Feb 26, 2018 | Market Outlook
Last week’s economic releases included minutes from the most recent FOMC meeting, a report on January sales of pre-owned homes and weekly readings on mortgage rates and new jobless claims.
FOMC Minutes: Economic Strength Hints at More Rate Hikes
Minutes of the January 30-31 meeting of the Fed’s Federal Open Market Committee indicated that most Committee members believe that inflation will reach the Fed’s goal of 2.00 percent. Members found that the economy was stronger since 2017 and expected “a gradual upward trajectory of the federal funds rate would be appropriate.”
While analysts expect three rate hikes in 2018, the FOMC voted to hold the federal funds rate at 1.25 to 1.50 percent. Most FOMC members expected that the goal of 2 percent inflation was within reach in 2018.
Analysts were not as confident about reaching to Fed’s inflation goal. Instead, the said that in response to tax cuts, the labor market could exceed full employment and lead to higher wages and surging inflation.
A minority of FOMC members said that inflation could fall short of the Fed’s goal as retailers would compete by lowering prices.
Existing Home Sales Drop in January
According to the National Association of Realtors®, sales of previously-owned homes dipped from a seasonally-adjusted annual rate of 5.56 million sales to 5.38 million sales in January. This reading was the lowest in more than three years; it could indicate that the shortage of homes for sale has reached critical mass.
Months of short supplies of homes for sale have caused rapidly rising home prices, buyer competition and fewer choices of homes for would-be buyers. Real estate pros have repeatedly said the only solution to shortages of available homes is that builders must build more homes but increasing materials costs and labor shortages have caused construction pace to lag demand for homes. Affordability continued to weigh on moderate-income and first-time buyers.
Mortgage Rates Rise for 7th Consecutive Week
Freddie Mac reported higher mortgage rates on average last week. The average rate for a 30-year fixed rate mortgage was two basis points higher at 4.40 percent; rates for a 15-year fixed rate mortgage averaged one basis point higher at 3.85 percent. The average rate for a 5/1 adjustable rate mortgage was two basis points higher at 3.65 percent.
New jobless claims dropped by 7000 first-time claims and regained a 45-year low. 222,000 new claims were filed last week as compared to expectations of 229,000 new claims and 230,000 new claims filed the prior week. Real estate pros and analysts cite strong labor markets as driving housing markets and high demand for homes. Workers with job security and options for advancement in their careers are more likely to consider investing in a home than paying rising rents.
What‘s Ahead
This week’s scheduled economic releases include Case-Shiller Home Price Indices, readings on new and pending home sales and construction spending. Weekly readings on mortgage rates and new jobless claims will be released along with a report on consumer sentiment.
Feb 20, 2018 | Financial Reports
Last week’s weeks economic releases included readings on the NAHB Housing Market Index, housing starts and building permits issued and consumer sentiment. Weekly readings on mortgage rates and new jobless claims were also released.
NAHB: Builder Confidence in Housing Market Holds Steady in February
The National Association of Home builders reported an index reading of 72 for its Housing Market Index in February. January’s reading was also 72; readings over 50 indicates that more builders than fewer are confident about housing market conditions.
Three readings comprising the overall NAHB HMI reading include builder confidence in current market conditions, which was one point lower in February at 78. Builder confidence in housing market conditions in the next six months rose two points to an index reading of 80.
This was the highest reading for future housing market conditions since before the recession. Builder confidence in buyer traffic in new housing developments was unchanged at 54.
Builders surveyed cited strong labor markets and short supplies of pre-owned homes as fueling confidence in current market conditions, but identified ongoing labor and lot shortages and rising materials costs as concerns for builders.
Housing Starts, Building Permits Issue Rise in January
High builder confidence was reflected in readings for housing starts and building permits issued in January. Housing starts rose to their highest level in more than 10 years. The annual pace of housing starts reached 1.326 million starts.
January’s reading exceeded expectations of 1.324 million starts and December’s reading of 1.209 million housing starts. January’s starts reflect strong builder confidence readings and may also signal future relief for short supplies of available homes and high demand for homes in many metro areas.
High demand for homes has caused rapid appreciation in home values and sidelined first-time and moderate-income buyers in areas with high home values. According to the Commerce Department, building permits issued rose to 1.396 million from December’s1.380 million starts annually.
The University of Michigan reported the second highest reading for consumer sentiment in 14 years. February’s reading of 99.9 was higher than expectations for a reading of 95.3 and January’s reading of 95.7Analysts said that recent tax cuts likely stabilized consumer outlook in spite of volatile financial markets.
Mortgage Rates, New Jobless Claims Rise
Freddie Mac reported higher mortgage rates for all three types of mortgages it tracks in its Primary Mortgage Market Survey. Rates for a 30-year fixed rate mortgage rose an average of six basis points to 4.38 percent.
The average rate for a 15-year fixed rate mortgage was seven basis points higher at an average of 3.84 percent. Rates for a 5/1 adjustable rate mortgage averaged 3.63 percent, which was six basis points higher than the prior week.
New jobless claims were higher last week with 230,000 new claims filed, which matched expectations and exceeded 223,000 new jobless claims filed the prior week.
What‘s Ahead
This week’s economic releases include readings on existing home sales along with weekly readings on mortgage rates and new jobless claims. Financial markets were closed on Monday for President’s Day.
Feb 12, 2018 | Market Outlook
Jerome “Jay” Powell was sworn in as Chair of the Federal Reserve amidst wild fluctuations in U.S. stock markets. Analysts attributed sliding stock prices to fears over inflation.
Mr. Powell, who follows former Fed Chair Janet Yellen, introduced himself via a video clip on the Fed’s website. Weekly readings on mortgage rates and new jobless claims were also released.
New Fed Chair Promises “Transparency“ in Video Introduction
In a video introduction posted on the Fed’s website, new Fed Chair Jay Powell promised that the Fed would explain “what we are doing and why we are doing it.” Mr. Powell did not address stock market volatility but said that monetary policy decisions would be made based on the Fed’s dual mandate of achieving maximum employment and price stability along with economic growth.
Mr. Powell took leadership of the Fed as the national unemployment rate dipped to 4.10 percent.
Mr. Powell is an attorney by profession and is the first Fed Chair not to hold a PhD in economics in more than 30 years.
Former Treasury Secretary Advises Against Raising Rates Too Fast
Former Obama administration Treasury Secretary Larry Summers cautioned against raising rates too fast: “If the Fed raises rates sufficiently to assure financial stability, there is a risk that the economy will slow too much.
When the Federal Reserve raises its target federal funds rate financial institutions, mortgage lenders and retail lenders usually follow suit.
Mortgage Rates Rise, New Jobless Claims Fall
Freddie Mac reported higher mortgage rates last week. The average rate for a 30-year fixed rate mortgage was 10 basis points higher at 4.32 percent; the average rate for a 15-year fixed rate mortgage rose by nine basis points to 3.77 percent.
The average rate for a 5/1 adjustable rate mortgage gained four basis points to 3.57 percent. Discount points averaged 0.60 percent, 0.50 percent and 0.40 percent respectively.
New jobless claims fell to their lowest level since the 1970s. 221,000 first-time claims were filed as compared to 232.000 new claims expected and the prior week’s reading of 230,000 new claims filed.
What‘s Ahead
This week’s economic news releases include readings on inflation, retail sales and the National Association of Home Builders Housing Market Indices. Readings on housing starts and building permits issued will also be released, along with weekly readings on mortgage rates and new unemployment claims.
Feb 15, 2017 | Home Mortgage Tips, Uncategorized
The post-election period is often one of uncertainty, and the time since the 2016 election has been no different with regards to market force and the financial world. With a new administration taking office, there are many questions regarding how Donald Trump’s presidency will impact the market and your mortgage. If you’re wondering what the predictions are for the coming year, here are a few things the experts are considering.
An Increase In Rates
Due to an expected hike in rates by the Federal Reserve, it’s unlikely that potential homebuyers will be able to get the low interest rates of previous years. While higher rates are likely, the proposed tax plan and budget of Donald Trump may lead to increased inflation and could also have an impact on rates down the road. The low rates of previous years certainly made homeownership a more feasible option, but it’s still a good time to get into a home before they rise even more.
Less Red Tape
The money invested into regulations is something that Donald Trump was highly critical of in the run up to the election, and this may mean many opportunities for home ownership that did not exist before. While a poor credit history can make or break a mortgage application, in a time of loosening regulations there will likely be more available mortgage products for those who have a less than stellar financial situation.
Privatizing Loan Programs
There is the possibility that government-sponsored home loan organizations like Freddie Mac and Fannie Mae will come under new ownership. While this may provide an opportunity for potential homeowners, because the risk will be taken on by private owners – and not the government – this may lead to higher rates. As Jordan Levin of the California Association of Realtors says, “I can say with a pretty good level of confidence that it will increase the cost of borrowing because there’s going to be more risk from those pools being borne by the private sector and they’re going to want to be compensated for that additional risk that they’re bearing.”
While the economic policy of the coming years has yet to take shape, the mortgage rates are on the rise and the regulations surrounding home ownership are likely to loosen.
Feb 8, 2017 | Home Mortgage Tips, Uncategorized
When it comes to real estate, there are always going to be upswings in the market that will have an impact on your mortgage payment and overall financial health. However, with a fluctuating market here to stay, you may be wondering how you can guard your biggest investment and your finances against rate increases. If you’re concerned about rates on the rise, here are a few tips to test out you’re fiscal well-being.
Calculate Your Debt-To-Income Ratio
It’s beneficial to determine your DTI ratio prior to purchasing a home, but since debt and housing costs are always fluctuating, calculating this number again can be a wakeup call. By adding up your monthly expenditures (including any debt), and dividing that number by your pre-tax income, you’ll be able to determine your DTI percentage. While it’s ideal to have a percentage of less than 28%, if your expenditures have risen above this number, it may be time to take a look at your monthly budget and see what you can cut out.
Do You Have Emergency Savings?
Many people make a habit of putting money into their retirement funds each paycheck, but it’s equally important to have emergency savings you can access in the event of car repairs, home maintenance issues or an unforeseen medical problem. While it’s often suggested that a person should have a minimum of 3 months of expenses at their disposal, saving more than this can make you even more prepared in the event that a rate increase requires you to dive into other funds.
Review Your Budget
It’s easy enough to have a monthly budget, but the hard part for most people is sticking to it on a day-to-day basis. If you’ve veered off the trail a little bit in this regard, sit down to review your expenditures and determine what your financial outlook would be if you experienced an interest rate bump next month. In the event that there’s very little cushion and no money for savings, it may be worth your time to craft a new budget that gives you a bit more wiggle room.
Many people are uncertain about what the short-term economy will bring for their mortgage rates, but by reviewing your budget and maintaining emergency savings, you can be better prepared for the future. If you’re currently considering purchasing a home, contact one of our real estate professionals for more information.
