Housing Market More homeowners might be ready to sell despite the lock-in effect: Redfin

Despite the still-challenging rate environment, some homeowners might opt to bite the bullet and give up their low rate to move, according to a Redfin study.

Nationwide, the share of homeowners with relatively low rates has fallen modestly from a record high of 92.8% in mid-2022. In the third quarter of 2023, 88.5% of U.S. homeowners with mortgages had an interest rate below 6%.

To conduct this study, Redfin analyzed data from the Federal Housing Finance Agency’s National Mortgage Database as of the third quarter of 2023.

Many homeowners choose to sell because of major life events, such as a marriage, a new child, a new job, or a divorce. Others simply want to move to a different house or city. Another reason explaining why the share of homeowners with relatively low rates has dipped is that some homeowners have a rate above 6%. For repeat buyers and first-time buyers who entered the market in 2022, the average mortgage rate was above 6%. As rates are currently declining, it makes sense for them to get a new mortgage.

The lock-in effect is still real but listings are starting to tick up

Declining mortgage rates appear to have helped the inventory situation somewhat. The 30-year fixed-rate mortgage averaged 6.66% as of Jan. 11, down from a peak of roughly 8% in October.

“Sellers have started coming out of the woodwork because that’s typical for January and because mortgage rates have dropped,” David Palmer, a Redfin Premier real estate agent in Seattle, said in a statement. “They’re also coming to terms with the fact that rates aren’t going back down to 3% any time soon, which makes it easier to pull the trigger on selling. But a lot of sellers are worried about finding their next house because even though listings are rising, there’s still a housing shortage. That’s part of the reason so many sellers remain on the sidelines.”

Of course, there’s a group of homeowners who are sitting on enough equity to justify selling their home and taking a higher mortgage. As prices soared during the pandemic, many homeowners made a big profit on their purchase. Taking a new mortgage now can make even more sense if the homeowners wish to downsize or move to a more affordable area. As of the third quarter of 2023, 88.5% of mortgaged U.S. homeowners have a rate below 6%, 78.7% below 5%, 59.4% below 4%, and 22.6% below 3%.

Affordability remains an issue even if mortgage rates started to trend down

For the four weeks ending January 7, 2023, the monthly payment on a median-priced U.S. home with an average mortgage rate of 6.62% cost $2,399. While that figure is down $325 from the all-time high in 2022, it’s still up 7.4% from a year ago. Overall, both mortgage rates and home prices are higher than they were last year.

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Housing supply will be impacted as more Americans age in place

By Didier Malagies • 12 Nov, 2024

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Small Business Emergency Bridge Loan

By Didier Malagies • 11 Nov, 2024

ender's 1% Down Payment program is designed to make homeownership more accessible for eligible first-time buyers by lowering the upfront costs typically required for a mortgage. Here's a breakdown of how the program generally works: How It Works 1% Down from the Borrower: The borrower contributes just 1% of the home purchase price as a down payment. 2% Contribution from Lender: Lender covers an additional 2% of the down payment, allowing the borrower to start with a total of 3% equity in the home. Eligibility: Borrowers must meet certain income and credit score requirements. The program often targets lower-income buyers or those who qualify for special financial assistance. Key Features and Benefits Low Entry Barrier: The reduced down payment can make homeownership achievable sooner for first-time buyers or those with limited savings. Conventional Loan: The loan is structured as a conventional mortgage, which may help borrowers avoid some of the restrictions associated with government-backed loans like FHA loans. Potential Mortgage Insurance: Depending on the loan details, borrowers may need to pay private mortgage insurance (PMI) until they reach 20% equity. Other Considerations Interest Rates: Rates and terms are subject to typical mortgage rate changes, so it's advisable to check the current rate before applying. Credit Requirements: There may be a minimum credit score requirement, though this is typically more flexible than for standard conventional loans. The 1% Down program can be an excellent option for buyers looking to make homeownership more affordable. tune in and learn at https://www.ddamortgage.com/blog didier malagies nmls#212566 dda mortgage nmls#324329

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By Didier Malagies • 06 Nov, 2024

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