Home Equity Continues to Soar

Despite the pandemic’s impact on the economy, home prices are not only still holding strong, but continue to show signs of strength.  A recent Home Equity Report from CoreLogic showed that US homeowners that have mortgages, which accounts for about 63% of all properties, have seen the equity in their home increase by 10.8% from Q3 this year versus Q3 last year. This increase represents a total equity gain of about $1 trillion and breaks down to about $17,000 per homeowner.  This also marks the largest average gain in equity since the beginning of 2014.  
Frank Nothaft, Chief Economist for CoreLogic said, “Over the past year, strong home price growth has created a record level of home equity for homeowners.” He continued to say, “The average family with a home mortgage loan had $194,000 in home equity in the third quarter. This provides an important buffer to protect families if they experience financial difficulties, and is one reason for the generational-low in foreclosure rates reported in September."

Going forward, CoreLogic forecasts that homes will continue to appreciate next year by 1.9%.  Other analysts are forecasting even stronger gains closer to 5-6%.  Home price appreciation is certainly supported by the fact that supply levels are around 20% less than where they were last year, even with demand levels at all-time highs.

Whether you want to tap into your equity for home renovations, refinance to get rid of mortgage insurance, or purchase a home to take advantage of appreciation going forward, this is a great time to speak with an Advisors Mortgage Loan Officer who can help you work the numbers and come up with a plan.


FHFA and FHA Raise Conforming Loan Limits for 2021!

For the fourth year in a row, the Federal Housing Finance Agency (FHFA) has raised the conforming loan limit for Fannie Mae and Freddie Mac in nearly every part of the US.  The four-year increase follows a ten-year period where the FHFA kept the conforming loan limit the same.   The decision to continuously raise loan limits over the past four years is a direct result of rising home values.  The US Census Bureau and the US Department of Housing and Urban Development recently announced their New Home Sales Report, which indicated the median home sales price in October was $330,600.  As a result, the maximum conforming loan limit will increase in 2021 from $510,400 to $548,250.
In addition, loan limits will also increase in “high cost areas.”  These are areas where 115% of the local median home value exceeds the baseline loan limit.  The new ceiling loan limit in these areas is calculated as 150% of the conforming loan limit, which comes to $822,375.  The previous high cost ceiling was $765,600.

The Federal Housing Administration (FHA) has also raised their 2021 loan limits in most of the US to $356,362, up from $331,760 in 2020.  In approximately 65 high-cost US counties, FHA is raising their loan limit to match FHFA at $822,375, up from $765,600.  

Call your Advisors Mortgage Loan Officer today to discuss the current market in more detail and to learn what you qualify for. 




Housing Continues to be on Fire
The New Home Sales report was just released by the U.S. Census Bureau and the U.S. Department of Housing and Urban Development.  This report showed a lot of strength in the national housing market for the month of October.  
This report showed that there were 999,000 houses sold, which is a slight drop of 0.3% from September.  This drop was on the heels of a 4.5% revision to September’s number.  Without this revision, we would have seen a positive monthly increase of new home sales.  Also, when comparing to October of last year, sales are up by about 41.5%!  The median home price was up by 2.5% to 330,000, but remember this doesn’t tell you appreciation, this just tells you the number that is in the middle of all the homes sold. A better read into appreciation would be from the Case Shiller Home Price Index, which was recently released at 7%.   In regards to the supply of new homes, inventories were very low, and there were only 278,000 “new” homes for sale, which represents a supply of more than three months at the current sales rate.  Imagine how many more sales there would be if the supply was even slightly higher!  This report, like many other recent housing reports, most certainly points to a very hot housing market.


October Home Sales Crush Expectations!

According to the National Associations of Realtors (NAR), sales of existing homes in October crushed market expectations, rising 4.3% versus September and 26.6% annually, to a seasonally-adjusted, annualized rate of 6.85 million units.  The 26.6% annualized rate marks the highest rate since February 2014.  Lawrence Yun, NAR’s chief economist, stated, “It’s quite amazing, even if home sales were to go down to 6 million, I would be happy.”  Yun went on to say, “With news that a Covid-19 vaccine will soon be available, and with mortgage rates expected to hover around 3% in 2021, I expect the market’s growth to continue into 2021.” 

In addition, strong demand for housing continues to push home prices higher and higher.  The medium existing home price in October was $313,000, up 15.5% from October of 2019.  Last month’s national increase marks 104 straight months of year-over-year gains.  With those two extremely positive reports, interest rates remaining at all time lows, and home builder confidence soaring to meet buyer demand, the housing market is as strong as it has ever been, despite economic challenges during this pandemic.

Call your Advisors Mortgage Loan Officer today to discuss the current market in more detail and to learn what you qualify for.



Interest Rates Still Historically Low, but Will They Go Up?

According to the Mortgage Bankers Association, interest rates are about 1% lower than where they were this time last year.  These lower rates are one of the factors causing purchase volume to be up 16.5%, and refinance volume up 67% from a year ago.  

As we can see, mortgage volume is on fire, especially with refinances.  But what happens if rates increase slightly?  According to Selma Hepp, Deputy Chief Economist at CoreLogic, “Rising interest rates likely will create affordability concerns for some prospective home-buyers, given that home price appreciation has picked up in pace in recent months.” But that shouldn’t stop the housing market’s momentum, as better employment prospects could lead to more home sales in 2021.  How much do increasing rates affect affordability?  The principal and interest on a $250,000 loan at 3% equals about $1,054.  Now say that interest rates revert to where they were about a year ago and increase by 1% back to 4%.  That same loan now will have a principal and interest payment of $1,193, which is an increase of about $139 more per month. Using a 20% debt-to-income ratio for the 3% loan, the borrower’s income would need to be around $63,000 to get this loan.  When comparing to the 4% loan which is 1% higher in rate, their income would have to increase not by the same 1% but much less, closer to around a quarter of a percent (0.25%) to make up for the $139 extra per month. Affordability is typically found using monthly payments and monthly income to generate debt to income ratios.

It is important to work the numbers with a true mortgage advisor and discuss affordability regularly if you are planning on refinancing or purchasing.  Some borrowers can afford more then they think just by working the numbers.   


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