Almost 50% of homes sold for more than list price, 25% were all-cash transactions

The National Association of Realtors (NAR) Confidence Index Survey for April reveals how hot the housing market is. Per the report, homes that sold had five offers on average, and nearly 50% of homes sold for more than their list price during the four weeks ending May 16. NAR expects home prices in the next three months to increase nearly 6% from one year ago and will increase almost 3% from last year's sales level, according to HousingWire.

"With little supply in the market, homes typically sold within 17 days — down from 27 days one year ago, as buyer competition heats up," NAR said in a statement. "The share of first-time buyers decreased to 31% from 32% in the month prior, and 36% one year ago. The pandemic continues to impact how people live and work."

However, there are signs that housing market demand may be reaching its peak, according to a recent study from Redfin.

"Make no mistake, the housing market is still very hot and will remain hot for the rest of the year," said Daryl Fairweather, Redfin chief economist. "But there may be signs that some buyers would rather spend their money on restaurants, vacations and other things they have held back on for the past year, instead of on housing now that the threat of the pandemic is dissipating in America."

New listings of homes for sale were down 12% from the same period in 2019, and active listings — the number of homes listed for sale at any point during the period — fell 49% from the same period in 2019. (2019 is being used as a reference point since 2020 data is skewed by the pandemic.)

This is happening, of course, with prices remaining astronomically high. Home prices were recently reported at a record high of $352,975, and were up 24% year over year. Asking prices increased to $358,975, also a record high.

Mortgage requirements are loosening for homebuyers

Good news for homebuyers: it's finally getting easier to get a mortgage loan. After lending standards tightened their reins during the pandemic, it seems like lenders are starting to relax a bit, according to The Mortgage Reports. 

In fact, according to the Mortgage Bankers Association, mortgages were about 2.2% easier to come by in April than in March. And on some types of loans? Mortgage availability was up as much as 12.6%.

Why did mortgage requirements get tougher during COVID? The short answer: risk. Unemployment hit record-breaking levels, many people lost jobs and wages and entire sections of the economy were shut down for months. 

To protect themselves from these added risks, many mortgage lenders raised loan requirements. Some even stopped offering certain loan programs altogether (namely FHA loans, HELOCs and non-QM loans). For the most part, lenders required higher credit scores and larger down payments over the last year.

According to the Mortgage Credit Availability Index from MBA, those high standards are finally starting to ease up. Standards for credit score, down payment, and other criteria loosened the most on conforming loans, with a 12.6% jump over the month.

Conforming loans are those that meet standards set by Freddie Mac and Fannie Mae. The agencies allow credit scores starting at 620 and down payments of 3-5% or higher. However, lenders are allowed to set their own, stricter requirements on top of Fannie and Freddie's (called 'overlays'). These overlays are the reason mortgage requirements vary so much from one lender to the next — and the reason some lenders are re-opening to lower-credit borrowers faster than others.

Despite the uptick, it's still harder to get a mortgage than it was a few years ago. Buyers are highly encouraged to work on their credit before applying for a mortgage, as well as save up a solid down payment and shop around with at least three to five different lenders. 

Housing bill proposed for first responders and teachers

As reported by HousingWire, this VA-like legislation is being introduced that would remove down payments and monthly mortgage insurance fees for firefighters, police officers, paramedics and teachers. U.S. Representatives John Rutherford (R-FL), Al Lawson (D-FL), John Katko (R-NY) and Bonnie Watson Coleman (D-NJ) introduced the bill, dubbed the Homes for Every Local Protector Educator and Responder Act, on May 13.

The bill would allow borrowers to finance up to 100% of the acquisition price. Mortgages would be subject to FHA loan limits. Homebuyers would pay an up-front mortgage insurance premium of 3.6 percent of the principal, which could be financed, and would not pay a monthly insurance premium. If passed, the new program would be administered by the Federal Housing Administration. The benefit is modeled on the widely used home loan program for veterans, which is administered by the Department of Veterans Affairs.

But before borrowers rush to take a job as a summer school teacher to get a break on a mortgage, the bill has a caveat. Eligible borrowers must have worked in one of those professions for at least four years. They also must be in good standing at their job, and not subject to disciplinary action. They must also show that they intend to keep working in the same job for another year.

Samuel Royer, the national director for Heroes First Home Loans at Churchill Mortgage and a veteran, came up with the idea for the program, to acknowledge first responders' sacrifices, he said. "I believe that American first responders deserve the same access to affordable housing benefits that I have as a veteran," Royer said.

Weekly Mortgage Rate Update

Mortgage rates are down below three percent, continuing to offer many homeowners the potential to refinance and increase their monthly cash flow – in fact, homeowners who refinanced their 30-year fixed-rate mortgage in 2020 saved more than $2,800 annually. 

Substantial refi opportunities exist today, as nearly $2 trillion in conforming mortgages have the ability to refinance and reduce their interest rate by at least half a percentage point.

The Freddie Mac weekly survey shows the average rate for a 30-year fixed mortgage is 2.95%, which is 0.05 points lower than last week, and down 0.20 points from this time last year.