TheMReport — News and strategies for the evolving mortgage marketplace.
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12 | M R EP O RT COVER FEATURE E ven with the massive gains of the last year, mortgage industry experts say that any plateau for the residential real estate market is nowhere in sight. Due to a persistent short supply of homes, low interest rates, and readily available credit, single- family homes are commanding multiple offers replete with vari- ous sweeteners, such as inspec- tion waivers, offers to cover any appraisal shortfall, etc. However, homeowners who get too greedy and list their homes at too high a price can still run up against issues of appraisals coming in too low and buyers recognizing the house is overpriced to start with. That's according to Brian Koss, EVP, Mortgage Network. Housing affordability declined in May (the latest figures available as of this writing) compared to a year ago, according to National Association of Realtors (NAR) Housing Affordability Index. Median family incomes rose mod- estly by 1.2%, while the monthly mortgage payment increased 20%. The effective 30-year fixed mortgage rate was 3.01% this May compared to 3.29% one year ago, but the median existing home sales price rose 24.4% year over year. Compared to the prior month, affordability also worsened as the monthly mortgage payment rose by 1.7% while the median family income declined by 1%. With all these factors in play, what does the face of the modern American homebuyer look like in 2021? MReport spoke to the experts for insights into the qualities, pri- orities, and needs of those on the road to the American Dream. The State of the Market T he adage about the critical importance of location still applies to this current market, said Yvette Clermont, Branch Manager, Inlanta Mortgage. Where homes are available, buyers want to be in good school districts, near shop- ping, and so forth. "It's a little bit of getting what- ever you can get your hands on right now," Clermont said. Keith Blevins, a Homespire Mortgage Branch Manager from Clayton, North Carolina, agreed, "I find people compromising on what they're looking for, because they start to get desperate for find- ing that home to move into due to the due to the low inventory." Part of that compromise means moving out from central cities and even nearby suburbs to more rural areas, according to Blevins, who added that many native North Carolinians are getting priced out of the market because people are coming in from other states to bid on any homes for sale. Sellers of move-in-ready homes primarily look for clean, noncontin- gent cash offers, said Jim Bopp, VP of National Renovation Lending, Planet Home Lending. "If you don't come in with a clean, noncontin- gent offer, and agree to pay at least a little over listing price, you may not get the house." Borrowers can choose from newer as well as traditional fi- nancing funding sources for home purchases. One of the newer sources, Sivert said, is iFunding companies, which provide funds up front to provide full or partial cash offers. These companies may provide the financing for homeowners planning to sell a current home to buy a new one. These funds provide the move-up buyer with funds for a cash offer on the new home. Sivert likened such fund- ing to a bridge loan, which the borrower pays off once the home is purchased and a traditional mortgage is obtained. Such companies may also offer shared equity programs, which enable the buyer and the equity partner to share in any home price appreciation. The borrower gives up some of the potential gain in exchange the shared-equity lender (or investor), providing part of the down payment. The borrower and lender share in the home's upside value or downside value at the time of the sale of the property. The above programs notwith- standing, there are still many prospective homebuyers who will look to mortgage lenders for home-purchasing funds. The 30-year, fixed-rate mortgage is hands-down the most popu- lar product among borrowers, according to mortgage industry experts. Fifteen-year, fixed-rate mortgages only offer a slight inter- est rate discount, so borrowers are trending toward smaller payments over a longer period. Though sellers prefer cash offers, if they do accept a mortgage, they also prefer the conventional, fixed-rate loan. So, borrowers who qualify for VA or FHA loans tend to get little The New American Homebuyer MReport speaks with experts from Embrace Home Loans, Homespire Mortgage, Inlanta Mortgage, Planet Home Lending, and more about how borrower needs and priorities are shifting. By Phil Britt