Chasing Opportunity

As we watch these amazing runners compete in the Olympics, we can’t help but see the common bond that real estate agents have with these incredible athletes. Okay, so maybe we’re not nearly as fast, but we all know that in order to beat the competition, we’ve got to pounce whenever we see the right opportunity.

Right now, the data is telling us that, for buyers, that opportunity is now. As our stories today show, prices are down and mortgage rates are down A LOT, so it’s a good time for buyers to get off the sidelines and get in the game.

It’s also a good time for current owners to consider refinancing. Today, we start Part One of our two-part mini-course on our overview on this important part of the business and discuss when it makes sense to refinance. 

The opportunities are out there, so let’s go get them… and let’s also get into this new edition of The Blueprint.

– James and David

Mortgage rates plunge to lowest level in 16 months

On Monday, the average rate on the popular 30-year fixed mortgage dropped nearly 23 (22.06) basis points to 6.34%, according to Mortgage News Daily. That is the lowest reading since April 7th, 2023. The 15-year fixed rate fell to 5.88%, its lowest level since May 2023.

The drop followed a weaker-than-expected monthly employment report that came out last Wednesday, which sent bond yields falling. Mortgage rates loosely follow the yield on the 10-year U.S. Treasury.

The Fed is almost certainly going to cut interest rates at its September meeting, if not sooner. However, before then, there are still two inflation reports and another employment report coming.

Our take

There are a lot of pessimists out there who say the latest jobs report is exceptionally bad news. We don’t fully see it that way. The report showed that working-age labor force participation set a new quarter-century record high. Meanwhile, on the subject of interest rates, it seems everyone is now on board with the idea of a rate cut (we thought the case was clear months ago). Treasury yields have fallen and mortgage rates are already at their lowest level in more than a year. To quote Redfin’s Chief Economist Daryl Fairweather, “Homebuyers should start their horses.”

Metros where price cuts are on the rise

Not only did median home prices drop in July, as we reported last week, but an astounding 47 of the 50 largest metros saw their share of price reductions increase year-to-year compared with last July.

Here are the top 10 metros with the highest year-over-year home price reductions in percentage points: 

1. Tampa, FL: 9.7 PP

2. Charlotte, NC: 9.5 PP

3. Phoenix, AZ: 9.4 PP 

4. Denver, CO: 8.9 PP

5. San Diego, CA: 8.6 PP

6. Jacksonville, FL: 8.2 PP

7. Atlanta, GA: 7.9 PP

8. Raleigh, NC: 7.6 PP

9. Virginia Beach, VA: 7.0 PP

10. Orlando, FL: 6.7 PP

Our take

To steal a line from Warren Buffett, it’s time to seize these opportunities. With home prices falling across the country, and mortgage rates dropping too, all the stars are lining up for buyers. We encourage agents to hit this message hard with all their clients who could be in the market for their next home.

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Top markets for buyer agent commissions

The typical U.S. home seller is paying a 2.55% commission to the buyer's agent, down from an average of 2.62% in January, according to a new report from Redfin. In dollar terms, the typical buyer’s agent earns $15,377 per deal, up marginally from $15,124 in January due to rising home prices. 

According to Redfin's research, the buyer's agent commission posted modest declines in the past decade, from 2.89% in 2013 to 2.66% in 2023. That decline picked up momentum in the first seven months of 2024.

Here are the top markets with the highest and lowest average buyer commissions:

Our take

We continue to believe the post-NAR settlement changes don’t signal the death of buyer agency. However, we do think that they might accelerate the pace of lower commission rates for buyer agents for two reasons: 1) consumer awareness of the lawsuits and 2) the realization that the burden is now on buyers to agree on commissions at the outset. However, real estate has always been a listing game. While there is still money to be made as a buyer’s agent, the real money is, and always has been, in listings.

The news that just missed the cut

• eXp’s seller’s toolkit – featuring forms, scripts, and agent resources –  is now live! 

• Fannie and Freddie are poised to tighten real-estate lending rules.

• Inside Billionaires’s Bluff: Why Paradise Cove keeps drawing the super-rich.

• House flipping and this real-estate investing strategy are back!

• US housing markets most at risk from climate change — with annual homeowners insurance premiums up to $10,473

Foundation Plans

Advice from James and David to win the day

Falling mortgage rates mean it’s a good time for both current homeowners and future homebuyers to capitalize. While buying now and refinancing later makes sense as a strategy, it raises a lot of questions. In our next two editions, we will answer the biggest questions surrounding refinancing.

How soon can you refinance after buying a home? – Not every mortgage lender or type of loan allows you to refinance immediately. Some enforce a waiting period. Beyond that, some mortgage lenders will have their own unique requirements for how soon you can refinance your mortgage after buying the home. Here’s a breakdown of what you 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

How long after your most recent refinance can you refinance again? – There’s no limit on how often you can refinance your mortgage, as long as it makes financial sense for you. However, depending on the lender and the type of mortgage loan, the waiting periods mentioned above can dictate how soon you can refinance again.

When does it make sense to refinance your mortgage? – Refinancing your mortgage may not always make financial sense, especially if the costs outweigh the benefits. But here are a few typical scenarios where refinancing is a good move:

• Your home value has gone up. If you need cash to pay for big-ticket items and your home value has increased since you first took out your original loan, a cash-out refinance can make financial sense if you get a better interest rate on the new loan.

• You want to convert to a fixed-rate mortgage. Refinancing into a fixed-rate mortgage could offer some peace of mind if you have an adjustable-rate mortgage but are worried about future interest hikes.

• Your credit score has improved. Typically, the better your credit score, the better the mortgage rates for which you can qualify. Use the myFICO Loan Savings Calculator to see how much you could save by refinancing your mortgage with a higher FICO score.

• Mortgage rates have gone down. If current rates are lower than when you bought your home, a mortgage refinance could save you money on interest and lower your monthly payments. No matter the latest rates, always check that the math works out in your favor using a mortgage calculator.

• You want a shorter loan term. Refinancing to a shorter loan term can be a solid idea if you want to pay off your mortgage faster. But remember, shorter loan terms mean higher monthly payments, so make sure you can afford them.

There is clearly a lot to unpack here, so in our next edition, we’ll pick up where we left off. In the meantime, use these resources to get a better handle on the subject.

To learn more about Estate Media, visit their website. And if you haven’t done so already, fill out this brief survey designed by EM. One lucky entrant will win a $500 Whole Foods gift card!

Just in Case

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

“You’ve got to keep control of your time, and you can’t unless you say no. You can’t let people set your agenda in life!” — Warren Buffett

We can’t emphasize this enough, but you have to set the agenda for your life. Have a clear vision of what you want and then go after it. Only you can do it. 

Thanks for reading. We’ll see you back here on Friday!

– James and David