With the housing market showing the first signs of a slump, it’s getting harder to find homes. Especially in crowded cities like Los Angeles, residential housing supply simply isn’t meeting the high demand, and homes aren’t being built fast enough to compensate. As a result, home prices are rising fast, but wages are not following suit.
Simply put, it’s not easy to buy a home right now.
However, there is at least one reason to be optimistic: the 30-year mortgage rate has reached a 2017 low. When Freddie Mac released the Primary Mortgage Market Survey this August, it showed the 30-year fixed mortgage rate at the lowest rate since November 2016.
That should make it easier for more people to secure attractive mortgages, which is important in an era of flat wages.
William E. Brown, president of the National Association of Realtors, believes that the mortgage industry is “trying to give them more options to buy a house.”
In addition, some lenders are lowering standards for the required down payments on homes. After the housing crash, many lenders required a 20% down payment to obtain a mortgage. Buyers could turn to the Federal Housing Administration for a lower down payment, but they would also find themselves strapped with a costly mortgage insurance premium. However, homebuyers now have options for lower down payments.
Starting in 2014, Fannie Mae and Freddie Mac began offering home loans with as little as 3% down payment, but few banks were willing to follow their example. That’s finally starting to change in 2017.
While many veterans can receive a loan from the Department of Veteran Affairs with no down payment or mortgage insurance, most potential homebuyers aren’t so lucky. Now, borrowers have more options.
“We are seeing more and more lenders adopting it every day,” said Danny Gardner, Freddie Mac’s Vice President of Affordable Lending and Access to Credit.
Unfortunately, these changes don’t affect the facts on the ground — housing supply is low, demand is high. And even though home sales have increased slightly on the West Coast, most economists agree that the housing industry is in a “holding pattern” right now.
“With the exception of a minimal gain in the West, pending sales were weaker in most areas in July as house hunters saw limited options for sale and highly competitive market conditions. The housing market remains stuck in a holding pattern with little signs of breaking through,” National Association of Realtors economist Lawrence Yun said recently.