April 18, 2017
A Stark Reminder
Actually, we have had a few stark reminders recently. The most recent was the escalation of our engagement in Syria and another, a show of force near the Korean peninsula. Since the election, much of America's attention has been focused upon domestic issues such as the health care bill, a nomination to the Supreme Court, budgets and more. But now we are reminded that the world is connected. Connected not only in our fight against terrorism, but also the economics. From Brexit, to a devastating tsunami on the other side of the world, we have been constantly reminded as to how events in one part of the world can affect our part of the world -- both good and bad.
Some of these reminders reside on our domestic side as well. Not long after the first attempt at "re-reforming health care reform," we now face a late April showdown which could result in a shutdown of the Federal government. While we are not predicting that this necessarily will happen, it is a reminder of the way Washington works -- contentiously and slowly. This is especially true when major changes are proposed.
How does this affect us? We have talked about the surge of confidence that America has experienced in the past several months. It would be natural for this confidence to wane somewhat, as the processes move forward slowly. While this may slow down economic growth a tad, it also gives us the benefit of slowing down the rise in interest rates that market analysts have been predicting. Lower rates would help boost the economy and hopefully offset the cooling off of enthusiasm. While we can't predict the path of rates or the economy, it does not hurt to gain some perspective as to the possibilities, especially when we get hit with news of world and domestic events.
Rates fell slightly to their lowest levels of the year last week. For the week ending April 13, Freddie Mac announced that 30-year fixed rates fell to 4.08% from 4.10% the week before. The average for 15-year loans decreased to 3.34%, and the average for five-year adjustables moved down slightly to 3.18%. A year ago, 30-year fixed rates averaged 3.58%. Attributed to Sean Becketti, chief economist, Freddie Mac -- "Following a weak March jobs report, the 10-year Treasury yield dropped about 5 basis points. The rate on 30-year fixed loans fell 2 basis points to 4.08 percent. Not only did the average decline for the fourth consecutive week in our survey, it also fell to a new 2017 low." Note: Rates indicated do not include fees and points and are provided for evidence of trends only. They should not be used for comparison purposes.
Current Indices For Adjustable Rate Mortgages
Updated April 14, 2017
|6-month Treasury Security
|1-year Treasury Security
|3-year Treasury Security
|5-year Treasury Security
|10-year Treasury Security
|| 1.790% (Mar)
|| 0.692% (Mar)
|11th District Cost of Funds
|| 0.591% (Feb)
|| 4.00% (Dec)
| J.D. Power has found that 21 percent of homebuyers regret their choice of a lender. That in itself is regrettable. But this significant minority might have been able to avoid many of their issues if they had been more careful in picking who they worked with for financing in the first place. Whether dealing with a loan officer who works for a lender that actually funds its own loans, or a broker who works for himself and deals with more than one lender, you should expect him to be responsive, according to the Consumer Financial Protection Bureau, the federal watchdog agency that grew out of the recent financial crisis. Being responsive is a key trait. But according to a recent survey of some 800 companies by Insellerate, a provider of support services for the marketing and sale of home loans, it took an average of 12 hours for loan officers to answer a client’s query. But that’s just among those who responded. A whopping 57 percent never responded at all, the survey found. And 60 percent of those who did respond failed to follow up with a second call. You also should be provided with a clear analysis of the different loan options that are available, along with an understanding of how they impact you financially, both initially and over time. Even more importantly, you should expect that the choices be explained in a way you can understand. Choosing a home loan is possibly the biggest financial decision you will ever make, so if you ask for a simple explanation and you don’t get it, ask again and again until you are certain you understand. It’s also wise to make sure what you choose is suitable to your lifestyle and financial picture. Many loan officers qualify people for the biggest loan they can afford. But while there’s nothing wrong with that, you may not be comfortable forking over that amount every month. On the flip side, if you fail to send a piece of requested information, you should expect the officer to hound you for it, or at least be persistent in asking for exactly what the underwriters need to approve your loan. Source: The Housing Scene, Lou Sichelman Note: These findings emphasize the importance of working with an expert mortgage advisor and a reputable company to help you with one of the most important financial decisions you will be making.
All the latest data indicates that the United States is very likely to experience another housing boom in the near future. Fortunately, some analysts think this will not be a boom in prices as was witnessed a decade ago. The next boom is most likely going to be a beneficial uptick in homebuilding, which would invigorate the economy, stimulate the construction industry, and lead to other positive effects. According to data from the National Association of Realtors, existing home sales rose more than expected in November, increasing by 0.7% at a seasonally adjusted annual rate of 5.61 million. Sales increased 18.2% before seasonal adjustment from November 2015, when changes in existing regulations delayed closings. It’s now clear that the sales of extant housing are back up to pre-real estate crash levels, which in turn is putting pressure on prices. While rates have been clearly on the rise post-election, we’re also seeing decent rises in wages and employment is robust. There’s been a noticeable increase in consumer and business optimism. Source: MPA
The Federal Reserve has made two swift rate hikes in just four months and vows of more to come. But there’s a way to slow the pace of interest-rate hikes: Build more homes, Lawrence Yun, the chief economist for the National Association of Realtors®, writes in his new column at Forbes.com. Building more apartments and single-family homes would help slow down inflation, Yun says. The nation has typically added 1.5 million new housing units each year to meet demand. After all, about 1 million to 1.2 million new households are formed nationally each year and about 300,000 to 400,000 homes are demolished or newly uninhabitable each year. As such, about 1.5 million new units are required. However, over the past decade from 2007 to 2016, average housing starts were 900,000 per year. “That is grossly inadequate,” Yun notes. “That is why there is a housing shortage across the country.” The inventory supply of homes available for sale is near all-time lows. Rental and vacancy rates have dropped to below 7 percent, the lowest since the mid-1980s, he notes. “The faster the homebuilding recovery, the slower the housing inflation,” Yun says. “Consequently, the broader consumer price index will also slow and thereby allow more breathing room for the Fed to temper the pace of rate hikes.” Source: CNBC