Let's talk about U.S. mortgage options for relocating employees

Consumer inflation continues to moderate, but home prices have hit another record high. The Case-Shiller Home Price Index, which is considered the gold standard for home appreciation, showed home prices nationwide rose 0.2% from June to July after seasonal adjustment, breaking the previous month’s all-time high. Home values in July were also 5% higher than a year earlier, following a 5.5% gain in June. 

Also, housing market activity is slowly increasing on the heels of lower mortgage rates. In September, once the Fed cut rates by 50 basis points, reports from Redfin and the Mortgage Bankers Association (MBA) highlighted a surge in mortgage applications and homebuyer demand. While lower interest rates have led to increased home tours and buyer activity, overall affordability continues to be a big challenge.

As we approach the U.S. election on November 5th, we are curious how mortgage rates will adjust, if at all. Many speculate that mortgage rates will continue to decline gradually over the next few months with further decreases by the end of 2025. Unfortunately, it's impossible to predict what events and disruptions could throw a wrench into rate reductions. 

Newsweek shares the following:

By the end of 2024, forecasts suggest that 30-year fixed mortgage rates could fall to around 6.15%. Predictions for 2025 vary from financial institutions like the Mortgage Bankers Association, Fannie Mae and Wells Fargo. But they collectively indicate that rates could further decrease, averaging between 5.6% and 5.9% by the end of 2025.

From Fortune, the current average interest rate for a fixed-rate, 30-year conforming mortgage loan in the United States is 6.419%, according to the most recent data available from mortgage technology and data company Optimal Blue. Read on to see average rates for different types of mortgages and how the current rates compare with the last reported day. Here is their latest info as of October 10:

In another article just out from Fast Company, they share that the “magic mortgage rate” as we look ahead for the housing market to truly unlock and open back up is below 5.5%.  They also provide the update that as today's rate has now creeped back up to 6.62%, only 13% of people would accept that rate, but it jumps to 47% once the rate falls to less than 5.5%.

For relocating employees, personal credit score largely determines the mortgage rate they receive, but several external factors also play a role. From the Fortune article, those would include:

• Actions by the Federal Reserve: When the Federal Reserve raises or lowers the federal funds rate, lenders typically adjust their interest rates in response. This strategy helps the Fed control the money supply and influence borrowing costs for both consumers and businesses.
• Inflation levels: Although related, inflation and the Fed’s actions are distinct factors. The Fed raises or lowers rates to control inflation, but lenders may also adjust rates independently to protect their profits when inflation is high.
• General economic conditions: Lenders consider factors like economic growth and housing supply and demand when setting mortgage rates. These are just a couple of the many puzzle pieces that can influence mortgage rate changes. 

Here is the reality:

• The median home listing price in the U.S. has jumped to $424,900—an increase of over $100,000 from just four years ago. 
• Mortgage rates are at a multi-decade high. 
• Incomes for low- and moderate-income workers have largely stagnated while housing costs have risen.
• Housing affordability has worsened over the past two decades, and is becoming an issue across the country
• Cost of living including housing is likely the biggest impactor on employee reluctance to relocate.

If you want to learn even more, we are gearing up for our next Spotlight webinar session on Thursday, November 7th at 11am CT with David Schroeder, Chief Revenue Officer at NewRez LLC. David will share his expertise and insights on the pros and cons of the current housing markets and the various mortgage options available for those trying to purchase a new home. He'll also share what he expects the newly elected President's impact will be and his 12 month outlook on where he expects rates to go. Join us to consider the latest trends and stats within employee relocation from a mortgage perspective.  

Hit this link to “Register for the Spotlight Webinar”.