Finance
Mortgage lending took a huge dip in Q4, but there’s hope for spring housing: report
Housing supply is improving as the spring home buying season nears. (iStock)
Mortgage lending continued to drop considerably in the fourth quarter of 2023, but a recent report indicates that a turnaround is coming.
High home prices, soaring borrowing costs and low housing supply drove lending rates to a two-decade low, with activity down 16.5% from a year earlier and 67.7% from a high point hit in the first quarter of 2021, according to the report by ATTOM. Lenders issued $417.4 billion of residential mortgages in the fourth quarter of 2023, a drop of 14.9% from the third quarter of 2023 and 18.6% from the fourth quarter of 2022.
However, home lending surged nearly 30% in the spring of last year and the rate could increase again this spring if mortgage rates continue to decline as predicted and housing supply improves.
“Multiple powerful forces continued to conspire against the mortgage industry during the fourth quarter, slicing back huge portions of their business,” ATTOM CEO Rob Barber said. “There were signs during the peak buying season of 2022 that things were starting to turn around, with increases in purchase, refinance and HELOC deals. That could happen again this year as we head into this year’s peak period, especially with interest rates coming down recently.
“But the fourth-quarter numbers revealed continued gloomy times for lenders, no matter how you sliced the pie,” Barber continued.
Homebuyers can find better mortgage rates by shopping around and comparing options. Visiting an online marketplace like Credible can help you compare rates, choose your loan term and get preapproved by multiple lenders at once.
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Supply builds as spring nears
Realtor.com economists predict that mortgage rates will slide into the 6% territory in 2024. Fannie Mae expects mortgage rates to decline gradually over the next two years, reaching 6.9% for the 30-year mortgage by 2025. At the same time, First American economists noted that mortgage rates will hover in the 6.5% to 7.5% range.
The dip in rates could help build some much-needed housing supply. Some homeowners are already selling, according to a recent Redfin report. New listings rose 13% from a year earlier nationwide during the four weeks ending March 3, the most significant increase in nearly three years. Home prices have also lost some momentum. Roughly 5.5% of home sellers dropped their asking price, the highest share of any February since at least 2015.
“There have been two major obstacles for homebuyers over the last year: low inventory and high housing costs,” Redfin Economic Research Lead Chen Zhao said. “Now, the first barrier is starting to come down as more supply comes on the market. Housing costs are still high, but they’re likely to come down a bit as mortgage rates gradually decline through the year and price growth loses some steam.
“Buyers who can afford today’s mortgage rates may have better luck finding a home now than they have in the past several months, and they also may be less likely to face competition because inventory is improving,” Zhao continued.
If you’re looking to become a homeowner, you could still find the best mortgage rates by shopping around. An online marketplace like Credible can help you compare your options.
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Creative avenues for home affordability
First-time homebuyers are finding ways to forge their path to homeownership. For example, many young Americans planning to buy a home next year are relying on side income to generate cash, according to a Redfin survey.
Forty-one percent of Gen Zers and 36% of Millennials said they are working second jobs to save for their down payment and about one-quarter plan to use a cash gift from family. Some have even opted to house hack to help pay off their mortgage and other bills, according to a recent Realtor.com report. This is when a buyer purchases a home intending to rent out rooms for the long or short term.
The co-buying trend is another way young buyers share homeownership costs, according to the report. Co-buying helps friends and family pool resources to come up with down payments and closing costs. It is also a way to share costly monthly mortgage payments, utility bills and maintenance and repair costs.
If you’re considering becoming a homeowner, it could help to shop around to find the best mortgage rate. Visit Credible to compare options from different lenders and choose the one with the best rate for you.
Have a finance-related question, but don’t know who to ask? Email The Credible Money Expert at [email protected] and your question might be answered by Credible in our Money Expert column.
Walmart stock may be a steal.
Former Walmart U.S. CEO Bill Simon contends the retailer’s stock sell-off tied to a slowing profit growth forecast and tariff fears is creating a major opportunity for investors.
“I absolutely thought their guidance was pretty strong given the fact that… nobody knows what’s going to happen with tariffs,” he told CNBC’s “Fast Money” on Thursday, the day Walmart reported fiscal fourth-quarter results.
But even if U.S. tariffs against Canada and Mexico move forward, Simon predicts “nothing” should happen to Walmart.
“Ultimately, the consumer decides whether there’s a tariff or not,” said Simon. “There’s a tariff on avocados from Mexico. Do you have guacamole with your chips or do you have salsa and queso where there is no tariff?”
Plus, Simon, who’s now on the Darden Restaurants board and is the chairman at Hanesbrands, sees Walmart as a nimble retailer.
“The big guys, Walmart, Costco, Target, Amazon… have the supply and the sourcing capability to mitigate tariffs by redirecting the product – bringing it in from different places [and] developing their own private labels,” said Simon. “Those guys will figure out tariffs.”
Walmart shares just saw their worst weekly performance since May 2022 — tumbling almost 9%. The stock price fell more than 6% on its earnings day alone. It was the stock’s worst daily performance since November 2023.
Simon thinks the sell-off is bizarre.
“I thought if you hit your numbers and did well and beat your earnings, things would usually go well for you in the market. But little do we know. You got to have some magic dust,” he said. “I don’t know how you could have done much better for the quarter.”
It’s a departure from his stance last May on “Fast Money” when he warned affluent consumers were creating a “bubble” at Walmart. It came with Walmart shares hitting record highs. He noted historical trends pointed to an eventual shift back to service from convenience and price.
But now Simon thinks the economic and geopolitical backdrop is so unprecedented, higher-income consumers may shop at Walmart permanently.
“If you liked that story yesterday before the earnings release, you should love it today because it’s… cheaper,” said Simon.
Walmart stock is now down 10% from its all-time high hit on Feb. 14. However, it’s still up about 64% over the past 52 weeks.
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Investors may want to reduce their exposure to the world’s largest emerging market.
Perth Tolle, who’s the founder of Life + Liberty Indexes, warns China’s capitalism model is unsustainable.
“I think the thinking used to be that their capitalism would lead to democracy,” she told CNBC’s “ETF Edge” this week. “Economic freedom is a necessary, but not sufficient precondition for personal freedom.”
She runs the Freedom 100 Emerging Markets ETF — which is up more than 43% since its first day of trading on May 23, 2019. So far this year, Tolle’s ETF is up 9%, while the iShares China Large-Cap ETF, which tracks the country’s biggest stocks, is up 19%.
The fund has never invested in China, according to Tolle.
Tolle spent part of her childhood in Beijing. When she started at Fidelity Investments as a private wealth advisor in 2004, Tolle noted all of her clients wanted exposure to China’s market.
“I didn’t want to personally be investing in China at that point, but everyone else did,” she said. “Then, I had clients from Russia who said, ‘I don’t want to invest in Russia because it’s like funding terrorism.’ And, look how prescient that is today. So, my own experience and those of some of my clients led me to this idea in the end.”
She prefers emerging economies that prioritize freedom.
“Without that, the economy is going to be constrained,” she added.
ETF investor Tom Lydon, who is the former VettaFi head, also sees China as a risky investment.
“If you look at emerging markets… by not being in China from a performance standpoint, it’s provided less volatility and better performance,” Lydon said.
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