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If you’re in the market for an affordable house to own, you might be debating whether it’s cheaper to build your own home or buy an existing home.

For those who have attempted a large-scale renovation on an older home, it may feel as if it would have been more cost-effective to start from scratch with new construction. But many costs go into building your own house that you must factor into the decision of whether to build or buy.

Let’s look at some aspects of building vs. buying an existing home. The outlook may vary depending on where you live and the type of house you want. You’ll also need to consider how you plan to pay for the home, and even if you are willing to consider off-grid living to reduce costs.

Key Takeaways

  • Building a house can be more expensive and time-consuming than buying an existing home due to costs like land purchases, construction, and potential delays, though it offers customization and energy efficiency benefits.
  • Buying an existing home is generally cheaper and quicker, providing location flexibility and mature landscaping, but may involve compromises in design, competitive markets, and potential maintenance issues.
  • Financing options for building include construction loans, personal loans, and land loans, while mortgages are typically used for purchasing existing homes.

Home and Land Values in Your Area

What’s the price of land in the area where you want to live? How much would it cost to purchase a fully constructed house (called “existing construction”) with the features you need and the size you want? Are empty lots available to build where you would like to live?

If you live in or are moving to a major metropolitan area or a suburb of a large U.S. city, it may be harder to find land and, if you do, the land will cost more.

On the other hand, if you move to a less populated area, you may be able to find several acres or more for under $20,000 or less.

When It’s Cheaper to Buy an Existing Home

Finding affordable land represents the first step toward being able to build a home for less than it would cost to buy. But if land goes for a premium in the area you wish to buy, it may be cheaper to buy an existing home.

Larger homes, obviously, cost more to build than smaller homes. If your main goal is to secure a house of your own for the lowest possible price, you can save money building a home in a less congested area where land is cheap.

It’s unlikely you’ll find a house for sale anywhere that doesn’t need a lot of work for less than $100,000. However, you may be able to pick up a plot of land and build a starter home like an A-Frame or a prefab, or even a tiny house under 400 square feet.

Types of Houses You Can Build

The cost of your house construction project depends on the house you choose. Here are some affordable examples.

Tiny houses – Tiny houses are typically under 400 square feet. They simply cost less to build than any other style of conventional home. They require less land, fewer materials, and take less time to construct.

Tiny houses may start at $10,000 and go up to $120,000 or more, which is the price of some regular homes. The average price for a tiny house is around $30,000 to $40,000.

Consider jumping on the tiny home trend to build your starter or retirement home.

A-Frame houses – A-frame houses represent a basic style of construction with slanted roofs. They have a loft bedroom rather than a full-fledged second story.

Prefab Homes – You can buy the parts for a pre-fab home and have it put together, or assemble it yourself, on your property. Some pre-fab homes, called modular homes, come as individual rooms and pieces that connect. Each module includes plumbing, electrical, and everything else you need to build a house already installed.

Some pre-fab home kits come as individual panels, and you’ll need to add the rest of the components. You can purchase pre-fab homes for as little as $50,000 or less on eBay.

Paying for Your Home: Construction Loan, Personal Loan, Land Loan, or a Mortgage

Unless you have cash reserves lying around, you’ll likely need financing to purchase your land or home.

If you do have the cash saved, once you do the math, you’ll probably realize it’s smarter to take out a mortgage or loan at a low interest rate. Then, you can invest your money at a higher rate of return.

That leaves you with several options to pay for your house or its construction.

Construction Loan

A construction loan acts as a line-of-credit rather than a conventional loan. The loan term usually lasts one year. In that time, you borrow the money you need as you need it. When you make your loan payments, you only pay interest on the money you borrowed.

Even though you only pay interest on the money you use, construction loans typically have higher interest rates than home mortgages. That’s because the land purchase is the only collateral available until the house is complete.

A construction loan can fund the land, building materials, and even provide funds to pay contractors to build your home. Your lender will want to see your construction documents and budget for the project. They’ll want to approve each step of the building process to ensure construction stays on track.

Once the home construction is complete, you can take out a conventional mortgage, which you can use to pay off the high-interest loan.

Personal Loan

If you’d rather not deal with the hassles of a construction loan, showing documentation to your lender, and taking out a mortgage after a year, consider a personal loan. The better your credit score, the lower your interest rate on an unsecured personal loan will be.

Personal loan terms tend to range from two to 10 years.

If you have cash reserves or assets that would cover the cost of the loan, you may want to take out a secured personal loan, using your cash or investments as collateral. You may be able to get approved for a secured personal loan at a much lower interest rate.

Land Loan

If you want to purchase land that doesn’t have power lines or public water running to the property, you may consider a land loan. Most lenders expect you to put at least 50% down on this type of purchase because it’s considered a high-risk investment.

Once you use the land loan to purchase the land, you may be able to finance construction through a personal loan. Or you can wait until you pay off the land loan, have utilities installed, and then get a construction loan.

Mortgage Loan

The best way to finance the purchase of an existing house is usually through a mortgage loan. These loans tend to have very low interest rates, especially compared to the loan options listed above. You may even be able to secure an FHA loan with as little as 3.5% down if you’re a first-time homebuyer.

Connect Utilities or Live Off the Grid?

There are a few more choices to make when it comes to building your own house or buying an existing home: What kind of utilities will you need?

Existing Construction

Existing construction, of course, comes already connected to sewer systems (or may include a cesspool septic system) and electricity. It already has home heating and cooling systems. And it’s probably fairly easy to run a cable television and broadband internet connection from the street to your house. At the very least, you can connect to satellite TV and internet services.

At most, it will cost a small connection fee to turn on the electricity and internet service to your home. Sewer service typically costs less than $100 per year.

New Construction

On the other hand, new construction has none of these things. You’ll need an electrician to run all the wiring. Then, you’ll need to connect to “the grid,” which means you’ll be getting electricity from your utility provider.

Even if you decide to install solar panels, which cost an average of $13,142 (after tax credits), you’ll need to pay to have them connected to your electric company. Your electric company monitors usage and charges you if your solar panels don’t produce all the energy your household uses.

Septic systems can cost from $3,000 up to $10,000, according to HomeAdvisor. Heating and cooling systems vary widely, too, depending on the type of system you prefer.

Building Your Home Off-the-Grid

If you think you can save money by living off the grid, you might be surprised. You’ll still need to invest in some sort of energy source, whether solar panels or wind turbines.

You can build a well for water and use composting toilets to avoid being connected to city water. But, unless you want to dramatically change your lifestyle, off-grid living may not be the best way to save money on your new house.

Some areas don’t permit off-grid living, so it may be harder to finance your new house if you can’t show plans for utility hook-ups.

Buy or Build a House: Pros & Cons

With so much to consider when deciding whether to buy or build a house, it can help to get a clear idea of the major pros and cons of each. We’ve listed some of the details below to help you make your decision.

Pros of Buying an Existing Home

  • Less costly: Buying a house is usually significantly less expensive than building one, especially as land loans can come with higher interest rates and down payments. And while home buying is an increasingly expensive endeavor these days, labor costs and construction materials are also increasing just as rapidly.
  • Quick move in: Most buyers of existing homes will be able to move within a few weeks, compared to the potential wait of over a year for new construction homes.
  • Location flexibility: Buying an existing home makes it much easier for you to live where you want. If you want to build a house and still live in or near the city, you’ll likely have to fork out a small fortune for the land rights. Home buying makes it much easier, and cheaper, to settle in the suburbs.
  • Established landscaping: Buying an existing property usually means you’ve got access to a mature landscaping, fully grown trees and a well established garden. For most homeowners, a beautiful garden is a must, but this can take many years to achieve with a new build.

Cons of Buying an Existing Home:

  • Competitive market: As we’re still very much locked in a seller’s market, the stress of trying to find and land the perfect home can make it a challenge. Home buying in today’s real estate market requires graft, patience and determination, not to mention a robust budget.
  • Aesthetic compromise: The intensity of the real estate market today means you’ll likely have to make some compromise when buying a house, as some elements of the design or style may not be to your tastes.
  • Maintenance & repairs: In a competitive market, you may also have to settle for a home that needs some repair. Depending on your initial budget, you might have to factor in funds for upgrades, and in general, you’re more likely to need to splash out on maintenance sooner than if you build a house.
  • Less sustainable & efficient: As a rule of thumb, buying a house is likely to mean that you’ll have a less sustainable home than if you had built one. Depending on how old an existing home is, you might have to budget for energy efficiency upgrades.

Pros of Building a House:

  • Customization: Building a house comes with the obvious benefit of customization, at least to some degree. The chance to build your dream home, and have full direction of the construction process, is a huge motivator for many.
  • Less competition: Another significant benefit of building your own home is avoiding the intense competition of the housing market. Once you own the land, the only major competition you need to consider is for construction supplies and labor.
  • Lower maintenance costs: A brand new home should be in the best condition possible, compared with any existing homes. You won’t have to worry about replacing major appliances or any significant home repairs in the near future.
  • Healthier & more sustainable home: A new build will be more energy efficient, meaning lower energy costs and a more sustainable home. There is also the benefit of not needing to worry about things like lead paint or possible asbestos in your home.

Cons of Building a House:

  • Expensive: Building a house is almost always more costly than buying an existing home. This is partly because you may need to obtain a land loan, as well as a loan to cover construction costs, and then a mortgage once the house is complete.
  • Hidden costs & delays: Most construction projects require us to expect the unexpected, and building a house is no different. Delays and unexpected costs are par for the course, and in today’s climate with supply chain issues and increased construction costs, the final cost of your new construction home can quickly soar.
  • Stress & time: It would be naive to underestimate the potential toll of both stress and time when building a house. With so much more work to do in terms of financing, budgeting, designing and decorating, the home building process will most likely be very stressful at least for a while, especially if you’re hoping to be finished on time.
  • More Work: Building a house means more involved effort on your part, as you’ll have to work with various professionals, approve every step of the process, review contracts and manage fluctuations in your budget along the way.

Bottom Line

Ultimately, you can save money building a home, especially if you choose a simple home style and are willing to do most of the work yourself. Plus, you’ll get the satisfaction of knowing the creative role you played in your home—and that everything in the house is brand new.

But if you’re not considering a small house in a rural area where land is cheap, you may find it’s more cost-effective to buy an existing house. Then, you can spend time and money over the years to turn it into your dream home.

Source: crediful.com

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From 2010 to 2024, the reverse mortgage industry sought to allow remote reverse mortgage counseling in the state of Massachusetts, citing an insufficient number of actual counselors and logistical challenges for senior clients.

But as time dragged on and state lawmakers seemed unwilling to seriously entertain the proposal, the ravages of the COVID-19 coronavirus pandemic helped to change the dynamics of the situation.

RMD has been covering the situation for much of that time period, including the exacerbation of the pandemic and the urgency it created for the business in the state, up through the various efforts to pass a law allowing for a permanent exception that would permit remote counseling.

Early days

In late April 2010, the Massachusetts State Senate introduced legislation requiring in-person reverse mortgage counseling.

Sponsored by the Senate’s Joint Committee on Housing and Urban Development, the law prohibited the origination of a reverse mortgage unless the borrower “affirmatively opts in writing for the reverse mortgage and has received certification from a counselor with a third ­party organization,” and in person, on the suitability of the loan.

<img decoding="async" width="450" height="450" data-attachment-id="461043" data-permalink="https://www.housingwire.com/articles/the-long-road-to-remote-reverse-mortgage-counseling-in-massachusetts/georgedowney_federalsavingsbank2023/" data-orig-file="https://www.housingwire.com/wp-content/uploads/2024/05/georgedowney_federalsavingsbank2023.jpg" data-orig-size="450,450" data-comments-opened="1" data-image-meta=""aperture":"0","credit":"","camera":"","caption":"","created_timestamp":"0","copyright":"","focal_length":"0","iso":"0","shutter_speed":"0","title":"","orientation":"0"" data-image-title="georgedowney_federalsavingsbank2023" data-image-description="

George Downey, regional SVP at The Federal Savings Bank in Braintree, Mass.

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George Downey

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George Downey

The bill ultimately passed on May 4 of that year under unanimous consent. Sponsored primarily by then-Sen. Susan Tucker (D), she told outlet ItemLive that the situation for reverse mortgages in the state amounted to a “Wild West” for seniors.

She recounted that “she’d heard story after story of sad people selling annuities and convincing people to take on reverse mortgages at a huge commission,” according to RMD’s reporting on the law’s passage by publication founder John Yedinak.

In subsequent interviews, George Downey — a leading reverse mortgage professional in the state and longtime advocate for relaxing the strict in-person counseling requirement — explained to RMD that the legislation came about from good intentions: A community activist sought to ensure that more seniors would be protected from potentially being “duped” into getting a loan they may not need.

’Logistically difficult’

Industry reactions at the time were swift. Originators were concerned about how the law would limit business, and a communications representative for the Massachusetts Bankers Association highlighted issues that people in the state would later say came to fruition. “The proposed change would be logistically difficult,” Yedinak reported in May 2010.

“Especially for people in rural areas, and for those with limited mobility, [the rep] said in-person counseling could be a challenge. And he said the organizations that do the counseling would have to ramp up their staffing to handle more in-person contact.”

In August 2010, the restriction was tightened further to apply to anyone meeting the label of a “low-income senior.” At the time, the National Reverse Mortgage Lenders Association (NRMLA) told RMD that of the 3,600 counseling sessions in Massachusetts in 2009, “approximately 130 of those being face-to-face, equaling a 96 percent opt-out rate for face-to-face counseling,” RMD reported. “Based on a recent ‘mystery shopping’ experiment, the association found only eight agency-approved face-to-face counselors in the entire state.”

That number would dwindle further in the following decade to roughly five. While industry advocates were successful in delaying the requirement to 2014, that would not improve the trajectory of available counselors. 

COVID-19 changes the dynamics

After an attempt to delay the implementation of the rule to 2016 failed, the rule went into full effect in 2014. Stories of business challenges immediately followed.

“[W]e have this mandated face-to-face counseling but there are many seniors not able to get the counseling, and so we continue to fight the fight,” Downey told RMD in 2015.

While former Massachusetts Rep. Paul Brodeur (D) had introduced legislation to roll back the in-person requirement shortly after its passage, legislation to that effect never materialized. At that point, Brodeur handed the issue off to his successor in the state’s 32nd Middlesex, Rep. Kate Lipper-Garabedian (D), who took office in 2019.

As the requirement persisted into early 2020, the onslaught of the COVID-19 pandemic — and its ability to cause more serious illness for seniors — would directly clash with a slew of mandates that restricted in-person business from taking place. The combination of the in-person reverse mortgage counseling requirement and the mandates restricting in-person business effectively stalled any reverse mortgage business in the state.

“Of course, everything was shut down,” Downey said in an interview with RMD. “People were working remotely and the mandate for in-person counseling was effectively neutralized, because people were not able to go out and to do it.”

Legislative action relaxing the in-person requirement on a temporary basis came swiftly, but it still wasn’t quite enough to do away entirely with the requirement that created logistical challenges for seniors in getting to their counseling appointments. It would still be four years before a permanent solution was placed onto the books.

Road to a permanent fix

Paul Brodeur was elected mayor of Melrose, Massachusetts — situated in the Greater Boston metropolitan area — in November 2019. Prior to that point, he had filed versions of a bill relaxing the in-person requirement in each of the two-year legislative sessions between 2010 and 2018. He handed the issue of a permanent legislative fix for the in-person requirement to his successor, Lipper-Garabedian.

<img decoding="async" width="500" height="500" data-attachment-id="459652" data-permalink="https://www.housingwire.com/articles/remote-reverse-mortgage-counseling-now-permanently-permitted-in-massachusetts/katelippergarabedian_mass/" data-orig-file="https://www.housingwire.com/wp-content/uploads/2024/05/katelippergarabedian_mass.jpg" data-orig-size="500,500" data-comments-opened="1" data-image-meta=""aperture":"0","credit":"","camera":"","caption":"","created_timestamp":"0","copyright":"","focal_length":"0","iso":"0","shutter_speed":"0","title":"","orientation":"0"" data-image-title="katelippergarabedian_mass" data-image-description="

Massachusetts Rep. Kate Lipper-Garabedian (D), who helped pass the bill permanently allowing remote reverse mortgage counseling in her state.

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Massachusetts Rep. Kate Lipper-Garabedian (D)

” data-medium-file=”https://www.housingwire.com/wp-content/uploads/2024/05/katelippergarabedian_mass.jpg?w=300″ data-large-file=”https://www.housingwire.com/wp-content/uploads/2024/05/katelippergarabedian_mass.jpg?w=500″ src=”https://www.housingwire.com/wp-content/uploads/2024/05/katelippergarabedian_mass.jpg?w=500″ alt=”Massachusetts Rep. Kate Lipper-Garabedian (D), who helped pass the bill permanently allowing remote reverse mortgage counseling in her state.” class=”wp-image-459652″ srcset=”https://www.housingwire.com/wp-content/uploads/2024/05/katelippergarabedian_mass.jpg 500w, https://www.housingwire.com/wp-content/uploads/2024/05/katelippergarabedian_mass.jpg?resize=150,150 150w, https://www.housingwire.com/wp-content/uploads/2024/05/katelippergarabedian_mass.jpg?resize=300,300 300w” sizes=”(max-width: 500px) 100vw, 500px”>

Massachusetts Rep. Kate Lipper-Garabedian (D)

She filed a bill seeking a permanent fix in 2020, but over the next few years, temporary relief was favored over a permanent solution. The process was long, involving meetings between industry stakeholders within the state, legislators and trade groups — including NRMLA and the Massachusetts Mortgage Bankers Association (MMBA). 

“What the pandemic did was approve the concept,” said Brett Kirkpatrick of The Federal Savings Bank, another key advocate for the permanent legislation. “Which means the sky didn’t fall when seniors were only counseling by telephone; it still worked. We had accumulated a track record and the counseling agencies were instrumental.”

These agencies surveyed their clients about their own preferences, which proved to be a major contributor to getting permanent changes over the finish line last month, Downey and Kirkpatrick said.

Not only can clients more easily attend their counseling sessions, but family members — often a reverse mortgage borrower’s most trusted advisers — could also attend them, no matter where in the world they might be, and thereby strengthening a consumer protection argument.

Passage relaxes the requirement

After a series of temporary extensions for years following the onset of the pandemic — which saw their expirations again threaten the existence of reverse mortgage business within the state multiple times — the final extension expired at the end of March 2024. This served as the catalyst for a final sprint to get some kind of permanent fix codified in legislation.

<img decoding="async" width="1166" height="1142" data-attachment-id="461051" data-permalink="https://www.housingwire.com/articles/the-long-road-to-remote-reverse-mortgage-counseling-in-massachusetts/brettkirkpatrick_federalsavingsbank/" data-orig-file="https://www.housingwire.com/wp-content/uploads/2024/05/brettkirkpatrick_federalsavingsbank.jpg" data-orig-size="1166,1142" data-comments-opened="1" data-image-meta=""aperture":"0","credit":"","camera":"","caption":"","created_timestamp":"0","copyright":"","focal_length":"0","iso":"0","shutter_speed":"0","title":"","orientation":"0"" data-image-title="brettkirkpatrick_federalsavingsbank" data-image-description="

Brett Kirkpatrick, HECM VP at The Federal Savings Bank in Braintree, Mass.

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Brett Kirkpatrick

” data-medium-file=”https://www.housingwire.com/wp-content/uploads/2024/05/brettkirkpatrick_federalsavingsbank.jpg?w=300″ data-large-file=”https://www.housingwire.com/wp-content/uploads/2024/05/brettkirkpatrick_federalsavingsbank.jpg?w=1024″ src=”https://www.housingwire.com/wp-content/uploads/2024/05/brettkirkpatrick_federalsavingsbank.jpg?w=1024″ alt=”brettkirkpatrick_federalsavingsbank” class=”wp-image-461051″ srcset=”https://www.housingwire.com/wp-content/uploads/2024/05/brettkirkpatrick_federalsavingsbank.jpg 1166w, https://www.housingwire.com/wp-content/uploads/2024/05/brettkirkpatrick_federalsavingsbank.jpg?resize=150,147 150w, https://www.housingwire.com/wp-content/uploads/2024/05/brettkirkpatrick_federalsavingsbank.jpg?resize=300,294 300w, https://www.housingwire.com/wp-content/uploads/2024/05/brettkirkpatrick_federalsavingsbank.jpg?resize=768,752 768w, https://www.housingwire.com/wp-content/uploads/2024/05/brettkirkpatrick_federalsavingsbank.jpg?resize=1024,1003 1024w” sizes=”(max-width: 1166px) 100vw, 1166px”>

Brett Kirkpatrick

“For the last three months, we’ve been full-court press in trying to get this, and it finally worked,” Kirkpatrick said. “Thanks to Kate and other representatives, we were able to get [the permanent fix] attached to a budget bill. A budget bill is always the vehicle of choice because that’s a must-pass.”

The legislation including the language to relax the in-person requirement passed in the final days of April and was soon signed into law by Gov. Maura Healey (D). It included a retroactive provision allowing for remote counseling in the period between the expiration of the last extension and the beginning of permission for remote counseling sessions.

Downey and Kirkpatrick expressed gratitude to all of the involved parties that helped make it possible, including NRMLA, MMBA, the Division of Banks and members of the Massachusetts Legislature, including Lipper-Garabedian.

To get such legislative and lobbying work done, “the stars have to align,” Kirkpatrick said. “You have to have the person, the moment, and you have to be there and strike when the iron is hot.”

Source: housingwire.com

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Hedging, Community Lending, Verification, CRM, Warehouse Products; NAR Reports on Q1; FHA and USDA Changes

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Hedging, Community Lending, Verification, CRM, Warehouse Products; NAR Reports on Q1; FHA and USDA Changes

By:
Rob Chrisman

Wed, May 8 2024, 11:25 AM

After a very long travel day filled with odd, time-sucking delays, when I arrived in Birmingham I was happy to hear Alabama on the Uber car’s radio singing, “My Home’s in Alabama.” “That my home’s in Alabama, no matter where I lay my head. My home’s in Alabama, Southern born and Southern bred.” Home prices in Alabama have tended to mimic many parts of the United States: In March 2024, home prices in Alabama were up 1.1 percent compared to last year, selling for a median price of $273,500 with the number of homes sold being down 8.9 percent year over year, per Redfin. (This morning NAR reported that more than 90 percent of metro markets posted home price gains in the first quarter of 2024: latest quarterly report.) There’s ample inventory, with over 22,000 homes for sale in Alabama, up nearly 11 percent year over year. A chunk of those are in Huntsville, 100 miles to the north of Birmingham, Alabama’s most populous city and the home of NASA’s Marshall Space Flight Center. (Found here, this week’s podcasts are sponsored by Matic, the digital insurance marketplace built for the mortgage industry. Matic integrates home insurance shopping into the lending and servicing experience, allowing customers to shop carriers and find a policy in minutes. Create a new revenue stream that boosts customer happiness today! Hear an interview with Matic’s Ben Madick on the insurance landscape and trends impacting both potential homebuyers and existing homeowners.)

Lender and Broker Software and Services

Do you love your technology partner so much that you’d tattoo its name on your arm? A top producing team at VanDyk Mortgage resorted to “tattoo” tactics when management replaced Floify with a competing mobile-first POS. The new system’s shortcomings in functionality and vendor support impacted the productivity and satisfaction of VanDyk’s team, particularly affecting branch managers and loan officers who struggled with the platform’s limitations and the vendor’s responsiveness. The result? A “baring” of arms and quick return to Floify, which in addition to preventing an LO mutiny saves VanDyk $300,000 annually in operating costs compared to the interim system. Read the full case study and see pics of the team’s “tats.”

Compliance Review Roadmap for Financial Institutions! Regular compliance testing and monitoring helps you get out in front of potential issues, identifying areas that might not normally receive enough attention. When you embrace compliance reviews, your entire institution becomes involved in building a culture of compliance. This whitepaper offers a how-to guide for implementing a compliance review process at your financial institution. Included in this roadmap is: Step-by-step instructions for building a compliance testing program; A checklist of what to assess in compliance monitoring; A breakdown of the roles and responsibilities for each department and division; The importance of conducting a root cause analysis; Challenges encountered in implementing compliance reviews and how to overcome them; and Solutions for automating your compliance review process. Download the free whitepaper now.

PlainsCapital Bank National Warehouse Lending, a subsidiary of Hilltop Holdings (NYSE: HTH), understands the importance of efficiency when it comes to meeting mortgage lenders funding requests. “Express Funding” is how we help our customers reduce the time needed to get loans funded quickly. Express Funding allows our customers to submit multiple loans for funding in one simple data upload, whether it is one loan or 100 loans. We have a growing list of 5,000+ approved closing agents, No Doc funding requirements and funding turn times averaging under 20 minutes! As a well-capitalized financially strong banking partner we give our customers confidence in an uncertain market. If you attending the MBA Secondary Conference in NY or the TMBA Annual Conference in Austin and interested in learning more about PlainsCapital Bank National Warehouse Lending please contact John White or Brent Amos.

Usherpa’s SmartCRM and Relationship Engagement Platform has been vetted by The Mortgage Collaborative (TMC), one of the largest mortgage cooperatives in the country, and is now a Preferred Partner to TMC’s growing network of mortgage lenders. According to TMC’s 2024 “Pulse of the Network” survey of 2,000 industry executives, finding new opportunities to grow volume and market share ranked first among the top critically important issues facing mortgage lenders. Having a CRM platform that is powerful but easy to use with guaranteed adoption is crucial. “TMC prides itself on having best in class preferred partners that help our lenders lower their cost of origination, improve their customer experience, and retain their best Loan Officers so that they can easily compete with even the largest lenders,” said Melissa Langdale, TMC’s President and COO. “We are thrilled to add Usherpa as a Preferred Partner.”

During the loan process, expedited turn times are crucial. Traditional methods of obtaining tax transcripts using a 4506-C form are slow and susceptible to rejections by the IRS due to minor discrepancies between the submitted form and what is on file at the IRS, thereby extending the verification process. Xactus, a leader in verification solutions, offers a streamlined alternative, Tax TranscriptX. Providing real-time IRS data feeds, this innovative tool enables fast and easy income verification, with the IRS rejecting less than 3 percent of the requests. Endorsed by the Government-Sponsored Enterprises (GSE), this solution empowers lenders to accelerate loan closures by furnishing tax transcripts within minutes rather than days. Lenders can use Xactus’ technology to streamline workflows, boost profits, and close loans right away. For more information, email Xactus. To stay up to date on its industry innovations, follow Xactus on LinkedIn.

Wholesale and Correspondent Products

Attention all TPO and wholesale lenders: Don’t miss out on “The Wholesale Lending Sales Machine” webinar hosted by OptifiNow and Lender Price on May 15th at 10 am PT. The webinar will discuss how wholesale lenders are finding success in today’s challenging market by equipping their account executives with technology tools that are proven to generate more submissions and fundings. Make sure to register for this webinar today!

“Visio Lending is breaking records with a relentless focus on improving our Broker Experience. We are the nation’s leader in Non-QM Investor DSCR loans for buy and hold SFR rentals with nearly a decade of experience and over $2.8 billion in originations. No-DTI, 30-year terms, rate buy downs, free 45-day rate locks; I/O and Sub-1 DSCR options available. Now choose your own title company (including on refinances). Through our top-notch Broker Program, brokers are able to earn up to 2 points YSP, and 5 points total. Visio Brokers can count on a designated Account Executive and in-house processing.”

“Citi Correspondent Lending remains committed to responsible and sustainable growth with a focus on expanding our Community Lending platform. We’ve continued to gain momentum in these areas as illustrated by the 126 percent increase year-over-year in non-delegated Agency production and April’s 22 percent month-over-month increase in our proprietary HomeRun program production. We’re excited to discuss all that Citi offers now and what’s on the horizon at the upcoming Secondary and Capital Markets Conference. Reach out to your Citi Account Executive or our National Client Services Team to schedule time to talk with us.”

Government Program Updates

The lion’s share of locks continues to be headed Freddie & Fannie’s way, but there is a sizeable chunk that are either non-Agency (non-QM, jumbo, bond programs spring to mind) or are FHA, VA, and USDA. Let’s see what’s happening in that latter category.

FHA’s Mortgagee Letter (ML) 2024-08 further extends its foreclosure moratorium for borrowers with FHA-insured mortgages in Maui County, Hawaii. This extension, which runs through August 4, 2024, is effective immediately.

Mortgagee Letter (ML) 2024-07 strengthens FHA’s existing ROV process as part of HUD’s commitment to strengthening safeguards against unlawful discrimination in residential property valuations as outlined in the Property Appraisal and Valuation Equity (PAVE) Interagency Task Force. This update is the result of FHA’s consideration of the feedback received on its January 2023 proposed policy posted to its Single Family Drafting Table, and subsequent engagement with stakeholders and other federal agencies, including the Federal Housing Finance Agency (FHFA), to identify policies that would support a consistent industry-wide framework of minimum standards for the ROV process.

Updated information on SFH Section 502 Direct Funding was posted in USDA Rural Development SFH Bulletin.

Revisions that impact the AmeriHome USDA Guaranteed Rural Housing Program Guide are available in AmeriHome Mortgage Announcement 20240403-CL.

Newrez is updating its Government and Conforming loan underwriting guidelines, details are available in announcement 2024-024 and announcement 2024-025.

Capital Markets

With little in the way of economic releases this week or next until April CPI a week from today, investors continue to focus on Fed Chair Powell’s post-FOMC comments, potential Fed rate cuts in the latter half of the year, and the softer than expected April payrolls print. The MBS market is also busy digesting April agency prepayments, which were released late Monday, where speeds increased much less than expected. In reaction to the reports, UMBS30 and GNII rolls were mixed in mostly small moves.

Yesterday brought bland remarks from Minneapolis Fed President Neel Kashkari and some supply hitting the front end of the curve with a $58 billion 3-year Treasury auction that was received with good demand. Internationally, there was a policy hold from the Reserve Bank of Australia and a better-than-expected March Retail Sales report from the Eurozone.

Today’s domestic economic calendar kicked off with mortgage applications increasing 2.6 percent from one week earlier, according to data from the Mortgage Bankers Association’s Weekly Mortgage Applications Survey. Sweden’s Riksbank was out with their latest monetary policy decision before the open. Later today brings wholesale inventories and sales, a Treasury auction of $42 billion 10-year notes, and remarks from three Fed speakers: Vice Chair Jefferson, Boston President Collins, and Governor Cook. We begin the day with Agency MBS prices little changed from Tuesday’s close and the 10-year yielding 4.48 after closing yesterday at 4.46 percent; the 2-year is at 4.83.

Employment

“Loan officers! Discover the radius advantage. Are you navigating a market that’s forgotten the value of loyalty? At radius financial group, we’re rewriting the script with our MLO Partnership-Proposition (MPP). We understand the industry’s pulse and the need for a genuine partnership—not just a platform to process loans. As lenders focus on consumers, we concentrate on you, the heartbeat of our business. You’re not just a number here; you’re the face of our brand, co-branded for success. We’re committed to investing in you, providing a stable home where your talents are nurtured and your book of business flourishes. For confidential inquires please contact Carla Herrera (781-742-6500).

Tired of having outdated news on your website or a stale newsletter? A skilled writer has some extra bandwidth and is available to produce weekly, monthly, or as-needed mortgage-related content for lenders on their website, email marketing or digital advertising. Reach out to Dustin Hobbs.

Carrington Mortgage Services has hired Steven Winokur to serve as VP, Marketing, Third-Party Origination using his “significant expertise in marketing strategy, brand development, marketing communications and digital marketing” to quickly build on existing marketplace momentum for Carrington’s diverse non-QM offerings. Congratulations!

Planet Home Lending has hired 20+ year vet Paul Walker to be Chief Financial Officer. “Paul will guide our financial strategy, leading Planet’s integrated platform to continuously deliver efficient, innovative solutions and services to consumers, business partners, and clients,” said Michael Dubeck, CEO and President of Planet Financial Group, parent of Planet Home Lending.

Flagstar Bank has promoted Rich Hoffman to senior vice president and head of TPO lending. Congratulations!

 Download our mobile app to get alerts for Rob Chrisman’s Commentary.

Source: mortgagenewsdaily.com

Apache is functioning normally

The cost to buy a home has reached historic highs in the U.S. — the median price of a home is $420,800, according to the Federal Reserve Bank of St. Louis — and housing and mortgage costs are increasingly turning into a November election issue. 

Home shoppers today need to an annual income of $114,000 in order to comfortably afford a typical home in the U.S., according to Redfin, nearly double what was needed to afford a typical home in 2020. That figure is far above the 2022 median household income of $74,580, according to the Census Bureau. 

Higher monthly payments are driven by higher home prices as well as significantly higher interest rates. Mortgage interest rates, which dipped to an historic low of 2.65% on a 30-year fixed mortgage in 2021, have soared beyond 7%, higher than they’ve been since 2001. Interest rates are set by the independent Federal Reserve, and President Joe Biden has insisted on the Fed’s independence. The Federal Reserve has been raising interest rates since 2021 in order to combat stubborn inflation. 

smaller, entry-level homes, several experts agree.

Once interest rates are removed from the picture, “then you’re left focusing mainly on the supply shortfall,” said Jim Parrott, fellow at the Urban Institute and former Obama White House economic adviser. 

The housing market has seen a severe shortage of smaller starter homes, Parrott said. Builders, he said, are incentivized to build large, often mansion-like homes, which more easily turn a profit. 

“The cost of building larger homes tends to be quite high, and it’s easier to recoup those costs if you’re making big, expensive homes,” Parrott said. 

The federal government needs to “make the math for building homes at the bottom of the market more favorable” for developers, Parrott suggested. And Congress can do this with the tax code. One approach would be to give a tax cut to any builder who constructs a residence for a first-time home buyer at below the median home price, Parrott said. 

“You need to provide some sort of tax benefit for building homes in the parts of the market where we need them the most,” Parrott said. 

But getting this divided Congress to work together on something like this would be challenging, Parrott said. 

“I’m afraid that the legislative environment right now just isn’t conducive to this sort of big, bipartisan effort,” Parrott said. “Hopefully after the election we’ll see a reboot that provides a more hopeful window.”

Withhold funding from localities that don’t change zoning laws

Most of the control over zoning lies with state and local governments. And states have been working to overhaul zoning to ease restrictions on denser residential construction. But the federal government isn’t entirely powerless on zoning. 

Parrott said the federal government has used a carrot approach to encourage localities to rezone in favor of denser housing, but now he thinks maybe it’s time to use a stick. For instance, any federal funding for communities could be conditioned on how zoning decisions are made. Communities receive substantial financial support from the Department of Housing and Urban Development (HUD), the Transportation Department and other agencies for projects, Parrott noted. 

“If federal policymakers were to condition even a little bit some of that funding on whether or not local decision-making is supportive of or prohibitive of more density,…then you could begin to change things at the local level in a way that would really matter,” Parrott said. 

Such a move would be almost certain to trigger strict opposition from localities and unions. But more states have already been enacting legislation to supersede local zoning rules, said Alex Horowitz, director of housing policy at The Pew Charitable Trusts. Horowitz said nine states have passed laws allowing accessible dwelling units or ADUs — like small, independent, mother-in-law suites — on homeowners’ properties. 

Sell federal land to use for housing

“The federal government owns hundreds and hundreds of millions of acres, and we’re not talking about the National Parks here,” said Edward Pinto, co-director of the American Enterprise Institute’s Housing Center. 

But that’s a proposal that Congress would need to authorize. 

It has been tried. Sen. Mike Lee’s HOUSES Act of 2022 would have approved the sale of federal land to states and localities for below-market rates for housing projects. The federal government owns two-thirds of the land in Lee’s home state of Utah, and the gap between median household income and median home cost is largest in the West, according to HUD. 

But his bill went nowhere. The Bureau of Land Management, which oversees federal land, said in written Senate testimony that it would be forced to “sell land without sufficient evaluation of the values to the public or to future generations, or sufficient compensation to the American taxpayer.”

The sale of unused land could also attract opposition from environmentalist groups, though sometimes that can be overcome. In March, Washington Gov. Jay Inslee signed a law that will allow that state’s Department of Natural Resources (DNR) to transfer some of its property to localities to build affordable housing. 

Washington state GOP Rep. April Connors, who introduced the bill, noted that that the DNR had 7,000 acres of land that was unusable for timber harvesting because it was too close to developed land. Building housing on it could ease the shortage of homes in Washington, Connors noted in a statement, pointing out that the state has the “fewest housing units per household in the nation and nearly half of renters spend a third of their income on rent.”

Improve consumer access to financing for manufactured housing 

Manufactured homes are factory-built residences built after 1976 — formerly known as mobile homes — that can be placed on land. The average new manufactured home sold for $126,600 in November 2023, according to the Census Bureau. 

But loans are harder for homebuyers to secure for manufactured homes than for traditional ones, Horowitz said. And since manufactured housing usually involves shipping over state lines, the federal government plays a big role. HUD controls access to financing for manufactured homes, and rules are stricter than they are for traditional homes. 

Interest rates are typically also higher for manufactured home loans than for traditional home loans, in part because unlike traditional homes, which tend to appreciate in value over time, manufactured homes can depreciate. The structures are also viewed as riskier than conventional homes because they’re usually harder to sell on the market. Horowitz suggests HUD could make it easier for borrowers to access loans. 

Eliminate tax breaks for second (and third) homes 

Congress could increase the national housing stock over time by eliminating tax breaks for any homes that aren’t a primary residence, said AEI’s Pinto. 

Getting rid of the mortgage interest rate deduction for non-primary residences would eventually encourage many homeowners to sell, Pinto said. 

“Why should they be subsidized by the tax code,” Pinto asked. 

Without that tax break, hundreds of thousands of homes would come back onto the market as primary residences, Pinto said. 

“It would cost the federal government basically nothing,” Pinto said. “They’d actually save some money on the tax savings, and it would not increase demand at all.”

This isn’t likely to happen soon though. Such a measure would have to be passed by Congress — and many lawmakers own second and third residences. And a number of their constituents and donors own multiple homes. Realtor interest groups would oppose it, too, Pinto said.

The most Congress has done in recent years to address tax breaks for expensive residences was in 2017, when the GOP-controlled Congress capped the deduction limit for state and local income taxes, which hit coastal, heavily Democratic states like New York and California particularly hard. 

Still, eliminating the tax break for secondary homes is “low-hanging fruit,” and would increase supply and reduce demand simultaneously, Pinto said. 

Lowering interest rates probably wouldn’t lower housing costs 

Economists mostly doubt that action by the Federal Reserve to significantly lower interest rates would help much. 

“If the Fed were to cut rates in a way that allowed mortgage rates to fall to the 4% range, we would see both supply and demand increase in the housing market,” said Chen Zhao, who leads the economics team at Redfin. 

And whether home prices rise or fall would depend on what then happens to housing supply and demand. 

“If demand increases more, then prices would grow at a faster rate than they are currently,” Zhao said. “However, it’s also possible that supply would increase more because sellers have been so locked in by low existing mortgage rates. If that’s the case, then price growth could fall. I think it’s unlikely in either case that prices would fall outright.”

Would Biden or Trump’s policies help or hurt housing costs?

Former President Donald Trump hasn’t offered policy suggestions to address housing affordability yet, although he criticizes mortgage interest rates and home prices under President Biden. 

The president has proposed giving a $10,000 tax credit to first-time middle class homebuyers, and up to $25,000 to first generation home buyers. He’s also introducing a $20 billion fund that in addition to helping build affordable rental units, is meant to peel away local barriers to housing development and spur the construction of starter homes. 

Down payment assistance may help home shoppers in the near term, although the tax credit probably falls short of the traditional 20% down payment on most homes. With monthly payments at record highs, this down payment assistance would not lower monthly costs. And down payment assistance could have unintended consequences, Pinto said: “It would increase the price of entry level homes.”  

What can the White House do about high housing costs?

05:26

The effect down payment assistance or a buyer tax credit would have on the housing market is complicated in a supply-constrained market, Horowitz said.

While Trump hasn’t made specific proposals on housing, his proposals in other policy areas would likely drive home prices up, Parrott said. Mass deportations of undocumented migrants, for instance, could drive the cost of labor higher, and raising tariffs on China could drive up material costs, Parrott said. 

“The things that Trump has said relevant to housing almost all cut the wrong way,” Parrot said. 

How home costs could affect the election 

The cost of home ownership is a top concern for Democrats and Republicans, city dwellers and rural residents alike, said Parrott. Once an issue has broken through the barriers of red and blue, metro and rural, “then it changes the probability of something happening,” Parrott said. 

“Housing has found its way to the grownups table, in effect, for the first time,” Parrott said. 

And even though it’s the Fed that controls interest rates, Mr. Biden could be held accountable by voters. 

“President Biden’s reelection is closely tied to the cost of homeownership and thus, the fixed mortgage rates,” Mark Zandi, chief economist at Moody’s Analytics predicted. “The fixed rate is currently just over 7%. If it rises above 8% for any length of time, his reelection odds will fade, and if it falls closer to 6% his odds will increase meaningfully, all else equal.”

More

Kathryn Watson

Kathryn Watson is a politics reporter for CBS News Digital based in Washington, D.C.

Source: cbsnews.com

Apache is functioning normally

Iowa provides residents a quintessential American experience characterized by its rich agricultural heritage, tight-knit communities, and scenic landscapes. From the vibrant urban energy of Des Moines, with its thriving arts scene and culinary delights, to the charming small-town charm of Iowa City, home to the University of Iowa and a bustling cultural scene, Ohio offers experiences for every lifestyle. However, there are cons to living in In this state. In this ApartmentGuide article, we’ll go over the pros and cons of living in Iowa, so you can learn what life is like in “The Hawkeye State.”

Renting in Iowa snapshot

1. Pro: Affordable housing

Iowa has an affordable cost of living, with lower housing costs, utilities, and overall expenses compared to many other states. Cities like Des Moines and Cedar Rapids offer residents access to affordable housing options, with median home prices and rental rates below the national average. For example, the median home price in Cedar Rapids is $182,500, making homeownership more attainable for many Iowa residents. Rental prices remain equally affordable, with the average one-bedroom apartment renting for $776.

2. Con: Harsh winter weather

Iowa experiences harsh winter weather conditions, with cold temperatures, heavy snowfall, and icy roads posing challenges for residents. Sioux City often contend with extreme cold snaps and blizzard conditions, leading to school closures, transportation disruptions, and safety concerns. Despite efforts to maintain roadways, winter storms can make travel hazardous, meaning you’ll need extra precautions navigating the icy terrain.

3. Pro: Thriving agricultural sector

Iowa’s thriving agricultural sector plays a vital role in the state’s economy, providing abundant job opportunities and contributing to the nation’s food supply. The state’s fertile soil and favorable climate make it ideal for farming, with crops like corn, soybeans, and oats grown extensively across its vast farmland. Additionally, Iowa is a leading producer of corn and hogs, with agricultural activities deeply ingrained in its cultural identity.

4. Con: Rural isolation

Residents in rural areas of Iowa may experience feelings of isolation and limited access to services and amenities. Towns like Decorah and Carroll may lack the same level of infrastructure and resources found in larger cities, leading to challenges in accessing healthcare, shopping, and entertainment options.

5. Pro: Rich cultural heritage

Iowa has a rich cultural heritage, shaped by diverse immigrant communities and indigenous peoples who have left their mark on the state’s history. For example, the Amana Colonies preserve the traditions of German settlers, while the Meskwaki Settlement honors the heritage of the Sac and Fox Tribe of the Mississippi.

6. Con: Limited cultural amenities

While Iowa offers some cultural attractions and events, larger cities in other states may have more extensive entertainment options. Cities like Waterloo may have fewer theaters, museums, and performing arts venues compared to metropolitan areas, limiting cultural experiences for residents.

7. Pro: Natural beauty

Iowa is home to diverse natural landscapes, including rolling prairies, scenic rivers, and picturesque parks, offering residents ample opportunities for outdoor recreation and exploration. Places like Maquoketa Caves State Park and Effigy Mounds National Monument showcase Iowa’s natural beauty, attracting visitors with hiking trails, camping grounds, and wildlife viewing areas.

8. Con: Tornado risk

Within Tornado Alley, Iowa is prone to severe weather events like tornadoes during the spring and summer months. While tornado warning systems and emergency preparedness efforts help mitigate risks, residents must remain vigilant and have a plan in place to seek shelter during severe weather outbreaks.

9. Pro: Low traffic congestion

Iowa’s relatively low population density results in minimal traffic congestion, making commuting and travel more efficient and stress-free for residents. Even in urban areas like Iowa City, residents enjoy shorter commute times and smoother traffic flow compared to larger metropolitan areas.

10. Con: Seasonal allergies

Iowa’s changing seasons can exacerbate allergies for some residents, particularly during the spring and fall. Pollen from trees like birch and oak can trigger allergic reactions, leading to symptoms such as sneezing, congestion, and itchy eyes.

11. Pro: Tight-knit communities

Iowa is known for its tight-knit communities, where neighbors know each other by name and support one another through shared values and traditions. Whether in small towns like Ames or larger cities like Cedar Rapids, residents experience a sense of belonging.

12. Con: High property taxes

Methodology : The population data is from the United States Census Bureau, walkable cities are from Walk Score, and rental data is from ApartmentGuide.

Source: apartmentguide.com

Apache is functioning normally

Nestled in the heart of the Great Plains, South Dakota provides residents a unique blend of natural beauty, rich history, and tight-knit communities. Living in South Dakota means embracing a lifestyle defined by wide-open spaces, outdoor adventure, and a strong sense of community. From the city life of Sioux Falls, with its bustling downtown and vibrant cultural scene, to the historic charm of Rapid City, gateway to the Black Hills and home to iconic attractions like Mount Rushmore, South Dakota offers a diverse array of experiences. In this ApartmentGuide article, we’ll uncover the pros and cons of living in South Dakota, so you can learn what life is like in “The Mount Rushmore State.”

Renting in South Dakota snapshot

1. Pro: Expansive outdoor activities

With its diverse landscapes providing the perfect backdrop for various recreational activities, South Dakota is the perfect place for exploring. Residents can enjoy hiking in the Black Hills, fishing in the Missouri River, and camping in the state’s numerous parks and wilderness areas. For example, Custer State Park boasts scenic trails and wildlife viewing opportunities, while Badlands National Park offers unique rock formations and scenic overlooks.

2. Con: Harsh winters

South Dakota experiences harsh winters characterized by frigid temperatures, heavy snowfall, and strong winds, which can pose challenges for residents. Cities like Rapid City and Sioux Falls often contend with blizzards and extreme cold snaps, leading to hazardous driving conditions and disruptions to daily life.

3. Pro: Low cost of living

South Dakota boasts a low cost of living compared to many other states, with affordable housing, utilities, and overall expenses. Cities like Sioux Falls offer residents access to affordable housing options, with median home prices and rental rates below the national average. For instance, the median home price in Sioux Falls is $317,836 and the average rental price for a one-bedroom is $930, making housing more attainable for many South Dakotans.

4. Con: Limited entertainment options

South Dakota may have fewer entertainment options compared to more populous states, particularly in terms of nightlife, cultural attractions and restaurants. While cities like Aberdeen offer some entertainment venues and events, residents may find a lack of diversity and variety in recreational activities.

5. Pro: Strong sense of community

South Dakota is known for its strong sense of community, with residents often forming tight-knit bonds and supporting one another. Towns like  Mitchell host community events and festivals that bring people together, such as the Shrine Circus, which adds to the community spirit.

6. Con: Limited public transportation

South Dakota may have limited public transportation options, especially in rural areas, which can hinder residents’ mobility and access to essential services. For instance, Sioux Falls has a transit score of 17, meaning there is minimal transit available.

7. Pro: Low traffic congestion

South Dakota enjoys low traffic congestion compared to more densely populated states, providing residents with shorter commute times and less stress on the road. Cities like Brookings have minimal traffic congestion, making it easier for residents to navigate urban areas and access amenities.

8. Con: Sparse population

South Dakota’s sparse population density, particularly in rural areas, can contribute to feelings of isolation and limited access to services and amenities. These rural towns and communities may be far removed from major urban centers and regional hubs, leading to challenges in accessing certain amenities and services.

9. Pro: Tax benefits

South Dakota’s lack of state income tax is a significant advantage for residents, allowing them to keep more of their earnings. This tax-friendly policy attracts individuals and businesses seeking to minimize their tax burden and maximize their disposable income.

10. Con: Economic dependence

South Dakota’s economy is heavily dependent on sectors such as agriculture, tourism, and healthcare, which can make it vulnerable to economic fluctuations. Deadwood and Spearfish rely on tourism and hospitality, while towns like Mitchell and Huron depend on agriculture and agribusiness. This economic dependence can lead to job insecurity and slower economic growth.

11. Pro: Sense of adventure

Whether it’s hiking to the summit of Harney Peak, the highest point in the Black Hills, or embarking on a scenic drive along the Needles Highway, there’s always something new to discover in the state. For example, the annual Buffalo Roundup in Custer State Park allows visitors to witness the thrilling sight of hundreds of bison thundering across the prairie, showcasing South Dakota’s rugged beauty and sense of adventure.

12. Con: Feeling of isolation

Methodology : The population data is from the United States Census Bureau, walkable cities are from Walk Score, and rental data is from ApartmentGuide.

Source: apartmentguide.com

Apache is functioning normally

While mortgage rates remain higher than they were during the housing market’s booming pandemic years, Moody’s Ratings has predicted them to finally start declining over the next few years in a new report.

Exactly a week ago, the Federal Home Loan Mortgage Corporation, better known as Freddie Mac, reported that the average rate for a 30-year-fixed mortgage—the most popular among U.S. borrowers—had reached 7.1 percent, a record high for this year so far.

Read more: How to Find the Right Mortgage for You

Moody’s Ratings’ experts believe mortgage rates will come down—just not as quickly as homebuyers might wish for. The financial research company is currently estimating that mortgage rates will remain higher “than the extremely low levels during the decade of aggressive central bank stimulus that preceded the past two years” in the coming months, but will likely reach around 6 percent or somewhat less by the end of 2025.

This is good news for aspiring homebuyers who have been squeezed out of the market by skyrocketing home prices and high mortgage rates, which climbed as a direct consequence of the Federal Reserve’s aggressive rate-hiking campaign to combat the rise of inflation last year.

An aerial view shows a subdivision that has replaced the once rural landscape on July 19, 2023 in Hawthorn Woods, Illinois. Mortgage rates are likely to come down to 6% by next year, Moody’s Ratings…
An aerial view shows a subdivision that has replaced the once rural landscape on July 19, 2023 in Hawthorn Woods, Illinois. Mortgage rates are likely to come down to 6% by next year, Moody’s Ratings experts predict.

Scott Olson/Getty Images

While most analysts expect the central bank to lower interest rates this year, the Federal Reserve has so far failed to do so, as the latest data on the cost of living show that inflation remains higher than expected at 3.48 percent in March. The Federal Reserve does not directly set mortgage rates, but any rise in interest rates impacts new mortgage lending.

Read more: Compare Low Rates With the Best Mortgage Lenders

Higher mortgage rates led to a drop in demand in late summer 2022 due to the unaffordability of buying a home for many Americans; but the price correction that followed this slide in demand was rather modest. In spring 2023, prices started climbing back up across the country, as the supply of homes remained low.

While the historic shortage of homes in the U.S. can primarily be traced back to the fact that the country has under-built following the bursting of the housing bubble and the financial crisis of 2007-2008, high mortgage rates have also caused many homeowners to hold on to their homes instead of putting them on the market.

“Many U.S. homeowners have low fixed-rate mortgages that they are reticent to give up, which is constraining existing property listings and sales,” Moody’s wrote in the report.

Faced with a growing demand for new constructions and mortgage interest rate buydowns, the company’s experts expect home prices to avoid significant decline in the coming months, sliding by a moderate 5 percent this year after falling 6.6 percent in 2023.

Uncommon Knowledge

Newsweek is committed to challenging conventional wisdom and finding connections in the search for common ground.

Newsweek is committed to challenging conventional wisdom and finding connections in the search for common ground.

Source: newsweek.com