Here’s a look at the latest developments in the mortgage market this week.
- New supply is picking up. Here’s how to make your offer stand out.
- Mortgage rates are at a five-month low, but it may not last long
- Rising prices tamp down demand for new construction
- How to decide between points and credits
New supply is picking up. Here’s how to make your offer stand out.
More homes are hitting the market and buyers are still fiercely competitive over them. June ended with 1.25 million homes for sale, which represents 2.6 months of supply—up from 2.5 months in May. This influx of listings should provide more selection to shoppers, but it’s not enough to meet demand or reverse rising home prices. The median price of an existing home has risen $68,900 over the last year, hitting $363,300 in June.
With competition tight over historically low inventory, finding new ways to improve your offer is paramount to getting ahead in today’s market. But most options involve more cash or more risk for the buyer. Here’s a quick rundown of the directions some shoppers are taking.
Offer more cash upfront
More than half of buyers in June put at least 20% down on an existing home. But with today’s rising prices, it can be tough coming up with that much cash. As many as 31% of buyers reported that saving for a down payment is their biggest stumbling block towards homeownership.
Waive the appraisal contingency
An appraisal contingency is a contract clause designed to protect buyers from purchasing a home for more than it's worth. Sellers are eager to accept an offer without it, because it means the buyer can’t back out of the sale. But by waiving the contingency, buyers take a risk. If the appraisal comes back lower than what they’ve set up financing for, the lender could back out or change their terms, which threatens their chances of closing.
Mortgage rates are at a five-month low, but it may not last long
Mortgage rates are at their lowest since February, with the average 30-year fixed rate loan falling to 2.79% last week. That’s a significant drop given that the rate hit an all-time low of 2.69% back in January.
Concerns about the delta variant brought rates into the dip they’re in, and could keep them low if the economy struggles to recover from the pandemic. If vaccination rates increase around the world and the market picks up, rates could climb. That’s partly because the Federal Reserve promised to pull back the measures it has in place which have kept mortgage rates low throughout the pandemic. Economists generally expect rates to rise in the second half of the year, so it’s a good time to see how much you can lower your payments today.
Millions of homeowners currently stand to save by refinancing, especially if they last financed before January 2020 when rates were at least 0.75% higher. Start by checking your rates online with Better Mortgage. If the numbers look good, lock a rate in as little as 30 minutes.
Rising prices tamp down demand for new construction
New construction homes were increasingly popular in the past year, but demand is slowing down due to rising prices. June saw the lowest number of building permits issued since last August, and applications to buy a new home fell 24% year-over-year.
The median price of a new home hit $374,400 in May—over $20,000 higher than that of an existing home, which has also been trending upward. Homebuyers can navigate the climb by utilizing loan options that lower their upfront costs. That could mean a lower down payment, rolling in closing costs, or adding a co-borrower to the loan. Here’s a guide to your home financing options to help you get a lay of the land.
How to decide between points and credits
If you’ve ever applied for a mortgage, you’ve probably heard the terms “points” and “credits”. Mortgage points are fees you can pay at closing that lower your interest rate, while credits (also known as lender credits) are added onto your interest rate in exchange for paying less at closing. Both are adjustable, so you can use them to your advantage. Read our guide to how points and credits work, where to find them, and how they’ll help you calculate the total cost of your loan. That way, you can make the best decision for your budget in the short- and long-term.
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**Results based on a survey of 104 real estate agents in competitive markets. Of those surveyed, more than ~60% responded that waiving the appraisal contingency could increase the likelihood of having a competitive offer accepted by 50% or more. Results may vary and are not intended to represent or guarantee that anyone will achieve the same or similar results.