During the week ending July 10, interest rates descended to their lowest point since mid-April 2018. But prospective mortgage borrowers should not rejoice yet. While interest rates are looking more attractive, prospective home buyers are still challenged with surging listing prices ― the result of bidding wars as buyers compete for the limited properties on the market.
Refinances were the hot product among homeowners in 2017, but this product has dramatically cooled with home equity lines of credit becoming more attractive in comparison.
The housing market is being driven by millennials still invested in the American Dream. But with political turmoil in the FHA, millennials may now be blocked from the homeownership access they seek.
Here are the big stories in the mortgage market for the week ending July 10.
Published by CNBC on July 4, 2018
- Refinances were down 28% year over year, resulting in one of the weakest readings in two decades, according to the Mortgage Bankers Association Chief Economist, Mike Fratantoni.
- More than half of all homeowners have an interest rate of 4% or lower on their current mortgage, according to data from CoreLogic, so recent interest rates have not enticed homeowners back to the refinance market.
- The interest for 30-year fixed-rate mortgages with conforming loan balances decreased, settling at 4.79% ― down from 4.84% the week prior.
- Total mortgage application volume is down 13.5% compared to this week in 2017.
- Homeowners may be more inclined to take a new loan versus refinance on their current mortgage. As refinances in 2018 continue to decrease, the volume of home equity lines of credit (HELOC) is rising.
Published by MarketWatch on July 6, 2018
- For the week of July 5, Freddie Mac reported the 30-year fixed rate mortgage averaged 4.52% after a three-week slide.
- The 15-year fixed-rate mortgage also dipped.
- Investors are focusing more on the bond market and less on mortgage as the possibility of a global trade war concerns grow, according to reporter Andrea Riquier.
- Housing demand remains fierce, and analysts project home prices will continue their rapid acceleration.
- Home prices in May 2018 were up 7.1% year over year, according to a CoreLogic report.
Published by National Mortgage News on July 6, 2018
- After the great recession, millennials flocked to urban areas as urban job growth outpaced suburban by 20%.
- Millennials now comprise 29% of urban heads of households across the 50 largest metro areas, according to the Urban Land Institute.
- In addition to employment opportunities, lifestyle preferences, such as access to arts, culture and walkability, are steering millennials further into urban living.
- Apartment inventory grew in urban areas at twice the rate of suburban growth from 2010 to 2017.
Published by National Mortgage News on July 9, 2018
- Home equity spiked in 2018, but not all homeowners are taking advantage of this increase in accessible value.
- Only 1.17% of homeowners nationwide tapped into their home equity so far in 2018. According to Black Knight, the share of total equity withdrawn by borrowers is now at its lowest point since Q2 2014.
- Due to rising 30-year-fixed mortgage rates, the market is ripe for an expansion of “low-risk” home equity line of credit (HELOC) loans.
Published by Investopedia on July 9, 2018
- June has been a much better month for prospective homeowners, but many are still being shut out of the market.
- Rising property values and a shortage of available listings remain obstacles in the path to homeownership for many.
- Homebuyers are also combatting escalating listing prices as bidding wars from a lack of inventory intensify the buying process and drive negotiations.
- Mortgage rates “may have a little more room to decline over the very short term,” said Sam Khater, Chief Economist for Freddie Mac.
- The average interest rate on a 30-year fixed-rate loan dropped again – down to 4.52% – for the week of July 5, according to Freddie Mac.
- Rates will move up in the next three to six months, according to Lawrence Yun, Chief Economist for the National Association of Realtors (NAR). He encouraged buyers to act fast.
Published by HousingWire on July 10, 2018
- Homebuyers were dealt a blow Tuesday when FHA Commissioner Brian Montgomery announced it is unlikely the FHA will cut mortgage interest premiums in 2018.
- A premium cut of 25 basis points was approved in 2016 for the Mutual Mortgage Insurance (MMI) Fund by the Obama Administration to go into effect January 27, 2017. This cut was suspended by President Trump.
“FHA Commissioner: We’re Easing False Claims Act Use to Bring Big Banks Back to FHA Lending” Published by HousingWire on July 10, 2018
- Last year non-bank originations of the FHA mortgage made up 75% of total FHA volume, according to Ginnie Mae, which issues mortgage backed securities for FHA loans.
- During the Obama Administration, the Department of Justice accused a number of depositories of violating the False Claims Act, citing these lenders were knowingly underwriting mortgages for borrowers who did not fit FHA criteria.
- This ultimately resulted in billions of dollars in punitive charges, and many lenders (both banks and non-banks) removed the FHA loan form their product offerings.
- This departure left an open space for non-depositories, such as Quicken Loans to fill the void in FHA lending offers.
- “I want to try to bring back some greater certainty on the bright line to get some of the depositories back into FHA fold,” said Brian Montgomery, FHA Commissioner.
What Do Recent Mortgage Reports Mean?
Based on reports last week, despite belief that mortgage rates will be higher by the end of this year, many hopeful buyers remain on the fence in anticipation that rates will fall further. First-time homebuyers seem to be experiencing the greatest home buying challenges, as the cost of buying a home rises.
The millennial first-time buyer consumer segment is looking for loan programs that cater to affordability with low down-payment requirements. Many traditional banks and depositories left the FHA lending space after the Department of Justice enforced a number of violations of the False Claims Act. As a result, consumers turned to non-banks for the FHA loan program.
Current homeowners have decreased refinance volume due to rate increases and general market volatility. Although surges in listing prices negatively affected prospective buyers, rising home values increased equity for many owners. Home equity lines of credit (HELOCs) appear to be a viable lending option for current homeowners reluctant to refinance or sell and buy.
What Should Mortgage Marketers Do Next?
According to Realtor.com, average days on market in June 2018 was down 10% year over year to 54 days, and active listings are down 4%.
Marketers should embrace the short-term marketing mentality as it pertains to the purchase market. Position mortgage loan product offerings that boast high loan-to-value ratios and low down-payment. Also, highlight timeline efficiency in your content marketing to help prospective borrowers understand how effective your loan officers and back-office support are at actively processing mortgage loans. Consider revamping your email marketing and social media marketing campaigns to include this content as you nurture leads.
Home equity is up 16.5% compared to June 2017. The HELOC market is ripe, and most current homeowners have not yet tapped into this new equity. Review your marketing content and determine if you are positioning HELOC offerings strategically. Encourage loan officers to review their databases, and consider revisiting borrowers who were interested in refinances and did not convert.
Contact the expert team at Best Rate Referrals to gain insight on how to best tackle current market conditions and win. Looking for purchase mortgage leads or prospective HELOC borrowers? Best Rate Referrals can help. Call 1-800-811-1402 to talk with a mortgage marketing expert about mortgage lead generation strategies that meet the needs of today’s market.