Mortgage interest rates have reached their highest levels in more
than 20 years. As interest rates creep towards 8%, many potential
homebuyers continue to be pushed out of the market. Bob
Broeksmit, president and CEO of the Mortgage Bankers Association,
says “Mortgage application activity is now at its lowest level in 29
years as high mortgage rates, limited housing inventory, and
affordability challenges continue to constrain borrowers.”
SIRVA MORTGAGE: INDUSTRY SNAPSHOT
November 2023
A Quick Update on the Latest Market Trends
The following update was curated by industry experts at Sirva Mortgage specifically for you
and other global mobility professionals. Visit our industry snapshot web page to view
additional updates.
INTEREST RATES
INVENTORY AND HOME SALES
According to the National Association of REALTORS®, home sales in
October fell to the lowest rate in 13 years. Unsold inventory sat at a
3.6-month supply in October at the current sales pace. The median
existing-home price increased to $391,800, up 3.4% from October
2022. According to Redfin, a buyer must earn $114,627 to afford the
median priced home, which is about $40,000 more than a typical
household earns.
While it may seem like we are in a housing “bubble,” it’s important to
remember that today’s market is very different than during the
mid-2000s. A typical homeowner today has good credit, a lot of equity
in their home, and a low fixed interest rate, which means fewer people
are underwater and in a home they can’t afford. Unlike risky subprime
mortgages and the oversupply we saw before the housing market crash,
today there are stricter lending standards in place and substantially
lower inventory levels. While the market may cool, the drop in home
prices won’t be as severe as the one experienced during the housing
crisis since there is not enough inventory to allow prices to
substantially decline.
STATE OF HOUSING MARKET: 2008vs TODAY
JEFF MEDLEY
President, Sirva Mortgage
“As we continue to see interest rates remain near 28-year highs, the
impact on affordability remains a top priority. Inflationary pressures and
weather events continue to increase the cost of construction and
insurance costs. As such, those in the market must consider lost
appreciation and cost of rent when determining the “right time to buy.”
HOUSING FORECAST
Fannie Mae expects higher mortgage rates to continue to impact
housing activity and affordability into 2024. The next few months
will continue to remain slow for lenders. The Mortgage Bankers
Association (MBA) expects home prices will continue to rise over
the next three years due to low inventory. The MBA expects
interest rates to fall to 6.1% by the end of 2024 and 5.5% by the
end of 2025.
US HOUSING IMPACT ON TRANSFERRING EMPLOYEES
Employees may express hesitancy to relocate if it means going from a low interest rate on
their current home to a much higher rate on a new home. For those who do accept a move
and are selling a home, they may be asked to consider pricing lower than expected based on
past market activity. Contingencies, such as inspections or appraisals, are now standard in
contracts again and sellers will need to accept these as part of an offer.
INSIDER TIPS
Change the index referenced, and
Leave the interest rate eligibility tiers as they are
Do you offer discount points on a sliding scale? With the
Fannie Mae 30/60 yield retiring, the industry recommendation
is to use the Freddie Mac Primary Mortgage Market Survey
(PMMS) 30-Year Fixed Rate Mortgage as a reference for
covering points. Although the indexes are different, the new
benchmark will provide a more accurate benefit entry point
where the market is priced. For client policies that include
discount points on a sliding scale, our recommendation is to:
More information on this benchmark can be
found here.
Sources:
https://www.housingwire.com/articles/the-8-mortgage-is-here/
https://abcnews.go.com/Business/wireStory/average-long-term-us-mortgage-rate-surges-763-104140960
https://www.nar.realtor/newsroom/existing-home-sales-receded-4-1-in-october
https://www.redfin.com/news/homebuyer-income-afford-home-record-high/
https://www.fanniemae.com/newsroom/fannie-mae-news/jump-long-term-interest-rates-expected-weigh-economy
https://www.mba.org/news-and-research/newsroom/news/2023/10/15/mba-forecast-recession-likely-in-2023-mortgage-originations-to-decline-9-to-2.05-
trillion
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