Be Well: Marty Mortgage Talks State of Housing Market

<div class="block">Homeownership is again becoming a realistic and attainable goal for Americans as rates decline from historic highs. Marty Cantor, CPA and economic development consultant, joined Cheddar News to talk about the state of the homebuying market.</div>

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Welcome back to be. Well, it is time now for your money with Marty and today we want to focus on home buying and home owning for a while. It seemed like there was just kind of one direction for the housing market and that was up and really out of reach for so many Americans. But things are starting to come down to earth a little bit. But the numbers are, you know, pretty mixed, Marty. Well, what's happening is, first of all, let's talk about the mortgage insurance rates before the pandemic. Uh they ran from 2.73% to 3.11% for a 30 year mortgage. Today. A 30 year mortgage will cost you seven point oh 6% interest, a 15 year mortgage about 6.46. So they're more than double. And that's really taking buyers out of the market. The only thing holding the prices of housing up is the fact that the inventory is low. Uh, right now where you normally have a six month inventory of homes, now it's only about two months worth of inventory instead of 6000 homes on the market, it's 2000 So the fact uh that the mortgage interest rates are so high, people are saying, well, where am I gonna go if I sell my house? So they're not putting it on the market. So you have, so what you have is you still have a seller's market. Uh You have buyers that are able to come in who have the money to pay those higher interest rates. Uh And uh you know, the prices are dropping somewhat a little, not a lot. It's not gonna be a collapse in the mortgage prices, uh rather the housing prices. But the fact is that, uh, that we're not seeing that much of a change in terms of, uh, of the housing market because mortgage rates are too high and the inventory is too low. Yeah, 2021 though, saw near record low mortgage rates. Well, well, they did that remember that was, uh, before the pandemic mortgage rates were just below 2.5%. But the Federal Federal Reserve is by increasing the over 500 basis points. Their, their discount rates that has caused the increase in the mortgages. And, and that, that's become pricey for some of the lower income wage earners and you have labor shortages. We've had all those supply chain issues rising costs. So that all really took a toll on builders. Well, builders. Yeah, last year I had done a study for uh a builders group last year and, and it found what I found was that all the raw materials, the GPS and the plaster boards, the steel, the concrete, they were up easily over 50 60% just due to inflation and supply chain issues. So the cost of new homes uh were prohibitive for people. But because the interest rates were low, uh people were able to buy today uh because the mortgage rates are high. Uh and those and those cost of construct actions have, have moderated somewhat. Uh Now the new homes are becoming competitive with, with existing home sales and that's why you're seeing a little difference and that's why you're seeing uh some home, uh some uh uh home builders uh for private residences, but the big boom is in multi resident, multi family homes and multi family rentals. Uh because uh a developer can make more money on those and rents right now uh are less expensive than mortgages and people are opting to rentals plus the amount of money available at banks for mortgages and the cost uh are prohibitive for people. It's knocking out potential buyers. So they're finding rentals are cheaper than, than mortgages. And that's why the rental market is, is uh is really hot. Yeah. All right. Let's talk about the actions of the fed and kind of the repercussions that that ends up having, you know, for people that are looking, you know, right now to make changes, obviously refinancing that that ship sailed, refinancing that ship has sailed three years ago, you might have been able to refinance if you had a 5% mortgage and, and you were able to get to 2%. But now a lot of those mortgages are 56% and with the long term 30 year mortgage, which is usually the mortgage of choice for people, but for new home buyers, those, those rates are too high. So, what are people going to do? They're staying put, right. So if there's not enough property, right, we don't have enough people putting their house up for sale. We have, you know, your mortgage is more expensive. What do you do if you're trying to buy a home right now? Well, right now, uh, you know, it, it's, it's pretty difficult and especially, you know, we're gonna talk about that, uh, that the F H A increased those rates for the, for the, uh, the loan, you know, the new loan people and it seems that they're penalizing. Remember the F H A, uh, is, is meant to guarantee mortgages that the banks are providing, they buy those mortgages if the banks, the banks buy them. So they need money to survive. The second thing they need money to provide for the 5% for first time home buyers. And that's really where the issue is is that they're collecting money from the higher credit rating people on a $500,000 mortgage. Uh, these folks are going to pay $5000 more for, for a half a million more home. Whereas those in the lower income putting 5% down are gonna pay, all are gonna pay 6000 less. So, what they're doing is they're providing benefits for low income, uh, home buyers and the first time home buyers and, and the ones who are gonna pay for it are the, uh, the higher credit worthy and the wealthier people now. So are the higher, higher credit score people really underwriting those loans? Well, they are, but, but that's always been the case. You know, look, uh, uh, if you wanna be able to encourage home buying, you have to be able to, and this has been, this problem is going around for 30 years. What a first time home buyers do, we have to get first time home buyers into the marketplace. Uh, those with the lower income or the lower credit scores. Rather, they usually are having more problems with their finances. So, and putting 5% down is a tred is a tremendous deal and my daughter put a 5% down first time home bor and that was a tremendous benefit and the banks, uh, provide the loans and so somebody's got to back those loans and that's the F H A and that's why they made this change. All right. Thanks so much. Mark.