Equity Matters: It’s Time to Buy! Buy! Buy!

With the recent uptick in motivated Homebuyers, coupled with a reprieve from rising mortgage interest rates… We are in the middle of a storm. The perfect storm for buying real estate in Hawaii.

The Feds raised interest rates seven times in 2022, bringing the average 30 year fixed mortgage interest rate to well over 7.0%, which resulted in the real estate housing market coming to a drastic standstill. However, right at this moment in early 2023, we find ourselves with interest rates taking a bit of a dive as the Feds took a break for the holidays and inflation seems to be easing for the time being.

So, the Paramount question is …. Is this a good time to buy real estate?

Yes, now is the ideal time to buy real estate in Hawaii. This is the moment we have all been waiting for. The home prices have settled from their skyrocketing trends in recent years, Sellers’ homes are taking longer to sell, and the market has clearly turned in the Buyer’s favor. But this rainbow of hope may only last a short while. So, while in the eye of the storm, it’s best to make your move, before the heavy rains come again.

1. Buyer’s Market: Historically the definition of a Buyer’s Market has been classified as housing inventory being inclusive of more than 6 months of available inventory. But just like everything else since the Pandemic that seems to not be playing by the rules, Hawaii is still in a low inventory space with only about 2.2 Months of Remaining Inventory (MRI). However, the market is softened as Buyer demand has tempered, and Sellers are facing price reductions and offering monetary credits to help or incentivize Buyers to purchase their property over others that may be presented for purchase. Since homes are taking longer to sell, this means the Sellers’ waiting and carrying costs are increasing, making them eager to wheel and deal. This current climate allows Buyers to negotiate great prices, repairs to the home, closing cost credits and more. And with fewer qualified Buyers to compete against, it’s a wonderful climate to really make your dream home purchase before the competition heats up again.

2. Interest Rates: The Federal Open Market Committee (FOMC) meeting, the Federal Reserve policy making meeting is scheduled for January 31st – February 1st and they are scheduled to meet eight times in 2023. Fed Chair Jerome Powell has already announced that the Reserve plans to continue the fight against inflation with more interest rate hikes to come. Like a Superhero chasing down the speeding bullet train called Inflation, the Fed needed to get in front of it to stop it, so they more than doubled interest rates in 2022 and they will continue their pursuit through 2023. Thus, before the Fed meets again, it’s best to lock in your mortgage interest rates at these lower levels because they are just going to get higher.

In 2022, the Feds hiked interest rates upon the following schedule:

March 17th 0.25%
May 5th 0.75%
June 16th 0.75%
July 27th 0.75%
September 21st 0.75%
November 21st 0.75%
December 14th 0.50%

3. Loan Level Price Adjustments: Fannie Mae and Freddie Mac are the largest investors for conventional mortgages in the United States. Thus, when we are talking about the 30-year fixed rate mortgage, Lenders are generally referring to a mortgage that is subjected to pricing arrangements set by Fannie Mae. A loan level pricing adjustment (LLPA) is a risk-based pricing adjustment that varies based on credit score, loan to value ratio, type of mortgage program, and various other factors. The LLPAs are what make the difference in interest rate for a Homeowner with an 800 fico score versus a 620 fico score. In 2022, Fannie Mae announced changes to their LLPAs for Second Homes (vacation homes) to liken the interest rates to Investment Home loan terms, as well as cash-out refinances to increase the cost to withdraw equity, among other changes. On January 19, 2023, Fannie Mae issued ‘Lender Letter 2023-01, New Loan-level Price Adjustment Framework’ which will implement additional changes effective May 1, 2023. The new changes to the LLPAs involve higher cost for low down payment scenarios, increased expense for low credit scores and an additional cost to use a mortgage broker as opposed to a direct lender such as Paramount Residential Mortgage Group, Inc. (PRMG). A list of the new LLPAs can be viewed on Fannie Mae’s website: https://singlefamily.fanniemae.com/media/9391/display. The key to navigating the changing mortgage climate is to be sure to align yourself with a knowledgeable mortgage expert that can lead you to financial success. At PRMG, our motto for 2023 is ‘No Homeowner Left Behind’ because we pride ourselves in offering traditional as well as creative financing options for those who may find themselves “outside the box”.

We have a dedicated team of Mortgage Experts to help you and we offer free consultations! Visit https://oahu494.prmgapp.com/HonoluluTeam.html today to book your appt with one of our Specialists!

Questions for Judy Meredith? “The Mortgage Professor”

Email me: I welcome the opportunity to help You find solutions! jmeredith@prmg.net

Judy Meredith
“The Mortgage Professor”
PRMG Hawaii Area Manager
Direct: (808) 222-7903
NMLS ID: 716323