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When Will Mortgage Rates Go Down?

Mortgage rates have already dropped by more than 0.5% between May and September. While the Federal Open Market Committee has yet to lower the benchmark interest rate, the market often reacts in advance of anticipated Fed policy changes. This, along with several other factors, helps drive mortgage rate fluctuations.

According to an August housing outlook from Freddie Mac, “The anticipation of an upcoming rate cut is already influencing the market, leading to downward pressure on mortgage rates.”

However, even with the market expecting a Fed rate cut, it’s unlikely that mortgage rates will see a significant decline right away. As Jessica Lautz, the deputy chief economist and vice president of research at the National Association of Realtors (NAR), noted in a September statement, lenders have already “priced in” the anticipated rate cut.

Although a sharp drop is not expected, experts predict that mortgage rates will continue to moderate through the remainder of the year. If economic conditions weaken further, we may see several rate cuts over the next 18 months. That said, rates are not expected to return to the 3% or 4% range anytime soon. The best-case scenario is a gradual decline to the higher 5% range by the end of 2025.

Here are the current predictions for mortgage rates through the end of 2024:

• Fannie Mae: Rates are expected to decrease to 6.4% by year-end. In 2024, rates are projected to average 6.7%, and in 2025, they may drop further to around 6%.
• Mortgage Bankers Association (MBA): The MBA predicts rates will fall to 6.5% by the fourth quarter of 2024. Looking ahead, they expect rates to dip to 5.9% by the end of 2025 and stay at that level into 2026.
• Realtor.com: According to a recent update, Realtor.com anticipates rates will close out 2024 at around 6.3%, down from their previous forecast of 6.7% earlier this year.
• Wells Fargo: In its U.S. Economic Outlook, Wells Fargo expects the 30-year fixed mortgage rate to decline to 6.25% by the end of 2024, with rates falling below 6% by mid-2025.

While mortgage rates are trending downward, the pace of decline will depend on a variety of factors, including economic conditions and Federal Reserve decisions. Stay informed and work closely with your financial advisor or mortgage professional to make the best decisions for your home financing needs.

Filed under: Blog by Joseph S. Rivera
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You may be familiar with the traditional real estate commission model, where the seller provides the total agent commission, often between 5 and 6 percent of the sale price of the home.

That payment is then split between their listing agent and the buyer’s agent after closing.

Due to a series of lawsuits, settlements, and renewed scrutiny from the Department of Justice, this model has changed significantly, with the onus of paying for the buyer agent’s compensation potentially shifting more to the buyer. As a seller, you no longer have to offer buyer agent compensation as part of your listing agent’s commission to list with the multiple listing service (MLS).

If you’re looking to put your house on the market in the coming months, it’s vital to understand these shifts in the process so you can make informed decisions that work for your specific situation. Check out this guide to common questions regarding buyer agent commission to get a better gauge of how they work, why they matter to you as a seller, and whether it’s in your best interest to offer to pay it as a financial incentive.

How is the process of buyer agent commissions changing?
Previously sellers were required to offer buyer agent compensation as part of their listing on the multiple listing service (MLS). There were no mandates on the amount that had to be offered, meaning you could advertise a $0 commission if desired, but most sellers were advised by thier listinge agents to offer a standard percentage for thier area as an incentive for buyer agents to show and sell their properties to clients. In this sense, the commission was essentially presented as a routine marketing cost for sellers in order to get their property in front of as many qualified buyers as possible via the MLS.

Starting in July, however, sellers will no longer be permitted to mention buyer agent compensation in their MLS listings. Additionally, if their agent is a member of the National Association of Realtors® (NAR), buyers will be required to sign a buyer-broker agreement that states the type and amount of their agent’s compensation; this could be a commission based on the sale price of the home they buy, a flat fee, an hourly rate, or some other form of payment. Together, these two changes may lead to a shift that generally sees the buyer assuming the responsibility for paying their agent’s compensation as opposed to the seller.

Can Sellers still pay the buyer agent commission if they wish?
Yes, there is no hard-and-fast rule about who has to cover the buyer agent’s compensation. Sellers can certainly market their property with an offer to pay buyer’s agent commission in advance—just not on the MLS—as a way to attract more interest from buyer agents and, subsequently, their clients. A buyer may also ask you for help with it during closing, requesting it as a seller concession. In that instance, the seller will have the opportunity to negotiate how much, if any, of the commission they are willing to provide to help facilitate the sales process.

How much is the typical buyer agent commission?
Commissions are not fixed, but in most markets, they traditionally range somewhere between 5 percent to 6 percent of the home’s sale price. That is then split between the buyer and seller agents, meaning that each generally receives between 2.5 percent and 3 percent commission. With the changes following the settlement by the NAR, advocates for the rule change argue that this amount will to go down over time, potentially even by half. Of course predicting the future is not an exact science, so in the end we will just have to wait and see how all this plays out in the market in the coming years.

How does paying the buyer agent commission affect how much I get from the sale?
If you are covering the buyer agent commission, it is typically deducted from the proceeds of the sale before you receive your profit. Be sure to factor this into your calculations when determining how much you expect to earn from the sale of your home. It is always best practice for listing agents to provide thier sellers with a “Seller’s Net Proceeds Worksheet” with their best estimates of the closing costs and the esitimated seller’s net proceeds from the sale of the property.

When should I consider paying the buyer agent commission?
Sellers need to remember, different markets demand different strategies for enhancing their home’s appeal. In a slower market, sellers may feel the need to provide buyer agent compensation to compete against other listings in the same neighborhood. Conversely, in a more seller-friendly market with low inventory and many eager buyers, sellers may be able to offer little or no buyer agent compensation, secure in their home’s potential for a lucrative sale.

As a seller, you deserve transparency around the services that are included in the sale of your home and the way that both agents will be compensated. By working closely with your real estate agent, you can get your questions answered, make more informed decisions, and effectively navigate the logistics of getting your home sold

Filed under: Blog, Uncategorized by Joseph S. Rivera
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The Keyword for 2024: Preparation

Preparation is still the key for California homebuyers looking to succeed in the competitive real estate market in 2024.

As the saying goes, “Proper Preparation Promotes Peak Performance.”

You are the driving force behind achieving peak performance in this intense market. Think of your Realtor as your performance coach, dedicated to helping you prepare for success. They understand that the best opportunities are secured by those who are the best prepared.

Buying a home can stir up a mix of emotions, from excitement to feeling overwhelmed. After all, purchasing real estate is a big deal—often the most significant investment of a lifetime. Here are a few essential tips to help you get ready for the journey of buying property in California’s 2024 marketplace:

1. Gather Key Documents

If you’re planning to finance your home purchase, start collecting the documents your loan professional will need to qualify you for a mortgage. Key documents include:

• Personal Identification: Driver’s license, Social Security card, work visas, etc. Lenders must verify your identity as part of the loan process.
• Federal Tax Returns & W2s/1099s for the past two years. If self-employed, include business tax returns and financial statements like profit & loss reports.
• Recent Pay Stubs or Pension Statements covering the last 30 days.
• Mortgage Statements or Rental Info: For homeowners, your latest mortgage statement and homeowner’s insurance. For renters, your landlord or property management contact.
• Monthly Bank Statements for the past two months to verify funds for your down payment and other assets.
• Credit Explanation Letters for any negative credit report entries.
• List of Outstanding Debt with creditor names and account numbers.

2. Make Lists

Create two lists:

• One for the features you need in your new home.
• One for the features you want but can compromise on.

Share these with your agent so they can better guide your search. Update your list as needed and keep your agent in the loop.

3. Keep Notes

While your agent will keep track of the homes you visit, take your own notes when attending open houses. Share what you liked or didn’t like after each showing. This feedback will help your agent refine your search and zero in on the right home for you.

4. Stay Positive

Buying a home is a process, and it’s easy to get discouraged if things don’t move as quickly as you’d like. Remember, even after finding your dream home and making an offer, the closing process can take time. Stay patient and positive—your agent is working hard to find the perfect property for you.

5. Choose Your Realtor Coach Wisely

Your Realtor is more than just a guide—they’re your “coach” through this process. Choose someone you feel comfortable with, who you can freely communicate with, and who you trust to offer guidance. A great Realtor will make the entire experience smoother and less stressful.

With the right preparation and support, 2024 can be your year to secure the home of your dreams!

Filed under: Blog, Uncategorized by Joseph S. Rivera
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Forbes Article By: Robin Rothstein : Forbes Advisor Staff

Published and Reprinted 05/18/2023

The opinions and information presented here are those of the article author and Forbes and are the sole property of Forbes and their Staff. We have reprinted the article here for sharing industry information only.

It’s May, but the spring homebuying season has yet to bloom—and it may turn out to be a total dud

Mortgage rates increased 15 basis points in April, while pending and existing home sales slumped in March. Though the median existing-home sales price edged lower year-over-year for the second consecutive month—a promising sign for home shoppers—substantial, nationwide price declines are likely not in the cards.

Tight inventory issues continue to keep prices high, perpetuating affordability challenges for many, especially first-time homebuyers. For one, the nation’s housing supply remains limited—and probably will remain so for at least the near future—due, in part, to those who purchased homes in recent years at record-low interest rates staying put.

Though home prices are not as eye-popping as in early 2022, how much further home prices dip in 2023 will depend on the housing market region and where mortgage rates go.

As we move through spring homebuying season, buyers and sellers remain at a standoff.

Persistently high mortgage rates and home prices continue to put off many prospective homebuyers as fears of ongoing inflation, bank sector volatility, weakening economic growth and an impending recession hang in the air.

Meanwhile, the Federal Reserve voted to raise its key interest rate by one quarter of a percentage point on May 3, a move in line with most housing experts’ predictions. The Fed also signaled that it may pause rate hikes for the remainder of the year should inflation continue to fall. A Fed rate hike has an indirect impact on long-term home loans, such as 30-year, fixed-rate mortgages.

These circumstances have put a strain on the housing market, which remains a mixed bag.

On the one hand, home shoppers received good news, with the median existing-home sales price declining 0.9% to $375,700 in March compared to a year ago, according to the National Association of Realtors (NAR). This is the second consecutive month of year-over-year home price declines after a 131-month streak of record increases.

On the other hand, total existing-home sales dipped 2.4% from February to March and are down 22% from a year ago, per NAR.

“Home sales are trying to recover and are highly sensitive to changes in mortgage rates,” said Lawrence Yun, chief economist at NAR, in a report. “Yet, at the same time, multiple offers on starter homes are quite common, implying more supply is needed to fully satisfy demand. It’s a unique housing market.”

Some Experts Foresee a Sluggish Housing Market Recovery

Following several weeks of declines in March and early April, mortgage rates edged higher in recent weeks, reaching 6.43% the week ending April 27, according to Freddie Mac. Rates have remained steady throughout May, most recently finishing at 6.39% the week ending May 18.

“If current economic conditions persist, with elevated mortgage rates and home prices amid scarce inventory, the market is likely in for a long, slow climb and a few bumps along the way,” said Danielle Hale, chief economist at Realtor.com, in an emailed statement.

One of those bumps includes the new mortgage fee rules imposed by the Federal Housing Finance Agency (FHFA). Beginning May 1, conventional mortgage borrowers who place between 5% and 25% down will pay more in fees—also known as loan-level price adjustments (LLPAs)—than those who put down less than 5%.

Though the Biden-Harris administration revamped the existing mortgage fee rules to make homeownership “more attainable and affordable for more low- and middle-income borrowers” the change has drawn criticism from some housing experts as the higher fees will hit people considered less risky.

While it remains to be seen how the mortgage fee changes will affect home shoppers, mortgage application activity at the moment remains low.

“Both conventional and government home purchase applications increased last week. However, activity was still nearly 28% below last year’s pace,” said Joel Kan, vice president and deputy chief economist at Mortgage Bankers Association.

Even so, some experts predict a slow recovery may soon be underway.

“The 30-year fixed-rate mortgage increased modestly for the second straight week, but with the rate of inflation decelerating rates should gently decline over the course of 2023,” said Sam Khater, chief economist, in a press statement. “The prospect of lower mortgage rates for the remainder of the year should be welcome news to borrowers who are looking to purchase a home.”

Housing Inventory Outlook for May 2023

Low housing inventory has been a challenge since the 2008 housing crash when the construction of new homes plummeted. It still hasn’t fully recovered—and won’t in 2023.

Housing supply holding steady at near historic lows has propped up demand compared to other downturns, consequently sustaining higher home prices.

“Inventory is approximately 46% below the historical average dating back to 1999,” says Jack Macdowell, chief investment officer and co-founder at Palisades Group.

At the current sales pace, unsold inventory is unchanged from March at a 2.6-month supply, according to NAR. Though up from 2.0 months a year ago, supply is low by historical standards, especially in the face of pent-up demand.

With reportedly 85% of homeowners sitting on mortgage rates below 6%, industry experts have a gloomy outlook on when inventory will eventually normalize.

“We think that it is highly unlikely that the inventory problem will be resolved in 2023,” says Macdowell.

Housing Starts Forecast 2023

At the same time, there are positive signals in the homebuilding realm. Single-family construction starts rose for the second consecutive month, increasing 2.7% in March, and applications for building permits increased by 4.1% from the previous month, according to the U.S. Census Bureau and HUD.

The latest builder outlook data reflected optimism as well.

The most recent National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI) that tracks builder sentiment ticked up a point, from 44 to 45. This is the fourth month-over-month increase following 12 consecutive months of declines.

Even so, builder confidence is still considered low—50 or above means more builders see good conditions ahead. Nonetheless, these consecutive upticks signal a positive trend in new-home construction as the apparent demand for new homes—which surged 9.6% in March—is likely due to a retreat in mortgage rates and tight existing-home inventory.

Also, the Federal Reserve isn’t helping matters with its ongoing rate hikes. At a semiannual hearing before the Senate Banking Committee, Federal Reserve Chair Jerome Powell addressed questions about the Fed’s aggressive monetary tightening policies in its efforts to rein in inflation.

In an exchange with Senator Raphael Warnock (D-Ga.), Powell acknowledged that raising the central bank interest rate increases borrowing costs for companies that develop new housing and makes financing and expanding production for suppliers more expensive. He also conceded that elevated mortgage rates discourage homeowners with low fixed-rate mortgages from selling their homes.

“Homeowners, homebuyers, lenders, as well as builders, are trying to adapt and predict interest rates, home prices, supply, demand and the potential for a Fed-induced recession,” says Macdowell. “As a result, builders may be reluctant to start new projects that would bring needed housing product to the market.”

Will the Housing Market Crash This Year?

Due, in part, to the ongoing inventory crunch keeping home prices elevated, many economists predict the housing market is more likely to correct itself from the double-digit percentage jumps in home prices we’ve seen over the past few years rather than crash.

The latest S&P CoreLogic Case-Shiller Home Price Index posted a negligible month-over-month national price growth reading of 0.2%, following seven consecutive months of declines. Even though year-over-year prices are higher, price appreciation has decelerated recently.

Nonetheless, experts say whether home prices rise or fall in the coming months will likely remain region-specific. For example, expect the steepest declines in areas that experienced big price booms during the pandemic, such as Austin, Texas; Phoenix; and West Coast metro areas.

“Home prices continue to rise in regions where jobs are being added and housing is relatively affordable,” said Yun. “However, the more expensive areas of the country are adjusting to lower prices.”

Additionally, other experts point out that today’s homeowners stand on much more secure footing than those coming out of the 2008 financial crisis, with many borrowers having positive equity in their homes. Consequently, the likelihood of a housing market crash is low.

“Homeowner equity is at the highest level it’s been in the past several decades, so homeowners have a lot of value in their home,” says Nicole Bachaud, an economist at Zillow.

In a housing market crash, you would typically see a 20% to 30% drop in home prices and a decline in home sales—far more than what’s currently happening. Another crash symptom that’s been missing is a jump in foreclosure activity.

“We assign a low(er) probability of a housing market crash in 2023, since a ‘crash’ would likely be the result of mortgage defaults, foreclosures and forced property liquidations,” says Macdowell.

However, the possibility of an economic downturn poses a concern.

“We think that the most significant risk to the near-term market (and housing market) outlook is the potential for a severe recession and/or prolonged stagflation,” says Macdowell.

Will There Be a Lot of Foreclosures in 2023?

Though still below pre-pandemic levels, foreclosures have been edging up since the expiration of the Covid-19 foreclosure moratorium in September 2021.

In the first quarter of 2023, foreclosures climbed 6% from the previous quarter and were up 22% from the first quarter of 2022, according to ATTOM, a property data provider. March foreclosures were up 10% from a year ago and 20% between January and February.

“This unfortunate trend (in foreclosure activity) can be attributed to a variety of factors, such as rising unemployment rates, foreclosure filings making their way through the pipeline after two years of government intervention and other ongoing economic challenges,” said Rob Barber, chief executive officer at ATTOM.

Even though foreclosures are on the rise, Barber noted that the significant equity many homeowners still have should help prevent increased levels of foreclosure activity.

When Should I Buy a Home in 2023?

Buying a house—in any market—is a highly personal decision. Because homes represent the largest single purchase most people will make in their lifetime, it’s crucial to be in a solid financial position before diving in.

Use a mortgage calculator to estimate your monthly housing costs based on your down payment and interest rate.

Trying to predict what might happen this year is not the best homebuying strategy. “Buyers sitting on the sidelines today in anticipation of lower prices tomorrow may end up disappointed,” says Neda Navab, president of the U.S. region at Compass, a real estate tech company.

Navab expects home prices in the hotter markets during the past few years to decrease somewhat, but she doesn’t expect a widespread, national price decline like what followed the 2008 financial crisis.

Instead of waiting for much lower prices, experts suggest buying a home based on your budget and needs. If you find a home you love in an area you love, and it also fits your budget, then chances are it might be right for you. However, if you make too many sacrifices just to get a house, you may end up with buyer’s remorse, potentially forcing you to offload the house.

Tips for Buying in Today’s Housing Market

Even as prices soften, you may realize that the area where you want to buy a home is still out of reach, so it’s important to be flexible.

“If you badly want a house and can work remotely or switch jobs, moving to lower-priced housing markets is a good idea to consider,” says Robert Frick, corporate economist at Navy Federal Credit Union. “Millions of Americans have done that already.”

Also, get all your ducks in a row in advance—review your financial situation, gather required documents, shop multiple lenders and strengthen your credit score. That way, when you find your dream home, you’ll be in a better position to act fast in a tight market.

“Only the best prepared, with their financing lined up, a solid understanding of what they can afford, and constant checking of prices and listings will be successful in today’s highly-competitive market,” says Frick. “Know how much your monthly payment will be—complete with taxes—and how well that fits into your budget.”

Tips for Selling in Today’s Housing Market

Even as prices soften, you may realize that the area where you want to buy a home is still out of reach, so it’s important to be flexible.

“If you badly want a house and can work remotely or switch jobs, moving to lower-priced housing markets is a good idea to consider,” says Robert Frick, corporate economist at Navy Federal Credit Union. “Millions of Americans have done that already.”

Also, get all your ducks in a row in advance—review your financial situation, gather required documents, shop multiple lenders and strengthen your credit score. That way, when you find your dream home, you’ll be in a better position to act fast in a tight market.

“Only the best prepared, with their financing lined up, a solid understanding of what they can afford, and constant checking of prices and listings will be successful in today’s highly-competitive market,” says Frick. “Know how much your monthly payment will be–complete with taxes–and how well that fits into your budget.”

Filed under: Blog, Uncategorized by Joseph S. Rivera
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