Recent articles from the Wall Street Journal (wsj.com) and the Kiplinger Letter (kiplingerbiz.com) point to some hopeful signs for housing and home buyers.

From The Wall Street Journal

Home buyers might soon enjoy a little break in mortgage rates. Although the benchmark national average 30-year, fixed-rate mortgage is again nearing 7%, a far cry from when it looked like it was heading below 6% back in the early fall, there is potential for an unusually wide gap between mortgage rates and Treasury yields to narrow.

From KiplingerBiz.com

REAL ESTATE

Fannie Mae and Freddie Mac will back larger mortgages next year. The limit on the size of loans that the government-sponsored mortgage finance firms can guarantee will rise 5.2% to $806,500 for most areas in the U.S. In pricey markets like New York and San Francisco, the limit will rise to $1,209,750. Fannie and Freddie buy mortgages from lenders, package them into securities, and sell them to investors, guaranteeing interest and principal payments, which boosts liquidity in the market.

The Federal Housing Admin. is also raising loan limits in 2025. The limit for mortgages guaranteed by the FHA will increase to $524,225 for single-family homes in most parts of the country, and to $1,209,750 in the same high-cost metro areas.

The higher limits will help some buyers. Conforming loans carry easier terms, like lower minimum credit scores and down payments. FHA loans are more flexible than loans backed by Fannie and Freddie, with smaller required down payments.

HOUSING

Just how tough is it for young people to buy their first home these days?

First-time buyers are now a decade older on average than prior generations. New owners are now 38 years old, on average. They also have much higher incomes than their predecessors (adjusted for inflation), out of necessity. The median income for a household purchasing their first home last year: $97,000, vs. $95,000 in 2022.

First-time buyers’ share of sales has decreased to the lowest in 43 years. They represent just 24% of home sales, down from 32% last year. Those buying for the first time can’t use home equity to fund their purchase. So, savings and money from friends and relatives are the top sources of down payment funds for first-timers.

Existing-home sales this year will likely hit a 14-year low. First-time buyers traditionally buy existing homes. Their absence from the market makes it harder for sellers to move from starter homes to more expensive ones, including new builds. Sales perked up in Sept., but Oct.’s rise in mortgage rates by more than half a point has put an end to any hopes of a sustained recovery in existing-home sales this year.

More home purchases will soon be conducted without a licensed appraiser. Early next year, mortgage finance firms Freddie Mac and Fannie Mae plan to adjust the required loan-to-value ratio for an appraisal waiver from 80% to 90%. The change will allow buyers with a lower down payment to qualify for the waiver. Some lenders will be able to offer same-day loan approvals with automated verification of assets, income and employment. Instead of having a licensed appraiser come to a house in person to ensure its value is in line with the sales price, a bank or mortgage lender can use Fannie or Freddie’s automated underwriting systems for the same purpose.

Buyers could save hundreds of dollars when buying a home. Fannie and Freddie estimate that the appraisal waiver programs have already saved borrowers more than $4 billion in appraisal costs. The average cost of an appraisal was $500 in 2023 and typically adds to the time it takes to close on a sale. Home appraisers warn that the expansion of waivers poses risks to consumers and the housing market.

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Visit:  WSJ.com  and KiplingerBiz.com

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