Mortgage Rates Dip Back Down
July 20, 2023
The 30-year fixed-rate mortgage (FRM) dropped from last week’s average of 6.96% to an average of 6.78% this week, according to the latest Primary Mortgage Market Survey® (PMMS®) from Freddie Mac released Thursday.
This week’s numbers:
- 30-year fixed-rate mortgage averaged 6.78% as of July 6, 2023, up from last week when it averaged 6.96%. A year ago at this time, the 30-year FRM averaged 5.54%.
- 15-year fixed-rate mortgage averaged 6.06%, down from last week when it averaged 6.3%. A year ago at this time, the 15-year FRM averaged 4.75%.
The takeaways:
“As inflation slows, mortgage rates decreased this week,” said Sam Khater, Freddie Mac’s chief economist. “Still, the ongoing shortage of previously owned homes for sale has been a detriment to homebuyers looking to take advantage of declining rates. On the other hand, homebuilders have an edge in today’s market, and incoming data shows that homebuilder sentiment continues to rise.”
“The Freddie Mac fixed-rate for a 30-year mortgage remained elevated this week,” said realtor.com® Economic Data Analyst Hannah Jones. “After June’s relatively positive inflation data, the market’s attention has turned to the upcoming FOMC meeting. Though inflation has slowed, the level remains well above the 2% target, and investors expect the Fed to hike interest rates in pursuit of this target. While the Federal Funds rate does not directly impact mortgage rates, it installs a floor beneath the cost of borrowing, meaning mortgage rates are likely to remain elevated for the time being.
“Mortgage rates have hovered in the 6% – 7% range for the past 10 months,” added Jones. “Though home prices have softened slightly nationally, the still-high cost of borrowing means hopeful homebuyers have felt little relief. Many homeowners feel ‘locked-in’ by their current mortgage rate and are therefore choosing to hold off on listing their home for sale. As a result, after more than a year of new listings lagging behind the previous year’s pace, the number of homes for sale has tracked lower than last year’s levels for the past four weeks. In light of limited home inventory, buyers are turning to new construction, and builders are picking up the pace of construction to fill the gap.
“As markets prepare for next week’s FOMC meeting and the probable resulting interest rate hike, strong employment data and cooling inflation suggest that the economy’s progress toward stability is on the right track,” concluded Jones. “However, home shoppers are still feeling the pressure of recently-climbing mortgage rates as well as limited affordable inventory. Sellers remain hesitant to engage with today’s market, creating competition for the relatively few homes on the market in many areas. The current market dynamics are likely to persist until affordability and inventory gains are made. Despite slowing price growth nationally, some low-priced markets continue to see high levels of price growth and a quick market pace, exemplifying how much housing market dynamics vary by locale.”
Existing-Home Sales Fall 3.3% In June
In keeping with the challenges of low inventory and high home prices, existing-home sales fell 3.3% to a seasonally adjusted annual rate of 4.16 million in June, according to the National Association of REALTORS®’ (NAR) most recent existing-home sales report.
NAR’s latest data on existing homes found that year-over-year, sales fell 18.9% (down from 5.13 million in June 2022). In addition, total housing inventory was 1.08 million units, identical to May, but down 13.6% from one year ago (1.25 million). Unsold inventory sits at a 3.1-month supply at the current sales pace, up from three months in May and 2.9 months in June 2022.
Key data points:
- Total housing inventory was 1.08 million units, identical to May, but down 13.6% from one year ago (1.25 million). Unsold inventory sits at a 3.1-month supply at the current sales pace, up from three months in May and 2.9 months in June 2022.
- The median existing-home price for all housing types was $410,200, the second-highest price of all time and down 0.9% from the record-high of $413,800 in June 2022. The monthly median price surpassed $400,000 for the third time, joining June 2022 and May 2022 ($408,600).
- Properties typically remained on the market for 18 days, identical to May, but up from 14 days in June 2022. Seventy-six percent of homes sold were on the market for less than a month.
- First-time buyers were responsible for 27% of sales, down from 28% in May and 30% in June 2022. NAR’s 2022 Profile of Home Buyers and Sellers found that the annual share of first-time buyers was 26%, the lowest since NAR began tracking the data.
- All-cash sales accounted for 26% of transactions in June, up from 25% in both May 2023 and June 2022.
- Individual investors or second-home buyers, who make up many cash sales, purchased 18% of homes in June, up from 15% in May and 16% the previous year.
- Distressed sales—foreclosures and short sales—represented 2% of sales in June, virtually unchanged from last month and the prior year.
Single-family and condo/co-op sales:
- Single-family home sales decreased to 3.72 million, down 3.4% from 3.85 million in May and 18.8% from the previous year. The median price was $416,000, down 1.2% from last year.
- Existing condominium and co-op sales were at 440,000 units, down 2.2% from May and 20% from one year ago. The median price was $361,600, up 1.9% from the previous year ($354,800).
Regional breakdown:
- Sales in the Northeast grew 2% to an annual rate of 510,000, down 21.5% from June 2022. The median price was $475,300, up 4.9% from the prior year.
- In the Midwest, sales were unchanged at an annual rate of 990,000, down 19.5% from one year ago. The median price was $311,800, up 2.1% from last year.
- Sales in the South fell 5.4% to an annual rate of 1.91 million, down 16.2% from the previous year. The median price was $366,600, down 1.2% from last year.
- In the West, sales declined 5.1% to an annual rate of 750,000, down 22.7% from one year ago. The median price was $606,500, down 3.4% from last year.
The takeaways:
“The first half of the year was a downer for sure with sales lower by 23%. Fewer Americans were on the move despite the usual life-changing circumstances. The pent-up demand will surely be realized soon, especially if mortgage rates and inventory move favorably,” said NAR Chief Economist Lawrence Yun.
“Home sales fell, but home prices have held firm in most parts of the country,” added Yun. “The national median home price in June was slightly less than the record high of nearly $414,000 in June of last year. Limited supply is still leading to multiple-offer situations, with one-third of homes getting sold above the list price in the latest month.”
“Sales of existing homes dipped in June, slipping 3.3% to a pace of 4.16 million, the slowest since January,” said realtor.com® Chief Economist Danielle Hale. “As current homeowners continue to sit on the sidelines, buyers have limited new options, which is putting a damper on sales. In fact, the number of newly listed homes year-to-date trails recent years, including 2020, when pandemic-related disruptions largely delayed the home-buying season. The pace of home sales continues to exceed the four million sales low reached in January, and while it still lags year ago sales by a considerable amount, 18.9%, the gap will close in the months ahead.
“Mortgage rates in May climbed sharply after mid-month inflation data. Buyers who hustled to lock in rates are likely happy with their decision, as mortgage rates have remained relatively elevated since then. With rates still high, buyers remain cost-conscious, but a competitive market makes this challenging. The median sale price continued to decline, but the size of the drop, 0.9% from the June 2022 peak, was more modest than we’ve seen in the past three months. In fact, the U.S. median existing-home sales price of $410,200 was the second-highest price ever recorded, and only the third time in the data’s history above $400,000. Our revised 2023 outlook expects that even though conditions are favorable, home sellers will remain scarce for the rest of the year, which will keep existing-home sales roughly at their current pace.
“May’s first-ever decline in asking rents will mean some would-be first-time homebuyers continue to rent longer, and the monthly cost advantage tips further toward renting. Already, NAR found that the share of first-time home buyers dipped to just 27% in June, down from 28% in May and 30% one year ago. With individual investors or second-home buyers stepping up their pace (to 18% in June, from 15% in May), a weaker trend for rents is likely to continue,” concluded Hale.
4 Reasons Not To Always Believe Online House-Value Estimtes
Prospective homebuyers often check national brokerages online for information. It’s logical to see houses for sale with list prices. But what about the ones that are not for sale? We all look at them, as almost every house has an estimated value. But it would be good to know why the ‘what-they’re-worth’ prices listed should be taken with more than just a grain of salt.
Here are four reasons why you shouldn’t put too much stock in national website not-for-sale house-price estimates.
They are computer-generated
The estimated price of a not-for-sale house is based on an algorithm and generic data. Important information like local market conditions, current mortgage, inflation and employment rates and more, are not included. AVMs (automated valuation models) also don’t take into account details of the home.
They won’t reflect a property’s current condition
Homeowners may make improvements like kitchen or bathroom remodels that would lead to a higher property value than what is shown. Or there could be something like neglected maintenance or structural issues that dramatically lowers the value presented.
The neighborhood factor is iffy
When generating an estimate, the algorithm uses the surrounding area as part of the equation. But the same radius in miles for all houses will usually result in very inaccurate results because neighborhoods (and prices) can change from block to block, which only local expert REALTORSⓡ would know.
They are likely outdated
There is usually a disclaimer that the websites admit they’re likely off base. One such disclaimer states: ‘The estimate is based on what we currently know about this home and nearby market. It is not a formal appraisal or substitute for the in-person expertise of a real estate agent or professional appraiser.’
First Impressions Matter – Get Your Home Market Ready
If you are considering selling your home, there are several things you can do now to make the best first impression on potential buyers. Taking the time to declutter, deep clean and make simple repairs will show buyers that your house and property are well-maintained and ready for a new owner.
Increase Curb Appeal
A clean and attractive exterior is crucial, as it creates a positive first impression and sets the tone for the rest of your home. Spruce up your outdoor space by removing overhanging tree limbs and branches, applying a fresh coat of exterior paint, mowing the lawn, adding plants or flowerpots, power washing, painting patio and deck areas and repairing or replacing damaged screens and doors.
Take Care of the Obvious
While grooming your outside space, you’ll need to address any glaring concerns. Check and fix loose or damaged roof shingles, bricks, wood and trim. Clean out septic systems to ensure your property is in top working condition. With these projects completed, you’ll also reduce maintenance stress while your home is listed.
Make the Interior Shine
Create an inviting and welcoming atmosphere by cleaning, decluttering and organizing your home, which shows buyers that there’s plenty of space. Freshen up your indoor areas by painting walls, removing outdated rugs or furniture, polishing kitchen appliances and deep cleaning hardwood floors, sinks, tiles and showers.
Remove the Clutter
You’ll also want to check that any clutter is cleared by organizing closets with shelves and storage bins, storing everyday items like paper and toys in cabinets and closets, and removing personal items like picture frames and your kid’s tee-ball trophies. While you’re thoughtfully arranging, you could take advantage of this opportunity to get rid of any paperwork that is no longer needed while gathering documents potential buyers may need to review in in a handy folder. These papers could include HOA information, appliance manuals, warranty information, records of repairs (especially if it involved electrical, plumbing or contractor issues) and the survey of your property.
By increasing the outdoor appeal, creating a warm, appealing indoor space and gathering all the information upfront before listing your home for sale, you’ll be well on your way to smooth, stress-free transaction – and seal the deal with a great first impression.
Article courtesy of Jennifer McGuire
Are you Putting your Faith in Zestimate?
Excerpts from Inman Article
Admit it, you have Googled your property address or gone to Zillow to see how much your home is worth. Haven’t we all?
Everyone probably has checked online to see what the online AVMs (automated valuation models) say their home might be worth at one time or another.
It may be good to understand that any AVM, in and of itself, is not an effective way to value a property.
Although one AVM for any given property might be close to reality, there is usually a wide disparity when comparing a few AVMs side-by-side.
What is an automated valuation (AVM)? It’s a fast and easy way for homeowners or prospective buyers to get a ballpark value for any given home.
AVMs are programs that automatically analyze various data points to produce an estimated value of a specific property. Online visitors can visit an AVM website (the most famous is Zillow’s “Zestimate”), type in a property address, and the AVM engine will use linear and multiple regressions to form an estimated market value.
The engine’s algorithm typically uses the age of a home, current market values, area trends, historical data, specific features of the property, and so on.
Although it’s well-known that AVMs (automated valuation models) can be speculative and inaccurate, it’s a good idea to examine what the various websites are listing as the current value for your home.
In our market, three readily available AVMs are Zillow, realtor.com and Homes.com. If one of those three does not provide a value, you can also go to a site such as Redfin. The easiest way to get their valuation is to type the address into Google.
Under the results, you should quickly find the three different websites — click on each, and, in most cases, the AVM will pop up right away. If, for some reason, the site does not show up in the Google search, go directly to each site and type in the address. The AVM should pop up on the front page unless the home is new or has just sold.
In most cases, there is a noticeable difference between the valuations. Many people are shocked to see the spread between the numbers, but the data can be misrepresentative based on the property’s actual condition and upgrades.
AVMs by any website can fluctuate dramatically in a short period based on what is happening in the local market. Here is an example from a home that recently sold:
As an example, the initial Zestimate for a home was $1,434,031. Based on the level of amenities, it was listed the home at $1,599,950. The very next day, the Zestimate jumped to $1,691,056.
Once the home was in contract one week later, the AVM jumped again to $1,806,823.
In the meantime, realtor.com showed the value at $1,615,734. With 11 offers, the home sold for $2 million, and 60 days later, the Zestimate showed the value to be $2,080,800 while Redfin placed the value between $1,720,000 – $1,890,000.
Good to note:
Any AVM will be averaging home values in any given neighborhood based on historical sales — not property condition or the level of amenities of any specific home.
AVM valuations are speculative and therefore cannot be used to accurately value a home. For this reason, appraisers will never use AVMs to provide market values for any given home.
The difference between an AVM and a CMA
The best and most accurate valuation for any given property will be a Realtor’s comparative market analysis (CMA). Instead of simply looking at overall market trends and a home’s configuration, a CMA takes into account property conditions, amenities, upgrades, condition of the overall neighborhood and other specifics that an AVM cannot effectively address.
When preparing the CMA a good agent will include all of the pictures from every property included in the CMA. Using all the images helps you see quickly and understand the difference between the various homes, and it further accentuates why AVMs are unreliable.
Pricing
Any real estate agent on any given day can promise you that they can get you a specific price. Unfortunately, this is simply not true. The number you see in your agents CMA is the recommended list price if you chose to go on the market today.
If you are not going on the market today, your agent will rerun the numbers the day before your home goes “live” to ensure that it is priced correctly for that market at that time.
Even then, the final price you receive is going to be contingent on:
- The level of your amenities
- The amount of property preparation you are willing to do
- Professional staging
- The quality of the photos and other listing media
- The state of the market when you go live
- Most importantly, the number of buyers who are currently out looking for a home like yours (once it hits the market) and what they are willing to pay for it
As you can see, there are a vast number of variables that will impact your selling price.