The average rate for a benchmark 30-year mortgage has held at 2.73 percent over the past two weeks, which is only 8 basis points (0.08 percentage points) above its all-time low of 2.65 percent recorded at the start of this year and less than half the average 30-year rate over the past 30 years (5.91 percent).
just spoke with lender (US Bank), 30 yr conventional loan rate went from 2.625 to 3.15 due to bond sell off!
Rate has increased. But we can provide unlimited cash out for primary home and second home now. For a 4M owner occupied house, you can get a cash out loan amount of 3.2M even if there was no mortgage.
10 year treasury rate is causing a lot of concern in the financial market, we need to watch closely how it will behave.
Very big changes ahead for Agency Conforming (standard and high balance) as it relates to 2nd home and investment property financing. It’s expected that by limiting the Agencies portfolio to no more than 7 percent for investment and 2nd home loans, lenders will need to come up with new funding resources for these transactions. The Agencies just won’t buy these loans if they exceed that 7 percent threshold and almost every lender today is beyond that limit. Many lenders either pulled out of the market, or increased their LLPA’s by 3 points or more.
Within the next few days you can expect an average Conforming 30 fixed Investment loan (purchase or refi) to average in the 5.x rate range and cost 2 points or more.
Jumbo portfolio lenders will still have funds to make these loans with rates in the low to mid 4’s, but only for loan amounts above the standard Conforming loan limit of $548,250. Jumbo lenders are loath to fund 2-4 unit investment properties so who knows where an investment or 2nd home borrower can go to find lending solutions that make economic sense.
This news is only a few hours old, and it it sticks, imagine the disruptive impact in the Tahoe, Palm Springs, or Vegas market.
If you are in process on an investment or 2nd home loan and have not locked, best to do so immediately.
Thanks for reading
Wouldn’t this majorly disrupt the housing market even in the bay area? Quite a lot of people are buying second homes and rely on cheap loans.
Yes. Significant disruption is ahead in these two markets. I think the intent is to force housing stock to sell “Owner Occupied” over anything else. It’s an offloading of risk from Agency (aka Government) to the private sector. The problem with this approach is that only the rich with cash in hand will make rental home buying economically sensible and at least for the time being, a great deal of cash is sloshing around these days.
I’d expect the Realtor community to push back on this as the begin to grasp just how impactful to their business model these lending changes will become in the days ahead.
To paraphrase another “I feel a great disturbance in The Force… It’s as if millions of home buyers cried out and were suddenly silenced. I feel something terrible has happened…”
Thanks for reading
Thanks for sharing. Agree this is a major change but IMHO probably the right kind of regulation to prevent a 2007-08 scenario. Buy second home or investment property only if you have resources to risk.
IMHO, should limit purchase of 2nd home or investment property. 2nd home should be subjected to 20% surcharge! Ditto for investment property for the first 5… before they can declare as investment as business and has to operate as a LLC or similar.
Loans are not important in the Tahoe market. If you want to get a house you have to bid all cash no contingencies. Buyers can get cash from refinancing other assets. Just like buying in Mexico. Get your cash from your principal residence. But getting a loan in Mexico isn’t worth the hassle. BTW even second homes in Mexico are appreciating fast. Too much cash flying around.