Mortgage Payments Require Largest Share of Income Since 2009

– Rising mortgage rates chip away at relatively affordable monthly housing costs Americans have enjoyed for a decade

– Monthly mortgage payments on the typical U.S. home required 17.1 percent of the median income in Q1 2018. From 1985 to 2000, mortgage payments took up an average of 21.1 percent of the median income.

– Mortgage payments are a bigger financial burden than they were historically (1985-2000) in nine of the 35 biggest U.S. metros.

– San Jose, Calif. has the least affordable mortgage payments, requiring more than half of the typical income.

Seattle, WA – June 21, 2018 (PRNewswire) The combination of rising rates and strong home value appreciation led to one of the largest recorded quarterly increases in the mortgage burden for homebuyers since the Great Recession.

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In the first quarter of 2018, the share of median income needed for monthly mortgage payments on the median U.S. home increased to 17.1 percent, up from 15.9 percent in the fourth quarter of 2017, according to Zillow®’s latest affordability report. This was the second biggest quarterly increase in the mortgage burden since the housing market collapsed in 2007. In the fourth quarter of 2016, the share of income needed for mortgage payments increased from 14.1 percent to 15.6 percent.

Throughout the housing market recovery, low mortgage rates helped sustain housing affordability, even as home values climbed to new peaks. But mortgage rates increased sharply to start the year, rising nearly 50 basis points in the first three months, and affordability is waning as a result.

Mortgage payments haven’t taken up such a large share of the median income since the second quarter of 2009, when monthly housing costs for the typical U.S. home required 17.5 percent of the median income, and mortgage rates were well above 5 percent.

As home values recovered following the Great Recession, wages rose much more slowly. The price-to-income ratio has stayed the same or increased each quarter since Q1 2012, a sign of home price increases outpacing income growth. In Q1 2018, the median U.S. home was worth 3.54 times the typical household income. From 1985 to 2000, the average home was worth 2.78 times the median income.

“For the past few years, historically low mortgage rates provided the silver lining for buyers as prices rose higher and higher,” said Zillow Senior Economist Aaron Terrazas. “If you were able to come up with a down payment, the low rates kept monthly housing costs relatively affordable in most parts of the country. Now, though, as rates are on the rise and home values are climbing at their fastest pace in 12 years, that affordability edge is getting thinner. In markets that have seen some of the biggest increases in home values, housing costs already take up a larger share of income than they did historically, making it all the more difficult for buyers.”

In nine of the 35 largest housing markets, mortgage payments are already a bigger financial burden than they were historically. Seven are along the West Coast, led by San Jose, Calif., where mortgage payments for the median home increased from their historic average of 35.8 percent to 51.2 percent of the median income, the highest required in any of the top metros.

If mortgage rates reach 5 percent next year, as many economists expect, home shoppers in an additional seven markets would face greater mortgage burdens than buyers did historically, including Sacramento, Orlando and Tampa.

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Zillow

Zillow is the leading real estate and rental marketplace dedicated to empowering consumers with data, inspiration and knowledge around the place they call home, and connecting them with great real estate professionals. In addition, Zillow operates an industry-leading economics and analytics bureau led by Zillow Group’s Chief Economist Dr. Svenja Gudell. Dr. Gudell and her team of economists and data analysts produce extensive housing data and research covering more than 450 markets at Zillow Real Estate Research. Zillow also sponsors the quarterly Zillow Home Price Expectations Survey, which asks more than 100 leading economists, real estate experts and investment and market strategists to predict the path of the Zillow Home Value Index over the next five years. Launched in 2006, Zillow is owned and operated by Zillow Group, Inc. (NASDAQ: Z and ZG), and headquartered in Seattle.

LendingTree Reveals Where Homebuyers See the Most Mortgage Lender Competition

New LendingTree study shows how competitive mortgage markets are by metro area

Charlotte, NC – May 31, 2018 (PRNewswire) LendingTree®, the nation’s leading online loan marketplace, today released its study on where homebuyers see the most mortgage lender competition.

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Mortgage rates are rising, recently reaching the highest levels in seven years. One of the most effective ways borrowers can adjust to rising rates is by shopping around to get the best deal possible. LendingTree tracks the savings available each week in the Mortgage Rate Competition Index, and thus far, the potential savings through comparison shopping in 2018 is an average of $28,000 based on a $300,000 loan, almost 10 percent of the loan amount.

The mortgage market varies across the country, and lenders are active in different regions at different intensities. If more lenders are originating loans in a specific area, there could be more opportunities for borrowers to save by shopping around.

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LendingTree analysts ranked the top 50 metros by the Herfindahl-Hirschman Index (HHI), which uses a formula to calculate how competitive a market is. This is based on the recently released Home Mortgage Disclosure Act (HMDA) data, which represents over 7.3 million mortgages originated in 2017. HHI creates a score that ranges from close to zero to 10,000, with a lower number indicating less market concentration and thus greater competition among lenders, which could mean more opportunities for consumers to find lower rates by shopping around.

The ranking also includes the market share of the top 10 lenders in the metro area for an alternative measure of market concentration and includes conventional, FHA and VA loans.

Key findings from the study include:

  • All metro areas show a healthy level of competition, with the highest HHI at 521 across the three loan types. The Department of Justice considers a market moderately concentrated when the HHI is above 1,500, so values below this are viewed favorably.
  • Some of the more expensive real estate markets have the least competition among lenders for conventional loans. San Jose, San Francisco and New York are all in the bottom 10 of the ranking. Market share for the top 10 lenders is close to or above 50 percent in these cities.
  • The most competitive markets were Providence, R.I., Boston and Hartford, Conn., with top 10 market share under 40 percent.
  • Markets that are less competitive for conventional loans are more competitive for FHA loans. San Jose, San Francisco and New York are examples again. This could indicate that lenders are unable to compete in the conventional market concentrate on FHA loans in these cities.
  • FHA markets are on average more competitive than conventional, but VA markets are less competitive than conventional.
  • The competition in mortgage markets means there are opportunities for borrowers to save by shopping around.

Metro areas with the most competition for conventional mortgage borrowers

#1 Providence, R.I.

HHI: 161
Market share of top 10 lenders: 34%

#2 Boston

HHI: 171
Market share of top 10 lenders: 35%

#3 Hartford, Conn.

HHI: 173
Market share of top 10 lenders: 37%

Metro areas with the least competition for conventional mortgage borrowers

#50 San Jose, Calif.

HHI: 521
Market share of top 10 lenders: 50%

#49 San Francisco

HHI: 512
Market share of top 10 lenders: 55%

#48 Buffalo, N.Y.

HHI: 380
Market share of top 10 lenders: 54%

“With rising interest rates, it is typical to see a decline in mortgage originations as refinance volume falls,” said Tendayi Kapfidze, Chief Economist at LendingTree. “In areas where there are more lenders competing for in-market borrowers, they may have to make more enticing offers to borrowers if they want to win market share and cover their fixed business costs. This means borrowers stand to benefit by comparison shopping, a strategy that could help to minimize the impact of rising interest rates.”

To view the full report, visit: www.lendingtree.com.

Metros Ranked by Conventional Mortgage Market Concentration

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About LendingTree
LendingTree (NASDAQ: TREE) is the nation’s leading online loan marketplace, empowering consumers as they comparison-shop across a full suite of loan and credit-based offerings. LendingTree provides an online marketplace which connects consumers with multiple lenders that compete for their business, as well as an array of online tools and information to help consumers find the best loan. Since inception, LendingTree has facilitated more than 65 million loan requests. LendingTree provides free monthly credit scores through My LendingTree and access to its network of over 500 lenders offering home loans, personal loans, credit cards, student loans, business loans, home equity loans/lines of credit, auto loans and more. LendingTree, LLC is a subsidiary of LendingTree, Inc. For more information go to www.lendingtree.com, dial 800-555-TREE, like our Facebook page and/or follow us on Twitter @LendingTree.

Media Contact:

Megan Greuling
(704) 943-8208
Megan.greuling@lendingtree.com

LendingTree Releases Monthly Mortgage Offer Report for April

LendingTree’s Chief Economist analyzes April’s mortgage offers

Charlotte, NC – May 9, 2018 (PRNewswire) LendingTree®, the nation’s leading online loan marketplace, today released its monthly Mortgage Offers Report which analyzes data from actual loan terms offered to borrowers on LendingTree.com by lenders on LendingTree’s network. The purpose of the report is to empower consumers by providing additional information on how their credit profile affects their loan prospects.

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  • April’s best offers for borrowers with excellent profiles had an average APR of 4.26% for conforming 30-year fixed purchase loans, up from 4.25% in March. Refinance loan offers were down 1 bps to 4.23%. Mortgage rates vary depending upon parameters including a borrower’s credit score, loan-to-value ratio, income and property type.
  • For the average borrower, purchase APRs for conforming 30-year fixed loans offered on LendingTree’s platform were up 7 bps to 4.92%. The loan note rate of 4.81% hit the highest since March 2016 and was up 6 bps from March 2018. We prefer to emphasize the APR as lenders often make changes to other fees in response to changing interest rates.
  • Consumers with the highest credit scores (760+) saw offered APRs of 4.78% in April, versus 5.07% for consumers with scores of 680-719. The APR spread of 29 bps between these score ranges was up 2 bps from March and the widest since this data series began in March 2016. The spread represents almost $15,000 in additional costs for borrowers with lower credit scores over 30 years for the average purchase loan amount of $234,437. The additional costs are due to higher interest rates, larger fees or a combination of the two.
  • Refinance APRs for conforming 30-year fixed loans were up 6 bps to 4.89%. The credit score bracket spread remained at 24 bps, amounting to nearly $13,000 in extra costs over the life of the loan for lower credit score borrowers given an average refinance loan of $239,199.
  • Average proposed purchase down payments were down nearly $5,000 from March at $57,946.

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“We are in the core of the spring selling season for homes,” said Tendayi Kapfidze, LendingTree’s Chief Economist and report author. “Supply problems are dampening sales of existing homes and are particularly acute for lower-priced homes. Sales for homes under $100,000 were down 21% Y/Y in March, and those between $100,000 and $250,000 were down 8% Y/Y. Low inventory is the defining characteristic of the current housing market, and buyers should do all they can to position themselves competitively. We advise improving your credit score, getting financing in place ahead of the house hunt and shopping around for the best mortgage rates.”

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About the Report

The LendingTree Mortgage Offers Report contains data from actual loan terms offered to borrowers on LendingTree.com by lenders. We believe it is an important addition to standard industry surveys and reports on mortgage rates. Most quoted industry rates are for a hypothetical borrower with prime credit who makes a 20% down payment. Most borrowers do not fit this profile. Our report includes the average quoted APR by credit score, together with the average down payment and other metrics described below. We stratify by credit score, so borrowers have added information on how their credit profile affects their loan prospects. The report covers conforming 30-yr fixed loans for both purchase and refinance.

  • APR: Actual APR offers to borrowers on our platform
  • Down Payment: Though analogous to the LTV, we find that borrowers identify more closely with the down payment. Academic studies have also found that the down payment is the primary concern for homebuyers and one of the main impediments to entering the homebuying market.
  • Loan Amount: The average loan amount borrowers are offered
  • LTV: Actual LTV offered to borrowers on our platform
  • Lifetime Interest Paid: This is the total cost a borrower incurs for the loan, inclusive of fees.

To view the original report, visit https://www.lendingtree.com/home/mortgage-offers-report-april-2018/.

About LendingTree:
LendingTree (NASDAQ: TREE) is the nation’s leading online loan marketplace, empowering consumers as they comparison-shop across a full suite of loan and credit-based offerings. LendingTree provides an online marketplace which connects consumers with multiple lenders that compete for their business, as well as an array of online tools and information to help consumers find the best loan. Since inception, LendingTree has facilitated more than 65 million loan requests. LendingTree provides free monthly credit scores through My LendingTree and access to its network of over 500 lenders offering home loans, personal loans, credit cards, student loans, business loans, home equity loans/lines of credit, auto loans and more. LendingTree, LLC is a subsidiary of LendingTree, Inc. For more information go to www.lendingtree.com, dial 800-555-TREE, like our Facebook page and/or follow us on Twitter @LendingTree.

Media Contact:
Megan Greuling
(704) 943-8208
Megan.greuling@lendingtree.com