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Real Estate Trends Newsletter -- A weekly news update for mortgage professionals

Dave Hershman
The Hershman Group
123 Anystreet
Suite 201
Centreville, Va 20122

NMLS #11111
NMLS Company #12345

OriginationPro Mortgage Company is dedicated to bringing the American Dream of Home Ownership to our clients.

We provide a variety of competitively priced mortgage products and services that are designed to help you achieve your financial goals.

As the experts in the world of real estate finance, we can help you achieve your goals with less stress, making your American Dreams Come True!

November 21, 2017
Happy Thanksgiving

Every year it seems like the months go by more quickly than before. Here we are wishing everyone a happy Thanksgiving already. Where did the summer go? Though the year passed quickly, there is plenty for us to give thanks for. This has been another year of economic growth and another year of positive stock growth. We have witnessed over eight years without a recession, and even though growth has not been robust, the total results of economic, stock price and house price growth has been impressive.

Speaking of which, many are starting to ask this question -- how long can housing prices keep rising before they become unaffordable? One factor propping up house prices for the past eight years has been incredibly low interest rates. But these rates can't last forever -- or might they? Five years ago, the median home price in the U.S. was around $210,000. Now median prices are closer to $250,000. At what point does this increase affect housing demand?

Besides interest rates, affordability is influenced by increased growth in wages. If wages double, then everyone can afford more. Though wage growth is a positive factor for workers, a large increase in salaries would contribute to inflationary pressure and this would put upward pressure on interest rates. The last jobs report showed tame wage growth and therefore, until wage growth accelerates, the pressure for higher interest rates has not appeared. The best of all worlds would be a very gradual increase in home prices, wage growth and interest rates. That is a future we would be thankful for.


The Markets. Rates moved higher in the past week. For the week ending November 16, Freddie Mac announced that 30-year fixed rates rose to 3.95% from 3.90% the week before. The average for 15-year loans increased to 3.31%. The average for five-year adjustables decreased one tick to 3.21%. A year ago, 30-year fixed rates averaged 3.94%, virtually the same as today. Attributed to Sean Becketti, chief economist, Freddie Mac -- "Rates increased this week. The 10-year Treasury yield ticked up 6 basis points, while 30-year fixed rate loans jumped 5 basis points to 3.95 percent. Today's survey rate is the highest rate in nearly four months." 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
November 17, 2017

  Daily Value Monthly Value
  Nov 16 October
6-month Treasury Security  1.42%  1.25%
1-year Treasury Security  1.59%  1.40%
3-year Treasury Security  1.83%  1.68%
5-year Treasury Security  2.07%  1.98%
10-year Treasury Security  2.37%  2.36%
12-month LIBOR    1.856% (Oct)
12-month MTA    1.063% (Oct)
11th District Cost of Funds    0.729% (Sep)
Prime Rate    4.25% (June)
 Homeowners who earn a high income are showing a preference for the suburbs—and even the far-out “exurbs”—over downtown living. A Census Bureau analysis of the 53 largest U.S. metros shows that only 3 percent of homeowners employed full-time who make more than $75,000 annually live downtown, while 11.4 percent live in inner-ring neighborhoods. But 14 percent live in the exurbs, and 71.5 percent are in the suburbs. In 2015, a $75,000 salary represented the 77th percentile of incomes nationwide, according to Chapman University researcher Erika Nicole Orejola. She found that 16 of the 20 counties with the largest share of full-time employed residents who were earning more than $75,000 were suburban. The majority of residents were driving to work and living in low-to-moderate-density communities. The remaining four counties in the top 20 fell on the other end of the spectrum and are considered some of the “most urbanized parts of the country,” such as New York and San Francisco. The biggest factors influencing where buyers settle are housing costs, jobs for a spouse, commute times, proximity to family, and quality of K-12 schools, according to a survey by the Center for Demographics and Policy at Chapman University of more than 1,000 professionals ages 25 to 64 with household incomes greater than $80,000. Source: Forbes

Ninety-one percent of closed sales recently contained a sales contingency, allowing a buyer or seller to back out of the contract if certain conditions were not met. This percentage was reported in the August 2017 Realtors® Confidence Index Survey, a survey sent to more than 50,000 real estate practitioners. The most common contract contingencies were related to passing home inspections (19 percent); the buyer obtaining financing (19 percent); and appraisal contingencies (15 percent). “These contingencies are reflective of the risks buyers face when purchasing a home and are meant to protect buyers against these uncontrollable, but anticipated, risks,” Scholastica Corporation, a research economist for the National Association of Realtors® (NAR), notes on the Economists’ Outlook blog. Appraisal contingencies are growing more common as home prices appreciate at quick speeds in many markets. In some hot markets, buyers are bidding up prices due to the steep competition, but the appraisals are then coming in lower than the agreed-upon sales price. Source: NAR

More than half of homebuyers would be willing to sacrifice the indoor living space of their home if that meant a bigger yard and more distance from their neighbors. The love of outdoor space is revealed in a new study from homebuilder Taylor Morrison which found that 56% of buyers would prefer a larger yard even if that means a smaller house and most said more distance between them and their neighbors was the most important factor. The need for a larger buffer between homes was important for 48% of millennials and 53% of non-millennials but siding, driveway styles, exterior paint color and roofing finishes are still on the wish list. Women are more likely than men to want a feature-rich outdoor space (62% vs. 51%) rather than a larger interior floor space. Asked how they would spend $10k-$15k to improve their new home, outdoor living enhancements such as outdoor living rooms and tiles that match those used indoor topped the list. That marks a shift away from higher spending on kitchen interiors. Source: MPA 

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