Don’t Expect a Flood of Foreclosures

Don’t Expect a Flood of Foreclosures The rising cost of just about everything from groceries to gas right now is leading to speculation that more people won’t be able to afford their mortgage payments. And that’s creating concern that a lot of foreclosures are on the horizon. While it’s true that foreclosure filings have gone up a bit compared to last year, experts say a flood of foreclosures isn’t coming. Take it from Bill McBride of Calculated Risk. McBride is an expert on the housing market, and after closely following the data and market environment leading up to the crash, he was able to see the foreclosures coming in 2008. With the same careful eye and analysis, he has a different take on what’s ahead in the current market: “There will not be a foreclosure crisis this time.” Let’s look at why another flood is so unlikely. There Aren’t Many Homeowners Who Are Seriously Behind on Their Mortgage Payments One of the main reasons there were so many foreclosures during the last housing crash was because relaxed lending standards made it easy for people to take out mortgages, even if they couldn't show that they’d be able to pay them back. At that time, lenders weren’t being very strict when assessing applicant credit scores, income levels, employment status, and debt-to-income ratio. But now, lending standards have tightened, leading to more qualified buyers who can afford to make their mortgage payments. And data from Freddie Mac and Fannie Mae shows the number of homeowners who are seriously behind on their mortgage payments is declining (see graph below): Molly Boese, Principal Economist at CoreLogic, explains just how few homeowners are struggling to make their mortgage payments: “May’s overall mortgage delinquency rate matched the all-time low, and serious delinquencies followed suit. Furthermore, the rate of mortgages that were six months or more past due, a measure that ballooned in 2021, has receded to a level last observed in March 2020.” Before there can be a significant rise in foreclosures, the number of people who can’t make their mortgage payments would need to rise. Since so many buyers are making their payments today, a wave of foreclosures isn’t likely. Bottom Line If you’re worried about a potential flood of foreclosures, know there’s nothing in the data today to suggest that’ll happen. In fact, qualified buyers are making their mortgage payments at a very high rate.

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What is a home equity line of credit, or HELOC?

As a homeowner, you have an opportunity to take advantage of the equity in your home through a home equity line of credit, or HELOC. This can be a great option for those who are looking to invest in their home, pay off high-interest debt, or make a large purchase. However, not all HELOCs are created equal. In this blog post, we will discuss the best home equity line of credit rates available to sellers, those with a mortgage, and those who are investing in their home. What is a home equity line of credit, or HELOC? A HELOC is a revolving line of credit that is secured by your home. It is similar to a credit card in that you are approved for a certain amount of credit, and you can borrow against that amount as needed. The interest rate on a HELOC is typically lower than that of a credit card or personal loan, making it an attractive option for those who need access to cash. Sellers If you are selling your home, a HELOC can be a great way to access the equity in your home without having to sell it outright. This can be especially helpful if you are looking to make improvements or repairs to your home before putting it on the market. The best HELOC rates for sellers can vary depending on your credit score and the amount of equity in your home. However, some of the top lenders for HELOCs include Wells Fargo, Bank of America, and Chase. These lenders offer competitive rates, flexible payment options, and the ability to access your funds quickly and easily. Mortgage If you have a mortgage on your home, you may still be eligible for a HELOC. In fact, many homeowners choose to take out a HELOC in addition to their mortgage in order to access additional funds as needed. The best HELOC rates for those with a mortgage can also vary depending on your credit score and the amount of equity in your home.  Investing If you are looking to invest in your home, a HELOC can be a great way to access the funds you need. Whether you are looking to make home improvements, add an addition, or even purchase a rental property, a HELOC can help you achieve your goals. HELOC vs. cash-out refinance A cash-out refinance replaces your current home mortgage with a larger home loan. The difference between the original mortgage and the new loan is disbursed to you in a lump sum. The main difference between a cash-out refinance and a HELOC is that a cash-out refinance requires you to replace your current mortgage, while a HELOC leaves your current mortgage intact; it adds an additional debt to your finances. A HELOC may be a better option for you if: You want more flexibility. You already have a good mortgage rate. You plan to use your HELOC only for tax-deductible home improvement projects. A cash-out refinance may be a better option for you if: You prefer a fixed monthly payment. You want a lower mortgage rate. You want to withdraw more home equity. In conclusion, a home equity line of credit, or HELOC, can be a great way to access the equity in your home and achieve your financial goals. Whether you are selling your home, have a mortgage, or are investing in your home, there are a variety of lenders available that offer competitive rates and flexible payment options. By doing your research and comparing rates, you can find the best HELOC rate for your unique situation.

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How Inflation Affects Mortgage Rates

When you read about the housing market in the news, you might see something about a recent decision made by the Federal Reserve (the Fed). But how does this decision affect you and your plans to buy a home? Here's what you need to know. The Fed is trying hard to reduce inflation. And even though there’s been 12 straight months where inflation has cooled (see graph below), the most recent data shows it’s still higher than the Fed’s target of 2%:  While you may have been hoping the Fed would stop their hikes since they’re making progress on their goal of bringing down inflation, they don’t want to stop too soon, and risk inflation climbing back up as a result. Because of this, the Fed decided to increase the Federal Funds Rate again last week. As Jerome Powell, Chairman of the Fed, says: “We remain committed to bringing inflation back to our 2 percent goal and to keeping longer-term inflation expectations well anchored.” Greg McBride, Senior VP, and Chief Financial Analyst at Bankrate, explains how high inflation and a strong economy play into the Fed’s recent decision: “Inflation remains stubbornly high. The economy has been remarkably resilient, the labor market is still robust, but that may be contributing to the stubbornly high inflation. So, Fed has to pump the brakes a bit more.” Even though a Federal Fund Rate hike by the Fed doesn’t directly dictate what happens with mortgage rates, it does have an impact. As a recent article from Fortune says: “The federal funds rate is an interest rate that banks charge other banks when they lend one another money . . . When inflation is running high, the Fed will increase rates to increase the cost of borrowing and slow down the economy. When it’s too low, they’ll lower rates to stimulate the economy and get things moving again.” How All of This Affects You  In the simplest sense, when inflation is high, mortgage rates are also high. But, if the Fed succeeds in bringing down inflation, it could ultimately lead to lower mortgage rates, making it more affordable for you to buy a home. This graph helps illustrate that point by showing that when inflation decreases, mortgage rates typically go down, too (see graph below):  As the data above shows, inflation (shown in the blue trend line) is slowly coming down and, based on historical trends, mortgage rates (shown in the green trend line) are likely to follow. McBride says this about the future of mortgage rates: “With the backdrop of easing inflation pressures, we should see more consistent declines in mortgage rates as the year progresses, particularly if the economy and labor market slow noticeably.” Bottom Line What happens to mortgage rates depends on inflation. If inflation cools down, mortgage rates should go down too. Count on a real estate professional you can trust for expert advice on housing market changes and what they mean for you.

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