Homeowners have built up record equity, and it’s nearly triple the amount of mortgage debt. This extra cushion gives homeowners more security, making the market much more stable than it was in 2008.
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According to a recent analysis by John Burns Research and Consulting (JBREC), there may be a "magic" mortgage rate that could spark renewed activity in the housing market. For 12 consecutive years, mortgage rates remained below 5%, enabling many homeowners to lock in favorable terms. Currently, 86% of mortgage holders have rates under 6%. JBREC's survey suggests that the 5.5% mortgage rate represents the tipping point that could release the “ lock in effect ”. Additional findings:
72% of buyers would not accept a rate above 5.5%
22% of buyers would accept a rate higher than 6%
66% of consumers believe a “normal” rate is below 5.5%
88% of consumers believe…
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On Wednesday, the Federal Reserve made an unexpected move by cutting its target interest rate by 0.50 percentage points (or 50 basis points). This was the first rate cut in 1,650 days. During this time, we saw:
11 rate increases since early 2022.
Mortgage rates peak at nearly 8% in October 2023.
Existing home sales plummet to 1995 levels.
Home affordability hit a 40-year low.
This is expected to be the beginning of a rate-cutting cycle, with further reductions expected later this year and into 2025.
The Federal Reserve's decision to cut interest rates is generally positive for the housing market for several reasons:
Mortgage…
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A recent Redfin article delved into the "mortgage rate lock-in effect”, where homeowners are reluctant to sell their homes due to their advantageous low mortgage rates - which is intensifying the housing shortage. As we mentioned in July, 86% of mortgages have an interest rate below 6%, but that has been gradually decreasing over the past two years (93% in 2022, 91% in 2023, 86% this year).
Current percentage of mortgages with:
Rates Below 6%: 85.7% (down from 92.8% in 2022)
Rates Below 5%: 76.1% (down from 85.6% in 2022)
Rates Below 4%: 57.4% (down from 65.3% in 2022)
Rates Below 3%: 22% (down from 24.7% in 2022)
…
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It’s important to know how mortgage rates can affect your monthly payment. Because even a slight change in rates can have a big impact. Overall, rates have been trending down lately. So, this could be your chance to make your move a reality. Send me a message today if you want to talk about starting your search.
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Many news outlets are emphasizing a 'mortgage application surge,' but the true situation is more nuanced. Mortgage purchase applications are down 8% from last year and nearly 50% from pre-pandemic levels, reflecting weak homebuyer demand. Although the seasonally adjusted Purchase Index rose by 3.0% from the previous week, and the unadjusted Index increased by 2.0%, both still lag behind the same week in 2023 by 8.0%. Read More
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Mortgage rates fell to 6.34% on Monday, the lowest since May 2023. Today, they’re at 6.54%, still showing a notable shift from last year’s peak of 8% in October and November, which significantly affected the housing market last year. The Mortgage Bankers Association’s (MBA) Weekly Applications Survey reports that mortgage application volume has now reached its highest level since January 2024. The Market Composite Index, reflecting mortgage loan application volume, increased by 6.9% on a seasonally adjusted basis from the previous week.
The 10-year Treasury yield dipped to 3.76%, the lowest since June 2023.
The 2-year Treasury yield slid to 3.88%, raising…
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