“The hardness of the butter is proportional to the softness of the bread.” Proportionality is important, whether in a restaurant or in a lender watching adjustable-rate loans (where the market favors credit unions and banks). With short-term rates dropping relative to long-term rates, the adjustable-rate mortgage market share has increased. Lenders that I have spoken with (mostly bank and credit union folks) say that the vast majority of ARM applications are 5-year, 7-year, and 10-year products, which, for anyone who’s been in the business for 25 years, is a shift from the mid-2000s when we had various types of 1-year ARMs, along with 3/1 and 5/1 products. For potential borrowers who have watched their landlords change rental rates, it may seem like their monthly payments are adjustable. But unfortunately for lenders, renting is cheaper than buying in 49 out of 50 MSAs with an average savings of $908 a month. Pittsburgh was the only MSA where buying is cheaper. The worst MSA? Austin, where it costs $1,467 to rent a starter home and $3,150 to buy one. More evidence of an unaffordable housing market: the homeownership rate has fallen to the lowest level since 2019. The drop affected all age groups, with the 45-54 age group seeing the largest percentage decline. (Today’s podcast can be found here and this week’s is sponsored by Arrive Home. Arrive Home helps mortgage lenders connect creditworthy buyers with down payment assistance and affordable homeownership solutions, offering tools that empower lenders and uplift communities. Hear an interview with MBA’s David Upbin and Arch MI’s Kevin Popoli on the Mortgage Banking Bound program and how it is preparing college students for careers in mortgage banking.)