With low mortgage rates and strong unemployment numbers, the current environment should create a frantic demand on housing and other related consumer spending with having a new home. But is it?
But yet, levels of bidding wars are nowhere in sight.
According to Mortgage Daily News there is a refinance boom in the market instead of frantic buying of homes.
For the fourth week, home purchase applications moved lower. But it’s still higher than last year by around 7%.
FHA applications are still the main purchase loan applications. With the low rates and low-down payment requirement, it could be the norm for the next few months.
With U.S. median home price is $315,000, a 20% down payment is $63,000 for a conventional mortgage loan application is still pretty steep for a first time home buyer.
While FHA mortgage loan down payment starts at 3.5%, which is $11,025. That is a $50,000 difference.
There are pros and cons in getting an FHA loans but $11,000 is easier to afford than $60,000.
On Tuesday, tensions over the trade war with China sent the mortgage rates lower to 3.7%.
But even with low rates, Redfin, a real estate brokerage, stated that bidding wars are down roughly 45%. Property records reports indicate that housing prices are going down slightly but still not enough to be afforded by first-time buyers.
San Diego, Boston, Los Angeles, Philadelphia and Denver are still the most competitive markets in the country for the month of July.
With the big cities, Miami was the least competitive market in July, while Houston, New York, Dallas and Las Vegas also saw lower than average competition.
With different factors concerning the housing market, rental demand is still high, as first-time home buyers are sidelined. This is due to homebuilders are still operating below demand since they are affected by high labor cost, material cost and lack of manpower in the industry.
Even with more Americans inclined to sell their home in combination with low mortgage rates, which could help supply and spark home buying, it’s still below the mark to make it affordable to a first-time home buyer with student loans to reach.
See also: https://themortgagereports.com/53474/homebuying-power-is-up-nearing-all-time-highs
