DSNews delivers stories, ideas, links, companies, people, events, and videos impacting the mortgage default servicing industry.
Issue link: http://digital.dsnews.com/i/1531277
51 January 2025 J O U R N A L January 2025 » 14.9% and $32,700. Overall, 2024 was down year over year as easing mortgage rates improved affordability conditions. "The annual decline in down payments is the result of less buyer competition in the third quarter. Easing demand and increasing inventory gave buyers more f lexibility last quarter, which led to slightly lower down payments," said Hannah Jones, Senior Economic Research Analyst with Real- tor.com. "The recent drop in mortgage rates could pave the way for more competition in the coming months, especially if rates fall further, but we haven't yet seen that ref lected in home sales or down payment trends. Homebuyers Still Using Pandem- ic-Era Savings Two things that likely contributed to homebuyers putting down large down payments are pandemic-era savings and high existing home equity. The typical down payment dollar amount is more than twice the pre-pandemic median, and the typical down payment as a share of the purchase price was more than three percentage points higher. Looking Forward Northeast states see climbing down payments: At the state level, Maine and Rhode Island had the greatest increase in down payment as a percent of price at 1.8 percentage points each. They were fol- lowed by Connecticut (+1.2 pp), Vermont (1.1 pp), and New Jersey (+1.0 pp). States with largest down payment growth in 2024: Rhode Island saw the largest increase in down dollar payment amount in Q3 2024, with the typical down payment rising a whopping 33.3%: from $45,300 in Q3 2023 to $60,400 in Q3 2024. Drivers include both the increase in down payment and the median home price increase. This list has mostly high- er-than-average down payment markets, plus Ohio, which tends to see a lower percentage down. States with largest down payment dollar growth Q3 2023-2024: Down payments as a share of purchase price fell in 24 states in Q3 2024, and down payment dollar amounts fell in 21 states, with significant overlap in the lists of metros with the largest decline in the percentage down and dollars down. Texas, Florida, and Montana might have been hotspots in the pandemic era, but they've been seeing significant softening over the last year—a combi- nation of waning demand and climbing inventory impacting home prices and reducing competition. States with biggest down payment declines: Florida saw down payments fall by almost one quarter (24.0%) year over year in Q3, an $8,500 drop. The District of Columbia saw the biggest absolute decline, with down payments dropping more than $17,000 year over year, a 17.7% drop. Despite this, down payments are still more than $80,000 on average in the district. For D.C. in particular, falling down payments may ref lect the preference for and availabil- ity of remote work, allowing workers to live further away from downtown jobs and in more affordable housing areas. MORTGAGE REFI OFFERS SURGE NATIONWIDE A recent LendingTree study highlights a considerable rise in 30-year fixed-rate mortgage refinance offers, showing an impres- sive 41.59% increase from September 2023 to September 2024. This growth correlates with a notable decrease in the average annual percentage rate (APR) on refinance loans, which fell by 156 basis points—from 8.19% down to 6.63%. With the drop in interest rates, homeowners across the country are seizing the oppor- tunity to lower their monthly mortgage payments or cash out equity. On average, this reduction in APR has translated to a monthly savings of $136, even as average loan amounts have climbed by $16,245. LendingTree's analysis, based on ap- proximately 180,000 refinance offers on its platform, provides a comprehensive look at the refinancing landscape across the United States. The report focuses on the 25 states where refinance offers in- creased most significantly year over year, illustrating a widespread trend in home- owners looking to lock in lower rates. Notably, 10 states saw refinance offers more than double within the past year, led by West Virginia, which recorded a remarkable 235.69% growth rate. Other states with substantial increases include Connecticut at 144.34% and Oklahoma at 141.77%. This trend reflects a strong response from homeowners seeking to capitalize on declining rates to improve their financial standing. Despite the allure of refinancing at a lower rate, the study also emphasizes that not all homeowners are necessarily positioned to benefit from current refi- nance options. Many existing mortgages have rates below 5%, with a substantial portion of loans locked in below 4% or even 3%. For these homeowners, refi- nancing could mean a marginal reduc- tion in monthly payments, which may not offset the associated closing costs. Refinancing typically incurs expenses ranging from 2% to 6% of the loan value. Although these costs can often be rolled into the loan itself, this approach results in a higher loan balance and, in some cases, higher monthly payments. For homeowners considering refinancing, determining a break-even point—the time it will take for monthly savings to cover upfront costs—remains critical. Factors like loan size, monthly savings, and long-term plans for staying in the home will all inf luence whether refinancing is the right financial move. As lenders cautiously adjust their offers amid market f luctuations, homeowners must assess their situations to decide if refinancing aligns with their goals. LendingTree's findings underscore the strategic role of refinancing amid favorable interest rate shifts. By exam- ining the notable uptick in refinance offers, particularly in states with the highest year-over-year increases, this study provides insight into the broader economic impact of declining APRs on household finances nationwide.