Homeowners are keeping up with their mortgage payments or arranging for loan modifications with their service providers. But housing analysts say that while the real estate market still faces pandemic-related fears about a wave of delinquencies, higher home prices are helping to alleviate some of those concerns.

The overall delinquency rate fell to the lowest level since the onset of the pandemic, CoreLogic, a real estate data firm, reports. “However, the decrease in delinquencies masks the serious financial challenges that a part of the borrower population has experienced,” Molly Boesel, economist at CoreLogic, writes for CoreLogic Insights. “In the months prior to the pandemic, only one in five delinquent loans had missed six or more payments. In August 2021 one in two borrowers with missed payments were behind six or more months. Fortunately, large increases in home prices [have] given most borrowers a large home equity cushion, making foreclosure far less likely.”

The nation’s overall delinquency rate was 4% in August, which reflects homeowners in some stage of delinquency, considered to be 30 days or more past due on their mortgage payments, according to CoreLogic. That is a decrease of 2.6% from August 2020. Delinquencies, however, are still slightly above the early pre-pandemic rate in 2020 of 3.6%.

All states posted annual decreases in their delinquency rates in August as the employment rate continues to improve across the country. The states with the highest delinquency rates include Louisiana, Mississippi, New York, New Jersey, and Maryland, according to CoreLogic.

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Home buyers and homeowners got another chance this week to lock in historically low rates. The 30-year fixed-rate mortgage averaged 2.98%, Freddie Mac reports.

“Despite the re-acceleration of economic growth, the recent bond rally drove mortgage rates down for the second consecutive week,” says Sam Khater, Freddie Mac’s chief economist. “These low mortgage rates, combined with the tailwind of first-time home buyers entering the market, means that purchase demand will remain strong into next year. However, affordability pressures continue to be an ongoing concern for home buyers.”

Freddie Mac reports the following national averages with mortgage rates for the week ending Nov. 10:

• 30-year fixed-rate mortgages: averaged 2.98%, with an average 0.7 point, dropping from last week’s 3.09% average. Last year at this time, 30-year rates averaged 2.84%.
• 15-year fixed-rate mortgages: averaged 2.27%, with an average 0.6 point, dropping from last week’s 2.35% average. A year ago, 15-year rates averaged 2.34%.
• 5-year hybrid adjustable-rate mortgages: averaged 2.53%, with an average 0.4 point, dropping from last week’s 2.54% average. A year ago, 5-year ARMs averaged 3.11%.

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

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The rapid rise in home prices over the past year is prompting Fannie Mae and Freddie Mac to revisit the maximum size of home mortgages they will back for 2022, possibly increasing to nearly $1 million in some areas, The Wall Street Journal reports.

That would mark a sharp jump compared to this year: The government-backed enterprises currently back single-family mortgages to $548,250 in many parts of the country and to $822,375 in pricier areas, such as California and New York.

The Wall Street Journal is reporting that the baseline levels are expected to jump to about $650,000 in many areas and to just under $1 million in high-cost areas.

However, the actual caps won’t be released by the Federal Housing Administration, which oversees Fannie Mae and Freddie Mac, until Nov. 30. The new limits would take effect in January 2022.

Freddie Mac and Fannie Mae update their loan limits annually. They use a formula that factors in average home price increases nationally.

Home prices have surged since the pandemic. The median single-family existing-home sales price jumped by 16% to $363,700 in the third quarter compared to a year earlier, according to the National Association of REALTORS®.

Fannie and Freddie guarantee about half of the $11 trillion mortgage market. Neither entity issues loans directly. Instead, they purchase loans from lenders and package them into securities that are then sold to investors. Mortgages within Fannie Mae and Freddie Mac’s limits are referred to as conforming loans.

Fannie Mae and Freddie Mac’s share of the mortgage market has comprised nearly 60% of all new mortgages during the pandemic, up from 42% in 2019, according to the Urban Institute.

Some housing analysts are expressing concern over Fannie Mae and Freddie Mac increasing their threshold prices and saying the government’s role in the mortgage market is becoming too big. But others in favor of the increases say that it helps borrowers in more expensive markets to be able to afford rising prices.

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Military families with Veterans Affairs loans are losing out in the competitive housing market. Sellers are showing preference to buyers with more conventional financing or all-cash offers that they believe will offer a faster and smoother closing.

Ninety-four percent of real estate professionals surveyed said sellers are most likely to accept an offer with conventional financing over a government-backed loan, according to an April 2021 survey conducted by the National Association of REALTORS®.

But sellers may have some outdated concerns over VA loans, Caitlin Turkovich, branch manager specializing in VA loans at Union Home Mortgage in Las Vegas, told CNBC. VA loans are partly guaranteed by the U.S. Department of Veterans Affairs and offer zero percent down financing.

“VA loans are actually the easiest to qualify for if you have entitlements,” Turkovich told CNBC. Entitlements refer to the amount the VA will repay if the borrower defaults.

Turkovich says buyers using VA loans should work with a lender who specializes in VA loans to help clear up possible misunderstandings and outline specifics in buyer preapproval letters.

Also, Turkovich says VA loan buyers can take other steps to try to stand out, like by making a 5% down payment. That matches the minimum for some conventional mortgages, and it also drops the VA loan funding fee from 2.3% to 1.65%, she notes.

VA loan buyers also may make their offer stronger by offering earnest money—such as 5% versus the standard 1%, Cedric Stewart, a real estate professional with Keller Williams in Rockville, Md., told CNBC. “The largest earnest money deposit is another instrument to communicate an ease in the relationship,” Stewart said.

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Rising mortgage rates don’t seem to be scaring off home buyers. Mortgage applications to purchase a home, viewed as a gauge of homebuying demand, increased 2% last week, the Mortgage Bankers Association reported Wednesday.

Homebuilders are reporting stronger buyer traffic too after a brief lull earlier this fall, according to a recent builder sentiment report released by the National Association of Home Builders.

“Purchase applications increased for both conventional and government loan segments, as housing demand continues to show resiliency at a time—late fall—when homebuying activity typically slows,” says Joel Kan, the MBA’s associate vice president of economic and industry forecasting. “The second straight increase in purchase applications suggests that stronger sales activity may continue in the weeks to come.”

Still, purchase applications for mortgages are 6% lower than the same week a year ago, when the housing market was even more unseasonably lively.

Mortgage rates are at their highest level in more than three weeks and continued to move higher at the start of this week, the MBA reports. The average contract interest rate for 30-year fixed-rate mortgages last week rose to 3.20%, up from 3.16% the previous week, the MBA reports. As rates rise, refinance demand has plummeted and is 31% lower than the same week a year ago.

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The 30-year fixed-rate mortgage was back above 3% this week, and economists believe rates will continue to increase over the next few months.

“The combination of rising inflation and consumer spending is driving mortgage rates higher,” says Sam Khater, Freddie Mac’s chief economist. “Shoppers looking to buy a home are fueling a strong demand while ongoing inventory shortages are not improving in the presence of higher home prices. This reality illustrates the challenging situation facing the housing market.”

The 30-year fixed-rate mortgage averaged 3.10% this week, Freddie Mac reports. The National Association of REALTORS® is forecasting that rates will increase to 3.50% by the middle of 2022.

“With more homes to hit the market and higher mortgage rates, expect the housing market to slow down in 2022 but remain above the pre-pandemic level,” Nadia Evangelou, NAR’s senior economist and director of forecasting, writes for the association’s blog.

Freddie Mac reports the following national averages with mortgage rates for the week ending Nov. 18:

• 30-year fixed-rate mortgages: averaged 3.10%, with an average 0.7 point, rising from last week’s 2.98% average. Last year at this time, 30-year rates averaged 2.72%.
• 15-year fixed-rate mortgages: averaged 2.39%, with an average 0.6 point, increasing from last week’s 2.27% average. A year ago, 15-year rates averaged 2.28%.
• 5-year hybrid adjustable-rate mortgages: averaged 2.49%, with an average 0.3 point, dropping from last week’s 2.53% average. A year ago, 5-year ARMs averaged 2.85%.

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

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Existing-home sales fared strongly in October even as buyers continued to complain there aren’t enough homes on the market. Existing-home sales, which are completed transactions for single-family homes, townhomes, condos, and co-ops, increased by 0.8% in October compared to September, the National Association of REALTORS® reported Monday. Compared to a year ago, however, sales are down 5.8%.

Meanwhile, the inventory of unsold homes fell by 12% in October compared to last year. A limited supply of homes for sale remains an ongoing issue for the housing market against continued strong demand among potential home buyers.

“Home sales remain resilient, despite low inventory and increasing affordability challenges,” says Lawrence Yun, NAR’s chief economist. “Inflationary pressures, such as fast-rising rents and increasing consumer prices, may have some prospective buyers seeking the protection of a fixed, consistent mortgage payment.”

Mortgage rates remain low, although rates are rising. The 30-year fixed-rate mortgage averaged 3.07% in October, up from 2.9% in September, according to Freddie Mac.

Here’s a closer look at key housing indicators from NAR’s latest housing report:

• Home prices: The median existing-home sales price rose 13.1% year over year to $353,900. Prices climbed in all four major regions of the U.S.
• Housing inventories: Total housing inventory at the end of October was 1.25 million units, down 0.8% compared to September. Unsold inventory sits at a 2.4-month supply at the current sales pace.
• Days on the market: Eighty-two percent of homes sold in October were on the market for less than a month. Properties typically remained on the market for 18 days in October, down from 21 days a year ago.
• First-time buyers: First-time buyers comprised 29% of sales in October, down from 32% a year ago.
• Investors and second-home buyers: Individual investors or second-home buyers comprised 17% of sales in October, up from 13% in September and from 14% in October 2020, NAR reports. Investors and second-home buyers tend to make up the biggest bulk of all-cash sales, which accounted for 24% of transactions in October.
• Distressed sales: Foreclosures and short sales accounted for less than 1% of sales in October, equal to October 2020.

A Regional Look at Home Sales

Two of the four major regions of the U.S. posted month-over-month increases in existing-home sales last month. Still, home sales remain strong in most parts of the country even as housing inventories remain low.

“Among some of the workforce, there is an ongoing trend of flexibility to work anywhere, and this has contributed to an increase in sales in some parts of the country,” Yun says. “Record-high stock markets and all-time-high home prices have worked to significantly raise total consumer wealth and, when coupled with extended remote work flexibility, elevated housing demand in vacation regions.”

Here’s how existing-home sales fared across the country in October:

• Northeast: Sales dropped 2.6% in October, reaching an annual rate of 750,000. That marks a 13.8% decline compared to October 2020. Median price: $379,100, up 6.4% from one year ago.
• Midwest: Sales increased 4.2% to an annual rate of 1.5 million in October, a 6.3% decrease compared to a year ago. Median price: $259,800, up 7.8% from October 2020.
• South: Sales rose 0.4% in October, posting an annual rate of 2.78 million, a 3.5% decrease compared to last year. Median price: $315,500, a 16.1% increase from a year ago.
• West: Sales remained stable in October compared to September, staying at an annual rate of 1.31 million. That is down 5.1% from one year ago. Median price: $507,200, up 7.7% from October 2020.

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National Association of REALTORS® President Leslie Rouda Smith testified before Congress Wednesday, encouraging lawmakers to further help veterans achieve the American dream of homeownership. The hearing before the House Committee on Veterans Affairs Subcommittee on Economic Opportunity brought together lawmakers and housing industry leaders to brainstorm ways to remove barriers specific to veteran homeownership.

“NAR has a tradition of service: 12% of our members are veterans or have a spouse or partner who is a veteran. That’s about 180,000 strong,” Rouda Smith said during her opening remarks. “The overarching theme in our policy solutions is to afford every veteran the opportunity to build wealth through homeownership.”

Rouda Smith highlighted the importance of strengthening the VA Home Loan Guaranty Program during her testimony, citing its benefits for borrowers and its role in closing the racial homeownership gap. “The VA Home Loan Guaranty program offers many unique benefits, including a zero down payment requirement,” said Rouda Smith. “VA loan delinquency rates are lower than FHA loans and comparable to conventional loans. With more than 90% of veterans choosing a no down payment option, this program shows that prudent underwriting and servicing is key.

“Sixteen percent of Black Americans received financing through the VA in 2018, compared to 9% of White Americans. Clearly, hurdles faced by VA borrowers will disproportionally impact home buyers of color. And, unfortunately, many elements of the VA loan program meant to protect veterans and service members are instead keeping them on the sidelines in today’s housing market.”

Following her testimony, Rouda Smith fielded questions from members of the committee and drew on her expertise as a 36-year real estate veteran in Texas. Committee Chairman Mike Levin (D-CA) brought up the appraisal process. “There are problems with the appraisal process, which can undermine the closing if it is longer than the review period,” Rouda Smith said. “VA appraisers are hard to come by, and the best way to solve that problem is to attract more appraisers to serve them. We need to pay them more.”

During the question-and-answer period of the hearing, Rouda Smith also had the opportunity to promote NAR’s Military Relocation Professional credential, which educates REALTORS® about working with U.S. service members and their families and veterans.

4 Recommendations

Rouda Smith spoke to NAR’s efforts to improve the homebuying process for veterans and offered lawmakers four policy recommendations:

1. Provide greater flexibility to make VA loan borrowers more competitive, noting one of the VA program’s most significant disadvantages has been the limitations on fees.
2. Oppose any increase in funding fees to offset costs associated with non-housing–related expenditures.
3. Ensure veterans and service members understand the advantages of a VA home loan through more robust marketing of the program.
4. Improve the home renovation and rehabilitation program.

Along with NAR, representatives from the U.S. Department of Veterans Affairs, Veterans of Foreign Wars, Veterans United Home Loans, and American Legion were present for the hearing.

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