Bank of America’s Head of Retail Banking Matt Vernon joins Yahoo Finance Live to discuss US mortgage rates and how Baby Boomers are participating in the housing market relative to Generation X.
– Mortgage rates have fallen for the fourth week in a row. Freddie Mac reported an average 30-year fixed rate of 6.33% for him, the lowest since September. Prices may be down, but they’re more than double what he was a year ago, and there’s still plenty. About 95% of current mortgage holders have interest rates below his 5%, according to Bank of America’s securities report. This is not an environment most owners want to sell.
Sheena Smith: All right, let’s discuss how this will affect the housing sector. To that end, Bank of America Retail He wants to bring in Matt Vernon, the head of the banking division. Matt, I’ll be working on a new survey soon. But first, let us hear your take on what we’ve heard from his fourth consecutive week of lower mortgage rates. The lowest value since September. Our impact on the real estate industry.
Matt Vernon: Hey, that’s nothing but good news for the industry. Over the past six months, we’ve seen massive and drastic changes here. This has shocked the system and raised questions in the minds of consumers for a variety of reasons. Is this a good time to enter the homebuying market? So a move like this is nothing short of good news to ensure clients are back on the market.
– At this point, there are actually two factions formed, Matt. And yes, it will probably lose low single digits by 2023 and basically flatten out. But there’s a complete opposite side of the school that says we’re seeing a crash where house prices are likely to drop 20% from peak to trough. where are you
Matt Vernon: Well, probably the latter. Heading into next year, we can say that house prices will level off from the historic rise of the past two years, and then drop to that 1% to 2% level next year. As you can imagine, we certainly see market volatility across the country. But I doubt we’ll see the kind of crash the ladder there said.
Sheena Smith: Matt, supply has long been an issue in the real estate market these days. It must be said that there’s a new homebuyer’s insight report out that looks at whether Gen Z and baby boomers plan to move out of their pre-retirement homes. What did you find?
Matt Vernon: Interestingly, Baby Boomers and Generation X make up 70% of all households, nearly 80 million of them. And of those 70%, 78% of Baby Boomers and Generation X say they want to live in the home they live in, have retired, or plan to retire. Therefore, it is not hard to imagine that the large populations of these two groups will impose more stress and challenges on the inventory challenges the market faces today.
– So, what impact do these numbers have on the wider housing sector?
Matt Vernon: Yeah, I think the biggest impact is exacerbating the inventory challenges we’re seeing. Today that number is about 787,000. And the fact that millennials and Generation X are a disproportionate part of the denominator at this point makes it even more difficult.
Couple that with the fact that from a development standpoint, housing growth has stagnated. So builder business. And stagnating demand will make this mortgage market even more challenging than it’s seen recently.
Sheena Smith: Matt, why did most of the baby boomers and Gen X decide to stay home? Is it all because of interest rates and today’s house prices?
Matt Vernon: It’s a combination of things. It’s one thing, they love the house they’re in. They’ve made memories there. They’ve been through a lot and I love it. They have also improved it over the years. They think this is home and they have what it takes to move forward. And they really love it.
Interest rates are certainly playing it now. Affordability certainly has a lot to do with it, and we’re discovering our next home has a lot to do with it. But most of all, 78% of the survey said it’s because he loves and feels comfortable in the home he lives in.
– Maybe they won’t like it a bit when the rate goes back to the 3 range. So its dynamics can certainly change. What’s primarily an inventory story in both single-family and multifamily homes?
Matt Vernon: Yeah, it’s almost at an all-time low for sure. We are away from the trough we were 3-4, 5 months ago. The supply is about three and a half months. But that number I mentioned has gone from 1.4 trillion to over 700,000, which is a very low number for us. But it’s still about 3 and 1/2. Well, good news. I think the Mortgage Bankers Association recently released some numbers that said inventory in October was up 38% from the previous quarter. As such, we’re starting to see a definite return on listings in the marketplace.
– faint hope. We’ll take it, sir. I’m Matt Vernon from B of A. it’s an honour to meet you.