Mortgage News for 6/19/2020
NAR’s plan to help increase Black American homeownership
The National Association of Realtors laid out a five-point plan for how the real estate industry can step up to provide support in increasing the number of Black American homeowners.
While the homeownership rate for Black households has slightly improved and now sits at 44%, compared with an overall U.S. rate of 65.3%, it was only a year ago that it fell to 40.6%, which not only was the lowest level in the Census Bureau’s quarterly data going back to 1994 but was also the smallest share recorded for Black households since the 1950 decennial Census when it was 34.5%.
NAR Chief Economist Lawrence Yun said that “given the events of the recent weeks, it highlighted the progress, or lack of progress, among the African-American community,” adding that the access to homeownership is a critical source for building financial wealth.
Yun added that this list isn’t new, but rather, it’s something the association has been pushing for and highlights conversations and discussions that have been taking plans among members. The five-point plan includes:
Build more homes to increase supply: Yun stated that since the pool of potential first-time buyers is higher in the minority population, if the industry can increase supply, it could help minority households lock in a home.
Build more homes in Opportunity Zones: Yun posed the question: “Since the industry needs to build so many homes, why not build or sell homes in the Opportunity Zones to help revive some of those areas?” He added that there is even a tax break in certain geographically defined opportunity zones for developers to go in and build homes, helping the revitalization of economically-distressed areas.
Increase access to down payment assistance: While family members are stepping in to help address affordability issues, NAR stated that it is still much more difficult for Black Americans to obtain substantial financial assistance from family members. They added that increased access to federal down payment assistance based on a certain income threshold is vital, particularly for Black Americans.
Strengthen FHA’s loan program: Yun explained that many minority households are able to become first-time buyers by using FHA mortgages, making the product an important source of financing. NAR stated that shifting federal dollars to strengthen the FHA program could lower mortgage insurance premiums and monthly mortgage payments.
Expand alternative credit scoring models: NAR outlined that expanding credit scoring models to include rent and utilities payments would help Black Americans boost their credit score. Yun also shared an estimate from the National Association of Real Estate Brokers that alternative credit scoring would open up buying to 115,000 Black Americans annually.
To turn these five points into tangible change, Yun suggested that Realtors should take these points with them as they speak with their local officials, showing their leaders the ways they can help minority homeownership. This is especially important since things like housing supply is often determined at the local level when it comes to zoning rules and fees.
Yun concluded by adding that the industry needs to ensure that it doesn’t make the mistakes of the past, especially 10 years ago with subprime lending. The homeownership rate for Black households fell more than seven percentage points from 47.8% a the start of the financial crisis to last summer’s record low after some predatory lenders focused on minority communities.
“We need to ensure successful homeownership, not just temporary homeownership,” said Yun.
Source: Housing Wire 6-19-2020 Author: Brena Nath
Mortgage rates drop again as US inflation rate plummets
The 30-year fixed-rate mortgage (FRM) has hit rock bottom again as the US inflation rate – weakened by the coronavirus pandemic – fuels homebuying demand.
The 30-year mortgage rate has reached an all-time low of 3.13%, according to Freddie Mac's Primary Mortgage Market Survey. Freddie Mac Chief Economist Sam Khater said that the decline was primarily due to "declining inflationary pressures." The US inflation rate fell 0.1% in May – slower than the 0.8% downturn in March and less than what analysts anticipated – the Department of Labor reported last week.
"While the rebound in the economy is uneven, one segment that is exhibiting strength is the housing market. Purchase demand activity is up over 20% from a year ago, the highest since January 2009. Mortgage rates have hit another record low due to declining inflationary pressures, putting many home buyers in the buying mood," Khater said.
"However, it will be difficult to sustain the momentum in demand as unsold inventory was at near-record lows coming into the pandemic, and it has only dropped since then."
The 15-year fixed-rate mortgage was also lower than last week's average, down from 2.62% to 2.58%. In comparison, the 15-year mortgage rate averaged 3.25% at this time a year ago.
The 5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) inched down from 3.10% a week ago to a 3.09% average. In 2019, the 5-year ARM was 3.48%.
Source: Mortgage Professional America 6-19-20 Author: Candyd Mendoza
Bidding wars up as buyers re-emerge, housing shortage grows
Nearly half of offers written by Redfin agents for their clients faced competition in May, with buyers re-emerging as the nation’s housing recovery from COVID-19 begins.
In May, 49.4% of Redfin offers faced competition, up from 43.9% in April. And such bidding wars are likely to recur as the shortage in for-sale inventory persists, with the number of listings on the market in May 18.9% lower than the same month last year.
“Bidding wars also jumped in May because homebuyers felt they were starting to get more clarity around where the economy was headed, with cities around the nation lifting stay-at-home orders,” said Taylor Marr, lead economist for Redfin.
“This gave house hunters more confidence to compete.”
Redfin reported on its blog that “fierce bidding wars” have cropped up in recent weeks, many involving all-cash offers that are pushing home prices upward. Of the 24 metros evaluated by the real estate brokerage, 11 saw a majority of offers facing competition in May, up from eight in April.
The highest rate of competition was found in Boston, which had 64.1% of Redfin offers facing bidding wars, up from 56% in April. Dallas, at 60.8%, and Washington, D.C., at 57.0%, joined Boston in the top three, while Salt Lake City; Denver; Seattle; Austin, Texas; San Francisco; Minneapolis; Los Angeles; and Portland, Oregon, also saw competition rates above 50%.
“We’re seeing a frenzy,” said Delince Louis, a Redfin agent in Boston.
“Any home below $500,000 is receiving multiple offers; we just don’t have the supply to meet the demand.”
According to Louis, buyers are looking for increased space with the coronavirus pandemic continuing to ravage the country.
“People no longer want to share laundry or a yard,” he said.
“I listed a single-family home in Boston proper at the height of the coronavirus lockdown and it got 14 offers. ‘Home’ means more right now than ever, and we’re seeing this new sense of urgency among buyers to find places with more privacy.”
Indeed, single family homes were most likely to see bidding wars last month, with 51.5% of Redfin single-family offers seeing competition, up from 45.6% in April. In comparison, 48.7% of townhouse offers and 38.8% of condo offers faced competition.
The pandemic has apparently raised the stakes in some of the country’s more competitive metros, such as Boston and Seattle. A Redfin agent in the Seattle metro area said that
“virtually every home between $300,000 and $500,000 gets into a bidding war,” compared to about half before the pandemic hit.
Marr said while demand currently appears on the upswing, the buyer pool’s positivity ultimately rests on whether or not the coronavirus outbreak can be contained as the country continues to reopen.
“With coronavirus cases back on the rise in many states, only time will tell whether that [homebuyer] confidence is sustainable,” said Marr.
Source: Scotsman Guide 6-19-20 Author: Arnie Aurellano
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