US
April 5, 2022
What’s going on today
Home buying surged in 2020 and 2021 as Work from Home mandates made many workers reassess how and where they wanted to live. This helped fuel the housing market, and many parts of the U.S. saw significant increases in selling prices as offers above listing became the a “new normal.” This phenomenon has now tempered somewhat in the past few months, but now there’s a new dynamic in play – the mortgage market:
- Mortgage rates are starting to rise to +/-4% while the typical homeowner carries a mortgage with an average interest rate of 3.250%.
- Adjustable-rate mortgages are becoming more popular.
- The new limit on conforming loans has been raised to $647,200; mortgages over this amount are considered “jumbo.”
What could happen in 2022?
You can anticipate that some transferring homeowners may express dissatisfaction when selling a home with a lower interest rate than will be available for their next purchase. The impact is real: typically, they may need to pay nearly $200 more a month (based on an average loan amount of $400,000) due to current interest rates. With alternative mortgage types regaining prominence, be prepared that transferring home purchasers may likely not be familiar with adjustable-rate mortgages as the terms and nuances of this loan type are very different from fixed-rate loans if their last borrowing experience is in the past 10 years. For your high-end homeowners requiring jumbo loans, advise them to shop for interest rates as there is competition among lenders for this business.
What does this mean for Global Mobility?
A few clients have asked Sterling Lexicon if instituting housing subsidies for employees moving to high-cost areas would be beneficial, and we have advised that if they offer this benefit as part of the mobility program that they should confirm the number of years the lender will allow as rules have changed recently. Don’t forget your RMC relocation consultants can help explain the U.S. housing and mortgage markets. They are there to guide your employees throughout their move, whether from abroad or from across the country.
How can global mobility help?
- If an employee purchasing a new home is concerned that the appraisal will not match the offered price, they can put in writing they will make up the difference between the appraised value and the offer.
- Buyers are competing by offering more Earnest Money upfront, and they need quick access to funds.
- Require (or, at a minimum, counsel) transferring employees to obtain a full credit approval concurrent with a loan pre-approval letter to make their offers appealing.
- Loss-on-Sale provisions, if not in your current policy, may not be necessary as housing continues to appreciate and there is continued strong housing demand.
- If your policy supports purchasing new construction, we recommend working with lenders that will allow a 1- to 2-year lock on the mortgage interest rate.
“Homeowners are typically factual and rational about refinancing, but buying a house remains a much more emotional experience.
Good advice to buyers is to pause and consciously introduce a rational perspective into the purchase process.”
Dan Mertes
Wells Fargo Mortgage
Leah Johnson is Sterling Lexicon’s Director, Client Solutions, and has worked in the global mobility industry for more than 20 years. She has held management positions in business development, operations, account management, and consulting, and had the opportunity to live and work in Tokyo and Hong Kong for six years. She initiated destination services in Hong Kong for a relocation management company and directed global mobility for Goldman Sachs in the APAC region. She graduated from Colgate University, earned an MBA from the University of Alabama in Huntsville, and maintains a Senior Certified Professional (SCP) certification from SHRM.
