Mortgage rates fell again this week amid Russia’s invasion of Ukraine, sparking uncertainty across the globe including in U.S. markets. The 30-year fixed-rate mortgage dropped to a 3.76% average this week, Freddie Mac reports.

“Geopolitical tensions caused U.S. Treasury yields to recede this week as investors moved to the safety of bonds, leading to a drop in mortgage rates,” says Sam Khater, Freddie Mac’s chief economist. “While inflationary pressures remain, the cascading impacts of the war in Ukraine have created market uncertainty. Consequently, rates are expected to stay low in the short term but will likely increase in the coming months.”

The National Association of REALTORS® echoed that sentiment. Nadia Evangelou, NAR’s senior economist and director of forecasting, wrote on the association’s blog that rates likely will rise soon as the Fed remains on course to raise its short-term interest rates in order to control inflation.

Freddie Mac reports the following national averages with mortgage rates for the week ending March 3:

• 30-year fixed-rate mortgages: averaged 3.76%, with an average 0.8 point, dropping from last week’s 3.89% average. Last year at this time, 30-year rates averaged 3.02%.
• 15-year fixed-rate mortgages: averaged 3.01%, with an average 0.8 point, falling from last week’s 3.14% average. A year ago, 15-year rates averaged 2.34%.
• 5-year adjustable-rate mortgages: averaged 2.91%, with an average 0.3 point, dropping from last week’s 2.98% average. A year ago, the 5-year ARM averaged 2.73%.

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

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Hoping to take advantage of mortgage rates that are still historically low, more Americans are pushing into higher mortgage levels to afford more expensive homes. Lenders reported that 2021 marked the highest dollar volume in jumbo loan origination’s since 2005. Jumbo loans are mortgages that exceed the loan limits of Fannie Mae and Freddie Mac.

Rates were cheaper last year, which gave buyers extra budgeting power. In 2021, mortgage rates on jumbo loans reached an all-time low.

The number of jumbo loans more than doubled in 2021 compared to the prior year, according to a new report from CoreLogic, a real estate data firm. The year-to-year comparison, however, is coming off very low numbers set in 2020 when the pandemic outbreak began in the U.S.

Still, jumbo-loan secularization in 2021 marked the largest issuance since 2007, according to CoreLogic.

Borrowers getting jumbo loans have better credit profiles than those buyers active during the housing bubble of 2005 and 2006, CoreLogic reports. Last year, borrowers with jumbo loans had an average credit score 30 points higher than that group in 2005 and 2006. Borrowers also had average loan-to-value and debt-to-income ratios that were 5 percentage points lower than those in 2005.

Jumbo loan origination’s are predicted to fall this year, however, as mortgage rates are expected to rise and home prices are forecast to moderate.

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About 87.5 million households are unable to afford a median-priced new home, according to data from the National Association of Home Builders. If the new-home market prices were to rise by just $1,000, an additional 117,932 would be priced out.

Mortgage rates also could further hamper household affordability. Many economists have predicted rates will rise over the course of this year.

NAHB researchers provide an example of how affordability erodes with rising rates: For a new home in 2022 with an estimated median price of $412,506 and a 30-year fixed-rate mortgage of 3.5%, an increase of one-fourth of a percentage point in the interest rate would price about 1.1 million households.

A table provided by the NAHB shows the number of households priced out of the market for a new home at the median price of $412,5050 based on fluctuations in interest rates.

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The percentage of homes with mortgages that have late payments or are in foreclosure has dropped to the lowest seen on record in more than two decades, according to CoreLogic’s data dating back to 1999. The nation’s overall delinquency dropped to 3.4% at the end of 2021, with the majority of states posting a year-over-year decrease in delinquencies, according to CoreLogic’s newly released Loan Performance Insights report.

Declining unemployment rates and higher home prices are helping more homeowners stay afloat. “National home prices increased by 18.5 percent year-over-year, helping more owners regain equity,” Molly Boesel, principal and economist at CoreLogic, writes in the report. “The combination of these dynamics pushed the overall mortgage delinquency and foreclosure rates to the lowest levels that CoreLogic has recorded in more than two decades.”

The data also reflects a time when pandemic-related forbearance aid was put in place to help financially struggling homeowners, although for many owners it had expired by the end of the year. U.S. employment has been robust and home equity levels have been on the rise, both of which have helped keep homeowners from going under. Lenders also reportedly have been stricter when issuing loans during the pandemic, ensuring it was to borrowers who were unaffected by hardships.

The majority of states saw a yearly decline in mortgage delinquencies, except for parts of Louisiana, which researchers attributed to damages from Hurricane Ida.

Otherwise, improvement in delinquency numbers suggested stronger loan performance across the board at the end of 2021. “The 30-, 60-day, and foreclosure rates are at the lowest that we’ve seen in a generation,” Frank Nothaft, chief economist at CoreLogic told the National Mortgage News. “What’s still elevated is the serious delinquency rate (90 days or more past due). Even though that’s way down from the peak we saw in 2020, it’s still above pre-pandemic levels.”

As for 2022 expectations, the data may not be as rosy coming off such low numbers. “There will be some distressed sales in the marketplace,” Nothaft says. “So we’ll see an uptick in that in 2022.” But rising home equity could help alleviate some possible distress as financially strapped homeowners may opt to sell instead.

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Homeowners across the board are feeling richer from rising home prices, but the wealthiest have enjoyed the largest gain, according to a report from the National Association of REALTORS®.

From 2010 to 2020, about 71% of the increase in housing wealth was in high-income households. Low- and middle-income households received a smaller share of housing wealth gains, according to the NAR report. Low-income homeowners comprise a smaller share of homeowners overall, while high-income homeowners make up the largest segment of owners.

Over the last decade, the housing value gap between households earning more than 200% of an area’s median income and those earning less has significantly widened, according to NAR’s report. High-income homeowners held 28% of all U.S. housing wealth in 2010, but by 2020, that percentage had grown to 42.6%.

“It’s a wake-up call,” Gay Cororaton, NAR’s senior economist and director of housing and commercial research, told The Wall Street Journal. “Policies have to be focused more on making sure that the lower-income and many more middle-income folks participate in the benefit of homeownership.”

Long-term homeownership has been shown to build wealth for households. The median homeowner realized $254,900 in wealth in 2019 compared to $6,270 for the median renter, according to the Federal Reserve’s Survey of Consumer Finances, as reported by The Wall Street Journal.

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