Old houses now cost as much as new houses

☀️ Welcome back to Mortgage Nuggets. I hope you had a wonderful weekend.

1. Old houses now cost as much as new houses

In June, the median price for existing single-family homes in the US was $416,000, which is about the same as the price for newly built homes.

• This is noteworthy because historically, new homes have been priced around $60,000 higher than existing ones, but now, the difference is less than $15,000.

The rate "lock-in" effect has resulted in a dwindling supply of existing homes on the market, helping to keep those prices elevated.

Meanwhile, home builders are offering smaller, more affordable houses to tap into demand from first-time buyers facing low inventories of existing homes. As a result, the price points between old and new houses are starting to converge.

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3. Urban Institute: Lift the ban on lenders providing down payment assistance on FHA loans

The Urban Institute has proposed to amend the FHA Modernization Act of 2008, which currently bans mortgage lenders from providing down payment assistance (DPA) to FHA borrowers. The paper suggests this could help underserved borrowers to become homeowners. Lenders could provide DPA through two channels:

• Self-Funding: The lender could charge the borrower a 1 percent higher interest rate to fund a 3.5 percent down payment, which would allow the lender to issue a Ginnie Mae–guaranteed mortgage-backed security (MBS) that would generate enough of a premium to fund the required down payment.

• Grant Programs: Lenders could offer grants from their corporate funds. These programs may be restricted to specific income levels and priority markets due to limited funding availability.

“The FHA could work with Congress to amend the FHA Modernization Act so only entities that can affect the home’s sales price are banned from providing DPA,” Ted Tozer said, a non-resident fellow at Urban Institute and the former president and CEO of Ginnie Mae.

As an alternative solution, Tozer floated the idea of making the FHA program a zero-down-payment program – a proposal first made by the George W. Bush administration in 2004.

“If this change were made, the FHA program would join the other government-insured programs offered by the US Department of Veteran Affairs and the US Department of Agriculture that do not require a down payment,” Tozer noted.

4. Near-record low delinquencies in June

Borrowers recorded the third-lowest national delinquency rate on record to end June despite some upticks in shorter-term late payments, according to Black Knight.

The nation's overall delinquency rate was 3.12% in June, a 2.8% decline from the same time last year, the company said Friday in its First Look report. The performance was boosted by the number of serious delinquencies approaching a 17-year low, falling to 471,000 such loans nationwide last month.

The declines line up with borrowers at-large getting back on track with loan payments, as many mortgage holders who went into forbearance during the pandemic have since become current.

☀️ See you on Wednesday!

Coming up: Fed meeting on July 25-26. Fed Chairman Jerome Powell and his colleagues look locked into raising interest rates by a quarter percentage point.

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