Boston condos and mortgage debt

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Boston Real Estate in 2021

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Boston condos and mortgage debt

  • Mortgage applications to purchase a home fell 4% last week from the previous week.
  • The average purchase application size hit $411,400 — the highest since February.
  • The average rate for 30-year fixed-rate mortgages increased to 3.15% from 3.11%

Sky-high downtown Boston condo prices mean demand for ever bigger mortgages, but those prices may also be causing a pullback in homebuying overall.

Mortgage applications to purchase a home fell 4% last week compared with the previous week, according to the Mortgage Bankers Association’s seasonally adjusted index. Volume was just 2% higher than the same week one year ago, when the housing market was just starting to come back after the pandemic shut it down.

“A decline in purchase applications was seen for both conventional and government loans,” said Joel Kan, an MBA economist. “There continues to be strong demand for buying a home, but persistent supply shortages are constraining purchase activity, and building material shortages and higher costs are making it more difficult to increase supply.”

The extreme shortage of Boston real estate for sale, especially in the suburbs has prices continuing to climb at the fastest pace in over 15 years, and as a result, average purchase loan balances are climbing in tandem. Last week, that average hit $411,400 — the highest since February.

Boston condo buyers who are able to stay in the market also faced higher mortgage rates last week. The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($548,250 or less) increased to 3.15% from 3.11%, with points increasing to 0.36 from 0.32 (including the origination fee) for loans with a 20% down payment.

While slightly higher, the rate was still lower than it was in March, and that gave borrowers looking to save on monthly payments an opportunity. Applications to refinance a home loan increased 4% from the previous week but were 2% lower than the same week one year ago. The refinance share of mortgage activity increased to 63.3% of total applications from 61.3% the previous week.

“Ongoing volatility in refinance applications is likely if rates continue to oscillate around current levels,” Kan said.

Mortgage rates have been in a holding pattern this week, with no significant economic reports or news to move them one way or another.

Boston Condos for Sale

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New data shows that more Americans are going into retirement with mortgage debt. Is this a problem, and what does it mean for today’s Boston condominium owners?

According to a recent article in Bloomberg, mortgages that stretch later into life are becoming more common, particularly as Millennials wait longer to purchase a Boston condo. “A lot of today’s Millennials are entering the market quite a bit later than their parents, so just by definition, they’re going to be carrying more debt later in life,” said Sam Khater, deputy chief economist at CoreLogic.

They also may be modeling their parents’ behavior. According to the Harvard Joint Center for Housing Studies, 41% of Americans over the age of 65 carry mortgage debt. This trend is entirely new. For most of homeownership history, people tended to buy houses young – in their 20s or early 30s – and if they did buy a second home, they did it before they were 40. Paying off a 30-year mortgage was the main goal of working life. In 1995, just 22% of homeowners 65 and older carried mortgage debt.

Real Estate Mortgage Debts Are Around Longer

Things have changed. Though owing on a mortgage can be a problem for some seniors — those who no longer have a source of income and do not have significant retirement savings set aside — for many older homeowners, it’s simply a matter of convenience to hold a mortgage later in life.

A recent article in the New York Times underlines this fact. For example, one couple in their early 70s took out a 30-year mortgage to finance a new home. They did this despite having just sold a home that they owned outright. The reasoning was to put the extra cash into savings for retirement, make improvements that would make the new home more livable as they age, and make the mortgage payment with their pension payments.

People are living longer, and looking at retirement as simply the next stage in their adult lives — not a short road to the grave. The rise in debt for those 65 and older may simply reflect a change in lifestyle. Seniors may be asking themselves why they would tie up all their resources in a piece of real estate when they could be using those funds to enjoy their retirement. Unfortunately, it also means there is a lower priority, in general, to leave an inheritance for those that follow after, but that would be a discussion for a different article.

Retire in a Different Housing Market

Nearing retirement age often means that a change in housing is necessary. The kids are grown, and it no longer makes sense to take care of a house with four bedrooms. Many retirees will also find that moving to a new city makes sense.

Ready to purchase your retirement Boston Beacon Hill condo? There are mortgage options available even for those who are no longer in the workforce. Work with the best and take advantage of early real estate market shifts — contact our top Boston real estate agents today.

Boston Real Estate in 2021

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