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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!

December 19, 2017
The Fed Decision

As expected, the Federal Reserve Board decided to raise its benchmark interest rates by .25%. The reaction of the markets was tame because this action was widely anticipated and there was no surprise .50% hike. While each Fed rate hike does signal an overall increase in interest rates, it also does not mean that all rates are spiking upward. For one, the Fed has steadfastly adhered to a plan that is designed to move back to what it calls normal rates in a slow and orderly fashion. The response to the recession and slow recovery was to keep short-term rates close to zero, which is something that could not be sustained forever.

In this regard, the markets are more likely to react to hints about the pace of future rate increases, which are likely to be detected from the minutes of the recent meeting and various public statements from Fed Board members. Right now, the markets seem to be betting on three to four rate increases during the course of 2018, and if the economy continues to perform well, that scenario is not out of the question. While facing that many rate hikes, it should also be noted that the Fed's action to raise rates directly affects short-term rates, but only indirectly affects longer-term rates, upon which home and even auto loans are based.

The Fed's control is over funds that are borrowed overnight by banks, which are very short-term. In fact, we can see that six-month Treasuries have moved up over .75% during the course of 2017. Yet, the 10-year Treasury has virtually remained the same from January to December, and actually was lower than January's level for much of 2017. What does this mean? For one, it means the spread between short-term adjustable home and other loans and long-term fixed loans have narrowed, making fixed rates a more logical choice for most. Secondly, it means that mortgage rates will not necessarily move up as fast as the Fed is moving. Of course, if we see more evidence of inflation taking root, all bets are off in this regard.


The Markets. Rates were stable in the past week, despite the Fed's move to increase short-term rates. For the week ending December 14, Freddie Mac announced that 30-year fixed rates fell one tick to 3.93% from 3.94% the week before. The average for 15-year loans remained at 3.36%. The average for five-year adjustables rose one tick to 3.36%. A year ago, 30-year fixed rates averaged 4.16%, almost 0.25% higher than today. Attributed to Sean Becketti, chief economist, Freddie Mac --"As widely expected, the Fed increased the federal funds target rate this week for the third time in 2017. The market had already priced in the rate hike, thus long-term interest rates, including rates on home loans, hardly moved. Mortgage rates held relatively flat across the board, with the 30-year fixed rate inching down 1 basis point to 3.93 percent in this week's survey. Rates on home loans have been in a holding pattern for the fourth quarter, remaining within a 10-basis point range since October." 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
December 15, 2017

  Daily Value Monthly Value
  Dec 14 November
6-month Treasury Security  1.48%  1.39%
1-year Treasury Security  1.70%  1.56%
3-year Treasury Security  1.92%  1.81%
5-year Treasury Security  2.14%  2.05%
10-year Treasury Security  2.35%  2.35%
12-month LIBOR    1.905% (Nov)
12-month MTA    1.132% (Nov)
11th District Cost of Funds    0.737% (Oct)
Prime Rate    4.50% (Dec)
 New homes are expected to be a “primary driver of sales in 2018,” as 1.33 million housing starts are predicted next year—up from 1.22 million in 2017, according to a recent Freddie Mac Outlook Report gauging future real estate activity. Total home sales are expected to increase about 2 percent from 2017 to 2018, according to the report. Economists also predict that the uptick in housing starts, coupled with a moderate increase in interest rates, will help slow the run-up in home prices next year. Freddie Mac forecasts a 4.9 percent increase in home prices in 2018, lower than the 6.3 percent growth seen so far this year. Homeowners likely will continue building equity next year. In the second quarter of 2017, the dollar volume of equity cashed out was $15 million, up $1.2 million from the first quarter. As home prices rise, cash-out activity has been rising, too. “The economic environment remains favorable for housing and residential loan markets,” says Freddie Mac Chief Economist Sean Becketti. “For several years, we have had moderate economic growth of about two percent a year, solid job gains, and low interest rates. We forecast those conditions to persist into next year.” Source: Freddie Mac

Zillow. Trulia. Redfin. All household names in the real estate listings world, right? Well, those companies now have some serious competition from a company that boasts an audience that dwarfs all of those sites put together – Facebook. That’s right. Facebook is coming to real estate listings. Now, anyone who’s “friends” with a real estate agent on Facebook is likely used to seeing real estate listings show up in their news feed, but it appears that Facebook has much bigger plans for real estate listings through its own platform. Facebook announced last week that it is significantly expanding the real estate listings section on its Marketplace, which is Facebook’s attempt to take on Craigslist, eBay, and other e-commerce platforms. And if Facebook’s previous history is any indication of its future successes, Marketplace will eventually blot out the e-commerce sun, just as Facebook already did with social media – as evidenced by Facebook’s monthly active user count of 2.07 billion. And now, Facebook is bringing that audience to real estate listings. Facebook currently allows individual homeowners to list their homes for sale on Marketplace. According to Facebook, the feature is “rolling out gradually” and is currently only available via the mobile app in the U.S. And while the feature is “rolling out gradually” for home sales, Facebook is going full force into rental listings, via partnerships with Apartment List and Zumper. Source: Housing Wire

Sellers’ use of a real estate agent remained at an all-time high this year at 89 percent, according to the survey. Meanwhile, for the third consecutive year, for-sale-by-owner sales continued to be at the lowest share in the history of NAR’s survey at 8 percent. “Homeowners understand the value, and seek the expertise and guidance Realtors® bring to the table when it’s time to sell their home,” says William E. Brown, NAR’s president. “Despite incredibly favorable market conditions for sellers, where finding interested buyers was not a problem, nearly all turned to a Realtor® to help assist them through the intricacies of listing their home on the market, accepting offers, negotiating the sales price, and closing the deal.” Sellers reported mostly being satisfied with the performance of their agents, too. Eighty-eight percent of sellers surveyed indicated they were satisfied with the selling process, and 85 percent said they are likely to use their agent again or recommend him or her to others. Source: NAR 

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