ICE Mortgage Monitor: Positive Signs in Housing, Mortgage Markets Ahead of Spring Homebuying Season

Affordability has improved along with rates in recent months, with the share of income required to purchase the median home falling nearly 5 percentage points from October’s 28-year high

• The national inventory deficit also improved for the 7th consecutive month which, along with improved affordability, points to a better housing market environment in coming months

• The ICE Home Price Index for December reported an annual growth rate of +5.6%, up from +5.1% in November, which at first glance suggests an accelerating housing market

• That acceleration, however, is a residual effect of last spring and summer’s strong run of growth, with more recent data suggesting that growth rate will begin to cool in coming months

• Lower interest rates have also begun to increase refinance incentive, albeit slowly, with more potential on the horizon, particularly among the 4.3M mortgages originated in 2023

• Of the 2023 vintage, 46% (2M) would be able to cut their first lien rate by 75 bps if 30-year rates fall to a projected 6% by year’s end, with 33% able to save a full percentage point or more

• Mortgage holders gained $1.6T in equity in 2023 to reach an aggregate $16T, the highest year-end total on record, two thirds of which is held by borrowers with credit scores of 760 or higher

• The average mortgage holder now has $299K in equity, $193K of which is “tappable” and could be withdrawn while still maintaining a healthy 20% equity stake

ATLANTA and NEW YORK, February 5, 2023 – Intercontinental Exchange, Inc. (NYSE:ICE), a leading global provider of technology and data, released its February 2024 ICE Mortgage Monitor Report, based on the company’s industry-leading mortgage, real estate and public records data sets. Mortgage rates were at 6.71% as of January 24 according to the ICE US Conforming 30-year Fixed Mortgage Rate Lock Index – more than a full percentage point below their October 2023 high. As ICE Vice President of Enterprise Research Strategy Andy Walden explains, this and other recent market trends have produced positive, yet measured, signs for the 2024 housing market.

“Prospective homebuyers may feel an all-too-familiar sense of dread upon hearing that prices – already at record highs – rose another 5.6% in 2023 according to our ICE Home Price Index,” Walden said. “As always, the truth of the situation is more nuanced than one simple, backward-looking metric might suggest, and the data holds some encouraging signals for these folks. In recent months, we’ve seen improvement in rates, affordability, and for sale inventory, with monthly home price growth moderating on a seasonally adjusted basis. While we are still out of sync with historical norms on multiple fronts, each of those metrics have at least been moving in the right direction.”

Research in this month’s report shows today’s market remains interest-rate-driven. The recent rebound in affordability has increased purchase mortgage demand, comparable to levels seen last summer when interest rates were in a similar range. Purchase demand continues to trend very consistently with 30-year-rate changes and their downstream impact on affordability. As Walden explains, the refinance market  has also seen some modest improvement, with the potential for more growth throughout the year.

“While the mortgage market remains overwhelmingly purchase-centric, refinance incentive is rising, albeit slowly, alongside easing interest rates,” Walden continued. “Since interest rates peaked back in October, we’ve seen a threefold increase in the number of mortgage holders who could reduce their first lien rate by at least 75 bps with a rate/term refi. And while that population stands at roughly 1.7 million – up from 520K last fall – it is still a historically small number. Should rates fall to 6% by year’s end as current forecasts suggest, the number of borrowers with refinance incentive would rise, particularly among 2023 vintage originations.

“Under that scenario – a potential needle mover for the refinance market – some 46% of 2023-vintage borrowers would be ‘in the money,’ with nearly a third able to cut a full percentage point off their current rates. As more legacy mortgages regain rate incentive as well, the overall ‘in the money’ population would more than double to 3.8 million by the end of the year, with nearly 60% of that growth coming from loans originated in 2023. Originators would do well to identify and engage with these potential customers now. Of course, what’s good news for mortgage originators simultaneously heightens prepayment risk in the capital markets. Getting a granular, daily view of prepay activity will become essential this year as investors navigate an extremely rate-sensitive and volatile market.”

The month’s data also shows that aggregate American mortgage holder equity ended 2023 at $16T – gaining 11% ($1.6T) over the year to reach the highest year-end total on record. The average mortgage holder now has $299K in equity, up from $274K at the end of 2022. Such historically high equity levels create the conditions for an upswing in equity lending when interest rates ease enough to make withdrawals more attractive to homeowners. Two thirds of all equity is held by borrowers with credit scores of 760 or higher, offering lenders a likewise appealing, lower-risk cohort to whom they can offer equity-based products.

Much more information on these and other topics can be found in this month’s Mortgage Monitor. Article found on Black Knight.

Home Appraisals 101: 5 Things Appraisers Wish Sellers Knew

Home appraisals are a piece of the selling process where you may have to let go of the reins. Lenders often require the use of their own, FHA-approved home appraiser. That means you get zero say in who’s determining the financial value of the home you’ve lived in, loved, and sunk your savings into.

Here are some things sellers can do—straight from the home appraisers’ mouths—to navigate the process of home appraisals.

Keep in mind that home appraisers aren’t magicians

The appraiser won’t know what your home is worth the second they walk in the door because home appraisals aren’t magic.

“People think we know the value of the property as soon as we see it,” says Michael Coyle, the founder of The Coyle Group in Lafayette Hill, PA.

That’s simply not the case. A good understanding of the home appraisal process will go a long way toward comprehending how your home’s value is determined.

First, a home appraiser will pull comparable listings (called “comps”) from the nearby area. These are homes similar in style, location, and square footage sold within the past few years. Then, they will come by your house to determine its condition and quality, as well as any other factors that would affect the cost of the home, and use that information — along with the comps — to make an accurate assessment.

This usually takes at least a few days — and definitely more than a few hours.

Prep your space — and its occupants for the home appraisals

No, the home appraiser isn’t coming by to judge the cleanliness of your homestead — but it’s still good form to declutter, dust, and mop beforehand to show your home in its best light, according to appraiser Adam Wiener, the founder of Aladdin Appraisal in Auburndale, MA.

Home appraisals won’t typically devalue your home because it’s messy—but a neat, organized home might help you.

“Even if they’re not consciously aware of it, the appraiser might value (a messy home) a little lower,” Wiener says.

Also, make sure the occupants of your home are prepared for the appraiser’s arrival, including teenagers who tend to stay holed up in their rooms.

“And make sure everyone’s clothed,” Coyle adds. “Sometimes, they forget to tell the teenager.”

Get your paperwork in order before home appraisals

Before any and all home appraisals, gather all the information you have about the house and send it over. Most appraisers will ask for this upfront, either directly or through the lender or broker.

Coyle recommends having on hand a list of major improvements as well as detailed info about the age and condition of the roof, HVAC systems, and major appliances. For any DIY projects, make sure you have the original permits.

“My favorite customers are the ones who have all the information ready for me,” he says.

There’s nothing worse than an appraiser pulling comps for a 1,200-square-foot 1920s Cape Cod–style house, only to realize on the day of appraisal that your primary bedroom addition adds an additional 500 square feet.

When that happens “none of my comps are any good and my values are off,” Wiener says.

And that means more work—and more time before a final assessment can be reached.

So go the full-disclosure route.

“Hand it to them on a silver platter: Here’s my neat, gorgeous house, shown in its best light and all the things that are awesome about it,” Wiener says.

Don’t put too much stock in home improvements

We’re sure your brand-new kitchen is stunning but don’t be surprised if it doesn’t proportionally raise your home’s market value when it comes to the home appraisals.

Home appraisers stress moderation in assuming how much your shiny, brand-new kitchen will add directly to the worth of your house. If you spent $50,000, you’re likely to see only a fraction of that returned in value. That goes double for a new pool, which “does not bring as much value as people think,” Coyle says. (This might vary if you live in a hot climate where pools are near expected.)

As for your finished basement: Sorry, but that’s even less help. Most home appraisers use ANSI standards for measuring the square footage of a home, which excludes any rooms below grade. That doesn’t mean your basement has no value, but it doesn’t technically add space.

If you’re thinking about adding a feature to your home before you have it appraised, ask your real estate agent if it’s worth the cost. Here’s how to find a real estate agent in your area.

Don’t engage in listing ‘puffery’

Before listing, make sure you and your agent take a realistic look at what your home actually offers. Are you including the basement square footage in the total? Are you hoping no one will notice your roof isn’t new? Preparing yourself ahead of time with a pragmatic estimate will ease the appraisal process.

And above all else, make sure not to fudge the numbers.

“There’s an epidemic of puffery,” Wiener says.

This is particularly rampant in areas where the assessor’s information isn’t accessible online. When you know potential buyers have to actually, gasp, go in person to look up the sketches, it might be a lot more tempting to pad some square footage here and there.

After all, who will notice?

Here’s who: Your appraiser—who’s happy to go to the office and pull 20 or 30 comps. And they won’t be fooled.

Jamie Wiebe writes about home design and real estate for realtor.com. She has previously written for House Beautiful, Elle Decor, Real Simple, Veranda, and more.

For the original article, visit Realtor.com

Expert Quotes on the 2024 Housing Market Forecast

If you’re thinking about buying or selling a home soon, you probably want to know what you can expect from the housing market in 2024. In 2023, higher mortgage rates, confusion over home price headlines, and a lack of homes for sale created some challenges for buyers and sellers looking to make a move. But what’s on the horizon for the new year?

The good news is, many experts are optimistic we’ve turned a corner and are headed in a positive direction.

Mortgage Rates Expected To Ease

Recently, mortgage rates have started to come back down. This has offered hope to buyers dealing with affordability challenges. Mark Fleming, Chief Economist at First American, explains how they may continue to drop:

“Mortgage rates have already retreated from recent peaks near 8 percent and may fall further . . .”

Jessica Lautz, Deputy Chief Economist at the National Association of Realtors (NAR), says:

“For home buyers who are taking on a mortgage to purchase a home and have been wary of the autumn rise in mortgage rates, the market is turning more favorable, and there should be optimism entering 2024 for a better market.”

The Supply of Homes for Sale May Grow

As rates ease, activity in the housing market should pick up because more buyers and sellers who had been holding off will jump back into action. If more sellers list, the supply of homes for sale will grow – a trend we’ve already started to see this year. Lisa Sturtevant, Chief Economist at Bright MLS, says:

“Supply will loosen up in 2024. Even homeowners who have been characterized as being ‘locked in’ to low rates will increasingly find that changing family and financial circumstances will lead to more moves and more new listings over the course of the year, particularly as rates move closer to 6.5%.”

Home Price Growth Should Moderate

And mortgage rates pulling back isn’t the only positive sign for affordability. Home price growth is expected to moderate too, as inventory improves but is still low overall. As the Home Price Expectation Survey (HPES) from Fannie Mae, a survey of over 100 economists, investment strategists, and housing market analysts, says:

“On average, the panel anticipates home price growth to clock in at 5.9% in 2023, to be followed by slower growth in 2024 and 2025 of 2.4 percent and 2.7 percent, respectively.” 

To wrap it up, experts project 2024 will be a better year for the housing market. So, if you’re thinking about making a move next year, know that early signs show we’re turning a corner. As Mike Simonsen, President and Founder of Altos Research, puts it:

“We’re going into 2024 with slight home-price gains, somewhat easing inventory constraints, slightly increasing transaction volume . . . All in all, things are looking up for the U.S. housing market in 2024.”

Bottom Line

Experts are optimistic about what 2024 holds for the housing market. If you’re looking to buy or sell a home in the new year, the best way to ensure you’re up to date on the latest forecasts is to partner with a trusted real estate agent. 

For the original article, visit Keeping Current Matters.