What 54% of homebuyers FAIL to do

Plus, where luxury home prices are dropping!

Money Matters

If today’s newsletter has a theme, it’s money, money, money.

There are so many things that buyers need to know about financing, but we have seen study after study which shows many players know very little, if anything, about how to shop for mortgage rates and finance a home. If you want some shocking proof, check out our second story below!

We can’t say enough how crucial it is for us agents to know all the ins and outs of the economic side of our business. Our knowledge can help them make better choices and potentially save boatloads of money.

On the subject of financing, in today’s Foundation Plans, we complete our two-part series where we answer a lot of common questions about refinancing. We hope you, and your clients, find it helpful.

And now, on with today’s Blueprint!

- James and David

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Pending home sales plunge in April

The Pending Home Sales Index, as tracked by NAR, fell to 72.3 in April, down from the March level of 78.8. It’s down 7.4% year-over-year and now sits at its lowest level since April 2020.

For reference, pending home sales refer to transactions in which the contract has been signed for the sale of a home, but the sale has not yet closed. 

Here are the other key takeaways from April:

  • Pending home sales dropped 7.7% month-over-month. 

  • New home sales fell 4.7% MOM and 7.7% YOY

  • Existing-home sales dropped 1.9% MOM and YOY

  • All four regions saw monthly and annual declines in pending sales

    • Northeast: -3.5% MOM, -3.1% YOY

    • Midwest:  -9.5% MOM, -8.7% YOY

    • South:  -7.6% MOM, -8.2% YOY

    • West: - 8.5% MOM, -7.3% YOY

Our take

We know some of this might be old hat to you, but we’ll break it down: since pending home sales measure the point when a buyer and seller have agreed on the price and terms in a sales transaction, those numbers tend to lead existing-home sale data by about one or two months. It makes them a good indicator of market conditions. Everything is indicating that buyers are on the sidelines now. Since mortgage rates aren’t likely to drop anytime soon, homebuyers have adopted a wait-and-see attitude.

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More than half of homebuyers don’t shop for a mortgage

54% of all U.S. homebuyers who took out a mortgage for their most recent home purchase received only one loan offer, indicating that the majority of borrowers do not shop around for the best mortgage deal, according to a new study from LendingTree. Here’s what else the company found:

  • 35% of buyers said they purchased a home sooner than they planned so they could take advantage of lower mortgage rates.

  • 45% of buyers who compared more than one mortgage offer said the lowest offer didn’t come from their first lender.

  • Among people who chose not to comparison shop:

    • 28% said they didn’t shop around because they were confident they got the best rate 

    • 20% said they just used a lender that had a preexisting relationship with their real estate agent

    • 14% said they rushed the financing process to close a deal due to the competitive nature of the current housing market

  • 45% of homebuyers refinanced the mortgage on their current home. Among them, 56% shopped around. That paid off because 81% found a lower rate than their current lender offered.

Our take

Honestly, we were astonished when we saw this report. Homebuyers are truly leaving money on the table by not shopping around. There is so much to say, but we want to focus on one finding here: 20% of buyers didn’t shop around because they used a lender that had a preexisting relationship with their agent. This shows how agents have enormous sway with their clients. It’s so important that we use that power responsibly. Introduce your clients to your preferred lenders, of course, but also urge them to shop around. If they find a lower rate, they will truly appreciate you for it.

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Luxury home prices aren’t rising that fast everywhere

We know luxury home prices are rising fast, but that’s not the case everywhere. Realtor.com compared the prices of “luxury” homes – homes in the top 5% of all listings in the top 50 metros – over the past four years. 

Here are the top 10 cities where luxury prices have seen the smallest rise:

  1. Washington, DC –  -1%

  2. Toledo, Ohio – 3%

  3. Winston Salem, NC – 6%

  4. Wichita, KS – 17%

  5. Stockton, CA – 18%

  6. Suffolk, VA – 19%

  7. Tyler, TX – 19%

  8. Tulsa, OK – 22%

  9. Tallahassee, FL – 22%

  10. Seattle, WA – 24%

Our take

Realtor.com has done us a real service here. Who would have thought that DC luxury homes actually have decreased in value over the past four years? This is great info to share with luxury buyers. Most of the ones we know don’t just settle for one home, so they might see this as a great opportunity to pick up another. There might be some bargains (relatively speaking) to be had!

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The news that just missed the cut

Foundation Plans

Advice from James and David to win the day

Today, we complete our two-part series answering the biggest questions regarding refinancing. You can read part one here.  As we mentioned in our last edition, mortgage rates will stay high throughout this year, but they are expected to fall next year. When refinancing becomes a live option, your clients should be ready to pounce and capitalize. Here are some more answers to some important questions:

Does refinancing hurt credit scores? –  Refinancing a mortgage could knock your client’s credit score down a bit since they’re applying for a new loan. This means lenders will conduct hard credit inquiries to check the credit report, which could stay on their credit report for up to two years. However, a hard credit inquiry doesn’t impact credit scores for the full two years. If your clients continue to make payments on time, refinancing could actually help their score in the long run.

Do your clients have to put 20% down to refinance? –  No, your clients don’t need to come up with a 20% down payment to refinance a mortgage. They usually only need 20% equity with a cash-out refinance. But they’ll probably have to pay closing costs, which they should factor into their refinancing budget. Depending on the lender, your clients may be able to roll these closing costs into the mortgage to avoid paying them all up-front. According to Freddie Mac, the average mortgage refinance closing costs are around $5,000, but this number could vary depending on the size of the loan and where your clients live.

What is the negative side of refinancing? – There are potential downsides to refinancing a mortgage. If your client refinances from a 30-year mortgage to a 15-year one, their monthly payments will probably increase since they have less time to pay off their loan. While a cash-out refinance lets them borrow against the equity in their home, borrowing that money also means they’re reducing their equity. Closing costs can also be pretty steep, which could cancel out the benefits of refinancing a mortgage, especially if they move before reaching their break-even point.

To learn more, use these resources to get a better handle on the subject.

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Just in Case

Keep the latest industry data in your back pocket with today’s mortgage rates:

Source: Mortgage News Daily

That’s a wrap on this edition of The Blueprint!

As we head into the weekend, remember that each day is a gift and a new opportunity to lead the life you want and to become the person you want to be. The mistakes and missteps you’ve made in the past don’t define you. Live as intentionally as you can and be ruthlessly focused on the goals you’ve set out to achieve. You can do it!

Thanks for reading, and we’ll see you back here on Tuesday!

- James and David