Borrowers rush to refinance as mortgage rates fall to near-record lows


With interest rates nearing all-time lows, borrowers seem to be in quite a hurry to refinance their mortgage.

Case in point: mortgage applications jumped 15.1% from one week prior, according to the Mortgage Bankers Association.

The organization explained this week’s reading includes an adjustment for last week’s Presidents’ Day holiday.

Mike Fratantoni, MBA’s senior vice president and chief economist attributes this week’s spike to the nation’s low-interest-rate environment.

“The 30-year fixed-rate mortgage dropped to its lowest level in more than seven years last week, amidst increasing concerns regarding the economic impact from the spread of the coronavirus, as well as the tremendous financial market volatility,” Fratantoni said. “Refinance demand jumped as a result, with conventional refinance applications increasing more than 30%.”

Given the recent drop in Treasury rates, Fratantoni said the MBA now expects refinance activity to increase until fears subside, and rates stabilize.

According to the organization, the Refinance Index increased 26% this week and was 224% higher than the same week in 2019.

The refinance share of mortgage activity was 66.2% of total applications, rising from 60.8% the previous week, the MBA said.

When it comes to purchasing volume, which slightly declined this week, Fratantoni said the market is likely to reignite as spring approaches.  

“We are now at the start of the spring homebuying season. While purchase applications were down a bit for the week, they are still up about 10% from a year ago, “he said. “The next few weeks are key in whether these low mortgage rates bring in more buyers, or if economic uncertainty causes some home shoppers to temporarily delay their search.”

According to the MBA, the seasonally adjusted Purchase Index fell 3% this week, while the unadjusted purchase index increased 11% from last week and remains 10% higher than a year ago.

Here is a more detailed breakdown of this week’s mortgage application data:

  • The adjustable-rate mortgage share of activity increased to 6.4% of total applications.
  • The Federal Housing Administration share of mortgage apps fell to 9.3% from 10.5% last week.
  • The Department of Veterans Affairs share of applications retreated to 10.5% from 11.8% the previous week.
  • The Department of Agriculture share of total applications inched backward to 0.4% from the prior week’s 0.5%.
  • Mortgage interest rates for 30-year fixed-rate mortgages with conforming loan balances ($510,400 or less) decreased to 3.57% from last week’s 3.73%.
  • The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances (greater than $510,400) held steady at last week’s 3.72%.
  • The average contract interest rate for 30-year fixed-rate mortgages backed by the FHA decreased to 3.74% from last week’s 3.84%.
  • The average contract interest rate for 15-year fixed-rate mortgages fell to 3.03% from last week’s 3.18%.
  • The average contract interest rate for 5/1 ARMs dropped to 3.12% from last week’s 3.21%.



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Zillow Offers announces expansion to Cincinnati


Zillow Offers has expanded yet again, and launched in the Cincinnati market.

The Ohio market is the 24th market that Zillow Offers has branched out to, and the company says it still has plans to expand Jacksonville and Oklahoma City this year.

“Sellers across the country have shown that they’re looking for more certainty, control and convenience during one of the most stressful experiences they’ll go through,” said Zillow President Jeremy Wacksman. “We’re thrilled to introduce this type of service to the greater Cincinnati area and help sellers find a new, simpler way to sell their home and move on to the next chapter of their lives.”

Through the Zillow Offers program, if the home qualifies, the owner will receive an initial cash offer from Zillow within 48 hours. In this case, a Cincinnati-based broker will also be assisting customers during their transactions.

If the homeowner accepts the offer, the seller gets to choose a date to move out, and not worry about cleaning or repairs. Zillow then makes the necessary repairs and/or improvements and sells the house back into the market. (For more on what, exactly, is an iBuyer, read this.)

In 2019 alone, more than 6,500 homeowners sold their homes to Zillow, the company said.

By bringing Zillow Offers to Cincinnati, Zillow says it is expanding its local presence as an employer, with around a dozen new positions and plans to hire more in the future as Zillow Offers grows, the company said.

There are 160 employees currently based in the Cincinnati office, where dotloop, a Zillow Group brand, has been headquartered since 2009.



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HomeServices earnings grow 10%, Warren Buffett says


Warren Buffet’s annual letter to Berkshire Hathaway shareholders published on Saturday featured the usual folksy wisdom from the “Oracle of Omaha,” and gave a glimpse into the earnings of its HomeServices of America affiliate, the nation’s second-largest real estate brokerage.

HomeServices net income grew to $160 million in 2019, compared with $145 million in 2018. That’s a gain of 10%, fueled by a years-long acquisition spree.

Last year, for example, HomeServices purchased one of its own franchisees, Berkshire Hathaway HomeServices Florida Realty, increasing its Florida footprint by 40 offices and 1,750 agents.

Buffett, the fourth-richest man in the world, according to Forbes’ real-time ranking, didn’t offer any pearls of wisdom related to his real estate brokerage business. The explanation of HomeService’s income gain in the annual report that accompanied his letter was pretty dry.

Some of it was due to a bump in refinancing activity, the report said. Like many brokerages, HomeServices offers mortgage, title, escrow and insurance services.

“The increase was primarily due to higher after-tax earnings at existing mortgage businesses due to increased refinance activity and earnings attributable to recent business acquisitions, partially offset by lower after-tax earnings at existing brokerage businesses primarily from lower units and margins,” the report said, the only discussion of the brokerage in its 144 pages.

HomeServices is part of Berkshire’s energy subsidiary, Berkshire Hathaway Energy – previously known as MidAmerican Energy. The parent company Buffett leads owns a wide range of businesses, including Dairy Queen, Fruit of the Loom, Geico, and Duracell.

Overall, Berkshire Hathaway reported $81.4 billion of net income for 2019, $53.7 billion of that coming from net unrealized gains in the stocks it holds.

Buffett did show some of his signature dry wit in a discussion about losses stemming from a fire at one of the French factories operated by Lubrizol, a chemical company Berkshire Hathaway bought for $9 billion in 2011.

Luckily, insurance will cover a big chunk of the losses, but the insurer is owned by Berkshire Hathaway, Buffett said.

“One of the largest insurers of Lubrizol was a company owned by . . . uh, Berkshire,” Buffet wrote. “In Matthew 6:3, the Bible instructs us to ‘Let not the left hand know what the right hand doeth.’ Your chairman has clearly behaved as ordered.”



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Purchasing a home drives 15% of buyers to tears


Purchasing a home can be one of the most stressful financial transactions most people ever make, causing about a third of buyers to lose sleep.

That’s according to a new survey from Seattle real estate startup Flyhomes asking 1,000 people about the stress of homebuying. About 15% of respondents said they were reduced to tears during the process while 20% got in a fight with their spouse or partner because of the stress.

Almost two-thirds of the buyers said purchasing a property “was more stressful than they expected,” the Flyhomes report said.

“Stress and homebuying tend to go hand-in-hand, even more than people think,” it said.

About 40% said they spent more than they expected to when purchasing a home, the report said. Half of the people who overspent say that they paid more than $20,000 more than they expected to – and 14% went more than $50,000 over budget.

Almost a quarter of buyers said they had some regrets about their purchase. When asked about specifics, over half say their new home required unexpected repairs or maintenance, a quarter said property taxes were higher than they expected, and 20% said maintenance was more work than they expected.

There were other regrets:

  • Almost 1 in 5 said they weren’t happy with the location.
  • About a third said they wished they’d bought a larger house.
  • One in 5 said they wished they had more bathrooms.
  • Nearly a third said they wished for a larger kitchen.



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Record number of renters believe renting is more affordable than owning


A recent report from CoreLogic showed that home prices increased 4% year over year in December, and projected the U.S. price index will rise by 5.2% by December 2020.

As home prices continue to rise nationally, it’s little wonder that Freddie Mac’s latest “Profile of Today’s Renter and Owner” found that the majority of current renters believe renting is more affordable than owning.

However, the percentage of renters who hold that belief has increased dramatically in the past year.

A whopping 84% of renters said they believe renting is more affordable than owning – an all-time high for the survey. For comparison, this number is up 17 percentage points from February 2018.

The survey also found that affordability issues affect the average renter more than a homeowner. Freddie Mac said there are 42% of renters who paid more than a third of their household income on rent.

This is compared to only 24% of homeowners who spend that amount on mortgage payments.

But there is good news for renters looking to own. Given current low interest rates, 40% of renters said they plan to purchase a home.

“The housing market is strong and, based on our survey, the low mortgage rate environment may inspire both renters and owners to make an educated move this spring,” said David Brickman, Freddie Mac CEO. “While Baby Boomers tend to be satisfied with their current housing situation, younger generations are still struggling to determine whether to rent or purchase a home, largely due to lack of supply and affordability constraints.”

And that lack of supply stretches beyond single-family housing. Last year saw record-high occupancy rates in multifamily housing with a shortage of supply. Naturally, this drove rent growth. Many of the renters surveyed by Freddie Mac voiced their worry in this area.

Almost 70% of renters said they are growing more concerned about their rent going up in the next 12 months, while 68% are concerned about not being able to afford their larger expenses. Even so, according to the majority surveyed, renting is still the more affordable option.



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Realogy unveils new CRM and app for agents


Realogy, the largest owner of U.S. real estate brokerages, this week unveiled a new suite of tools for its agents it’s calling a “productivity hub.”

It includes a customer relationship management (CRM) program as well as an app that allows agents to instant message with customers.

Other features still in development that will be included in the productivity hub in the future include a transaction management program, a lead management tool and a program for analytics and reporting data, Realogy said in a statement.

“It’s all about making agents productive, deepening agents’ relationships with existing clients and expand their network with new clients,” Dave Gordon, Realogy’s chief technology officer, said in an interview with HousingWire. “These tools enable them to do that, making them more productive and more efficient.”

Realogy is the owner of NRT, the nation’s largest brokerage measured by two key metrics: the total dollar volume of transactions and the number of real estate agents. In addition to NRT, Realogy brands include Better Homes and Gardens Real Estate, Century 21, Coldwell Banker, Corcoran, ERA, Sotheby’s International Realty.

In July, Realogy announced a partnership with Amazon, the world’s largest retailer, to match homebuyers with real estate agents through a program called TurnKey.

Potential buyers will be able to go through their Amazon account, click on TurnKey, put in details about the size, price and location of the home they want to buy, and then be matched with one of Realogy’s agents.

In return, customers get up to $5,000 of Amazon products and assistance called a “Move-In Benefit,” which includes help with chores and product installation through a division of the retailer called Amazon Home Services.



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RE/MAX: The December housing market broke records


By one measure, December 2019 was the strongest close to the year of any year in the last decade.

RE/MAX released its National Housing Report for December 2019 last week, which revealed that the month posted a record finish to a year and the decade.

December finished with a year-over-year increase in home sales of 13.5% in the 54 metros it covers. This is the highest increase of any month in 2019, the report said.

It’s also the highest for the month of December since 2009.

And as sales increased, inventory fell. According to RE/MAX’s report, December saw a 14.5% year-over-year decline in inventory.

Consequently, there was a significant drop in the months supply of inventory. According to the report, there was only 3.3 months of available inventory on the market as of December 2019, compared to 4.8 months in December 2018.

“It was good to see the year-over-year spike in December home sales, indicating robust homebuyer interest,” said Adam Contos, CEO of RE/MAX.

“The strong December capped a solid second half of 2019, with year-over-year sales increases in four of the final six months,” Contos added. “The gains were largely attributable to low interest rates and high demand, and with those factors still in place, we expect sales to continue at a solid pace into the first part of this year.”

Interestingly, housing inventory grew year over year in the first six months of 2019, but shrank for the last six months of 2019, the report said.

The median sale price of a home was $266,000 in December, 11.1% higher than in December 2018. It also represented the highest year-over-year increase for any month of 2019.

Leaders of the year-over-year sales percentage increase were Birmingham, Alabama, up 34.3%; Burlington, Vermont, up 26.7% and Los Angeles, up 26.2%.

Average days on the market remained near the same level as the previous year, with days on the market in December 2019 for 54.

That’s up five days from November’s average but down one day from December 2018’s average.

The metro with the lowest days on the market were Omaha, Nebraska at 24. Homes in Des Moines, Iowa spent the most time on the market, at 110 days.



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