
Investor outlook — Asset
Bearish
Neutral to Bullish
Risk
Premium
(Strike Price – Premium)
Reward
(Strike Price – Premium)
Premium
Long Put Option Example
An investor has been watching XYZ stock, which is trading at $100 per share. The investor believes the $100 share price for XYZ is excessive and believes the share price will fall over the next 30 days.
The investor purchases a long put with a strike price of $95 per share for a premium of $5 and an expiration date of 60 days from today. Because options contracts are sold based on 100 share lots, the price for this contract will be $5 x 100 = $500.
The options contract gives the investor the right to sell 100 shares of XYZ at $95 for the next 60 days.
The breakeven price on this investment is:
Breakeven Price = Strike Price – Premium Paid
Breakeven Price = $95 – $5 = $90
Should XYZ be trading below $90 at expiration, the option trade will be profitable.
If XYZ stock should fall to $0 at expiration, the investor will realize their maximum possible profit:
Maximum Profit = Strike Price – Premium Paid
Maximum Profit = $95 – $5 = $90 profit per share or $9,000 per put option
However, if XYZ stock should stay above $90 at expiration, the investor will realize their maximum possible loss and the option will expire worthless:
Maximum Loss = Premium Paid
Maximum Loss = $5 per share or $500 per put option
Even if XYZ rose above the $100 price at purchase, the investor’s loss would still be limited to $500.
The Takeaway
Long put options provide an excellent entry point for newly minted options investors to dip their toes into the market. The trading strategy offers significant profit potential if investors make the right call on the underlying security’s future performance while providing limited downside risk.
If you’re ready to try your hand at options trading, You can set up an Active Invest account and trade options online from the SoFi mobile app or through the web platform.
And if you have any questions, SoFi offers educational resources about options to learn more. SoFi doesn’t charge commissions, and members have access to complimentary financial advice from a professional.
With SoFi, user-friendly options trading is finally here.
Photo credit: iStock/Paul Bradbury
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Neither the Investment Advisor Representatives of SoFi Wealth, nor the Registered Representatives of SoFi Securities are compensated for the sale of any product or service sold through any SoFi Invest platform. Information related to lending products contained herein should not be construed as an offer or prequalification for any loan product offered by SoFi Bank, N.A. Options involve risks, including substantial risk of loss and the possibility an investor may lose the entire amount invested in a short period of time. Before an investor begins trading options they should familiarize themselves with the Characteristics and Risks of Standardized Options . Tax considerations with options transactions are unique, investors should consult with their tax advisor to understand the impact to their taxes. Exchange Traded Funds (ETFs): Investors should carefully consider the information contained in the prospectus, which contains the Fund’s investment objectives, risks, charges, expenses, and other relevant information. You may obtain a prospectus from the Fund company’s website or by email customer service at [email protected] Please read the prospectus carefully prior to investing. Shares of ETFs must be bought and sold at market price, which can vary significantly from the Fund’s net asset value (NAV). Investment returns are subject to market volatility and shares may be worth more or less their original value when redeemed. The diversification of an ETF will not protect against loss. An ETF may not achieve its stated investment objective. Rebalancing and other activities within the fund may be subject to tax consequences. SOIN223451
Evelyn Arceo holds down a full-time job as a baker at Universal Studios Hollywood, earning $19 an hour. But even when she gets a few hours of overtime at the theme park, the single mother of four can barely afford the rent of her one-bedroom apartment in Panorama City.
On her salary, buying a home is out of the question.
Already, her monthly rent of $1,300 is “just too expensive at this point,” Arceo said, with late fees of $40 to $50 compounding her financial plight. “I don’t think I’ve ever been on time on my rent.”
Arceo’s situation is common in California, which is among the nation’s leaders in renter-occupied housing. In the Golden State, 45.5% of housing units were occupied by renters in 2020, a small increase from the 44% rate in 2010, according to newly released data by the U.S. Census Bureau.
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California was second only to New York, where 49.7% of the housing units are renter occupied. The District of Columbia was an outlier, at 61.7%.
Nationwide, the rate of renter-occupied housing units — 36.9% — is at its highest point since 1970.
“The growth of renter-occupied units continues to outpace the growth of owner-occupied units,” the Census Bureau said in a statement.
The states with the lowest renter rate — and therefore the highest owner-occupied rates — were West Virginia, at 27.4%, and Maine, at 28.9%.
Hans Johnson, a demographer at the Public Policy Institute of California, said the new data were “not shocking.” California’s high rate of renters can be attributed mostly to “the high cost of housing,” Johnson said.
The annual income needed to buy a home in Los Angeles rose last year beyond $220,000, according to a study by the residential real estate firm Redfin. With higher mortgage interest rates and inflation cutting into household incomes, the ability to own a home is increasingly out of reach for residents in Los Angeles, where the median annual household income in 2020 was just over $65,000.
High housing costs are also a factor in putting California near the bottom in another category: the rate of single-occupancy households.
New data from the Census Bureau show that more than a quarter of all households in America — 27.6% — had just one occupant in 2020. The rate of solo occupancy is more than three times the recorded level in 1940, 7.7%.
A Times analysis found that California ranked 49th of the 50 states in the rate of single-occupant dwellings, with 23% of households occupied by just one person — a rate that has remained steady for about 20 years. Only Utah had a lower rate, at 20%.
North Dakota had the highest rate of single occupancy, 32.8%. The District of Columbia’s rate was an astronomical 43.7%.
In states other than California, “where rents are much lower or the opportunity to buy a house is better, it’s not as difficult for a single worker” to live alone, Johnson said.
Another factor is California having a “larger immigrant population than in the rest of the U.S.,” according to Johnson. “It is more common for immigrant families to live in multigenerational households,” he said.
Utah has the lowest rate of single-occupant homes because the state has a high marriage rate and an uncommonly high number of children per household, Johnson said. He attributed those trends partially to Mormon residents, who make up well over half of the state’s population.
The increase in people living alone coincides with higher social isolation, a worrying trend outlined by U.S. Surgeon Gen. Dr. Vivek Murthy in a recent report.
“Our epidemic of loneliness and isolation has been an underappreciated public health crisis that has harmed individual and societal health. Our relationships are a source of healing and well-being hiding in plain sight — one that can help us live healthier, more fulfilled and more productive lives,” Murthy said.
Such isolation increases the risk of premature death by more than 60% and includes higher risks of heart disease, stroke and dementia, according to the report.
To counter the increased isolation, “communities must design environments that promote connection,” the report said, and “invest in institutions that bring people together.”
While more Americans are living alone, Arceo, 32, worries about providing her children a home where they can enjoy some space for themselves.
With a 14-year-old son in the throes of adolescence and a 12-year-old son entering that stage, “they need their privacy,” she said.
“It’s insane to say that I work for this company and can’t afford to give my kids a proper living,” Arceo said.
Cristina Arceo babysits her grandchild Yahir Pinto, 4, at the Panorama City apartment where her daughter Evelyn Arceo lives with her four children. A corner of the living room serves as a bedroom where Evelyn Arceo and Yahir sleep.
(Myung J. Chun / Los Angeles Times)
She has worked as a baker for the theme park for eight years, but Arceo notes that “I was homeless for the first year working at Universal,” when she was forced to live with her then-three children in hotels, friends’ homes, wherever they could.
With the bakery short-staffed, she has recently picked up “at least an hour of overtime a day,” but it hasn’t been enough, forcing her “to choose whether I pay my car insurance or my rent,” she said.
Johnson, the demographer, pointed to possible hope on the horizon. He noted that California has reported a steady decline in population since 2020 — starting at the beginning of the pandemic. The drop has coincided with the construction of more housing, primarily in the state’s suburbs and exurbs.
“If California continues to lose people and build housing, at some point it should make a dent in the housing deficit.”
A construction surge is not likely to make enough of a difference to change the conditions for low-wage workers like Arceo.
Looking to the future, she doesn’t see many options.
After falling for three consecutive weeks, purchase mortgage rates jumped 14 basis points, reflecting the expectation that the Federal Reserve (The Fed) will maintain its tightening monetary policy to fight inflationary pressures.
According to the latest Freddie Mac PMMS, purchase mortgage rates this week averaged 5.23%, compared to 5.09% the week prior. A year ago at this time, 30-year fixed rate purchase rates were at 2.96%.
The government-sponsored enterprise index accounts solely for purchase mortgages reported by lenders during the past three days.
“After little movement the last few weeks, mortgage rates rose again on the back of increased economic activity and incoming inflation data,” said Sam Khater, Freddie Mac’s chief economist.
Another index also showed higher rates this week.
Black Knight’s Optimal Blue OBMMI pricing engine, which includes some refinancing data — but excludes cash-out refis to avoid skewing averages – measured the 30-year conforming mortgage rate at 5.5% Wednesday, up from 5.42% the previous week.
Creating a path to success in today’s purchase market
Meeting the needs of a new generation of homebuyers while managing the ebbs and flows of a volatile housing market is a major endeavor for any mortgage lender. So, what should lenders be doing to thrive in the face of a post-pandemic housing market rife with new hurdles?
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The 30-year fixed-rate jumbo was at 5.05% Wednesday, also up from 4.97% the week prior, according to the Black Knight index.
Higher rates are reducing borrowers’ demand for mortgage loans. This week, mortgage application volume dropped 6.5% from the past week to the lowest level in 22 years: Refi applications declined 6% and purchase apps decreased 7%, according to the MBA.
The housing market is incredibly rate-sensitive, consequently, demand again is pulling back, according to Khater.
“The material decline in purchase activity, combined with the rising supply of homes for sale, will cause a deceleration in price growth to more normal levels, providing some relief for buyers still interested in purchasing a home,” he said.
Overall, mortgage rates are following the Fed’s inflation-fighting monetary policy. Minutes from the Fed’s meeting earlier this month showed policymakers emphasized the need to quickly raise interest rates to bring consumer prices closer to the Fed’s 2% goal.
The central bank raised the interest rate by a half percentage point on May 4 and unveiled a plan to reduce its $9 trillion asset portfolio. The Fed also has repeatedly signaled it will continue to raise rates in 2022 and into 2023.
According to Freddie Mac, the 15-year fixed-rate purchase mortgage averaged 4.38% with an average of 0.8 point, up from last week’s 4.32%. The 15-year fixed-rate mortgage averaged 2.23% a year ago.
The 5-year ARM averaged 4.12%, with buyers on average paying for 0.3 point, up from 4.04% the week prior. The product averaged 2.55% a year ago.
Economists expect the tightening monetary policy to reduce origination volume significantly in 2022 and 2023. The Mortgage Bankers Association expects loan origination volume to drop more than 35% to about $2.5 trillion this year, from last year’s $4 trillion. Meanwhile, the MBA expects 5.93 million home sales in 2022, compared to 6.12 million in 2021.
Fitch Ratings, however, in a May 31 report said the pace of falling mortgage originations has surpassed its expectations and it is likely to fall short of the industry forecasts by MBA and Fannie Mae.
Purchase mortgage rates this week averaged 5.81%, compared to 5.78% the week prior, when rates rose 55 basis points, the largest 1-week increase since 1987, according to the latest Freddie Mac PMMS index.
A year ago at this time, 30-year fixed rate purchase rates were at 3.02%. The PMMS, a government-sponsored enterprise index, accounts solely for purchase mortgages reported by lenders during the past three days.
“Fixed mortgage rates have increased by more than two full percentage points since the beginning of the year,” said Sam Khater, Freddie Mac’s chief economist, according to a statement.
However, another index showed mortgage rates declining this week.
Black Knight’s Optimal Blue OBMMI pricing engine, which includes some refinancing data — but excludes cash-out refis to avoid skewing averages – measured the 30-year conforming rate at 5.9% Wednesday, down from 6.03% the previous week. The 30-year fixed-rate jumbo was at 5.33% Wednesday, a decline from 5.46% the week prior, according to the Black Knight index.
Mortgage rates tend to move in concert with the 10-year Treasury yield, which reached 3.16% Wednesday, down from 3.33% a week before.
According to Khater, the combination of rising rates and high home prices likely is the driver behind recent declines in existing home sales.
“However, in reality, many potential homebuyers are still interested in purchasing a home, keeping the market competitive but leveling off the last two years of red-hot activity.”
Mortgage application volumes rose 4.2% from the past week, propelled by borrowers’ demand for purchase loans. Refi applications decreased 3% from the prior week, and purchase apps ticked up 8%, according to the Mortgage Bankers Association (MBA).
According to Freddie Mac, the 15-year fixed-rate purchase mortgage averaged 4.92% with an average of 0.9 point, up from last week’s 4.81%. The 15-year fixed-rate mortgage averaged 2.34% a year ago.
The 5-year ARM averaged 4.41%, with buyers on average paying for 0.3 point, up from 4.33% the week prior. The product averaged 2.53% a year ago.
Purchase mortgage rates this week averaged 5.81%, compared to 5.78% the week prior, when rates rose 55 basis points, the largest 1-week increase since 1987, according to the latest Freddie Mac PMMS index.
A year ago at this time, 30-year fixed rate purchase rates were at 3.02%. The PMMS, a government-sponsored enterprise index, accounts solely for purchase mortgages reported by lenders during the past three days.
“Fixed mortgage rates have increased by more than two full percentage points since the beginning of the year,” said Sam Khater, Freddie Mac’s chief economist, according to a statement.
However, another index showed mortgage rates declining this week.
Black Knight’s Optimal Blue OBMMI pricing engine, which includes some refinancing data — but excludes cash-out refis to avoid skewing averages – measured the 30-year conforming rate at 5.9% Wednesday, down from 6.03% the previous week. The 30-year fixed-rate jumbo was at 5.33% Wednesday, a decline from 5.46% the week prior, according to the Black Knight index.
Mortgage rates tend to move in concert with the 10-year Treasury yield, which reached 3.16% Wednesday, down from 3.33% a week before.
According to Khater, the combination of rising rates and high home prices likely is the driver behind recent declines in existing home sales.
“However, in reality, many potential homebuyers are still interested in purchasing a home, keeping the market competitive but leveling off the last two years of red-hot activity.”
Mortgage application volumes rose 4.2% from the past week, propelled by borrowers’ demand for purchase loans. Refi applications decreased 3% from the prior week, and purchase apps ticked up 8%, according to the Mortgage Bankers Association (MBA).
According to Freddie Mac, the 15-year fixed-rate purchase mortgage averaged 4.92% with an average of 0.9 point, up from last week’s 4.81%. The 15-year fixed-rate mortgage averaged 2.34% a year ago.
The 5-year ARM averaged 4.41%, with buyers on average paying for 0.3 point, up from 4.33% the week prior. The product averaged 2.53% a year ago.
We’re starting to get a better picture of how COVID-19 affected the housing market, with the National Association of Realtors’ existing-home sales report showing a big drop in May.
It’s based on completed transactions, including both single-family homes and condos/townhomes, meaning these were likely under contract during the full lockdown seen a month or so ago.
Home Sales Hit Hard by COVID-19
Existing home sales fell 9.7% in May from a month earlier per NAR
Off a sizable 26.6% from April 2019 as traditional home buying period disrupted by virus
Housing supply increased but likely only due to artificially slower sales pace
Home prices were down slightly month-to-month but still registered 99th straight YoY increase
As expected, existing home sales were off 9.7% from April, falling to a seasonally-adjusted annual rate of 3.91 million in May.
That’s a whopping 26.6% below the 5.33 million sales pace seen in May 2019, though there are some pretty serious extenuating circumstances at play here.
NAR chief economist Lawrence Yun noted that the sales completed last month “reflect contract signings in March and April.”
The true test on the existing home sale front will be a month or two from now, assuming the country remains open post the worst of COVID-19.
The lack of home sales also seemed to boost unsold inventory, which rose to a 4.8-month supply based on the current sales pace, up from 4.0 months in April and 4.3-months in May 2019.
Again, the caveat here is current sales pace, which was affected by the coronavirus pandemic, so it too needs to be taken with a grain of salt.
If home buyers get out there again, the sales pace could accelerate dramatically and push inventory much lower once again. As it stood, it was already quite low pre-COVID-19.
Despite lower sales volume, properties only remained on the market for 26 days in May, seasonally down from 27 days in April and the same as May 2019.
Additionally, 58% of the homes that sold last month were on the market for less than a month.
In other words, lower volume aside, homes were moving quickly from list to pending to sold, which bodes well for buyer appetite.
With regard to home prices, the median existing-home price was $284,600 in May, down slightly from $286,800 in April, but up 2.3% from May 2019 ($278,200).
That marked the 99th straight month of year-over-year gains, so let’s hope they get to 100 next month. Would be a shame not to…
Pending Home Sales Up 33%, New Listings Rise 36%
Redfin said pending home sales (those currently under contract) rose 33% in May
New for-sale listings up 36% from April to May, but still 20% below February levels
Home sales fell 30.8% in May from a year ago, with dramatic declines in most expensive metro areas
Median home prices relatively flat from a year ago despite a big drop in expensive property sales
It appears we may have hit bottom in terms of COVID-19 impact, at least for now, and it wasn’t so bad, assuming those missed home sales were merely delayed.
We’re already seeing signs that may be the case, with Redfin reporting that pending sales were up a sizable 33% in May after two monthly declines.
Unlike existing home sales, pending sales are a key indicator for home sales that are expected to take place in the near future, namely during June and July.
At the same time, new listings increased 36% from April to May, so assuming those also get scooped up relatively fast, sales should see a pretty quick recovery.
And they probably will, given median days on market barely budged in May despite a global pandemic.
Again, this hinges on the economy and the country staying open, and not closing up again, as has been discussed in some circles given the recent case increases in states like Arizona, Florida, and Texas.
Redfin said home prices increased a mere 0.5% on a year-over-year basis in May to a median $299,400, the smallest annual increase since home prices bottomed in February 2012.
However, they only believe it was much lower than the 4.7% gain in April because fewer homes sold in the most expensive metro areas tracked by the company.
For example, home sales declined between 38% and 58% from a year earlier in the 12 metro areas with median prices above $450,000 (seven of them are in California).
In San Francisco and San Jose, where the median price exceeds $1 million, home sales dropped more than 55%.
This tells us home prices held up pretty well in the face of COVID, another good sign for the housing market that continues to roll on, fueled by record low mortgage rates.
Interestingly, the median off-market Redfin Estimate was up both on a month-to-month basis and annual basis.
The only real worry is home prices might increase too much and become out of reach for first-time home buyers, something Yun lamented about while urging more new construction.
He might be right, given the fact that home purchase applications are also reportedly surging.
Quicken Loans CEO Jay Farner told Fox that the company is experiencing a record number of home purchase applications to go along with their record mortgage refinance applications which might explain their rumored IPO.
He said purchase apps are up significantly over last year’s numbers, so it appears many prospective buyers are getting their ducks in a row so they don’t miss out.
Now we just need to be concerned about that second wave, which could stop the housing market in its tracks if consumers lose confidence and no longer believe the worst is behind us.
If it doesn’t come, surging home prices might usher in another era of unaffordability and creative financing, followed by another housing crisis. But that might still be a few years out.
Then quickly reversed course over the past two days
Now 30-year fixed mortgage rates are pricing closer to 3.5%
Because lenders are too busy to offer lower prices
And just like that, they disappeared…
After hitting all-time lows just over a week ago, mortgage rates bounced markedly higher over the past two days.
This despite the continued stock market rout, the emergency Fed rate cut, and the worsening coronavirus, which was just classified as a pandemic.
If anything, you’d think 30-year fixed mortgage rates, which were hovering around 3% early in the week, would be closer to 2.5% today, given all the continued bad news.
But here’s the problem. When you flood the market with anything, mortgage-backed securities in this case, it gets harder to find a buyer. Or at least a buyer willing to pay a high price.
And the only way you can really entice buyers is to lower the price, and when we’re talking about bonds, that raises the yield.
That higher yield means higher mortgage rates for consumers, which explains the massive increase in interest rates over recent days.
If you consider the fact that the 10-year bond yield was as low as 0.32% on Monday, and has since bounced to 0.87%, it also makes more sense.
Call it an overreaction, followed by a quick counteraction, granted the 10-year yield is still in record low territory.
Extreme Ups and Downs Are the New Normal
All financial markets are experiencing big swings at the moment
The stock market has plummeted 20% in the past month
And the 10-year bond yield has fallen to an all-time record low
Mortgage rates fell quickly and have since recovered, but it might be short-lived
Just like the stock market, which plummeted the most on record, only to rise the most on record the next day, only to fall again massively, mortgage rates are exhibiting some crazy movement.
As Matthew Graham over at MND aptly pointed out, mortgage rates rose at their “fastest pace in years.”
He noted that it was the quickest jump “since the 2 days following the 2016 presidential election,” and one of the few two-day periods in which long-term fixed mortgage rates moved more than three-eighths (0.375%) of a point.
In short, many lenders were offering an interest rate of 3% flat on the 30-year fixed for top loan scenarios on Monday, and now 3.5% to 3.625% is the norm.
Put another way, we’re back to where we were a month ago. At that time, mortgage rates were hovering around all-time lows, but weren’t quite there yet.
Whether things will be even worse tomorrow remains to be seen, but given the sharp increase, we could see a slight improvement tomorrow, or perhaps just flat rates while the market rebalances itself.
Will the Record Low Mortgage Rates Come Back?
Mortgage lenders raised rates because they got too busy
They have little incentive to lower rates or even advertise at the moment
This will rebalance the market and eliminate many borderline refinance applications
The good news is it will also lead to lower rates once the dust settles and business slows down
Now the next logical question – will mortgage rates return to record lows, given all the uncertainty in the world, and the fact that the 10-year yield is still under 1%?
While nobody can say for sure, if I had to guess, I’d say it’s more probable that rates will head back toward 3% (and below) versus the holding where they are or moving higher.
Similar to the stock market, which was nearing 30,000 a month ago before plummeting 20% to around 23,500 today, we are in a downward cycle when it comes to interest rates.
Sure, the Dow has mustered some big one-day gains as it has marched lower, but the trend has been pretty darn clear – LOWER.
The same should go for mortgage rates too, but if mortgage advertising is any indication lately, it’s going to take some time for lenders to budge.
You can also kiss the idea of a 0% mortgage rate goodbye while you’re at it.
There’s just so little incentive for them to lower mortgage rates at the moment – they’re already slammed and probably understaffed, so why lower the price?
Remember, it’s better to apply for a mortgage when things are slow.
The good news is lenders are already solving the oversupply problem by raising the price of mortgages.
So all those homeowners who were on the cusp of a mortgage refinance making sense, rule of thumb or not, may have withdrawn their applications, assuming they didn’t lock in their rate.
Even a swing of an eight to a quarter point is enough to eliminate the incentive of refinancing, so a move from 3% to 3.625% will surely rule out millions of homeowners.
This might be enough to right the supply/demand imbalance and eventually allow mortgage lenders to lower rates again.
Whether that takes a week, two weeks, or two months is another question. But for me, the trend is clearly lower.
And if you use the 10-year bond yield as a guide, that puts the 30-year fixed firmly below 3%.
Read more: Quicken Loans CEO Doesn’t See the 30-Year Fixed Falling Below 3%