While American’s average credit score has never been better as reported by FICO This Week in Real Estate, conversations swirl around the notion of interest rates dropping to zero following the President’s ask of the Federal Reserve. Below are a few highlights from the second week of September that influence our business:
Could Mortgage Rates Really Drop to Zero? President Donald Trump has called on the U.S. Federal Reserve to drop interest rates to zero, or even negative, at its next meeting on September 17. That has sparked several discussions this week on how that could impact the housing market. For one, that could mean cheaper mortgages for home buyers, housing analysts say. While the Fed’s benchmark rate does not have a direct influence on mortgage rates, it does often influence them. “If the federal rates go down to zero, mortgage rates could drop from 3.56% for a 30-year fixed-rate loan, as of Thursday, to, well, nothing,” realtor.com reports. Is it feasible? Bank of America officials told USA Today: “We believe negative rates in the U.S. are a possibility.” How would a zero mortgage rate work? “Most people think they’d get money back … but not really,” says George Ratiu, senior economist at realtor.com. “A portion of your loan is forgiven each month so you end up paying a little less over the life of the loan.” Buyers and refinancers could expect fees to rise as a result. Lenders would still need to turn a profit.
Average FICO Score Hits All-Time High. When it comes to credit, Americans are scoring better than ever. For the first time, the average national credit score has reached 706, according to FICO, the developer of one of the most commonly used scores by lenders. FICO scores range from 300 to 850. A good score generally is above 700, and those over 760 are considered excellent. “At over 700, you will qualify for just about any credit at favorable terms,” said Ethan Dornhelm, vice president for scores and analytics at FICO. “We’ve been in a relatively stable economic period,” Dornhelm said. During that time, low unemployment and a strong market have helped improve the average consumer’s financial health and FICO score, which Dornhelm referred to as “a lagging indicator.” In addition, more people understand their credit behaviors and scores, and they are checking their scores more often, Dornhelm said. As a result, many consumers have changed their behavior for the better.
NAR: Three-Quarters of Buyers Found Their Homes on Their Phones. About three-quarters of buyers reported finding their homes using their phones, according to a report from the National Association of Realtors. Mobile-phone use differed by generations: about 80% of Millennials, meaning younger than 38 years old, began their search on their phone, while 78% of Gen Xers, meaning 39 to 53, and 68% of Young Boomers, meaning 54 to 63, started there. The typical buyer contacted an agent and visited a median of 10 homes over 10 weeks before purchasing a home, NAR said. Broken out by generations, it was older buyers who spent the shortest amount of time looking at houses. The so-called Silent Generation, meaning people older than 73, spent eight weeks searching for homes, while Young Boomers spent 12 weeks on their home search. All the other generations found a home in 10 weeks, the report said. Finding the right property ranked highest among all generations as the most difficult step in home buying, with 56% putting it at the top of the list. About 20% of respondents said “paperwork” was the most difficult step, 16% said “understanding the process” was the most difficult part, and 13% said “saving for the down payment” was the hardest. Only 8% cited “getting a mortgage” as the most difficult step. The use of open houses to view properties were about evenly split: 53% of home searchers reported going to open houses, and 47% said they didn’t.