Two years ago, home interest rates were low and mortgage loan officers were seeing buyers who had gotten into bidding wars, waiving home inspections and appraisal contingencies, or having offers rejected.
The beginning of 2023 is a very different real estate market, with Maryland’s bankers prioritizing helping buyers navigate their loan options.
M&T Bank, a major bank in the region, is encouraging mortgage loan officers to provide buyer education to show them that today’s market can still be a good climate for buyers, said Dave Skaff, the director of sales for mid-Atlantic and Pennsylvania at M&T Bank.
Officers are sharing options like Adjustable Rate Mortgages with an initial fixed-term period of seven or 10 years and taking time to calculate and share monthly payments.
“I think it allows people to be a lot more cautious, aware, and a lot more educated, which is so important for the most important financial transaction of your whole life,” Skaff said.
The Maryland REALTORS reported on Jan. 17 that Maryland home sales fell 21.2% in 2022 vs. 2021. There were 107,407 homes sold in 2021 and 84,658 units sold in 2022.
And other indicators are showing a slowdown, such as pending sales falling 27% to 4,218 and median days on the market expanding to 16 days.
The 30-year fixed rate was at about 6.48% when the report came out, more than double what it was in 2021, so affordability is at the top of buyers’ minds.
At M&T, Skaff is advising that the market is more normal and easier for buyers, even though rates are up from unprecedented, record-setting low interest rates.
Buyers can now ask for inspection contingencies, appraisal contingencies and seller help with closing costs that should be factored into the overall financial decision, he said.
“It’s shifted from a total seller’s market to a more normal, if not leaning buyer’s market,” Skaff said. “The buyer is more in the driver’s seat, whereas two years ago the seller was completely in the driver’s seat, the seller could accept whatever offer they wanted, the one that suited them the best without having to make any concession to the buyers.”
Buyers are more likely to get a successful offer on the first house they choose, and mortgage loans are processing faster now that volume has slowed and bankers are no longer overwhelmed.
Here are some mortgage offerings that Maryland bankers are discussing with their customers:
- Adjustable rate mortgages, such as a 10-year fixed window at about a point lower than a 30-year fixed rate.
- A Home Equity Line of Credit (HELOCs) allows people to leverage the equity on their home to borrow funds for home improvements or other cash needs like paying for college or debt consolidation. Skaff reports these types of loans doubled in 2022 versus 2021.
- Interest-only loans that allow people to get lower monthly payments because they aren’t paying down the principal of the loan. These types of loans are a good fit when equity increases through the home value rising due to the market.
- Grant programs. PNC Bank offers the PNC Grant of up to $5,000 toward closing costs on eligible properties. Grants are offered for those who meet income requirements or reside in a qualified community to reduce or eliminate mortgage closing costs, cover other prepaid costs such as prepaid insurance premiums and establishing an escrow account for property taxes, or be put toward a down payment.
At a Jan. 6 Economic Outlook Forum hosted by the Maryland Bankers Association, more than 500 people gathered to discuss the economic outlook. Ramon Looby, President and CEO of the Maryland Bankers Association, said that all the bankers attending agreed that inflation was the primary threat to the economy.
“Each bank and financial institution governs its products differently,” Looby said. “What’s critical is that consumers shop around for the best product and price that helps them achieve their financial goals.”
When choosing a mortgage, Rob Robertson at PNC Bank said buyers need to consider their individual circumstances like how long they plan to stay in the house to determine if a fixed-rate loan is the right option for them.
Robertson, a former Baltimore Ravens player who is now PNC’s mortgage territory sales manager for the Southeast region, said consumers can contact a PNC home lending officer for a home lending checkup if they are thinking about purchasing a house, refinance or just want a consultation.
As they enter 2023, Robertson said his team is celebrating news that service surveys sent after closing between the third quarter and fourth quarter of 2022 showed their service scores were at an all-time high.
“I believe that knowledge is power, and if we can educate and inform with impact we’ll continue to do exactly what we strive to do here at PNC, and that’s help our customers succeed financially,” Robertson said.