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Buyers Seek Bigger Mortgages as Home Prices Continue to Rise: Over the past year, there has been a significant increase in home prices forcing home buyers to borrow more to keep up. The average size of a loan purchase rose to $411,400 last week, according to Mortgage Bankers Association, the highest since February. The average loan for a new home surpassed $377,000 last month, a record high.
Home prices are climbing at their fastest pace in more than 15 years. And while low mortgage rates are helping to offset some of those higher prices – mortgage rates are predicted to head up soon. The 30-year fixed-rate mortgage averaged 3% this week, up from 2.94% the week prior, according to Freddie Mac.
Rising house prices put pressure on loan sizes
“We’ve seen very red-hot house-price appreciation across the country—double digits nationally,” says Len Kiefer, deputy chief economist at Freddie Mac. “That puts pressure on loan sizes because, to purchase a home at a higher price, you’re going to need to borrow more money.”
The MBA’s head of forecasting, Joel Kan, said the increase is partly due to the kinds of homes people are buying. The pandemic has led many newly remote workers to seek bigger houses in the suburbs, with more outdoor space. “These homeowners, typically, are still gainfully employed, might be higher-income, etc.,” Kan said. “They might be able to afford a little bit more.”
However, to get these larger mortgages, borrowers will need stellar credit to qualify. The median credit score for new mortgages was 788 in the first quarter of this year, up from 773 during the same period last year.
Supply shortages are constraining purchase activity
Mortgage applications to purchase a home fell 4% last week compared with the previous week, according to the Mortgage Bankers Association’s seasonally adjusted index. Volume was just 2% higher than the same week one year ago when the housing market was just starting to come back after the pandemic shut it down.
Joel Kan, an MBA economist stated that “A decline in purchase applications was seen for both conventional and government loans. “There continues to be strong demand for buying a home, but persistent supply shortages are constraining purchase activity, and building material shortages and higher costs are making it more difficult to increase supply.”
The majority of Americans believe now is a good time to buy a home
Despite a surge in home prices, a majority of Americans believe now is a good time to buy a home, according to a new survey from Gallup. Some 53% of Americans believe it is a good time to buy, Gallup reported, citing the results of a survey of nearly 1,000 U.S. adults conducted in April.
Last year, only 50% of people felt this way, marking a record low since Gallup began tracking Americans’ sentiment on the housing market in the 1970s. At the time, people were responding to the sudden slowdown in real-estate transactions as the economy shut down at the beginning of the COVID pandemic.
Demographic shifts and the pandemic-fueled move to remote working caused demand among home buyers to rise. As people rushed into the market and quickly bought up properties, the inventory of available homes for sale has dropped to a record low in recent months.
Americans believe home prices are going to increase over the next year
To an extent, this inventory supply gap is a reflection of years of under-building following the Great Recession. The Gallup survey also found that 71% of Americans believe home prices are going to increase over the next year in their local market.
Expectations of rising home prices were essentially the same across the U.S., regardless of whether the survey respondents lived in a major city, suburb, or rural area.
Nevertheless, Americans continue to prefer homeownership to other long-term investments. Gallup found that 41% of people believe real estate is the best long-term investment, up from 35% last year.
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As your Farmington Hills MI real estate agent, Tom will protect your best interests, advocate for you, handle all the details of the transaction, and do whatever is necessary to ensure the best results possible. Having a trusted professional like Tom by your side means there is one less thing to worry about. To find out more about buying or selling real estate in Farmington Hills MI, or homes in the surrounding Oakland County area, please give highly-rated Farmington Hills MI REALTORⓇ – Tom Gilliam a call directly at (248) 790-5594 or send him an email.
Tom Gilliam, REALTOR®
29630 Orchard Lake Rd.
Farmington Hills 48334
Email: Tom @ Homes2MoveYou.com
Farmington Hills MI Real Estate