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Archives for April 2024

Mortgage Rates Rise in April: Future Rate Outlook

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For prospective homeowners and those looking to refinance, the latest news on mortgage rates may not be the most reassuring. As of April 17, 2024, rates on 30-year mortgages have experienced a significant surge, reaching their most expensive level since late November. This sudden increase has caught the attention of both industry experts and potential buyers alike.

Current Mortgage Rate Trends

Over the past week, 30-year mortgage rates have risen by almost half a percentage point, settling at an average of 7.65%. This uptick follows a series of consecutive increases, with rates climbing steadily since the previous Tuesday. This upward trajectory has pushed rates to levels not seen since late November, prompting concerns among consumers.

These figures represent national averages based on data collected from over 200 leading lenders across the country. The calculations are based on a loan-to-value ratio (LTV) of 80% and a FICO credit score ranging from 700 to 760, with no mortgage points involved.

Overview of Mortgage Rate Averages

Here's a breakdown of the current averages for various mortgage types:

  • 30-Year Fixed: 7.65% for new purchases, 8.05% for refinancing
  • FHA 30-Year Fixed: 7.48% for new purchases, 7.77% for refinancing
  • Jumbo 30-Year Fixed: 7.20% for both new purchases and refinancing
  • 15-Year Fixed: 7.00% for new purchases, 7.32% for refinancing
  • 5/6 ARM: 7.89% for new purchases, 7.97% for refinancing

Analysis of Rate Fluctuations

The recent surge in 30-year mortgage rates reflects a broader trend observed over the past several days. Rates have increased by 45 basis points since the previous Tuesday, marking a significant departure from the more affordable rates witnessed in early February. While current rates remain below the historic peak observed in October, they have climbed notably from the lows experienced earlier this year.

Similarly, 15-year fixed-rate mortgages have also seen an upward trajectory, with rates reaching 7.00%, the highest level in over five months. Despite this increase, rates remain below the peaks recorded in the fall of the previous year.

Notably, jumbo 30-year rates have remained relatively stable in recent days, holding steady at 7.20%. However, this figure represents a notable increase compared to earlier in the year, signaling potential challenges for buyers in the high-end market segment.

Impact on Refinancing

Refinancing rates have also experienced upward pressure in recent days, with notable increases observed across various loan categories. The widening gap between 30-year new purchase and refinancing rates underscores the evolving dynamics of the mortgage market.

State-Level Variations

It's important to note that mortgage rates can vary significantly depending on the state of origin. Factors such as credit score distribution, average loan size, and regional market dynamics can influence the prevailing rates in each state. As such, consumers should be mindful of these variations when exploring mortgage options.

Regional Disparities on Mortgage Rates

According to recent data, states such as Mississippi, Louisiana, and Rhode Island offer some of the most favorable rates for 30-year new purchase mortgages. Conversely, states like Minnesota, Oregon, and Tennessee have reported higher-than-average rates, reflecting regional disparities in the mortgage market.

Key Factors Influencing Mortgage Rates

Several key factors contribute to the fluctuations observed in mortgage rates:

  • Bond Market Trends: The level and direction of the bond market, particularly 10-year Treasury yields, exert significant influence on mortgage rates. Bond yields serve as a benchmark for lenders, affecting the cost of borrowing for both consumers and financial institutions.
  • Federal Reserve Policy: The monetary policy decisions of the Federal Reserve play a pivotal role in shaping mortgage rates. Of particular importance is the Fed's approach to bond buying and its impact on funding government-backed mortgages. Changes in these policies can have ripple effects throughout the mortgage market.
  • Competition Among Lenders: Competition among mortgage lenders, as well as across different loan types, can impact the prevailing rates offered to borrowers. Lenders may adjust their rates in response to market dynamics and competitive pressures, influencing the overall borrowing environment.

Given the interplay of these factors, pinpointing the exact cause of a rate change can be challenging, as fluctuations often result from a combination of multiple variables.

Recent Trends and Policy Shifts

The trajectory of mortgage rates in recent years has been shaped by a series of policy shifts and macroeconomic developments:

  • Bond Buying Policies: Throughout much of 2021, the Federal Reserve engaged in significant bond purchases in response to economic pressures stemming from the pandemic. These purchases exerted downward pressure on mortgage rates, keeping borrowing costs relatively low.
  • Tapering of Bond Purchases: Starting in November 2021, the Fed initiated a gradual reduction in its bond purchases, ultimately reaching net zero in March 2022. This tapering process marked a significant shift in monetary policy, impacting the trajectory of mortgage rates.
  • Interest Rate Increases: Between November 2021 and July 2023, the Federal Reserve implemented a series of interest rate hikes in response to rising inflation levels. While the federal funds rate—controlled by the Fed—does not directly dictate mortgage rates, it can indirectly influence borrowing costs. The aggressive rate hikes during this period contributed to a notable upward pressure on mortgage rates.
  • Future Rate Outlook: Looking ahead, the Federal Reserve has signaled a potential shift in its policy stance, with expectations of rate reductions in 2024. The Fed's “dot plot” forecast, which aggregates the expectations of its committee members, indicates a median expectation of three rate decreases totaling 0.75 percentage points by the end of the year.

As mortgage rates reach their highest levels since November, prospective buyers and refinancers must navigate these challenging conditions with careful consideration. While rates remain below historic peaks, the recent surge underscores the volatility inherent in the real estate market. As consumers evaluate their options, staying informed about rate trends and regional variations is essential for making informed decisions.

ALSO READ:

Mortgage Rate Predictions for Next 5 Years

Will Mortgage Rates Drop After Fed’s April Meeting?

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The Federal Reserve's meetings are always closely watched by financial experts and consumers alike, as the decisions made can significantly influence the economy, including mortgage rates. As we approach the April 2024 meeting, there is a heightened interest in whether the Fed will adjust interest rates, which in turn impacts mortgage rates.

The potential for mortgage rates to rise or fall after the Fed's April 2024 meeting is subject to various factors, including the Fed's commentary, inflation data, and broader economic conditions. The connection between the Fed's decisions and mortgage rates is not direct but is influential. The Fed sets the benchmark federal funds rate, which affects short-term interest rates. Mortgage rates, on the other hand, are long-term rates. However, the policies and economic outlooks shared by the Fed can lead to anticipatory reactions in the mortgage market.

Will Mortgage Rates Rise or Fall After Fed's April Meeting?

According to recent reports, expert predictions on the outcome of the Fed's April 2024 meeting and its impact on mortgage rates vary. Some experts suggest that there could be a slight decrease in mortgage rates following the meeting. This expectation is based on the anticipation that the Fed may signal a rate cut later in the year, which could put downward pressure on mortgage rates.

Another scenario presented by experts is that mortgage rates may not see a significant change immediately after the April meeting but could potentially decrease after the Fed's June meeting. This outlook is based on current economic data and the probability of rate cuts occurring later in the year.

It's also important to note that while the Fed raised rates quickly in the previous years, any reductions in the benchmark rate are expected to occur at a more gradual pace throughout 2024 and beyond. This suggests that any impact on mortgage rates may also unfold slowly over time.

For those looking to secure a mortgage, it's advisable to stay informed about the latest economic indicators and Fed announcements. While it's challenging to predict with certainty, understanding the trends and expert analyses can help in making more informed decisions regarding home loans.

 Current Mortgage Rates: April 2024

For those looking to secure a mortgage, the rates as of April 2024 present a mixed bag. According to recent data, the average rate for a 30-year fixed mortgage has seen an uptick, crossing the 7% threshold. This increase is a reflection of the persistently high inflation rates that continue to challenge the economy.

Current Mortgage Rates

  • The 30-year fixed mortgage rate stands at 7.05%, marking a slight rise from the previous week.
  • The 15-year fixed rate has climbed to 6.54%, also experiencing an increase.
  • For those considering shorter terms, the 10-year fixed rate is now at 6.31%.
  • Adjustable-rate mortgages (ARMs), such as the 5/1 ARM, have seen a minor decrease to 6.33%.

It's important to note that these rates are averages and can vary based on a multitude of factors, including credit score, down payment, and the overall financial profile of the borrower.

The current rates are a testament to the complex relationship between the Federal Reserve's policies, inflation, and the broader economic environment. While the Fed has maintained the federal funds rate at a range of 5.25% to 5.5%, the ripple effects on long-term mortgage rates are evident.

Looking ahead, experts suggest that there may be a gradual decrease in mortgage rates by the end of 2024, with projections moving towards the 6% mark. This forecast hinges on the anticipation of the Federal Reserve beginning to cut interest rates later in the summer, which would, in turn, ease the cost of borrowing for home loans.

High Mortgage Rates Impact New Construction: Builders Pull Back

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New home construction experienced a significant setback in March, marked by a notable decline in activity across various regions, especially in the Northeast. This downturn coincided with a surge in mortgage rates, with the benchmark 30-year fixed rate loan inching close to 7%, casting a shadow over the housing market.

In March, the pace of new construction witnessed a substantial slowdown, evidenced by a 14.7% decrease in housing starts compared to the previous month. Additionally, permits for new construction plummeted by 4.3%, indicating a reluctance among builders to initiate new projects amidst the prevailing market conditions.

Of particular concern was the Northeast region, which experienced the sharpest decline in construction activity. While weather might have played a role in this downturn, the overarching influence of rising mortgage rates cannot be ignored.

Impact of Mortgage Rates on New Home Construction

One of the primary factors contributing to the sluggish pace of new construction is the persistent elevation of mortgage rates, which have remained higher than anticipated throughout the year.

This upward trend, coupled with an increase since the beginning of the year, has deterred both builders and potential homebuyers. Despite this temporary slowdown, underlying demand for housing remains robust, fueled by limited options in the resale market. Builders, however, find themselves at a crossroads, balancing the need to stimulate demand with the challenges posed by higher mortgage rates.

Builders' Response

In response to the changing market dynamics, builders have adopted a cautious approach, holding back on incentives and price cuts. This hesitancy reflects a broader uncertainty among industry stakeholders regarding the future trajectory of interest rates and its impact on housing demand.

The National Association of Home Builders/Wells Fargo index of builder sentiment for March remained stagnant, indicating a cautious outlook among builders. While the potential for demand growth exists, buyers are adopting a wait-and-see approach, closely monitoring interest rate movements.

Anticipated Market Shifts

Looking ahead, there is optimism that the market will regain momentum, albeit at a measured pace. The April survey revealed a slight decrease in builders offering price reductions, suggesting a stabilization in pricing strategies.

Furthermore, the expectation of future rate cuts by the Federal Reserve offers a glimmer of hope for both builders and buyers. It is anticipated that mortgage rates will moderate in the latter half of 2024, potentially stimulating renewed interest in new construction.

While the current landscape presents challenges for new construction, it also offers opportunities for adaptation and resilience. Builders must remain agile in their strategies, responding adeptly to market fluctuations while maintaining a focus on meeting the evolving needs of homebuyers.

As the housing market navigates through this period of uncertainty, collaboration between builders, policymakers, and industry stakeholders will be paramount in ensuring a sustainable and thriving real estate sector.

US Home Price Forecast by Goldman Sachs Shows 5% Surge in 2024

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Housing prices in the US defied expectations last year, showing resilience despite a surge in mortgage rates. Now, with the anticipation of interest rate cuts, Goldman Sachs Research predicts a more substantial increase in home prices than initially projected.

The latest forecast indicates a 5% surge in US home prices for the current year, up from the previous estimate of 1.9%. Goldman Sachs Research's senior strategist, Roger Ashworth, and analyst Vinay Viswanathan delve into the factors influencing this forecast and how it varies across regions.

Projections and Factors:

Goldman Sachs Research anticipates a 3.7% rise in home prices in 2025, compared to the earlier forecast of 2.8%. This optimistic outlook is driven by several factors:

  • Rising Momentum: Recent home price index releases indicate a high momentum, with an annualized rate of approximately 8% heading into the current year.
  • Low Inventory: The housing market experiences low inventory, supporting prices, coupled with stable demand from factors like household formation.
  • Rate-Cut Expectations: The expectation of a rate cut, with the 30-year fixed mortgage rate projected to drop to 6.3% by the end of the year.

Regional Variances:

The forecast considers the local nature of housing, categorizing markets into three main buckets:

  • Expensive Markets: Areas like California and the Pacific Northwest, expected to become even more expensive.
  • Affordable to Expensive: Regions like the Southeast, witnessing a shift from affordable to somewhat expensive.
  • Relatively Cheap Markets: Parts of the Mid-Atlantic and the Midwest, where affordability remains and is expected to stay.

Rental Affordability:

The forecast acknowledges the impact of rental affordability on the housing equation, especially for the largest demographic in the US, the 30- to 39-year-olds. Despite higher financing costs, renting remains cheaper than buying, and only a slight improvement in mortgage affordability is expected in the near term.

Key Risks:

Roger Ashworth highlights potential risks to the outlook, including the market's expectations on rate cuts, the impact of inflation on consumer costs, and the tightness of the labor market. A potential increase in job losses could dampen consumer confidence, delaying home purchases and putting downward pressure on prices.

Conclusion:

In conclusion, Goldman Sachs Research's optimistic forecast for US home prices in 2024 is grounded in factors like rate-cut expectations, strong momentum, and low inventory. However, the outlook is not without risks, including uncertainties in inflation and the labor market. Homebuyers and investors should stay vigilant and consider these factors in their decision-making process.

How to Choose the Best Market for Your Real Estate Investment

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Successful real estate investing relies on several factors, but as the old adage goes, “location, location, location” is top of the list.  But “location” is a broad term, and evaluating the right place to invest your dollars in real estate means identifying the right market in both the macro and micro senses.

Some cities simply provide better opportunities than others based on factors like the relative cost of housing to average incomes, availability of good jobs, and demographic trends.  Within each metro area, however, there are many local real estate markets, and at that level factors like the quality of schools, neighborhood safety, access to amenities like parks, shopping and entertainment and a host of other variables come into play.

Choosing the right markets for your investing needs involves several considerations, some of which go beyond just the property and neighborhood itself.

How to Choose the Best Market for Your Real Estate Investment?

Here are some guidelines to help you ask the right questions as you determine where to invest.

Start with your Goals

Are you investing for the long term or trying to achieve a shorter-term boost in value?  Various markets throughout the country will produce more consistent cash flow per dollar invested, but the properties may not appreciate much.  Other regions will exhibit strong trends for appreciation in value, but may not cash flow well due to the high costs of properties relative to rental rates.

Investing for cash flow tends to be somewhat more reliable and predictable, while investing for appreciation tends to be more speculative in nature.  Where you are at in your retirement savings path and how your retirement plan fits into your overall wealth portfolio, as well as things like risk tolerance and amount of available capital will all help shape this decision.

Investing Locally vs in Remote Markets

Many investors want to be able to see their investments or rely on their own expertise and local network to manage properties.  This is great if your market and your investment goals match up, but that is not always the case.  If you live in a high cost city like San Francisco or Washington, DC, the real estate market can produce some positive opportunities, but only if you have significant capital to work with.  One option is to participate in a partnership with multiple investors to acquire properties, but that comes with its own set of challenges.  In many cases, it may be better to evaluate other markets that fit your goals more cleanly.

If you do choose to look beyond your local market, it can be helpful to consider cities where you have connections or may have lived in the past, but that should not be a deciding factor.

An economic analysis of a market is MUCH more important than feel good reasons like “My cousin John lives there and could keep an eye on things”.

Top Down Analysis

When evaluating a region or city to invest in, start at the big picture level to determine the right geography for your needs, and then drill down to the neighborhood level.

When looking at a metro region, there are a wealth of statistics available to help you determine the overall viability of that market.  Here are several categories of data to look into:

Economic factors

  • How many people live there?  Is the area large enough to provide a diverse rental population?
  • Is the population expanding or contracting?  Cities experiencing growth are a good thing.  A declining population is generally a sign of economic decline and may bode poorly for your investment prospects.
  • Is the economy diverse?  A one company or one industry market can take a big hit if that one employer base goes through difficult times.  A city with multiple economic drivers will be more stable and more likely to grow.
  • Are wages rising, falling or stagnant?
  • What is the unemployment rate?

Real Estate Factors

Once you find a market or couple of markets that look positive at the economic level, it makes sense to start looking at the general housing market in that area.  Some of the questions to ask here include:

  • What is the ratio of owner occupied to rental properties?  Areas with a higher percentage of renters will obviously create a bigger pool for you to choose from and more demand for quality rental units.
  • Rent-to-Value Ratios.  A general rule is that monthly rents should be at least 1% of the property value.  If you buy a property for $250K and can only rent it for $1,800/month, the likelihood that you will see positive cash flow if slim and you will be banking on appreciation.
  • Vacancy Rates and Time on Market.  A property purchased at a bargain rate does you no good if you cannot find a renter.  Evaluating trends in the number of vacant properties and average time to fill a vacant rental can be critical.
  • Housing Sales Statistics.  Even if you are looking at a long term buy and hold, the ability to sell a property and receive a reasonable price is critical to your exit strategy.  This can also be a solid indicator of the overall health of the real estate market.  Look at trends in month' supply of inventory, time on market, and asking vs sales prices.

Once you have used the above metrics to identify a possible market at the regional or city level, you can then hit the zoom button and start focusing on the local or neighborhood level sub-markets that fit your criteria.

Regulatory Factors

Some markets are more friendly to real estate investors than others.  If you take two individual properties with similar dynamics such as cost, condition and rental potential, you can see very different results based on things like taxes and whether landlord/tenancy laws are more or less favorable.

It really pays to understand the following factors:

  • Property tax rates
  • Property insurance rates
  • Municipal landlord taxes (an IRA or 401k may not be exempt from certain local taxes)
  • Local landlord/tenant laws – how easy is it to evict a tenant, for example.

Local Market Factors

You will want to reevaluate most of the above mentioned real estate factors at the more local level.  In addition, you will want to look at things like neighborhood safety, quality of schools, access to transportation, proximity to shopping and recreation, and other factors that drive desirability.

Investing in real estate is not really that different than any other type of investment.  You want to identify opportunities that present the maximum potential with the least risk possible.

Understanding a real estate market is a lot like evaluating a particular industry sector when you are investing in equities.  You would not just decide to invest in Nike because you live in Portland, or Coca-Cola because you live in Atlanta.  You would evaluate how that company’s stock is likely to perform based on many factors related to the industry, competition, regulation and the like.

If you apply the same kind of analytical reasoning to real estate markets, you are more likely to find properties that will produce success for your plan.

Detroit Housing Market Overtakes Miami in Annual Price Gain

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Home prices across the nation are on a remarkable upward trajectory, showcasing a robust growth of 5.2% year over year in November 2023, according to the latest report from analytics company CoreLogic. This trend follows a significant 4.7% year-over-year increase in October 2023. Projections from CoreLogic indicate a steady continuation of this trend into 2024, foreseeing a 2.5% year-over-year growth in November 2024 compared to the same month in 2023.

Regional Variances in Price Growth

While the national trend is positive, certain states in the Northeast stand out with impressive gains. Rhode Island leads the pack with a staggering 11.6% year-over-year growth, followed closely by Connecticut at 10.6% and New Jersey at 10.5%. On the flip side, areas experiencing year-over-year price declines in November include Idaho (-1.3%), Utah (-0.4%), and Washington, D.C. (-0.2%).

This robust and continued growth in home prices is particularly noteworthy in the face of the nation’s affordability crunch, pointing towards pent-up demand driving prices higher. Selma Hepp, Chief Economist for CoreLogic, emphasized the impact of prolonged inventory shortages and the lack of new homes for sale on price gains in 2023.

Mortgage Rates and Buying Power

The relationship between mortgage rates and buying power is crucial in understanding the dynamics of the housing market. The lower the mortgage rate, the greater the buying power for consumers. While a slight softening of prices is anticipated in the coming year, much of it hinges on the supply of homes. With current low supply levels and increasing demand due to lower mortgage rates, the prevailing trend suggests that prices have no immediate direction but up.

After experiencing record lows in the first two years of the Covid-19 pandemic, mortgage rates began rising sharply in 2022, reaching a more than 20-year high in October of the same year. Although the rates have since fallen back, hovering in the high 6% range, they remain a critical factor influencing the housing market's trajectory.

Detroit Overtakes Miami: A Housing Market Revelation

In a surprising turn of events, Detroit emerged as the leader in annual price gain at 8.7%, surpassing Miami, which held the top spot for the previous 16 months, with an 8.3% increase, as reported by CoreLogic.

Explaining Detroit's exceptional performance, Selma Hepp noted that the city had lagged in appreciation during the pandemic, contributing to a catch-up effect. Other Midwest areas are also experiencing stronger appreciation due to their more affordable nature.

Factors Behind Detroit's Rise

Despite the median price of a home in Detroit remaining among the most affordable in the nation, the market is considered overvalued in relation to local income levels. Approximately 82% of the nation's 397 metropolitan housing markets surveyed by CoreLogic are deemed overvalued, signaling that Detroit's home prices are disproportionately high compared to local household incomes. Notable exceptions include Boston, Chicago, Los Angeles, and Washington, D.C., which are considered “normal” in terms of valuation.

Hepp highlighted that the valuation perspective depends on the buyer demographic, with higher-income individuals increasingly investing in areas like Boston, Chicago, Los Angeles, and Washington, D.C. Detroit, once seen as a city in decline, has become an attractive destination for higher-tier housing. Overcoming its past, Detroit now attracts individuals with larger budgets, as their money stretches further in the city. The historic neighborhoods offer attractive housing stock that, while expensive for the area, provides value for what's available.

Investing in Detroit Real Estate

For real estate investors eyeing Detroit, selectivity in property choices is crucial. The CoreLogic report suggests that higher-income individuals seek better-than-average properties, emphasizing the importance of value for money. While the issue of affordability persists, it takes on a slightly different angle in a large metro area like Detroit.

In summary, the surge in home prices nationwide, with Detroit surpassing Miami, reflects a complex interplay of factors, including supply and demand dynamics, mortgage rates, and local market characteristics. As the housing market continues to evolve, staying informed about these nuances becomes imperative for both homeowners and investors.

US Home Prices Recorded a Substantial Rise of 6.3 Percent, FHFA Reports

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The Federal Housing Finance Agency (FHFA) recently released its seasonally adjusted monthly House Price Index (HPI®), providing insights into the state of U.S. house prices. The October report reveals notable trends and changes in the housing market, shedding light on both monthly fluctuations and the broader 12-month picture.

Key Findings from the October FHFA House Price Index:

  • Overall Growth: U.S. house prices exhibited a resilient trend, experiencing a 0.3 percent increase from September to October.
  • Yearly Surge: Over the span of October 2022 to October 2023, house prices recorded a substantial rise of 6.3 percent.
  • Revision in September: The initially reported 0.6 percent price increase in September underwent a revision, now reflecting a 0.7 percent uptick.

Regional Variations in House Prices:

For a more granular view, the FHFA report breaks down the data into nine census divisions, highlighting the diversity of price changes across different regions of the United States.

  • Monthly Fluctuations: From September 2023 to October 2023, seasonally adjusted monthly price changes ranged from -0.3 percent in the New England division to +1.1 percent in the Middle Atlantic division.
  • Annual Shifts: The 12-month changes exhibited a broader range, spanning from +2.6 percent in the Mountain division to an impressive +9.9 percent in the Middle Atlantic division.

Expert Insights:

“U.S. house price gains remained strong over the last 12 months,” remarked Dr. Nataliya Polkovnichenko, Supervisory Economist in FHFA’s Division of Research and Statistics. “On a monthly basis, price appreciation moderated in October, with four divisions exhibiting slowdowns from the previous month.”

Analysing the Resilience:

The sustained growth in U.S. house prices, as indicated by the FHFA's October report, raises several questions. What factors contribute to this resilience, and how do regional variations play a role in shaping the overall market dynamics?

Factors Influencing Resilient Growth:

  • Economic Stability: The overall economic stability of the nation is a crucial factor influencing the resilience of house prices.
  • Supply and Demand Dynamics: An analysis of supply and demand imbalances in different regions can provide insights into the variations observed in monthly and yearly price changes.
  • Interest Rates: The role of interest rates in shaping the affordability and attractiveness of real estate investments cannot be overlooked.

Data for Home Price Change & Estimates for U.S. and Census Divisions

The intricacies of U.S. house prices become even more apparent when we examine the monthly price change estimates for different census divisions. The Purchase-Only FHFA HPI®, presented in a seasonally adjusted, nominal format, offers a detailed perspective on the fluctuations in various regions.

September 2023 – October 2023:

Census Division U.S. Pacific Mountain West North Central West South Central East North Central East South Central New England Middle Atlantic South Atlantic
Monthly Change 0.3% 0.0% -0.2% 0.2% 0.0% 0.8% 1.0% -0.3% 1.1% 0.1%

August 2023 – September 2023 (Comparison):

Census Division U.S. Pacific Mountain West North Central West South Central East North Central East South Central New England Middle Atlantic South Atlantic
Monthly Change 0.7% -0.2% 0.8% 0.1% 0.9% 0.5% 0.9% 1.5% 0.2% 1.4%
Previous Estimate 0.6% -0.4% 0.6% 0.3% 0.6% 0.4% 1.2% 1.6% 0.1% 1.4%

The detailed breakdown reveals the nuances in each division's performance, emphasizing the diversity in monthly price changes. Notably, the Middle Atlantic division experienced a remarkable 1.1% increase, while the New England division saw a slight decrease of -0.3% during this period.

12-Month Change (October 2022 – October 2023):

Looking at the broader 12-month picture, the changes in house prices across different divisions paint a varied landscape of growth.

Census Division U.S. Pacific Mountain West North Central West South Central East North Central East South Central New England Middle Atlantic South Atlantic
12-Month Change 6.3% 2.8% 2.6% 6.4% 3.6% 9.1% 6.3% 9.7% 9.9% 7.2%

The Middle Atlantic division stands out with an impressive 9.9% increase over the 12-month period, showcasing robust growth compared to other regions.

Looking Ahead:

The FHFA's House Price Index for October paints a dynamic picture of the U.S. housing market. As we delve into the intricate details of regional variations and expert commentary, it becomes evident that the market's resilience is a result of a complex interplay of economic, regional, and financial factors.

As the market continues to evolve, keeping a close eye on these trends and factors will be essential for homeowners, investors, and policymakers alike.

Housing Market Shows Signs of Thawing, JPMorgan Report Indicates

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The housing market, once frozen in the grip of economic uncertainty, is beginning to thaw according to a recent report by JPMorgan. Despite enduring challenges, optimistic indicators are suggesting a gradual rebound in housing activity. One significant factor contributing to the stagnant housing market has been the “mortgage lock” effect.

This phenomenon has kept households with locked-in low mortgage rates from moving, fearing higher rates. Consequently, the supply of existing homes for sale has been severely limited. However, recent data suggests that this trend is starting to reverse. Seasonally adjusted existing homes for sale have been on a steady upward trajectory since last spring, indicating a thawing of supply constraints.

Moreover, there's relief on the horizon with new home supply underway. With 1.6 million units currently under construction and housing completions reaching their highest levels in 17 years as of February, the outlook for increased supply is promising. Factors such as improved homebuilder sentiment, robust hiring rates, and a chronic undersupply of housing all contribute to a positive forecast for construction activity in the coming years.

Resilient Demand Side of Housing Market

On the demand side, the housing market has displayed resilience. Despite recent strong housing completions, homeowner and rental vacancy rates remain at multi-decade lows. Contributing to this resilience may be a surprising immigration boom, which has raised the bar on housing units needed for population growth.

Modest declines in mortgage rates have also stimulated activity and improved home affordability. The current 30-year fixed mortgage rate stands at 6.9%, down from its peak of 7.8%. Further declines are anticipated, with Fannie Mae predicting rates to reach 6.4% by the end of 2024 and 6.2% by the end of 2025. Additionally, the recent settlement on realtor commissions by the National Association of Realtors (NAR) may lower home prices by reducing transaction costs over the long term.

Gradual Transition and Economic Resilience

For the average household, the “mortgage lock” has provided a layer of immunity to higher rates. Despite the gradual fading of this immunity, improving real wages and strong balance sheets suggest that consumers should be able to weather incremental exposure. Furthermore, the recovery in housing market activity is expected to be gradual, with resilient supply and demand dynamics indicating that it is not a source of vulnerability for the economy.

While a recession is not anticipated this year, should one occur, the lack of private sector imbalances suggests that it is unlikely to be severe. As more new homes enter the market, albeit a smaller portion of the overall inventory, the housing market is poised for a period of transition and potential growth.

Overall, while challenges remain, the housing market is showing encouraging signs of recovery. With a thawing supply, resilient demand, and gradual economic transition, the outlook for the housing sector appears optimistic.

Home Price Forecast Shows That Prices May Decline in 2024

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As we navigate through the complexities of the housing market, a common question in many homeowners' and potential buyers' minds is the trajectory of home prices. Looking ahead to 2024, the forecast for home prices is a topic of significant interest and importance.

The Forecast for Home Price Decline in 2024

The housing market is expected to continue grappling with the dual challenges of high home prices and elevated mortgage rates. The National Association of Realtors has recently settled a major lawsuit, which is anticipated to bring changes to broker commissions and could potentially alter the traditional buying and selling model.

Experts from Fannie Mae suggest that while the market will face affordability constraints due to high prices and interest rates, there is an expectation of an increase in home sales transactions compared to previous years. The S&P CoreLogic Case-Shiller Home Price Index indicates that U.S. home prices declined for three consecutive months as of January, yet the year-over-year increase was the fastest since 2022.

Some predictions point to a gradual thaw in the housing market with added challenges. As mortgage rates slowly fall, more buyers and sellers are expected to enter the market, stabilizing housing prices. However, these predictions also acknowledge the influence of various factors such as an aging population, climate change costs, and the expansion of artificial intelligence on the housing market.

Realtor.com‘s forecast aligns with the notion of a slight easing in home prices, projecting a drop of less than 2% for the year on average. This, combined with lower mortgage rates and income growth, is expected to improve the home purchase mortgage payment share relative to median income. Zillow‘s forecast echoes this sentiment, suggesting a modest 0.2% decrease in home values nationally, indicating a trend toward market stability.

Factors Influencing Home Prices in 2024

The real estate market is a dynamic entity, influenced by a multitude of factors that can sway home prices in various directions. As we look towards 2024, several key elements are expected to play significant roles in shaping the housing landscape. Here's an exploration of the factors that could influence home prices in the upcoming year:

  1. Economic Indicators and Interest Rates: The broader economic environment, including GDP growth, employment rates, and consumer spending, directly impacts housing demand and affordability. Interest rates, set by the Federal Reserve, are particularly influential as they affect mortgage rates, borrowing costs, and ultimately, buyer demand.
  2. Technological Advancements and Remote Work: The continuation of remote work trends could shift housing preferences, with more people seeking larger homes away from urban centers. Technological advancements in home construction and smart home features may also drive up prices for properties that offer these modern amenities.
  3. Demographic Shifts: Changes in population demographics, such as the aging of the baby boomer generation and the home-buying habits of millennials and Gen Z, will influence the types of properties in demand and their prices.
  4. Environmental Concerns and Location Desirability: As climate change becomes a more pressing issue, properties in areas less prone to natural disasters or those offering sustainable features may command higher prices. Location desirability, including proximity to good schools, healthcare facilities, and green spaces, will continue to be a significant price determinant.
  5. Housing Supply and Government Policies: The balance between housing supply and demand is a fundamental driver of home prices. Government policies related to housing development, zoning laws, and subsidies can either alleviate or exacerbate supply constraints, impacting prices accordingly.
  6. Global Economic Trends: International trade, foreign investment in real estate, and global economic stability can influence domestic housing markets, especially in cosmopolitan cities that attract international buyers.
  7. Inflation and Consumer Confidence: Inflation rates can erode purchasing power, affecting how much buyers are willing to spend on homes. Consumer confidence, driven by economic outlook and job security, also plays a role in housing market activity.
  8. Construction Costs and Labor Availability: The cost of construction materials and the availability of skilled labor can affect the pace of new home construction, which in turn influences housing supply and prices.
  9. Market Speculation: Investor activity and speculative buying can drive up home prices, especially in markets with tight supply and high demand. This can lead to rapid price increases but also poses the risk of creating housing bubbles.

Bottom Line: While the housing market continues to face challenges, the forecasts for 2024 suggest a period of adjustment and potential stabilization. Home prices are expected to ease slightly, but regional variations and local market conditions will play a crucial role in determining the actual price movements.

As always, potential buyers and sellers should stay informed and consider their circumstances when navigating the housing market. Whether you're planning to buy, sell, or simply keep an eye on the market, staying updated with the latest predictions is key to making informed decisions.

14 Things to Know Before Investing in Rental Properties

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Many real estate investors long to own a rental property for a passive income, increase in wealth, and financial independence. Before stepping into rental property investing you should make sure that you invest some of your time in learning the market and its basics. In this blog, we will be discussing all the things to know before investing in rental property. The most imperative question you have to ask yourself is would you like to be a landlord?

Do you have the temperament to become one and manage your property and also address the complaints of tenants? It is easier said than done. Most landlords like to hire a property management company to handle all of this and pay them a monthly fee. The management of a rental property is not an easy task for most of the investors.

Differences between tenants, tenants that won't pay, sudden and costly repairs, and long vacancies are some of the drawbacks of owning a rental property. But if you manage all the affairs very well, a rental property investment can become a steady source of income for your family. Best investors always do their due diligence before taking the plunge.

Things To Know Before Investing In Rental Property

Things To Know Before Investing In Rental Property

If you're not careful rental property can be an expense, instead of an investment. Here are the things you must consider before buying a rental property.

1. It's not as easy money as it seems

Investing in a rental property is frequently placed in the category of income sans work. However, it's not like that at all. In spite of the fact that it actually qualifies as passive income, that doesn't mean you're not going to buckle down. Actually, in the event that you choose to manage the property yourself, you must know that unlike stocks it is not a hands-off management.

You will be required to do a lot of work for managing the rental property as well as your tenants. Making money in real estate is not necessarily as easy or simple as you've been told. Even if you hire property managers to help you manage your rental properties, you still have to manage them. Buying rental property is not for everyone.

It should be an investment option you consider only once you’ve achieved a certain level of financial independence. If you do it right, you can put yourself on the road to success with cash regularly flowing into your bank account.

2. There is no assurance that it will be a successful investment

Things-To-Know-Before-Investing-In-Rental-Property

Investing in a rental property is a bit risky. Just like any other business, there is always an element of risk involved. Rental property investing is no different. No one can give you a guarantee that your investment will be a successful one. With fluctuating market and economic conditions, you really need to ascertain whether it is worth your time and money.

In rental property investing, you should not forget that the reason for investing in rental property is to generate a steady income stream for yourself. Therefore, it is important to do some research before choosing the property as well as the market in which it is located. Do not make a hasty decision, if you don't want to regret it later on.

3. More money is needed than the cost of the property

When investing in a rental property, the underlying purchase price of the property is just the start. All potential landlords consider the cost of purchasing an investment property, but many overlook the costs of remodeling. If you are buying a distressed asset such as a REO, Shortsale, or any old property that may require some repairs and renovation before it can be put on the market for rent, you need money to do all of this.

Any damage to the foundation, plumbing, or wiring can cost thousands of dollars to repair. But even if you buy a property in good condition, you may still have to make changes to get it up to code. These additional expenses are over and above the purchase price of the property. You should have a strong income or enough savings to accomplish all of this. The other way, which is easier, is to buy a “turnkey” rental property from a turnkey property seller. In this case, the purchase price of the property would be higher than a REO or Shortsale asset.

Click on the link to learn what is turnkey property investing.

4. Be Careful with Leverage

Loans are convenient but may come at a big cost. Understanding how to handle loans of this nature allows you to benefit from it to the maximum. Ignoring the risks can lead to major financial entanglements in the near future. According to Investopedia.com,

  • Decide on the type of mortgage loan that best fits your situation (Fixed Rate, Adjustable Floating Rate, Interest Only, or Zero Down Payment)
  • Be aware of the terms and conditions and other charges levied by lenders.
  • Hunt around and bargain for a better deal using a tool like a mortgage calculator to find lower interest rates. Also, look for lower insurance premiums.

If you do it right, you will be able to add more and more rental properties to your investment portfolio. If you want to buy $100,000 worth of stocks, you need to invest $100,000 out of your savings.  But, if you want to buy a rental property that costs $100,000, you can use other people’s money to make this purchase.

A bank or other lender will generally give you 80% of the purchase price. You just need to make a down payment of the remaining 20%. Click on the link to learn about buying rental property with no money down. You will get to learn about several loan options.

To read more about how to finance turnkey rental properties, click on the link.

5. Importance of location

As you already know, “Location, Location, Location” still rules and remains the most important factor for profitability in any form of real estate investment whether it is “fix and flip” or rental property investment. Before you get your heart set on a specific location, bring the property's location into serious consideration.

  • Find out what is crime rate in that location.
  • Are there schools close by and how are they rated?
  • How far are the amenities like parks, supermarkets, transport hubs, and restaurants?
  • How good is the rental property market of that location? What are the comparable rents and purchase prices?
  • How is the economic development of the area?
  • How the locality is expected to evolve over the investment period? If the area develops, the rent price will increase and so will your income and vice-versa.

6. Property inspection before buying

Property inspections are important for helping to disclose issues that may detract from the property's value. Before you finalize your rental property investment, be sure the property is in good condition. Doing an inspection can be a daunting task for anyone, no matter how experienced you are.

Knowing as much as you can about the condition of the property before you buy will help you avoid problems and extra costs down the track.  A good property inspection will provide you with information that could ultimately influence your decision to purchase the property. The best way is to have a professional inspection.

Hiring a professional inspector for $300 – $500 will tell you whether the property has termites or molds, and what is the condition of the foundation and the roof. They will also give you a correct estimate of the rehab costs. Some of the important things that they will look for during property inspection are:

  • Mold and Mildew
  • Damp Basements and Crawlspaces
  • Roof and Chimney Conditions
  • Plumbing Issues
  • Electrical Issues
  • HVAC and Hot Water Heater Issues
  • Conditions of Doors, Windows, and Trim
  • Pest Inspections
  • Structural Issues
  • Condition of the Kitchen

7. Expect the difficult circumstances

A sudden storm or hurricane, flooded basements, clogged toilets, and burst water heaters are some of the issues that you need to be prepared for. Things like these cannot be foreseen in a real estate investment. If they happen, you need to be patient and handle the situation at your best.

There are very less preemptive measures that can be taken to avoid such circumstances, especially for natural calamities. According to multiple reports, Hurricane Harvey damaged a quarter of Houston's real estate. The best you can do is research the natural hazards in any area you're looking at for rental property investing.

Learn about the risks and likelihood of hurricanes, flooding, earthquakes, tornadoes, mudslides, and other extreme events. This can help you in mitigating the risks to a certain extent.

8. Damage by renters

Damage by renters can be accidental, deliberate, or malicious. It's every landlord's worst nightmare — a tenant who destroys the property because he or she is disgruntled for some reason. A disgruntled tenant can cause havoc on your rental property.

Some of the damages to expect from them are graffiti on the walls, torn or stained rugs, broken windows and doors, scratches on the hardwood floors, a hole punched in the wall, and any other damaging mischief your disgruntled tenant can think of. It should be mentioned in the lease agreement as to who will pay for these damages. If it is the renter, then they will be highly unlikely to think of doing such things.

9. Screening of tenants to find a good one

Virtually all of the problems a landlord faces with tenants can be eliminated through a good screening process. With a good tenant, the rent will get paid on time and the property will stay relatively undamaged. With a bad tenant, you’re left to worry about the state of your property. To start off, you should always ask your prospective tenant to complete an application form that covers their personal, professional, and financial information (credit report).

Go through the lease agreement with them carefully and make sure all the rules are completely understood. It’s not too late to rip up the lease if things aren’t going well. By doing this you will find good tenants, who will pay rent on time, take pride in their home and yard by keeping everything clean and in great working condition, treating the property like their own.

10. Collecting rent from tenants

You’ll have the tenants that don’t pay and don’t call in case of delayed payment. As a landlord, you’re going to have to face this problem from time to time. Ask yourself if you’re comfortable confronting your tenants before you start renting. Keep in mind that you’ll have to make judgment calls as a landlord.

For instance, envision you've had a tenant for six months and for one month he doesn't pay the rent. You don't get a notification from him for seven days. When you call the tenant, he discloses to you he won't be able to pay for an additional 7 days. In these circumstances, you'll need to settle on a decision to either let the tenant slide or to begin the eviction process. Ensure you're happy with settling on this sort of decision and adhering to it.

11. Vacancies

Vacancy is the bane of every landlord's existence. If the vacancy persists, you may be unable to make your mortgage payment. While there are many things that can lead to high vacancy rates, there are specific steps you can take to reduce the vacancy rate of your rental property. The best way to minimize vacancies is to find a long-term tenant.

Keep your property clean. A clean dwelling is a place where people will want to live. Make timely repairs and address the complaints of your tenants. Invest the time and money that is necessary to keep your rental properties operating in good condition. Landscaping is also very important in attracting and keeping new tenants. Make your rental property beautiful from the exterior as well as the interior.

12. Hiring a property management company

Hiring a property management company has its own advantages and disadvantages. Not every rental property owner needs to hire a property manager. However, if you have more than one property to manage, this task can be quite time-consuming, so hiring a property management company can take off your burden to a great extent.

While this can save you a ton of the hands-on work and the headaches that keep running with it, you'll be losing around 10 percent of the rent to pay for this property management. You should consider hiring a property management company – if you have lots of rental properties, you're not interested in hands-on management, your time is limited, you can afford the cost and you feel overwhelmed with management tasks.

A good property management firm can easily become one of your greatest assets, second only to the properties that they manage on your behalf. If you do intend to hire someone, you should at least plan on being there in the beginning, to make sure the tenants are properly screened by them.

Moreover, you'd be placing yourself in a situation where you have less learning of what's really going ahead with the property—a decision that could cause issues down the road for you additionally not far off. Therefore, you should also take some time to visit the property and check if it is well-maintained. After all, it is your own asset.

13. Paying Taxes

One thing you can't ignore is taxes. Renting property is your business thus you'll need to report the income you earn while filing your taxes. You can deduct the expenses if they are deductible rental expenses such as mortgage interest, property tax, operating expenses, depreciation, and repairs.

You can deduct the costs of certain materials, supplies, repairs, and maintenance that you make to your rental property to keep your property in good operating condition. All rental income must be reported on your tax return, and in general, the associated expenses can be deducted from your rental income.

14. Being a landlord is not easy

Being a landlord isn't for the timid. In spite of the fact that you may like giving a place to people to live, if your renters don't pay on time, or they're causing inconvenience, you can't be insipid about implementing the rules or hinting at any violation of the terms of lease agreement. You must assert yourself and be firm wherever necessary and do not let your tenants exploit your property.

Conclusion: Things to know before investing in rental property

Rental property investing offers a good high-value risk-return profile. With a little thinking ahead and some watchful steps, you can make your rental property investment the success you have always wanted. Buying rental properties is a great way to make money. You’ll work hard for your money and may be faced with adversity from time to time. With enough passion and determination, you will find success eventually creating a better life for yourself and your family.

Some of the best real estate markets you can choose for rental property investing:

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Norada Real Estate Investments 30251 Golden Lantern, Suite E-261 Laguna Niguel, CA 92677

(949) 218-6668
(800) 611-3060
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