My broader question for the pros (Steve and Andrew) is what does all of this mean for the overall housing market? So far we've seen a rapid rise in appreciation, a significant spike in interest rates, and now a a program traditionally aimed at first time home buyers become more expensive. Are you guys seeing an effect? I know all these changes aren't "baked in" to current sales data as the July numbers are based on contracts started in May and June before the rate increase and increase in FHA costs. Thoughts?
From a financing perspective, the 1% jump in rates had a significant impact on the number of applications in our office, namely refinances. It was so fast/sudden, everone seemed to be like "deer in headlights", stopping in their tracks: "now, what do I do: wait for rates to come down; lock now before they go up; hope/pray..."
For those purchasing, the rate increase may have stopped a few people--temporarily--from buying, but these rates are still about 3.5% below the historic average. Affordability is still fantastic. Maybe a buyer couldn't qualify for as large/expensive of a home, but the rates were "artificially low" due to stimulus from the Fed.
People will digest the news and get comfortable with the "new normal" for rates. And yes, rates will still climb as the Fed removes itself from the market. (be mindful of the fact that actions over-seas in Syria, etc. could have a positive impact on rates in the short-term as there is a "flight to safety" to our mortgage-backed securities). So, if people want to buy, they should move sooner rather than later in a rising-rate-market to qualify for the maximum loan amount/purchase price for their income/debt level. Once they're qualified, then they should decide if the payment for which they qualify is comfortable for their lifestyle/needs.
Regarding FHA and the new allowance for derogatory events:
The change allows more buyers BACK into the market sooner than previously allowed. That's a good thing and comes at a time when the "Blackstones" and other cash investors begin to exit the market. It also helps at a time when we're coming to the end of the traditional summer selling season (traditionally, less homes on the market but seems--and Steve corroborates--more listings coming on now towards the end of the season with people having waited to list their homes in the hopes of capturing longer appreciation and higher selling prices/profits from sales).
The higher cost of FHA hasn't deterred any of our clients. If people wantinto a home sooner than other programs allow (and why not, appreciation and tax-deductibility of mortgage interest and mortgage insurance make owning a home very desirable), they have an option--albeit, more expensive--than had they not had a troubling credit event in their financial lives, they can choose the FHA option.
As an aside: Two years ago, when clients would ask how long they had to wait to qualify for a new home after a short-sale or foreclosure, I quoted the guidelines at that time...with a caveat: "that's how guidelines read today...they can get tighter; they can get looser". It's the government: Who knows!!
