What a difference a year makes. I quickly scanned the letter I created in May of 2020. I discussed many challenges – difficult lending restrictions and some products, like bank statement loans, were hard to come by.
Today, the news has taken a 180-degree turn. Our economy is heading in a powerful direction, interest rates are still low, and banks are offering much friendlier terms on most loans. The primary industry negative now? There is no quick way to build the homes needed to meet epic buyer demand.
Here are the key trends I see heading into May.
Many consumers are in a healthy financial position.
The Commerce Department reported Friday that personal income jumped 21.1% in March — the most significant increase on record. Personal saving and spending also jumped by 27.6% and 4.2%, respectively. The increase in savings could end up financing many more months of robust spending. Also, average FICO scores have increased since early 2020 for both first-time and repeat home buyers, and debt-to-income ratios remain healthy for both groups.
Mortgage delinquency is down.
According to Black Knight’s Mortgage Monitor, loan delinquency rates dropped 16.4 percent to 5.02 percent, the largest monthly decline in 11 years.
While some news headlines point to a mass population exodus from states like California, the reality is more people are putting down roots and buying homes in California than ever.According to the California Association of Realtors (CAR), the state’s highest-earning sectors are coming out ahead financially. Additionally, the flexibility of not being tied to a single work location means many are buying in areas like Big Bear, Lake Arrowhead, and Tahoe. CAR expects more double-digit increases in single-family home sales for April and May. Driving much of the rise are first-time home buyers and buyers purchasing at $2M+.
At the local level, I see more lenders, including regional banks, create better opportunities for borrowers for home purchase and refinance, often with no cash-out limit restrictions.I now have lenders who will finance –
• 90% of the purchase price up to $2,000,000
• 85% to $3,000,000
• 75% to 5,000,000
• 70% to $7,000,000
• 60% to $10,000,000
Some lenders now recognize Bitcoin. I qualified and closed a $6.5M purchase last week using Bitcoin assets.
I am still a big fan of a 15 – year fixed. There might be an initial adjustment to acclimate to a higher payment, but interest rates on this product are phenomenal, as are savings on interest over time.
Please contact me to discuss your refinance or home purchase goals. I am confident we have a solution for nearly all borrowers.