Sellers are anxious, but homebuyers are ready to shop

Here’s a look at the latest developments in the mortgage market for the week beginning 5/11/20.

• Home sellers nervous, buyers remain positive
• Rates steadily decline, but only for the lowest risk loans
• Suburban home sales rise during COVID-19 pandemic

Home sellers nervous, buyers remain positive

According to a survey of homebuying and selling sentiment by Fannie Mae, the majority of those looking to sell a home are worried about the current conditions. Sellers reportedly expect prices to go down over the next twelve months, though there is good reason to believe home prices won’t suffer as they did in 2008. Nevertheless, the sentiment among potential buyers remains positive. Mortgage applications for new purchases also grew or held steady for the last 3 weeks, showing that as state lockdowns start to ease, homebuying could begin to pick up steam as the season approaches.

Rates steadily decline, but only for the lowest risk loans

Average mortgage rates are continuing to creep down towards record lows, but lenders are still wary of reducing rates for, or even offering, riskier loans. Factors that typically result in modest price increases like lower FICO scores, high Loan-to-Value (LTV) ratios, and high debt-to-income ratios are now being weighed more heavily. In addition, some lenders have stopped offering riskier types of loans altogether. Lenders are taking these steps as they see a growing number of loans in forbearance, although the number of forbearance applications is now increasing at a slower rate.

Suburban home sales rise during COVID-19 pandemic

Better.com CEO, Vishal Garg, spoke with Yahoo Finance recently about a surprising trend; the number of Better Mortgage applicants purchasing new homes has actually increased during the COVID-19 pandemic. Last month, homebuying applications were up 36% compared to April of last year. The data suggests that despite social distancing restrictions, homebuyers are still looking to take advantage of historically low rates.

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