Sharp drops in activity
Lending activity in the US has gone into reverse after only 2.71 million mortgages were secured for residential properties during the first three months of the year, according to a new report by real estate data provider, ATTOM. The ‘2022 US Residential Property Mortgage Origination Report’ for Q1 shows there was an 18% drop in mortgage lending compared to the last quarter of 2021, representing the largest quarterly decrease since 2017. It was also down 32% from the first quarter of 2021 and the biggest annual fall since 2014. The decline resulted from double-digit downturns in purchase and refinance activity, even as home-equity lending rose, the report said. Lenders issued $892.4 billion worth of mortgages in the first quarter of 2022 in total, which was down quarterly by 17% and annually by 27%. The figures show they were the steepest quarterly and annual falls in the dollar volume of loans in five and eight years, respectively. The ATTOM report attributed plummeting refinance deals as the major contributor to the downturn, as only 1.45 million residential loans “were rolled over into new mortgages” during the first quarter of 2022, down by 22% compared with the last quarter of 2021 and by 46% year over year. The fall in the number of refinance mortgages decreased for the fourth straight quarter amid rising mortgage interest rates, which currently stand at 5.49% for 30-year fixed-rate mortgages. The dollar volume of refinance loans was also down 20% from the previous quarter and 42% annually, to $470.7 billion. Purchase-loan activity also shrank during Q1 as lenders issued just over one million mortgages to buyers - down 18% quarterly and 12% annually. Meanwhile, the dollar value of loans taken out to buy residential properties dropped to $371.3 billion, down by 16% from the last quarter of 2021. However, ATTOM noted that despite the reduction, purchase loans remained at 37% of all loans in the first quarter of this year. Rick Sharga, the executive vice president of market intelligence at ATTOM, said the drop in Q1 refinance activity had been expected, given how fast mortgage rates had been rising, but he expressed surprise that purchase loans had also plummeted. He said: “Many forecasts expected purchase loans to remain strong in 2022, and even increase in both the number of loans originated and the dollar volume of those loans. The weakness in purchase loan activity shows just how much of an impact the combination of escalating home prices and rising interest rates have had on borrower activity this year.” One product that bucked the trend was home-equity lending, which increased by 6% in the first quarter of this year and by 28% annually to 249,900. In addition, so-called HELOC mortgages represented 9% of all first-quarter residential loans, up from 7% in the fourth quarter of 2021 and 5% in the first quarter of last year. The report, however, concluded that the “continued shrinkage in overall residential lending” during the first quarter “reinforced a stark reversal for the mortgage industry following a near-tripling of activity from early 2019 through early 2021”. It cited “multiple forces” that would continue to impact on the housing market, including 30-year mortgage rates that have risen past 5%, the ongoing tight supply of homes for sale around the US “that limits the number of home purchases”, as well as rising inflation and “other uncertainties surrounding the US economy”. The ATTOM report reflected the latest findings by the Mortgage Bankers Association (MBA), which show that mortgage applications have dropped for the last four weeks in a row. The latest MBA weekly survey this week revealed that mortgage applications fell 6.5% from a week earlier. Meanwhile, Moody’s economist Mark Zandi this week reaffirmed his view, in an interview on CNBC, that the housing market was going to weaken, saying “there’s a comeuppance coming”. He said home sales and housing demand “are going to be hit hard”, citing the difficulty to obtain a mortgage for first time buyers as well as the reluctance among trade-up buyers to sell their home due to the fact they were unlikely to obtain a better interest rate than the one they were already on. However, he dismissed fears of a housing crash like the one which sank the US economy in 2008, citing the “severe shortage of homes” while adding that current mortgage lending was “pristine”, thanks to 15- and 30-year loans and “excellent” underwriting that bore no resemblance to the two-year subprime and ninja-loan fiascos of 14 years ago.
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ITip 1: Organize, organize, organize.
Selling your home can be a process that comes with numerous headaches, especially if you don’t want to spend too much time on the market. The good news is that not only are there various strategies to choose from, but there are also multiple common-sense approaches that you can take. Here are six effective tips to sell your house fast. Make your home’s interior appealable to buyers. One of the most effective ways to sell your house fast is to make your home’s interior appealing to buyers. Cleaning and decluttering your home, for instance, is also a very easy way to appeal to the largest amount of potential buyers as possible. Here are a few simple ways to make your house more appealing: - Organize, organize, organize—especially the closets. The reason this is so effective is that potential buyers are usually interested in storage space (a recent survey found it is extremely important to 64% of people), so you can be sure they will look in storage areas, closets, and pantries. For this reason, it is best not to simply throw everything you own into these spaces to make the rest of the house appear more organized. Instead, leave just enough open space to show the buyer how much storage space your home has. - Procure a storage unit so that you can pack away large furnishings that make your rooms appear too small, messy, or crowded or simply to store away any extra belongings. - Store away any family photos, religious items, keepsakes and any other personal belongings that may distract prospective buyers and keep them from imagining themselves living on the property. - Deep clean the entire house, including bathroom tile, carpets, baseboards, and kitchen cabinets. If you are working on a tight timeframe, it would be worthwhile to enlist the help of professional cleaners. Stage a “curb appeal” The interior of your home is not the only area that will attract prospective buyers—it benefits every seller to spruce up their property’s exterior as well, regardless of timeline. This is where “curb appeal” comes in. Because your property’s exterior is the first impression prospective buyers will get, it is crucial that it appears well-maintained, tidy, and welcoming. Creating curb appeal oftentimes can be completed in a weekend. If, however, you are on a time crunch, or your property simply needs more work, it would be worthwhile to hire a professional landscaper. Different ways that you can create curb appeal are as follows: clear paths and walkways; trim overgrown tree branches, hedges, and shrubs; clean doorknobs and windows; plant flowers; paint the front door; sweep away cobwebs and debris, especially in and around the front porch; and replace broken mailboxes or lights. Choose a selling strategy There are typically two conventional selling strategies to consider when you are deciding how to list your property. The first is called for sale by owner, or FSBO, and the second is using a real estate agent. There are, however, alternatives. Here the different selling strategies you can choose from. Sell FSBO. If you go with FSBO, you save on the commission (usually 3% for your own agent, though you still need to pay 3% to the buyer’s agent). On the other hand, however, you will have to be able to negotiate like a professional on escrow timelines, as well as juggle paperwork and consult an attorney to ensure everything is filled out properly. Hire an agent. If you go with an agent, they will have the expertise to sell your property quickly, as well as streamline negotiations, signing and closing, and contract prep work. Going this route will also mean that you must pay that added 3% commission. Sell to a developer. Selling to a developer is generally only an option if your property is on a large lot or is a teardown. Sell at an auction. If you sell at an auction, your home will likely go for less than on the local market, although it might mean you sell quickly. Do not overprice If you overprice, your home will likely be on the market for a longer period of time and you will also likely end up selling at a lower price regardless. If you price your home competitively, on the other hand, you can really speed up the process. When it comes to pricing, you could even price your property lower than similar properties in the area in order to ignite interest and start a bidding war. Choose a cash buyer A cash buyer is a good way to speed up the closing process, regardless of whether you are selling your home on your own (FSBO) or using a listing agent. In this scenario, you can avoid headaches that come with how long the mortgage underwriting will take or whether the buyer’s financing will come through. By removing buyer financing from the equation, you dramatically drop the time it usually would take to close your home sale. We’re talking as little as two weeks with a cash-in-hand offer versus nearly two months on average. Be accommodating to your prospective buyers Hold an open house. One way to sell your property quickly is a weekend open house, i.e., on days when prospective buyers are actually likely to have the time. Fresh flowers, a clean home, treats, and flyers all go a long way. Private showings. People who request private showings may be returning after an open house or could even be seeing your home for the first time. In either case, it is important to keep your home tour-ready 24 hours per day, seven days per week—to ensure you are accommodating any time a prospective buyer makes a request. Today's historic run is a hark back to the 2008 GFC.
The most robust markets of today will also be the hardest hit of tomorrow if the housing market crashes, as observed by Fortune and a team of data scientists at Home.LLC. The companies have built a forecast model to assess the risk factors across the 100 largest metropolitan areas in the nation, grouping them into three tiers: low risk, moderate risk and high risk. Those labeled high risk are set for the worst impact should a housing correction arise over the next few years. Eleven regional markets received a high-risk label, namely: Atlanta, Georgia; Boise, Idaho; Cape Coral, Florida; Deltona, Florida; Des Moines, Iowa; Jacksonville, Florida; Lakeland, Florida; Miami, Florida; North Port, Florida; Orlando, Florida; and Winston Salem, North Carolina. Nine of the markets are located in the nation’s booming Southeast corridor. Fortune claimed that Jacksonville, Atlanta and Orlando made the list given the massive number of homebuilding taking place, which would leave them at a higher risk of oversupply if the bubble bursts. “As workers in high-cost Northern cities like New York, Boston, and Chicago realized during the pandemic they’d be able to do their job from home for the foreseeable future, many departed for the relatively low-cost Southeast,” Fortune reported. “A similar phenomenon happened in Boise as it became the top destination for professionals departing California over the past two years. But if work-from-home loses momentum, so could places like Boise and the Southeast corridor.” Meanwhile, Fortune identified 37 housing markets that are considered low risk, some of which included: Boston, Massachusetts; Columbus, Ohio; Denver, Colorado; Grand Rapids, Michigan; Los Angeles, California; Portland, Oregon; Sacramento, California; San Diego, California; San Jose-Sunnyvale, California; Seattle, Washington; and Honolulu, Hawaii. Price growth in 20 cities across the country picked up again.
Home-price growth in 20 US cities picked up for the fourth straight month with Tampa, Florida, showing the biggest gains. A measure of prices in those 20 cities climbed 21.2% through March following a 20.3% gain in February, the S&P CoreLogic Case-Shiller index showed Tuesday. All 20 cities reported double-digit price increases for the year ended March and prices in Tampa jumped 34.8%, according to a statement. “Those of us who have been anticipating a deceleration in the growth rate of US home prices will have to wait at least a month longer,” Craig Lazzara, a managing director at S&P Dow Jones Indices, said in the statement. Homebuyers are facing a worsening affordability situation with mortgage rates hovering around the highest levels in more than a decade. Further price appreciation threatens to add to the pain even as higher rates and economic uncertainty have started to soften the market slightly. Redfin Corp. said earlier this month that the number of sellers cutting prices hit the highest level since October 2019. Nationally, prices rallied 20.6%, but S&P Dow Jones Indices’ Lazzara warned that a deceleration could be on the horizon. “Mortgages are becoming more expensive as the Federal Reserve has begun to ratchet up interest rates, suggesting that the macroeconomic environment may not support extraordinary home-price growth for much longer,” Lazzara said. “Although one can safely predict that price gains will begin to decelerate, the timing of the deceleration is a more difficult call.” Find out whether it's the right option for you – and how to qualify.
Purchasing a property is one of the costliest decisions you will make—which means, financially, you will likely need all the help you can get. This is where the mortgage interest tax deduction comes in. This guide will help you understand what it is, who is eligible, and what is not deductible. What is the mortgage interest deduction? A tax incentive for homeowners, the mortgage interest deduction lets you count interest that you pay on a loan for buying, building, or upgrading your primary residence against your taxable income, thereby lowering the amount of taxes that you will owe. It can also be used for various expenses such as mortgage insurance points and premiums. And as long as it is within a certain limit, the mortgage interest deduction can also be taken on loans for your second home. The mortgage interest deduction will apply solely to the interest on your mortgage and not the principal. In order to claim it, you will be required to itemize your deductions. While the mortgage interest deduction has evolved over time, it has been in practice for over 100 years. Mortgage interest tax deduction limit. The mortgage interest tax deduction limit changed in 2017 with the signing of the Tax Cuts and Jobs Act, or TCJA, which lowered the mortgage deduction limit and placed a limit on what you could educt from your home equity debt. The mortgage interest tax deduction limit was $1 million prior to the signing of the TCJA but is now limited to $750,000. The limit means that now married couples that file jointly, and single filers, can deduct the interest on a mortgage of $750,000 for head of household, single, or joint filers. On the other hand, married taxpayers that file separately can deduct upwards of $375,000 per person. Exceptions to the mortgage interest tax deduction limit include: mortgages taken out prior to October 13, 1987, which would be considered grandfathered debt, and therefore not limited, meaning that the interest you pay is completely deductible; homes bought between October 13, 1987 and December 16, 2017, which would still be eligible for the $1 million limit, or $500,000 each if you are married but filing separately; and homes that are sold prior to April 1, 2018, which would be eligible for the $1 million limit, but only if the property was bought prior to that date and if there was a binding contract entered prior to December 15, 2017, that closed prior to January 01, 2018. What qualifies as deductible mortgage interest? Different kinds of home loans qualify as a deductible mortgage interest, including loans to improve or build your house, or to purchase. Second mortgages, home equity loans, or lines of credit could also qualify for mortgage interest tax deduction, even though typical loans are for a mortgage. After you refinance your property, you could also use the mortgage interest deduction, but you will have to ensure the loan meets the qualifications—improve, build, or buy—previously listed and that the property is used to secure the loan. Other fees and costs that may be added to the mortgage interest deduction include: any interest on your home; interest on a second home you do not rent out; late payment fees; most mortgage insurance premiums; points; prepayment penalties; and home equity loans and home equity lines of credit used to improve your home. What’s not deductible? When you buy a property and become a homeowner, mortgage interest is not the sole expense that you will incur. There are a slew of other expenses that most people think are tax deductible but are not. Some of the expenses that are most commonly mistaken as being tax deductible include: homeowners insurance; moving expenses, unless you are active-duty military; other closing costs, such as title insurance; down payments, deposits, or earnest money that you have forfeited; any payments made when living on the property prior to the purchase being finalized (which are considered rent); and interest accrued on a reverse mortgage. Why is some mortgage interest not tax deductible? Some mortgage interest is not tax deductible because it usually depends on whether your loan is secured by the value of the property that is being mortgaged and used as collateral. If, like a personal loan, for example, the loan is unsecured, the interest usually can not be deducted. And if you want to have the HELOC, or the interest on a home equity loan, deducted but have used it for other ways than improving or buying the property (for example, paying off your credit card debt), you will not be able to do so. Home prices are unlikely to fall anytime soon, says economist.
The First American Real House Price Index report, which measures price changes of single-family properties throughout the US adjusted for multiple factors, increased by 32.5% year over year in March – the fastest growth in the series’ more than 30-year history, according to analysts. The report adjusts price changes for the impact of income and interest rate changes on consumer house-buying power over time at national, state and metropolitan area levels – thereby also serving as a measure of housing affordability. This rapid annual decline in affordability is attributable to two factors: a 21.6% annual increase in nominal house prices and more than a full-percentage-point increase in the 30-year fixed mortgage rate compared with one year ago, First American’s chief economist Mark Fleming said. While household income increased 4.9% since March 2021 and boosted consumer house-buying power, it was not enough to offset the affordability loss from higher mortgage rates and fast-rising nominal prices, Fleming added. The economist explained that reduced affordability prompts some buyers to pull back from the market and sellers to adjust their price expectations. “The housing market is slowing down by design as the Federal Reserve tightens monetary policy in order to tame inflation,” Fleming said. “Early data signals the housing market is normalizing – our preliminary nominal house price index for the months of April and May indicates annual house price growth is decelerating. Historical data provides helpful perspective on how house prices react to rising mortgage rates.” Rising mortgage rates and declining affordability have been two of the defining trends of the 2022 housing market, Fleming noted. Yet mortgage rates and their effect on home prices may not be as straightforward as many think. He added: “More often than not, house price appreciation has been resistant to rising mortgage rates. One exception is the 1994 rising-rate era, when house prices declined slightly and briefly. Another exception is the 2005-06 period, otherwise known as the US housing bubble, when house prices peaked in early 2006 and started to decline through 2006 and 2007. The rising rate period during the housing bust of 2008 and 2009 is another key exception.” He advised market watchers not to expect home prices to fall anytime soon: “History has shown that rising mortgage rates may take the steam out of rising house prices, but they don’t necessarily trigger a decline. In today’s housing market, demand for homes continues to outpace supply, which is keeping the pressure on house prices, so don’t expect house prices to decline.” The bottom line is that supply-demand imbalance is keeping the pressure on, Fleming noted: “House prices don’t fall just because mortgage rates rise. Rising mortgage rates do influence house prices, but broader economic conditions are often more influential. “The Federal Reserve is purposely trying to slow the housing market in order to tame inflation, and early indications, based on our preliminary house price index, signal a normalizing housing market,” he said. “History has shown that rising mortgage rates may take the steam out of rising house prices, but they don’t necessarily trigger a decline. In today’s housing market, demand for homes continues to outpace supply, which is keeping the pressure on house prices, so don’t expect house prices to decline,” Fleming concluded. Key highlights of the price index include:
The news suggests housing supply hit a turning point last month. Home listings increased for the first time since June 2019, according to Realtor.com data, suggesting the US housing supply hit a turning point last month. The number of active listings rose 8% year-over-year in May, probably driven by new sellers and a slowdown in would-be buyers deterred by high prices, Realtor.com said in a report Thursday. The largest increases in new listings were in the West and the South, in cities including Austin, Texas, and Phoenix, Arizona. Still, the uptick in inventory doesn’t necessarily mean that the housing market exuberance is softening. Listings remain 48.5% below their May 2020 level, and price increases have accelerated in recent months. “While this real estate refresh is welcome news in a still-undersupplied market, it has yet to make a dent in home price growth,” Danielle Hale, chief economist for Realtor.com, said in the report. The US median listing price rose to a record $447,000 in May, after just crossing the $400,000 threshold in March. And buyers made purchasing more quickly than in any month in Realtor.com data history going back to July 2016. Nonetheless, the jump in mortgage rates and a softening economic outlook may have thinned out buyers and made bidding wars less exuberant. In an early sign, the rate of sellers making price cuts accelerated in May, Hale said. Scam involved at least two dozen fraudulent loan transactions totaling $6.5M.
A former self-proclaimed Salem real estate developer has been convicted by a federal jury in Boston in connection with a 10-year mortgage fraud scheme involving at least two dozen fraudulent loan transactions totaling $6.5 million and resulting in more than $3.8 million in losses to lenders, justice officials said. George Kritopoulos, 50, of Salem, was convicted on May 27 of one count of conspiracy, two counts of wire fraud, six counts of bank fraud, one count of aiding the preparation of a false income tax return and one count of obstruction of justice. US District Court Judge Patti B. Saris scheduled sentencing for September 29. Kritopoulos was charged in September 2018 along with co-defendants Joseph Bates III and David Plunkett. “Mr. Kritopoulos held himself out to be a prominent real estate developer and believed he was above the law,” US Attorney Rachael S. Rollins said in a prepared statement. “This guilty verdict makes it clear that he is not. Mr. Kritopoulos and his co-conspirators thought they could line their pockets by victimizing innocent lenders and borrowers. “When the scheme began unraveling, Mr. Kritopoulos attempted to have his co-conspirators create phony documents, but they refused. In an interview, Mr. Kritopoulos lied to investigators. We are committed to holding those who engage in this type of behavior accountable.” Added Joseph R. Bonavolonta, Special Agent in Charge of the Federal Bureau of Investigation, Boston Division: “This verdict proves that George Kritopoulos is a predator who repeatedly targeted young, financially vulnerable victims and exploited them to pad his own pockets while driving them deeper into debt. “He lied to the banks on behalf of those victims and tried to obstruct our investigation. Mortgage fraud cases like this one are important to deter would-be fraudsters from acting, and to ensure those who commit fraud, like Kritopoulos, face justice. After all, this type of crime artificially influences home values and threatens the investments of lawful buyers." Joleen D. Simpson explained these are not victimless crimes: “Mortgage fraud, like many financial crimes, creates untold harm to individuals, communities, businesses and the integrity of the financial system,” the Special Agent in Charge of the Internal Revenue Service – Criminal Investigation Division, Boston Office, said. “This guilty verdict is proof of IRS Criminal Investigation’s dedication to protecting the financial health of our communities when they are threatened.” From 2006 through 2015, Kritopoulos, Bates and others engaged in a scheme to defraud banks and other financial institutions by causing false information to be submitted to those institutions on behalf of borrowers – people recruited to purchase properties – located primarily in Salem. The properties were usually multi-family buildings with two to four units, which the co-conspirators then converted into condominiums. Kritopoulos recruited new borrowers to purchase the individual condominium units, which were also financed by mortgage loans obtained by fraud. The false information submitted to lenders included, among other things, representations concerning the borrowers’ employment, income, assets and intent to occupy the property. Specifically, the false employment information included representations that borrowers were employed by entities that were, in fact, shell companies “owned” by Kritopoulos and were used to advance the fraudulent scheme. The employment information also included false representations about the income that the borrowers received from the entities, when, in fact, the borrowers received little or no income from them. As a result, the income asserted on the borrowers’ loan applications that Kritopoulos submitted to lenders grossly inflated their true income. The false information also included representations that the recruited borrowers intended to live in the properties that they were purchasing, when the borrowers, in fact, did not intend to do so. Kritopoulos brought newly recruited borrowers to Plunkett, who then prepared tax returns that contained false and inflated income. Some of those tax returns were submitted to lenders in support of the fraudulent loan applications. Because the borrowers did not have the financial ability to repay the loans, in all but two instances among 21 properties, they defaulted on their loan payments, resulting in foreclosures and losses to the lenders of more than $3.8 million, according to justice officials. In addition, justice officials detailed how Kritopoulos sought to obstruct the federal criminal investigation into the mortgage fraud scheme by encouraging Bates and Plunkett to make false statements and create false documents he hoped would make the companies appear to have been legitimate. In October 2018, Bates pleaded guilty to one count of conspiracy, three counts of wire fraud affecting a financial institution, and two counts of bank fraud. A sentencing hearing for Bates has not yet been scheduled by the Court. In February 2019, Plunkett pleaded guilty to one count of bank fraud and one count of aiding in the submission of false tax returns and is scheduled to be sentenced on Sept. 15. The charges of bank fraud and wire fraud each provide for sentences of up to 30 years in prison and five years of supervised release. The charge of obstruction of justice provides for a sentence of up to 20 years in prison and five years of supervised release. The charge of conspiracy provides for a sentence of up to five years in prison and three years of supervised release. The charge of aiding the preparation of false tax returns provides for a sentence of up to three years in prison and one year of supervised release. Each charge also carries a fine of $250,000, or twice the gross gain or loss, whichever is greater. Sentences are imposed by a federal district court judge based upon the U.S. Sentencing Guidelines and statutes which govern the determination of a sentence in a criminal case. Economic analyst gives sober assessment.
The fall in home sales as buyers are put off by soaring house prices is not a sign of an impending market bubble or crash, according to Lending Tree economist, Jacob Channel. The senior economic analyst at the online lending shopping place told Mortgage Professional America (MPA) that it seemed “very likely” that there will be less demand for homes, in part due to the fact that people will not be able to keep up with “really crazy” home price growth. He said: “Homes will probably end up sitting on the market for a little bit longer before they’re sold. People won’t be able to keep up with that really crazy home price growth and really crazy demand that we saw through 2020 and 2021.” His comments come as figures show that both pending and new home sales have been falling as the market responds to higher inflation and prices, and ever-increasing mortgage rates. Pending home sales fell by 3.9% in April, according to data released last week by the National Association of Realtors (NAR), while sales of new single-family homes, which account for 9.5% of all home sales, tumbled to a two-year low last month, down by 16.6% - the fourth straight monthly decline. Meanwhile, median home prices have jumped by 19.6% from a year ago to $450,600, just as sales of new homes are down by almost 27% compared to a year ago. However, Channel said the figures were evidence more of a slowdown than an impending market crash. He said: “I think there’s a big distinction between a cool off and a crash. The 2008 financial collapse is still really fresh in everyone’s minds and it’s really important to point out that distinction, because even if the market does cool and slow down a little bit, that doesn’t mean that we’re going to end up in the same situation that we were in 2008, when you had people defaulting on their loans left and right and the market was absolutely flooded with houses that were just dropping and dropping in value because nobody wanted to buy.” Turning his attention to brokers’ concerns, he said: “If you’re a mortgage originator, things this year are probably going to get a little bit trickier in terms of what you’re going to have to do to attract customers than what you might have had to deal with when rates were at record lows. But I don’t think that we’re on the cusp of some massive housing crash that ends up kind of taking down the entire economy with it.” He said Lending Tree’s own data reflected the trend, including the impact rising rates were having on prospective buyers. “Since the start of the year, the average rate offered to somebody in Lending Tree has increased by more than 2%. Not only that, but we are seeing some slowdown in terms of the people who are actively house hunting and who are actively applying for mortgages, so our data really does match up pretty closely with what others are reporting.” He said the drop in demand was directly linked to potential homebuyers pulling back from the market because of concerns about high rates and the overall cost-of-living, together with the fact that underwriting standards were now much stricter than they were in 2008. He said: “It’s one thing to buy a $354,000 house when mortgage rates are at 2.5%, for example, whereas today they’re over 5%. And because underwriting and lending standards are still strict, lenders still aren’t particularly keen to just say, ‘we’ll wing it, just this loan that you probably can’t afford’ and hope for the best.” First-time buyers in particular, were more vulnerable, he added: “First time buyers, who maybe don’t have a lot of cash for something like a down payment, haven’t had as much time to build a good credit score, so they’re probably going to have a harder time even getting a loan in the first place. Add that in with the fact that inflation is high and that it’s just harder to buy basic necessities - and they need extra money for that.” Channel’s views were echoed by fellow economist Lawrence Yun, from the NAR, who said the figures for pending sales “are telling” as “they better reflect the timelier impact from higher mortgage rates than do closings”. He predicted pending home sales “to be off by 9% this year”, while home price appreciation will slow to 5% by the end of the year, representing a sharp drop from recent gains of almost 20% annually. |
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