They are only expected to keep climbing…
US mortgage rates are still on the rise, with the 30-year fixed-rate mortgage jumping to an average of 5.11% this week. Freddie Mac’s latest reading showed that the average 30-year conventional rate climbed 11 basis points from 5% a week ago. The 15-year fixed-rate mortgage increased from 4.17% to 4.28%, and the five-year Treasury-indexed hybrid adjustable-rate mortgage rose from 3.69% to 3.75%. The uptick in mortgage rates is causing a pullback in overall mortgage applications, which fell 5% on a seasonally adjusted basis, according to the Mortgage Bankers Association. “Mortgage rates increased for the seventh consecutive week, as Treasury yields continued to rise,” said Freddie Mac chief economist Sam Khater. “While springtime is typically the busiest home buying season, the upswing in rates has caused some volatility in demand. It continues to be a seller’s market, but buyers who remain interested in purchasing a home may find that competition has moderately softened.” Mortgage rates are expected to keep climbing as the Federal Reserve continues to raise its benchmark interest rate to combat the 40-year high inflation. Lenders are already feeling the squeeze on margins, and more homebuyers are getting discouraged, but Robert Heck, vice president of mortgage at Morty, said the Fed’s actions are designed to stamp out inflation and preserve the overall health of the economy, not tank the housing market. “Of course, if inflation were to spiral out of control and the Fed took more aggressive action, rates could rise to a level at which they could send demand and affordability into a steep downward spiral. Current market indicators, including the Fed funds futures, are not projecting interest rate levels in the next 10 years to reach a level that would send mortgage benchmarks above 7%. Treasury Rates were well above 4% when mortgage rates were above 6% in the early 2000s, and the entire yield curve sits below 3% currently,” Heck said. “The bottom line is that there’s a lot of uncertainty in the market and a lot left to play out. We’re a third of the way through 2022, and we’ve already seen quite a bit of what was predicted for the year play out,” he added. “Headlines pointing to a housing bubble are oversimplifying things. While there’s no question that price growth has been significant over the past two years, we were still seeing significant demand up until rates rose over the past month. “
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He describes the labor market as overheated
Federal Reserve Chair Jerome Powell outlined his most aggressive approach to taming inflation to date, potentially endorsing two or more half percentage-point interest-rate increases while describing the labor market as overheated. “I would say that 50 basis points will be on the table for the May meeting,” Powell said at an IMF-hosted panel on Thursday in Washington that he shared with European Central Bank President Christine Lagarde and other officials. He said demand for workers is “too hot -- you know, it is unsustainably hot.” The Fed chief is taking direct aim at strong demand that the central bank wants to cool. It’s a strategy that bears considerable risk for US workers and the economy’s overall growth prospects in months ahead, as well as for the Fed itself in a year of midterm congressional elections, with inflation a major concern among ordinary Americans. “This is going to be a very close call on whether we get a recession or not,” said Ethan Harris, head of global economics at Bank of America Securities. “They have to get monetary policy into tight territory, and they probably need to get some kind of rise in the unemployment rate.” Powell also reinforced expectations for another half-point increase in June, by citing minutes from last month’s policy meeting that said many officials had noted “one or more” 50 basis-point hikes could be appropriate to curb the hottest inflation in four decades. “There’s something in the idea of front-end loading” moves if appropriate, Powell said -- “so that points in the direction of 50 basis points being on the table.” Investors are betting on half-point increases in May, June and possibly July. Rising yields in turn have unsettled the stock market, with the S&P 500 Index closing down 1.5% Thursday. Powell’s St. Louis Fed colleague James Bullard has also opened a debate about doing a more aggressive 75 basis-point increase if needed, while even normally dovish officials like San Francisco’s Mary Daly have said that a “couple” of half-point moves are likely. Powell “approved a 50 basis point hike in May, but I think June is also there and maybe even more,” said Yelena Shulyatyeva, senior US economist for Bloomberg Economics. To some, it’s too little, too late. Critics say that US central bankers are caught in a policy bind of their own making. Prices began to accelerate in the fourth quarter, when employers shrugged at the latest wave of the coronavirus and added more than a half-million workers each month. Wage gains picked up and demand strengthened, broadening inflation pressures throughout the economy even as the Fed continued to add stimulus by holding rates near zero and buying bonds. Policymakers last year wanted to avoid pre-emptive tightening, but the combination of fiscal stimulus, monetary support, and bounce-back in demand put them behind inflation pressures that were well underway. The consumer price index rose 8.5% in March from a year earlier, the most since 1981; the Fed’s target is based on a separate measure known as the personal consumption expenditures price index, which rose 6.4% for the year through February. Russia’s invasion of Ukraine will likely raise food and energy prices further. Catch upNow, Fed officials are scrambling to get interest rates back up to a level that doesn’t add further stimulus, and possibly push forward into restrictive territory. Powell said the Fed will no longer forecast relief from goods prices and improving supply chains, which could be an acknowledgment that pressures have also disbursed into service prices as well. “I just don’t understand why they did this,” Harris said. “They had many chances to take the off-ramp and they never did.” Another uncertainty in policy strategy is what happens to financial conditions when officials start running assets off their balance sheet. Fed officials have signaled this process will be announced in May, with the runoff stepping up to $95 billion a month combined for Treasuries and mortgage-backed securities. Shulyatyeva said there is no reliable estimate about how much tightening the runoff will add. “They want to believe they can achieve a soft landing,” said Shulyatyeva. “It will be extremely difficult to do. Monetary policy is a very blunt tool.” We take an in-depth look at the homeowner tax incentive
What is mortgage interest deduction?The mortgage interest deduction is a tax incentive for homeowners on the mortgage interest paid on the first $1 million of mortgage debt. Homeowners can deduct interest on the first $750,000 of the mortgage if they purchased their homes after December 15, 2017. It should be noted that you have to itemize on your tax return in order to claim the mortgage interest deduction. The mortgage interest deduction essentially lets homeowners count interest paid on loans for purchasing, building, or improving their primary home against their taxable income. Ultimately, this lowers the amount of taxes you owe, and, within limits, can be taken on loans for second homes. Since a mortgage interest deduction lets you reduce your taxable income by the amount you have paid in mortgage interest throughout the year, the interest you are paying on your home loan might help cut your tax bill. Mortgage interest deduction limitThe mortgage interest deduction limit was signed in 2017, when the Tax Cuts and Jobs Act, or TCJA, lowered the mortgage deduction limit, altering individual income tax, and placing a limit on the amount you may deduct from your home equity loan debt. Prior to the Tax Cuts and Jobs Act, the limit for mortgage interest deduction was $1 million. In 2022, however, the limit dropped to $750,000, meaning that this tax year, married couples filing together and single filers can deduct the interest as high as $750,000. Married taxpayers filing separately can deduct has high as $375,000 each. The exceptions to the mortgage interest deduction limit include: - Mortgages taken out prior to October 13, 1987, are called grandfathered debt and are not limited, meaning all of the interest paid is deductible; - Homes bought after October 13, 1987, and prior to December 16, 2017, are eligible for the previous $1 million limit. If married and filing separately, that number becomes $500,000 each; and - Homes sold prior to April 1, 2018, are still eligible for the $1 million limit—if there was a binding contract signed prior to December 15, 2017, that closed prior to January 1, 2018, and the house was bought prior to April 1, 2018. What qualifies as mortgage interest? What qualifies as deductible mortgage interest includes the following: Interest on the mortgage for your primary home. Your primary home could include an apartment, a condo, a house, a mobile home, a co-op, and a houseboat. Properties that do not qualify as your primary home are properties that don’t have basic living accommodations, such as bathroom, cooking, and sleeping facilities. Additionally, the property must be listed as collateral for the loan you are deducting interest payments from. It also applies if you have a mortgage to buy out an ex-partner’s half of the property following a divorce. Interest on the mortgage for a second home. So long as your second home is listed as collateral for that mortgage, you can use the mortgage interest deduction on a mortgage for a home that is not your primary residence. If you rent out your second home, however, you must live there for more than 14 days, more than 10% of the days you rent it out, or whichever option is longer. You can only deduct the interest from one home if you have more than one second home. Mortgage points you have paid. You might have the option to pay mortgage points when you take out a mortgage, meaning you can pay a portion of your loan interest in advance. Points usually cost roughly 1% of your mortgage amount and can earn you roughly 25% off your mortgage rate. To qualify you for the deduction, mortgage points must be paid at closing and directly to the lender. In some cases, mortgage points can be deducted during the same year they’re paid. How to claim the mortgage interest deduction To claim the mortgage interest deduction, you can take the following steps: Form 1098. In January or early February, your mortgage lender will send you a Form 1098, detailing how much you paid in mortgage interest and points during the tax year. The lender will also send a copy to the IRS to match up what you report on your tax return. Keep records. You might also be able to claim mortgage interest deduction if you were a co-op apartment owner, used a portion of your house as a home office, rented out a portion of your home, the home was a timeshare, or a portion of the home was under construction that year. Other circumstances include the home being destroyed during the year or the homeowner using a portion of the proceeds to pay off debt or invest. Being divorced or separated but having to pay interest on a co-owned home might also qualify an individual for mortgage interest deduction, as well as you and someone who isn’t your spouse not being liable but paying the mortgage interest on your house. Itemize taxes. If you claim the mortgage interest deduction on Schedule A of Form 1040, you will need to itemize rather than take the standard deduction when you file your taxes. What does the sharp uptick in mortgage rates mean for the housing market?
The 30-year fixed mortgage rate has reached the 5% mark, hitting its highest level in more than 10 years as inflation continues to soar. Freddie Mac's weekly primary mortgage market survey showed that the average 30-year fixed-rate mortgage jumped to 5% as of April 14 from 4.17% the week prior. A year ago, the benchmark mortgage rate was just 3.04%. "This week, mortgage rates averaged 5% for the first time in over a decade," said Sam Khater, Freddie Mac's Chief Economist. "As Americans contend with historically high inflation, the combination of rising mortgage rates, elevated home prices and tight inventory are making the pursuit of homeownership the most expensive in a generation." The 15-year fixed-rate mortgage averaged 4.17%, up from 3.91% last week and 2.35% during the same period last year. The 5-year Treasury-indexed hybrid adjustable-rate mortgage increased 13 basis points to 3.69% and was 89 basis points higher than a year ago. The steady rise in mortgage rates has dimmed consumers' outlook on homebuying. Fannie Mae's Home Purchase Sentiment Index revealed that 73% of respondents in March feel that now is a bad time to buy a home. Mortgage rates and home price expectations also worsened, with 69% of Americans anticipating rates to go up in the next 12 months and 48% of consumers expecting a continued rise in home prices. Early this month, most Fed officials agreed to increase interest rates by 25 basis points to counter the highest inflation in four decades. Some officials believed a 50-basis point hike might be more appropriate if inflation remained well above the committee's target. "We believe the Fed will act aggressively to combat rising prices, meaning a 50-basis point hike in the federal funds rate and the commencement of the balance sheet runoff are both likely in May,” said Nathaniel Drake, quantitative modelling associate at Fannie Mae’s Economic and Strategic Research (ESR) Group. “We've stated previously that the exact impact of policy tightening on long-term rates is difficult to predict, but thus far, the Fed's more hawkish tone has prompted an unusually sharp jump in mortgage rates,” he added. "This is likely to weigh dramatically on housing activity this year and slow home price growth, and we are likely to downgrade our forecasts for new and existing home sales." America's housing market has grown increasingly frenzied.
Shortly after moving to South Florida for a new job with the US military, Shannon Kaufman and his wife, Wendy, signed up for a whole other mission: buying a home. For months, they scoured listings, strategizing late into the night on which homes to target and working out how much they could afford, even if it meant using some of their retirement savings. After visiting 200 listings and making offers on 15 homes that ultimately didn’t pan out, the Kaufmans finally found a home that fits at least some of their needs. They’ll be renting it, however. “We found a place that’s smaller than we want, but it’ll work until we have something built or until the market cools off,” said Shannon Kaufman, 47. America’s housing market has grown increasingly frenzied, and prices are out of reach for many buyers, especially first-timers. This spring, traditionally the busiest season for home sales, is more likely to deliver frustration and disappointment for aspiring homebuyers than it is homeownership. The number of homes for sale nationally remains near record lows, fueling fierce competition among buyers vying for fewer homes. From Los Angeles to Raleigh, North Carolina, when a house does hit the market, it typically sells within days. Bidding wars are common, often driving the sale price well above what the owner was asking. And would-be buyers planning to finance their purchase with a home loan are often losing out to investors and others able to buy a home with cash. A quarter of all homes sold in February were purchased with cash, up from 22% a year ago, according to the National Association of Realtors. Real estate investors accounted for 19% of transactions in February, up from 17% a year ago. Nichol Khan, a project manager, and her husband Ed moved to Mesa, Arizona, from Phoenix two years ago to shorten their commute to work. Home prices in the Phoenix area have jumped 20% from a year ago to $500,000, according to Realtor.com. “The prices just keep going up and up,” Khan said. The couple has lost out on more than a dozen homes they bid on. Some of the homes ended up selling for less in cash than the couple had offered. “We don’t have $500,000 in cash,” said Khan, 42. “We just could not be competitive with that.” Fewer homes on the market and high prices have been the hallmark of the housing market for the past 10 years or so. Now, rising mortgage rates further complicate the homebuying equation. Higher rates could limit the pool of buyers and cool the rate of home price growth - good news for buyers. But higher rates also weaken their buying power. The average rate on a 30-year home loan has climbed to around 4.7%. A year ago, average rates hovered just above 3%, according to mortgage buyer Freddie Mac. The increase follows a sharp move up in 10-year Treasury yields, reflecting expectations of higher interest rates overall as the Federal Reserve moves to hike short-term rates in order to combat surging inflation. Would-be buyers who applied for a home loan in February faced a median monthly mortgage payment of $1,653, including principal and interest, an increase of 8.3% from a year ago, according to the Mortgage Bankers Association. “It’s hard to believe, but I do think it’s going to be tougher this year, in some respects, than it was in previous years,” said Danielle Hale, Realtor.com’s chief economist. “So far, at least, we have seen the number of homes for sale continue to decline and prices continue to rise. Those two factors combined suggest that the competitive market is going to keep buyers on their toes.” Buyers should set their sights on homes that are listed well within what they can afford, experts say. “You should be looking 15%-20% below their limit; that gives them room for appraisal gaps, it gives them room for negotiating,” said Tracy Hutton, a broker with Century 21 in Indianapolis. Being well prepared sometimes isn’t enough when a homeowner prefers to accept an all-cash offer, rather than sell to a buyer with financing. Wendy Kaufman in South Florida couldn’t even get into an open house for a property on the market after she revealed the couple had a mortgage backed by the Veterans Administration. “When they saw I had a VA preapproval they said, `Sorry we don’t want to work with you.”‘ she said. Sometimes, buyers don’t have a chance to make an offer before a home is snapped up, sight unseen. In the Miami area, so-called “blind offers” have become common as a way to get around other buyers, said Rafael Corrales, a Redfin agent. One reason is the ultra-low level of homes for sale, which for the greater Miami metropolitan area, was down 55% in February from a year ago, according to Realtor.com. While every market is unique, there is one common hurdle across the US: affordability. The median US home price jumped 15% in February from a year earlier to $357,300, according to the National Association of Realtors. The San Jose, California, metro area had 40% fewer homes for sale in February than a year ago, according to Realtor.com. Buyers there have to navigate some of the most expensive home prices in the nation. The median home listing price climbed 13.3% to about $1.36 million in February from a year earlier. The market trends are a bit more welcoming for buyers in the Midwest, including the Indianapolis metropolitan area, where the number of homes for sale was down about 23% from a year ago. The median home price there stood at $287,000 in February, up 8.5% from a year earlier. In Raleigh, home listings were down a whopping 55% in February from a year earlier. Competition for fewer homes helped push the median home price to $430,000, a 9% increase from February 2021. Those trends made for a more competitive market for first-time buyers like Lisa Piercey and her husband, Alex Berardo. First-time buyers made up 29% of all homes sold nationally last month. That share has averaged 31% annually over the past 10 years. The couple began looking in December for homes at $350,000 or below. They offered $5,000 over the asking price on two properties but lost out to rival bidders. “That was all we could afford,” said Lisa Piercey, a 32-year-old project manager. “It’s really defeating, really disappointing.” In the end, the couple bought a townhome in a new construction community, though they see it as a stepping stone to a more spacious house with a big yard. “It’s big enough that we can still start our family and then move when the market hopefully dies down in a couple of years,” she said. "Some owners struggle to remain current after forbearance and loan modification"
The overall mortgage delinquency rate in the US fell to a new record low in January, according to a report released by CoreLogic. The share of mortgages in some stage of delinquency (30 days or more past due, including those in foreclosure) dropped 2.3% year over year to 3.3% in January. According to CoreLogic, this marks the lowest recorded overall delinquency rate since at least January 1999. “The drop in the nation’s overall mortgage delinquency rate in January marked the 10th consecutive month of year-over-year declines. This trend can be attributed to two familiar factors: escalating home prices and a strong job market,” CoreLogic said in its release. By stages, early-stage delinquencies (30 to 59 days past due) dipped one basis point from the same period a year ago to 1.2% in January. Likewise, adverse delinquency (60 to 89 days past due) was down by two basis points to 0.3%, and serious delinquency (90 days or more past due, including loans in foreclosure) posted a two-percentage-point decline to 1.8%. “The large rise in home prices — up 19% in January from one year earlier, according to CoreLogic indexes for the US — has built home equity and is an important factor in the continuing low level of foreclosures,” said Frank Nothaft, chief economist of CoreLogic. Foreclosure inventory rate, or the share of mortgages in some stage of the foreclosure process, decreased to 0.2% from 0.3% in January 2021. Transition rate, or the percentage of mortgages that transitioned from current to 30 days past due, remained unchanged at 0.7%. While the January foreclosure rate is down from last year’s level, the expiration of moratoriums in some states caused the number of foreclosures to rise month over month. “There are many homeowners that have faced financial hardships during the pandemic and are emerging from 18 months of forbearance. The US may experience an uptick in distressed sales this year as some owners struggle to remain current after forbearance and loan modification,” Nothaft said. However, CoreLogic noted that the January 2022 foreclosure rate was flat from December and is still the lowest recorded in 23 years. Pay raises are being wiped out
Inflation soared over the past year at its fastest pace in more than 40 years, with costs for food, gasoline, housing and other necessities squeezing American consumers and wiping out the pay raises that many people have received. The Labor Department said Tuesday that its consumer price index jumped 8.5% in March from 12 months earlier, the sharpest year-over-year increase since 1981. Prices have been driven up by bottlenecked supply chains, robust consumer demand and disruptions to global food and energy markets worsened by Russia’s war against Ukraine. From February to March, inflation rose 1.2%, the biggest month-to-month jump since 2005. Gasoline prices drove more than half that increase. Across the economy, the year-over-year price spikes were widespread. Gasoline prices rocketed 48% in the past 12 months. Used car prices have soared 35%, though they actually fell in February and March. Bedroom furniture is up 14.7%, men’s suits and coats 14.5%. Grocery prices have jumped 10%, including 18% increases for both bacon and oranges. Investors focused on a bright spot in the report and sent stock prices up: So-called core inflation, which excludes volatile food and energy prices, rose just 0.3% from February to March, the smallest monthly rise since September. Over the past year, though, core prices are up 6.5%, the most since 1982. “The inflation fire is still out of control,” said Christopher Rupkey, chief economist at the research firm FWDBONDS LLC. The March inflation numbers were the first to fully capture the surge in gasoline prices that followed Russia’s invasion of Ukraine on Feb. 24. Moscow’s attacks have triggered far-reaching Western sanctions against the Russian economy and disrupted food and energy markets. According to AAA, the average price of a gallon of gasoline - $4.10 - is up 43% from a year ago, though it’s dipped in the past couple of weeks. The acceleration of inflation has occurred against the backdrop of a booming job market and a solid overall economy. In March, employers adding a robust 431,000 jobs - the 11th straight month in which they’ve added at least 400,000. For 2021, they added 6.7 million jobs, the most in any year on record. In addition, job openings are near record highs, layoffs are at their lowest point since 1968 and the unemployment rate is just above a half-century low. The escalation of energy prices, a potential threat to the economy’s long-term durability, has led to higher transportation costs for the shipment of goods across the economy, which, in turn, has contributed to higher prices for consumers. The squeeze is being felt particularly hard at the gas pump. “That’s an extra dollar per gallon that I’m paying to get into the city to work,” Jason Emerson of Oakland, California, said as he loaded groceries into his car. “And then, you know, we have the tolls that just went up this past year a dollar. My eggs are a dollar more as well. So everything’s going up at least a dollar, which, you know, adds up.” The latest inflation numbers solidify expectations that the Federal Reserve will raise interest rates aggressively in the coming months to try to slow borrowing and spending and tame inflation. Kathy Bostjancic, an economist at Oxford Economics, said she expects year-over-year inflation to hit 9% in May and then begin “a slow descent.” Some other economists, too, suggest that inflation is at or near its peak. With federal stimulus aid having expired, consumer demand could flag as wages fall behind inflation, households drain more of their savings and the Fed sharply raises rates, all of which could combine to slow inflation. But that could take time. Robust spending, steady pay raises and chronic supply shortages are still fueling inflation. In addition, housing costs, which make up about a third of the consumer price index, have escalated, a trend that seems unlikely to reverse anytime soon. Economists note that as the economy has emerged from the depths of the pandemic, consumers have been gradually broadening their spending beyond goods to include more services. A result is that high inflation, which at first had reflected mainly a shortage of goods - from cars and furniture to electronics and sports equipment - has been emerging in services, too, like travel, health care and entertainment. Airline fares, for instance, have soared an average of nearly 24% in the past 12 months. The average cost of a hotel room is up 29%. The expected fast pace of the Fed’s rate increases will make loans sharply more expensive for consumers and businesses. Mortgage rates, in particular, though not directly influenced by the Fed, have rocketed higher in recent weeks, making home buying costlier. Many economists say they worry that the Fed has waited too long to begin raising rates and might end up acting so aggressively as to trigger a recession. The American public’s expectation for inflation over the next 12 months has reached its highest point - 6.6% - in a survey the Federal Reserve Bank of New York has conducted since 2013. Once public expectations for inflation rise, they can be self-fulfilling: Workers typically demand higher pay to offset their expectations for price increases. Businesses, in turn, raise prices to cover their higher labor costs. This can set off a wage-price spiral, something the nation last endured in the late 1960s and 1970s. Inflation, which had been largely under control for four decades, began to accelerate last spring as the US and global economies rebounded with unexpected speed and strength from the brief but devastating coronavirus recession that began in the spring of 2020. Many Americans have been receiving pay increases, but inflation has more than wiped out those gains for most people. In February, after accounting for inflation, average hourly wages fell 2.7% from a year earlier. It was the 12th straight monthly drop in inflation-adjusted wages. Still, for now, with the job market healthy, inflation has yet to dampen overall consumer spending. Levi Strauss & Co., for example, says its price increases don’t seem to have fazed its customers. That said, Adrian Mitchell, chief financial officer at Macy’s, cautions that chronically high inflation will likely lead consumers to be choosier: They may spend less on department store goods and more on services like travel and dinners out. “We do believe that the consumer is going to be spending,” Mitchell said. “But are they going to be spending on discretionary items that we sell, or are they going to be spending on an airline ticket to Florida or air travel or going out to restaurants more?” In Atlanta, Shirley Hughes has had to raise prices at her bakery, Sweet Cheats, because of soaring costs for items like eggs and milk. Two years ago, a 36-pound container of butter cost $75. Now, it’s $145. Thirty dozen eggs were $50. Now, they’re $75 - and even that price is possible only if Hughes picks them up herself, instead of having them delivered. She’s raised the price of her six-inch cake by $5 to $50. So far, she said, people have generally accepted her higher prices. But there are limits. One customer wanted a six-inch cake delivered to her boyfriend - an hour’s drive away. Hughes told her the price of making the cake and delivering it would come to nearly $200. The customer canceled. MPA hears from an expert on the subject…
At just 24 years old, Eloisa Marchesoni has become a trusted advisor on cryptocurrency. In a recent interview with Mortgage Professional America, she expressed bullishness in the cutting-edge currency, envisioning its widespread use across the breadth of industries – including the mortgage field. The precocious pundit has been advising on cryptocurrency since 2018. Asked why she is so bullish on crypto, she responded: “The power of the underlying technology, blockchain, and the growing need of the human being to finally re-gain self-sovereignty. It is such a coincidence that blockchain fits that need just right, and right now, when the institutions are proving to be the greatest enemies of the individual rights.” The dynamics of cryptocurrency she likes the most are peer-to-peer, self-sovereignty; pseudo- and/or anonymity; transparency when the blockchain is there; social mobility; and equality. “It’s going to be adopted by the masses and added to the mainstream,” she told MPA. “I’m speaking of a world when we’ll all be using cryptowallets daily.” And yet, the factors that lead to its wider adoption are still guided by more mainstream bellwethers, she added. “The rise in value sometimes is not really tied to the rise in mainstream adoption,” she said. “It’s driven by the same factors we see on Wall Street.” For now, she noted, most investors are turning to cold storage for fear of a potential recession. “We’re all expecting a crash like what happened in 2008,” she said. “I agree it’s going to come pretty soon, and there will be a drop in cryptocurrency pretty soon. That’s why we’re switching to cold storage,” the New York City-based adviser said. Another fear for the moment is the ability of some governments to block withdrawals, as is happening as a result of the Russian war with Ukraine, she said. “While that is going down, the adoption rate will still be positive,” she added. “Even negative news benefits the market because a lot of people will become more educated.” Once those exigencies are past, however, she envisions a time of widespread adoption in the not-too-distant future. “I’m talking about the banks and big tech companies integrating crypto,” she said. “Apple Pay will have crypto wallets. Bitcoin to me,” she added, “is like electronic gold.” Living in the Trump Tower, Marchesoni has become something of a celebrity in the world of crypto. Born in the US, she spent her formative years in Italy. The Europeans, she noted, are more easily convinced on the crypto market of the future, and she acknowledged a greater degree of difficulty in converting many in the US. Some companies have already made strides into cryptocurrency. Luxembourg-based Altisource Portfolio Solutions SA recently struck an agreement with a cryptocurrency payment and conversion service to facilitate the purchase of homes with digital currency. Michael Jansta, chief marketing officer for Altisource, told MPA the agreement with ForumPay makes it easier to buy real estate with cryptocurrency, despite the currency’s volatility. “It’s kind of like buying gold from a dealer during the day while it’s fluctuating. They lock the exchange rate for a couple of minutes, and you put in your credit card or your bank transfer information and you can buy gold. ForumPay does the same thing with cryptocurrency.” He provided an accessible example related to the mortgage industry: “So if you want to buy a house and your title company sends you a total that you’re supposed to tender – whether that’s your down payment amount on a finance deal or you’re paying in full as a cash buyer – there is a specific dollar amount that you need in funds to close escrow. ForumPay enables you to pay using bitcoin or another cryptocurrency. You press the button when you’re ready to pay and they lock what your exchange rate is going to be.” For its part, United Wholesale Mortgage in late 2021 announced it would start accepting cryptocurrency as payment. Company CEO Mat Ishbia initially announced that UWM would begin allowing the use of digital currencies in mortgage transactions during the company’s Q2 earnings in August 2021. Rate of sellers dropping prices growing amid rising rates
There are signs the US housing market is beginning to cool amid reports that 12% of homes for sale have seen a drop in prices in the last month, according to online brokerage, Redfin. Additional reports confirm that rising mortgage rates, which are edging closer to 5%, have caused sellers to lower their asking prices, with Fannie Mae’s deputy chief economist, Mark Palim, saying that the housing market could expect to see “an even greater cooling…than previously forecast” if consumer pessimism toward homebuying conditions continued and mortgage rate increases were sustained. Redfin led with a headline last week suggesting that sellers’ “tight grip” on the market was “starting to loosen” after more than a tenth of homes reported a price drop during the four weeks up to the period ending April 03 – representing a 9% increase from a year earlier and the highest share since December. Significantly, Redfin added that the rate of sellers dropping their prices “is growing faster month over month than it has since August”. Redfin’s chief economist, Daryl Fairweather, stressed that while drops in prices were still rare, they were becoming more frequent – a clear sign, she said, that “the housing market is cooling”. Despite the fact that demand was still outstripping supply, she said sellers “can no longer overprice their home and still expect buyers to clamor at their door”, due mostly to the fact that higher mortgages were “eating into homebuyers’ budgets”. In a separate report, Fannie Mae’s Home Purchase Sentiment Index (HPSI) decreased by 2.1 points to 73.2 in March, reflecting consumer pessimism over mortgage rates and homebuying conditions. Fannie Mae’s 'Good Time to Buy' survey of the index also hit another record low, with only 24% of consumers believing it was a good time to buy a home. In raw figures, soaring interest rates aimed at controlling inflation have caused mortgage demand to plummet by more than 40% compared with a year ago, with CNBC saying last week that it was “crushing” the mortgage market. To add to brokers’ woes, refinance demand has also slumped by more than 60% compared with a year ago. In addition, data from the Mortgage Bankers Association (MBA) shows that mortgage applications have been steadily falling since the beginning of the year. The only notable exception in the last two months was the week ending March 04, following the Russian invasion of Ukraine on February 24, which saw mortgage rates drop for the first time in 12 weeks. Since then, mortgage rates have been rising rapidly, and last week the average interest rate for a 30-year fixed-rate mortgage with conforming loan balances jumped to 4.90%. Total mortgage application volume also fell by another 6% last week compared with the previous week, and while mortgage demand falls, there is also evidence that lending standards are getting stricter, with the MBA’s latest report showing that mortgage credit availability fell slightly by 0.7% to 125.1 last month. Joel Kan, the MBA’s associate vice president of economic and industry forecasting, said the drop in credit availability was driven by a reduction in higher LTV, lower credit score programs. Industry sources consulted by Mortgage Professional America have revealed that over the last month and-a-half, lenders have also been changing loan terms and prices at the last moment in response to concerns about borrowers’ levels of debt and rising rates. Kan last week confirmed that the financial markets “expect significantly tighter monetary policy in the coming months” as higher rates would have an impact by reducing the incentive to refinance. Meanwhile, the fall in mortgage business is having a negative impact on jobs, in stark contrast to the pandemic years when firms embarked on hiring sprees. The latest job losses affect retail lender Movement Mortgage following unconfirmed reports that it intends to lay off about 170 staff across the country. This follows digital mortgage lender Better.com’s decision last week to cut its workforce through a ‘voluntary separation program’, telling affected employees under the age of 40 that they had a week to accept the offer, or up to 21 days if they were older. The firm, which is reportedly losing about $50 million a month, sacked about 900 workers last December during an infamous video conference call conducted by the company’s CEO, Vishal Garg. In some of the country's priciest neighborhoods, they're relatively subdued
In most of the US, housing markets are exuberant. In some of the country’s priciest neighborhoods, they’re relatively subdued. Upscale suburbs of Washington, D.C., and wealthy New York enclaves are among the markets with the slowest price appreciation, according to the latest report on US home affordability by real-estate research firm Attom Data Solutions. House prices were up less than 1% last quarter from a year earlier in Westchester, New York, for example -- and not much more than that in Montgomery County, Maryland, a favorite of wealthy commuters to the capital. The trend isn’t limited to the east coast, with Chicago’s Cook County posting an increase of 2%. By comparison, almost two-thirds of the counties surveyed saw prices rise more than 10%. The wealthiest areas may be victims of their past success. The spread of remote work during the pandemic has allowed many employees to opt for living somewhere more affordable. “Demand today tends to be stronger at the entry and mid-priced tiers of the market than at the higher end,” said Rick Sharga, Attom’s executive vice president of market intelligence. “Price appreciation tends to rise more quickly in counties with a higher percentage of lower-priced homes available.” While still pricey, those neighborhoods are at least becoming more affordable compared to historic averages, the data show. That’s a rarity in today’s market, where most counties are seeing home prices rising faster than household incomes. In more than three-quarters of the 586 counties analyzed by Attom, housing was less affordable than in the past relative to incomes. With interest rates approaching 5% on a 30-year mortgage, that suggests a squeeze is coming, Sharga said: “More consumers are going to struggle to find a property they can comfortably afford.” |
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