In this Sand Castles mortgage market update, I discuss four topics: second and investment home mortgage availability improvement, rising interest rates and their causes, increased conforming loan limits and the general state of the Ponte Vedra Beach housing market.
Second and investment home mortgage restrictions eased: It has been confirmed by the two government sponsored entities (GSE), Freddie Mac and Fannie Mae, that second home and investment property lender restrictions have temporarily been lifted. Previously, lenders such as Ameris Bank were restricted to 7% of their portfolio consisting of second home and investment properties. You can imagine the negative impact this had on interest rates and guidelines. Earlier this year, when the new administration instituted the restrictions, it became more expensive and challenging for buyers to qualify for a second home or investment property. Although the lift is temporary, it offers respite for sellers and buyers.
Rumblings of rising rates: Recently, fears of Fed tapering along with Federal Reserve Board sentiment leaning towards increasing rates sooner than 2023 caused mortgage interest rates to rise. Subsequently, Freddie Mac reports the 30-year fixed rate mortgage surpassed 3% on October 14. This is the highest we have seen since April of this year.
Freddie Mac went on to report the causes of the increase, unlike in April, is due to inflationary pressure building due to the ongoing pandemic and tightening monetary policy, stating, “we expect rates to continue a modest upswing. Historically speaking, rates are still low, but many potential homebuyers are staying on the sidelines due to high home price growth. Rising mortgage rates combined with growing home prices make affordability more challenging for potential buyers.”*
As a reminder, your particular interest rate is based on your situation. Credit score, loan to value, loan type (purchase, refinance), residence (primary, second or investment home) and loan amount can have an impact on the interest rate.
Conforming mortgage limit increase: Each November, the Federal Housing Finance Agency (FHFA), an entity of the federal government, issues conforming mortgage limit increases. The FHFA ensures that Fannie Mae, Freddie Mac and the Federal Home Loan Banks operate in a safe and sound manner so that they serve as a reliable source of liquidity and funding for housing finance and community investment.** Industry experts expect the FHFA to increase the conforming mortgage limit from $548,250 to $625,000.
Once implemented, this is a very encouraging development for the Ponte Vedra Beach market because home prices are relatively high compared to the rest of Northeast Florida. More homes in Ponte Vedra Beach will soon qualify for conforming mortgages compared to portfolio jumbo mortgages. Conforming mortgages offer competitive interest rates and lower down payments compared to jumbo mortgages. Local Realtor Katie Johnson of RE/MAX Specialists Ponte Vedra offers this assessment of conforming mortgage limit increases: “Affordability is a hot topic, and anything that helps our market become more affordable without reducing seller sales prices is a plus. It benefits buyers and sellers.”
Ponte Vedra Beach housing forecast: Two additional components continue to benefit the Ponte Vedra Beach housing market: local population growth and continued migration from the Midwest and Northeast. I mentioned the Northeast and Rustbelt mass migration in a previous Sand Castles article and can report it continues well into 2021. These two factors, along with local and state business-friendly political leadership, the absence of a state income tax, beautiful weather, beaches, great schools and relatively affordable housing continue to offer beacons of hope to people throughout the nation. They also serve as a reminder of how blessed we are to call Ponte Vedra Beach home, and how excited we are to continue welcoming fellow citizens into our community.
David Johnson
Mortgage Banker
Ameris Bank, NMLS 1446956
386-288-7117
*www.freddiemac.com
**www.fhfa.gov
