Buyers Should Shop Around for a Mortgage as Rates Rise

As mortgage rates surge and remain volatile, it’s becoming increasingly necessary for home buyers to shop around for a loan to find savings. According to Freddie Mac, borrowers potentially could save an average of $1,500 over the life of a loan by gathering one additional rate quote from a lender. And borrowers could save even more by gathering five different quotes from lenders—up to $3,000, Freddie Mac research shows.

Every dollar may help as housing affordability reaches a critical threshold. The typical U.S. household will no longer be able to afford a median-priced home when mortgage rates reach 5.7%, Nadia Evangelou, senior economist and director of forecasting for the National Association of REALTORS®, predicted last week.

This week, the 30-year fixed-rate mortgage pushed to an average of 5.89%. That means the typical household must now spend more than 25% of their income on mortgage payments, a level most financial experts consider to be cost-burdened, Evangelou notes.

“Mortgage rates rose again as markets continue to manage the prospect of more aggressive monetary policy due to elevated inflation,” says Sam Khater, Freddie Mac’s chief economist. “Not only are mortgage rates rising but the dispersion of rates has increased, suggesting that borrowers can meaningfully benefit from shopping around for a better rate.”

Freddie Mac reports the following national averages with mortgage rates for the week ending Sept. 8:

• 30-year fixed-rate mortgages: averaged 5.89%, with an average 0.7 point, rising from last week’s 5.66% average. Last year at this time, 30-year rates averaged 2.88%.
• 15-year fixed-rate mortgages: averaged 5.16%, with an average 0.8 point, increasing from last week’s 4.98% average. A year ago, 15-year rates averaged 2.19%.
• 5-year hybrid adjustable-rate mortgages: averaged 4.64%, with an average 0.4 point, increasing from last week’s 4.51% average. A year ago, 5-year ARMs averaged 2.42%.

Freddie Mac reports commitment rates with average points to better reflect the total upfront cost of obtaining the mortgage.

©National Association of REALTORS®
Reprinted with permission

Could Solving the Housing Shortage Help Close the Racial Gap, Too?

The nation’s housing shortage has also fueled a housing inequity problem, Bryan Greene, vice president of policy advocacy for the National Association of REALTORS®, writes in an essay included in a new report, “Housing Underproduction in the U.S.” To close the widening racial gap in ownership, housing’s underproduction must be widely addressed, he notes.

And that problem is only worsening: The Up for Growth report puts a new number on the nation’s housing shortage—3.8 million homes, more than double where it stood in 2012. The deepening inventory crisis is widening in scope, affecting urban, suburban and rural areas alike and hitting certain minority groups particularly hard, according to the report.

“Underproduction in this country has many causes,” Greene writes. “Local zoning and land-use restrictions have, for decades, proved to be one of the greatest barriers to housing construction, affordable housing and diverse communities.”

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Report Shows ‘Double Trouble’ for Housing

The report notes long historical racial inequities in access to housing, such as from past discriminatory government grants and programs, widespread exclusionary zoning policies originally designed with racial segregation in mind, racially restrictive covenants written into home deeds from the 1910s to the 1940s, redlining practices that limited access to capital investments to prospective homeowners of color, and urban renewal projects that caused displacement and gentrification. These have led to a widening racial wealth gap that has stretched over generations and has made it more difficult for families of color to qualify for loans and afford homeownership, according to the report. The gap between Black and White homeownership rates has widened over recent years. These historic and systemic constraints combined with housing underproduction and high prices make homeownership even less attainable for buyers of color, the report notes.

‘Double Trouble’

In a report released earlier this year, NAR called record-high home prices and record-low housing inventories “double trouble” for real estate, particularly for Black Americans. The report found that about half of the homes for sale would require a household income of $100,000 or more to purchase. That has placed homeownership increasingly out of reach for a number of households: 50% of Asians, 65% of Whites, 75% of Hispanics and 80% of Blacks do not earn enough income to buy these homes, the report notes.

Where to Go From Here

Housing supply and housing equity can be addressed on multiple fronts such as by expanding the types of housing available for greater income levels and a broadening focus on land use. Greene points to zoning reforms, investments in new construction, expansion of financing, and tax incentives that prompt investment in housing and convert unused commercial space to residential spaces. NAR continues to advocate for incentives in the tax code to promote zoning and land-use changes, such as tax credits or other support to communities that ease zoning rules that had been limiting the supply of homes, like minimum lot sizes and bans on multifamily housing. Such policies can not only help ease housing shortages but ultimately help expand housing opportunities to more people, Greene writes.

“For more than a half-century we’ve witnessed how land-use decisions can limit housing development, affordability and equity,” Greene notes. “We cannot stand by and lament this lack of progress. Now, it is time to act.”

Read more from Greene’s article in the “Housing Underproduction in the U.S.” report.

©National Association of REALTORS®
Reprinted with permission

Background, Credit Checks Are Fertile Ground for Lawsuits

Property managers and other real estate professionals routinely conduct background and credit checks in the course of business. Be vigilant: You could be sued for not adhering to federal and state regulations when gathering and sharing sensitive consumer data.

The latest “Window to the Law” video from the National Association of REALTORS® details your duty to comply with the Fair Credit Reporting Act when handling this data, including a consumer’s credit and rental history as well as other personal data. Aside from the federal law, state consumer data laws vary widely, says NAR staff attorney Mike Rohde. “Regardless of jurisdiction, consumer reports must only be used for a permissible purpose, which includes evaluations connected with credit, employment, insurance and rental housing,” he adds.

To prevent liability, Rohde suggests asking for written consent before ordering background or credit checks. If these reports could lead to a negative outcome, such as the denial of employment or rental housing, provide the person with notice and an opportunity to review a copy of the information, he says. Also, have a system in place to properly dispose of collected background and credit reports. A document retention policy should detail how you’ll handle it.

©National Association of REALTORS®
Reprinted with permission

Mortgage Rates Rise Again, Nearing Affordability Threshold

Mortgage rates continued inching up this week, nearing a threshold that would bring the average American household to a financial tipping point, warns Nadia Evangelou, senior economist and director of forecasting for the National Association of REALTORS®.

The 30-year fixed-rate mortgage jumped to an average of 5.66%, Freddie Mac reported Thursday. A 5.7% mortgage rate would force the typical household to spend over 25% of its annual income on a median-priced home, Evangelou notes on the Economists’ Outlook blog. Most financial experts consider homeowners to be “house burdened” at that level.

There’s a strong likelihood that mortgage rates move even higher, Evangelou writes, noting that the recent rise in the 10-year Treasury yield is influencing borrowing costs. Mortgage rates are nearly double what they were a year ago.

However, relief may be on the horizon for buyers. Fannie Mae predicted this week that the 30-year fixed-rate mortgage will drop to an average of 4.5% in 2023. Still, economists say home buyers who can afford to purchase now are better off moving forward rather than waiting for lower mortgage rates. Even if borrowing costs drop next year, high home prices likely will remain a challenge, Keith Gumbinger, vice president of the research firm HSH, recently told CNBC.

Freddie Mac reported the following national averages with mortgage rates for the week ending Sept. 1:

• 30-year fixed-rate mortgages: averaged 5.66%, with an average 0.8 point, increasing from last week’s 5.55% average. Last year at this time, 30-year rates averaged 2.87%.
• 15-year fixed-rate mortgages: averaged 4.98%, with an average 0.8 point, rising from last week’s 4.85% average. A year ago, 15-year rates averaged 2.18%.
• 5-year hybrid adjustable-rate mortgages: averaged 4.51%, with an average 0.4 point, increasing from last week’s 4.36% average. A year ago, 5-year ARMs averaged 2.43%.

Freddie Mac reports commitment rates along with average points to better reflect the total upfront cost of obtaining the mortgage.

©National Association of REALTORS®
Reprinted with permission

FSBOs Usually Soar in a Hot Market. Not This Time

The volatile housing market over the last couple of years has driven more consumers toward using real estate professionals rather than attempting to complete a transaction independently. FSBOs made up only 7% of home sales in 2021—the lowest share since 1981—according to the latest Profile of Home Buyers and Sellers from the National Association of REALTORS®. That’s a stark contrast from 15 years earlier when 12% of sellers went the FSBO route during the 2006 housing boom, the data shows.

While sellers also were in the driver’s seat last year as bidding wars exploded and list prices soared, most of them—90%—still found value in working with an agent in 2021 to get their home sold, according to NAR research. This may mean consumers are getting the message that a REALTOR® is an ally in any housing market. The top issues for which sellers are seeking your guidance, according to NAR data, are:

• Pricing a home competitively
• Marketing to potential buyers
• Negotiating a deal
• Finding a trustworthy, reputable professional

Talking Points to Convert Leads

NAR is helping you harness your influence by spotlighting the difference a REALTOR® makes to the success of a transaction at a new website, thedifference.realtor. The site emphasizes how REALTORS® abide by a strict Code of Ethics, observe standards of professionalism and are highly trained in the industry.

NAR is providing members with succinct language they can add to their websites and online profiles and bios, including static and animated social graphics, cover images, email signature banners and conversation-starters. This is intended to help provide a unified message around the value proposition of REALTORS®, NAR says. Association members are encouraged to leverage the resources about the value of the REALTOR® brand so consumers understand the REALTOR® difference.

“As members of the National Association of REALTORS®, we are unified by the REALTOR® brand and its iconic trademark ‘R,’” says NAR President Leslie Rouda Smith. “It’s important for consumers to understand that distinction. We need to engage with consumers in conversation that articulates our value.”

©National Association of REALTORS®
Reprinted with permission

REALTORS® Rush Aid to Kentucky, Missouri Flood Victims

The record-setting rains that deluged areas of Kentucky and Missouri in July caused extensive damage to homes and properties. The REALTORS® Relief Foundation has provided $1 million to help flood victims in both states stay in their homes or find emergency housing while recovering from their losses. RRF announced last month two separate $500,000 donations to the Missouri REALTORS® and Kentucky REALTORS® state associations to use toward disaster relief.

A slow-moving severe thunderstorm system crossed central Missouri on July 25, dumping a record amount of rainfall on St. Louis and St. Charles. The system continued moving into eastern Kentucky, causing a 1,000-year flood in the area that washed away homes.

“REALTORS® serve and care about the communities in which they live and work,” says RRF President Michael Ford. “When our members are mobilized to assist others who are facing difficult times, the collective impact is immeasurable. The REALTORS® Relief Foundation looks forward to assisting those who’ve experienced unimaginable loss and doing what we can to help these victims pick up the pieces of their lives.”

RRF has distributed more than $36 million in aid since 2001 toward disaster relief. It has funded over 100 disaster efforts and helped 19,000 families across 42 states and territories. The National Association of REALTORS® covers all administrative costs so all of the funds donated go directly to disaster relief causes.

©National Association of REALTORS®
Reprinted with permission