What a difference a rate cut makes!

It has been a very short time since the Fed made its stunning announcement to lower interest rates by 50 basis points, and as you’ll see in our first today, we are already seeing some very positive effects, specifically in refi applications. These are terrific upward trends, and we are so excited to see them (finally!).

Since many people are looking to refinance, we thought it would be a good time to discuss some of the hurdles with refinancing. Approvals are not nearly as automatic as some people think. There are circumstances in which refi applications can be denied, and in today’s Foundations Plans below, we list the three typical reasons why this can happen.

And now, on with today’s Blueprint!

– James and David

Refi applications surge

Applications to refinance a home loan surged 20% week-over-week, according to the Mortgage Bankers Association’s seasonally adjusted index. According to CNBC, demand was up 175% compared to the same week a year ago. Here’s what else the business network reports:

• The refinance share of applications rose to 55.7%

• Mortgage refi applications are now the majority of total mortgage demand

• Home mortgage purchase applications rose 1.4% for the week and were up 2% YOY, reaching their highest level since early February.

• Average loan sizes were higher both for purchase and refinance applications, which pushed the overall average loan size to $413,100, the highest in the survey’s history

• The contract rate on a 30-year fixed mortgage eased 2 basis points to 6.13%, the eighth straight weekly drop and the longest stretch of declines since 2018-2019.

Our take

We are certainly not surprised by these numbers, and we are sure you aren’t too. The interest rate cuts are clearly having an effect. Consumers can finally capitalize on the cheapest borrowing costs in two years. As you can see, even home-purchase applications saw a slight jump. This is all just shows that the housing market is moving in the right direction.

Metros where homes are selling the fastest

In August, 48% of all homes for sale nationwide had been on the market for at least 60 days, the highest share for any August since 2019. According to Redfin, that share was up 43.2% YOY and marked the fifth straight month in which the share of homes sitting for at least 60 days posted an annual increase. In fact, 68.5% of homes on the market last month had been sitting for at least 30 days, up from 63.9% a year ago.

But there are some areas bucking the trend. Here are the markets where listings are selling the fastest:

Our take

As we always say, nationwide stats don’t show the whole picture. This stat clearly varies based on markets, and it’s so crucial to know the latest numbers in your area. Buyers in markets where listings are going to stale have a distinct advantage to get concessions from sellers. For example, in West Palm Beach, Florida, homes are spending an average of 79 days on the market! We can chalk that up to the spike in new homes built over the past few years, as builders raced to meet the demand of people moving to the state during the pandemic. Now that inbound migration has leveled off, homes are sitting longer, with rising insurance and HOA costs also putting a dent in buyer demand.

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Top 10 markets for real estate investment

New analysis from Agent Advice, an agent platform founded by industry veteran Chris Heller, ranks a handful of markets ideal for real estate investors. This ranking is based on annual home price growth, population growth, personal income, and income growth. According to its findings, the ten best markets for investors are almost all in the South. 

Here is the Top 10 list from Agent Advice:

1. Miami, Florida

2. Tampa, Florida

3. Charlotte, North Carolina

4. Raleigh, North Carolina

5. Phoenix, Arizona

6. Orlando, Florida

7. Austin, Texas

8. Nashville, Tennessee

9. Dallas, Texas

10. Jacksonville, Florida

Our take

This is a useful list to share with your clients who happen to be real estate investors. However, keep in mind certain caveats. First, many of these markets are witnessing increasing property taxes. Second, particular markets in Florida are witnessing astronomical home insurance and flood insurance prices as extreme weather and natural disasters become more common. Lastly, metros like Austin, Dallas, and Phoenix have seen some of the steepest drops in overall home prices since their peak, while inventory continues to pile up in Phoenix. That said, there are still many opportunities out there.

The news that just missed the cut

• Home renovations that will actually boost your listing price

• Here’s how agents can boost their productivity

• Small towns with the home values rivaling top metros

• Here’s how your buyers can save up to $38,000 on their next purchase

• The priciest home sale nationwide this year

Foundation Plans

Advice from James and David to win the day

As we said up top, refinancing applications are surging right now. Since interest rates have been cut and more cuts are in store in the future, we think buying now and refinancing later is a sound strategy. However, to implement this strategy effectively, you and your clients need to know they are not universally approved under all circumstances. These are the three typical reasons a refi application can be denied:

Reason 1: Your financial standing has changed

Your clients must make sure their finances are in order. Otherwise, their lender might not approve their mortgage refinance. Applying to refinance is similar to applying for a mortgage. A change in financial situation, like a layoff or lower income, or higher debt, could mean they don’t qualify. Clients need to think about all of the variables that got them approved in the first place, such as credit score, income and debt they’ve taken on recently. A change in those variables could affect their ability to be approved.

Reason 2: You haven’t held your loan long enough 

How soon your clients can refinance their mortgage will depend on their loan time and lender’s requirements. With some types of loans, they can refinance within days of closing, while others may require a year’s worth of payments. 

Some mortgage lenders will have their own unique requirements for how soon clients can refinance their mortgage after buying the home. Here’s a breakdown of what they can expect:

• Conforming loan refinance (no cash out): No waiting period

• Jumbo loan refinance (no cash out): No waiting period

• Cash-out refinance (conforming, jumbo, FHA): 12-month waiting period

• Cash-out refinance (VA): 210-day waiting period

• FHA or VA Streamline Refinance: 210-day waiting period

• USDA loan refinance: 12-month waiting period

Reason 3: You refinanced recently

There’s no limit on how often clients can refinance their mortgage, as long as it makes financial sense for them. However, depending on the lender and the type of mortgage loan, the waiting periods mentioned above can dictate how soon they can refinance again. 

Having these things in your knowledge bank will help you effectively advise your clients on how to use the “buy now, refi later” strategy to full effect. To learn more, start here.

To learn more about Estate Media, visit their website.

Just in Case

Keep the latest industry data in your back pocket with today’s mortgage rates:

“We have two lives, and the second begins when we realize we have only one.” — Confucius

Remember: each day is a gift and a new opportunity to lead the life you want and to become the person you want to be. The mistakes and missteps you’ve made in the past don’t define you. Live as intentionally as you can and be ruthlessly focused on the goals you’ve set out to achieve. You can do it!

Have a fantastic weekend, and we’ll see you back here on Tuesday!

– James and David