By   – Real Estate Editor, Pacific Business News

Homebuyers in Honolulu have the highest mortgage debt-to-income ratio in the nation, while homebuyers on Maui have a ratio that’s third-highest in the U.S., topped only by San Jose in California’s Silicon Valley, according to a report by the personal finance company SmartAsset.

Homebuyers in the Honolulu metropolitan area have mortgages worth 3.959 times their annual income, on average, according to an analysis of data from the Consumer Financial Protection Bureau.

The data showed that Honolulu homebuyers have an average income of $131,639 and that the average mortgage is for $521,201.

Maui homebuyers in the Kahului-Wailuku-Lahaina metro area have an average income of $131,681, and the average mortgage there is $468,597, putting their mortgage-to-income ratio at 3.559.

By contrast, homebuyers in San Jose have an average income of $207,062 and an average mortgage of $740,693, giving them a ratio of 3.577.

California had 17 of the top 25 cities with the largest mortgage-to-income ratios on the list, while Hawaii had two of the top three.

Nationally, the average mortgage-to-income ratio was 2.119.

“The goal of all our studies is to get people thinking about personal finance issues,” AJ Smith, SmartAsset’s vice president of financial education and author of the report, told Pacific Business News. “To look at what the mortages are compared to the income that they’re making.”

Great Article by Diana Olick at

A realtor, right, walks with potential home buyers as they tour the property of a home for sale in Sparland, Illinois.

Daniel Acker | Bloomberg | Getty Images
A realtor, right, walks with potential home buyers as they tour the property of a home for sale in Sparland, Illinois.

A huge sell-off in the bond market is about to make buying a home more expensive. Mortgage rates, which loosely follow the yield on the 10-year Treasury, have been rising for the past few weeks, but are seeing their biggest move higher Monday.

“Bottom line, rate sheets are going to be ugly this morning,” wrote Matthew Graham, chief operating officer of Mortgage News Daily. “Some lenders will be at 4.5 percent on their best-case-scenario 30-year fixed quotes.”

That is the highest rate since 2014.

The average rate on the popular 30-year fixed started the year right around 4 percent but then began to climb on positive news in the U.S. economy, solid company earnings reports and a shift in foreign central bank policies which appear to now be following the Federal Reserve’s tightening of monetary policy. The rate was at 4.28 percent by the end of last week.

“Apart from central banks, there’s a ton of bond market supply coming down the pike due to infrastructure and tax bill spending,” Graham said. That new supply will send yields and, consequently, mortgage rates higher.

While mortgage rates are still historically low, they were even lower in the years following the financial crisis. That not only helped juice the sharp increase in home prices, but it has also given borrowers a new sense of normal. Both will hurt affordability this spring on several fronts.

“Today is one more reason for Realtors and buyers to move up their spring schedule,” said Chris Kopec, a mortgage loan consultant at Chicago-based Lakeside Bank.

The housing market is already facing a supply crisis, with demand substantially higher than the supply of homes for sale. Higher mortgage rates will exacerbate that problem because most current homeowners have likely refinanced to rates in the 3 percent range over the past few years and will be reluctant to give those rates up, either to downsize or upsize to a new home. Hence, fewer new listings.

For first-time buyers, even a quarter point difference in mortgage rates could price them out of the type of home they’re looking to buy. Today’s buyers are saving less, due to high levels of student debt and high rent rates. Confidence in the current economy is driving spending even higher and savings even lower.

“With spending rising faster, what also drove spending was credit card debt as the US savings rate is down to just 2.4 percent in December from 2.5 percent in November and 3 percent in October. September 2005 was the last time it was this low,” Peter Boockvar, chief investment officer with Bleakley Advisory Group, wrote in a note to clients. “Lower taxes and higher wages couldn’t have come at a better time for the average consumer, but some of that will likely go towards paying down some of the accumulated debt.”

Wages may be growing, but the rate is nowhere near the now-nearly 7 percent annual home price growth. Price gains are highest on the lower end of the housing market, where demand is highest and supply is lowest. That is also where buyers are most sensitive to mortgage rates because they are already squeezing to make the monthly payment.

A great article by Diana Olick:

  • Total mortgage application volume fell 4.6 percent from the previous week.
  • The average loan amount on purchase applications increased to $317,000, the highest since May.
  • Mortgage applications to refinance a home loan fell 3 percent for the week.

A for sale sign is posted in front of a home as interest rates for home loans climbed to nearly 4% in the wake of the election of Donald Trump to be the U.S. president on November 17, 2016 in Miami, Florida.

Joe Raedle | Getty Images
A for sale sign is posted in front of a home as interest rates for home loans climbed to nearly 4% in the wake of the election of Donald Trump to be the U.S. president on November 17, 2016 in Miami, Florida.

A few weeks ago, it looked like interest rates were on their way down again, but that was short-lived. So was the surge in mortgage application volume that went along with it.

Interest rates rose last week, and consequently total mortgage application volume fell 4.6 percent from the previous week. The Mortgage Bankers Association’s seasonally adjusted weekly index now stands down 19 percent from the same week one year ago.

The drop affected all types of applications, but those to purchase a home fell the hardest — 6 percent for the week. This may have less to do with the rise in rates and more to do with the lack of homes for sale. The drought in supply continues to push prices higher and clearly sidelined more buyers. Purchase applications remained 10 percent higher from the same week one year ago.

Higher home prices are now showing up in mortgage applications. The average loan amount on purchase applications last week increased to $317,000, the highest since May.

Mortgage applications to refinance a home loan fell 3 percent for the week and are down 36 percent from a year ago, when interest rates were higher. The MBA is now forecasting a 28 percent drop in refinance originations next year because interest rates are expected to rise further.

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances of $424,100 or less increased to 4.18 percent last week from 4.14 percent the previous week, with points decreasing to 0.42 from 0.44, including the origination fee, for 80 percent loan-to-value ratio loans.

“Rates increased late last week as the market responded to news of a Senate budget plan which may positively impact tax reform progress and more speculation around the future leadership of the Federal Reserve,” said Joel Kan, an MBA economist.

The 30-year fixed rate last week was at its highest level since July, and it continued to rise this week, ahead of a policy announcement expected Thursday from the European Central Bank.

Great Article from CNBC.

More Americans are renting homes today than at any time in more than half a century.

As a result, more investors are looking to cash in on that trend as landlords of single family rental homes. If you’re one of them, you want to know where you’ll get the most bang for your buck. Try this ZIP code: 33434.

That is the finding of HomeUnion, one of several companies that help investors find, purchase, renovate, manage and sell single-family rental homes. With so much real estate data available now, most of these companies are compiling lists of best bets.

HomeUnion is offering a list of projections for investors looking to hold and rent properties over the next five years. Its analysts are considering factors beyond just vacancies and rent appreciation, examining permitting activities for both apartments and single-family homes, as well as area job growth and school rankings. HomeUnion updates its data each quarter.

“We’re looking at the supply-and-demand factors in each market and all of the neighborhoods within those markets,” said Steve Hovland, director of research. “As we get new information, we apply that to our methodology.”

ZIP code Submarket Metro Area Annualized Total Return School Rating
19035 Gladwyne, Penn. Philadelphia 6.9% 86.9
30078 Snellville, Ga. Atlanta 5.8% 72.5
33158 Palmetto Bay, Fla. Miami 6.8% 83.9
33327 Weston, Fla. Fort Lauderdale, Fla. 6.6% 70.5
33434 Hamptons at Boca Raton, Fla. West Palm Beach 8.1% 87.9
34677 Oldsmar, Fla. Tampa 5.7% 78.6
37062 Fairview, Tenn. Nashville 6.5% 70.6
44023 Chagrin Falls, Ohio Cleveland 5.6% 70.8
45255 Forestville/Cherry Grove Cincinnati 5.9% 75.7
46280 North Indianapolis Indianapolis 5.4% 71.9
48322 West Bloomfield Township, Mich. Detroit 6.9% 74.4
60016 Des Plaines, Ill. Chicago 6% 76.4
63043 Maryland Heights, Mo. St. Louis 5.5% 71.9
66223 Overland Park, Kan. Kansas City 6.2% 97.4
73003 Edmond, Okla. Oklahoma City 5.4% 90
75022 Flower Mound, Texas Dallas 5.6% 84
77059 Clear Lake City, Texas Houston 5.6% 76
85259 North Scottsdale, Ariz. Phoenix 5.5% 88
91602 North Hollywood, Calif. Los Angeles 5.4% 71.4
97224 King City, Ore. Portland, Ore. 5.8% 81.9

Great Article by

Rates are above 1% for the first time since 2008. Time

The Federal Reserve raised short-term interest rates another quarter percentage point Wednesday. No surprise there. If only you could talk the central bank into a game of high-stakes, no-limit hold ’em. The Fed doesn’t have a poker face — and that’s the way it’s supposed to be.

Fed Chair Janet Yellen and her Federal Open Market Committee counterparts go out of their way to make sure short-term interest rate moves are anything but a surprise to world markets. But even an expected interest rate increase can have some very real consequences.

Here’s what this latest move means for mortgage rates.

The Fed hikes, mortgage rates head-fake

Before this third short-term rate hike in just six months, fixed-rate mortgages were barely off 2017 lows. The experts have been predicting a gradual rise in home loan interest rates for months, but rates have head-faked their way lower since the Fed’s last rate increase in March.

Why is that happening?

“Even though the U.S. economy is really looking pretty strong right now, particularly in the job market, the rest of the world is lagging behind,” says Mike Fratantoni, chief economist for the Mortgage Bankers Association. “So central banks elsewhere are still aggressively stimulating their economies and keeping their rates low, and that’s acting as a bit of an anchor on longer-term rates.”

MORE:  Calculate your monthly mortgage payment

With this foreign demand for safe assets, the MBA expects U.S. mortgage rates “are going to be held back by the lower rates abroad over the next couple of years.”

Where mortgage rates will end 2017

The three economists we interviewed say they expect the Fed to raise rates by another quarter-point before the end of the year. That will make for a full percentage point increase within one year.

“This move by the Fed to increase short-term rates was expected, and we expect to see another increase from them before the end of the year,” says Sean Becketti, chief economist for Freddie Mac. He notes that 30-year fixed mortgage rates are still close to a seven-month low, “which is very good news for those potential homebuyers in the market and even those who may be looking to refinance.”

However, Freddie Mac expects mortgage rates to “start rising slowly as the year progresses, yet still remaining right around 4%,” Becketti adds.

Frank Nothaft, chief economist at CoreLogic, says, “Fixed-rate mortgage rates are likely to gradually edge higher over the next six to 12 months. Rates are likely to rise to 4.25% to 4.50% by the end of 2017.”

Fratantoni also expects 30-year rates to be near 4.5% by the end of the year — and above 5% by the end of 2018.

“We think [the Fed will] hike once more in September and then probably three or four times in each of the next couple of years,” Fratantoni says.

The Fed is not only raising interest rates

The Fed is planning another action that could affect mortgage rates: selling off its portfolio of mortgage-backed securities.

During the financial crisis, the Fed lowered short-term rates to zero. In an effort to further stimulate the economy by lowering long-term interest rates, such as mortgage rates, it began buying mortgage-backed securities. Higher demand raises bond prices, resulting in lower yields.

The Fed now holds more than $1.7 trillion in mortgage-backed securities, about one-third of all those outstanding. Now the central bank is looking to get back to a “more normal operating environment,” Fratantoni says, with a smaller portfolio — and holdings only in U.S. Treasurys.

“They’re not going to get there all at once,” he says. “Our expectation is that … [the Fed] will begin to lay out a schedule for how they’ll treat that balance sheet over time. This will be another factor putting some upward pressure on mortgage rates.”

A ‘double whammy’ for home buyers

Every time rates sneak up a half percentage point or so, experts declare it will be the death of refinancing. It never really is.

Sure, the share of mortgage refinance lending has dropped significantly during the past year. In 2016, refis accounted for 48% of all loans, and that’s expected to drop to between 21% and 31% by the end of 2017, according to the Urban Institute. But homeowners still have ample opportunities to refinance their loans.

Yet, even gradually increasing interest rates affect the housing industry. Nothaft says the “double whammy” of rising mortgage rates and higher home prices are thwarting potential home buyers.

“For example, with fixed-rate loan rates up by 0.5 [percentage point] since last summer, and house prices in national indexes up at least 5%, the monthly principal and interest payment is more than 10% higher than it was last summer, adding to affordability challenges for first-time buyers,” Nothaft says.

Hal Bundrick is a staff writer at NerdWallet, a personal finance website. Email: Twitter: @halmbundrick.