January 16, 2018
Believe it or not, we are halfway through the first month of the year. While a few weeks passing may not seem like much, these are very exciting times. Americans are reacting to a new tax plan, stocks have already broken records and we have had the first natural disaster of the year -- a bomb-cyclone. A few weeks ago, most of us had never heard of a bomb-cyclone. And even though we did not know, since we are publishing from the east coast, we certainly felt the cold. When it snows in Florida, it is definitely a weather event.
The question is--what have we learned since the beginning of the year? We have learned that the stock market's surge in anticipation of the adoption of the tax plan is not over now that the plan has come to fruition. There was some concern that all the gains were built into the pricing of stocks, but the New Year has brought more good news in this regard. Of course, this does not mean that the gains will last all year -- but it was a good start.
In addition, stocks are not the only items that are going up in price. Oil prices have topped $60 per barrel for the first time since 2015. Interest rates have also risen, though the move has been more pronounced with regard to shorter-term rates. Again, this does not mean that oil prices and rates are moving up all year. On the other hand, if the economy does continue to expand and this expansion accelerates because of lower tax rates, it makes sense that rates and commodity prices will move up. Yes, it is hard to get a feel for a year based upon two weeks of activity, but we already have some interesting news to reflect upon this year.
Rates bounced back in the past week as the rising stock market and growing economy continue to push long-term rates higher. For the week ending January 11, Freddie Mac announced that 30-year fixed rates increased to 3.99% from 3.95% the week before. The average for 15-year loans rose to 3.44% and the average for five-year adjustables climbed slightly to 3.46%. A year ago, 30-year fixed rates averaged 4.12%, higher than today's level. Attributed to Sean Becketti, chief economist, Freddie Mac -- "After dipping slightly last week, Treasury yields surged this week amidst sell-offs in the bond market. The 10-year Treasury yield, for instance, reached its highest point since March of last year. Rates on home loans followed Treasury yields and ticked up modestly across the board. Rates on 30-year fixed loans averaged 3.99 percent, up 4 basis points from a week ago." 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
January 12, 2018
|6-month Treasury Security
|1-year Treasury Security
|3-year Treasury Security
|5-year Treasury Security
|10-year Treasury Security
|| 2.107% (Dec)
|| 1.201% (Dec)
|11th District Cost of Funds
|| 0.746% (Nov)
|| 4.50% (Dec)
| Existing home sales increased more than expected in November, hitting their highest level in nearly 11 years, the latest indication that housing was regaining momentum after almost stalling this year. The report from the National Association of Realtors® also added to data ranging from the labor market to retail sales that have suggested the economy was ending 2017 on a strong note. “The greater home sales will stoke the fires for stronger economic growth next year as consumers spend more to furnish their new homes with new appliances and furniture and all the decorations and trimmings,” said Chris Rupkey, chief economist MUFG in New York. Existing home sales surged 5.6 percent to a seasonally adjusted annual rate of 5.81 million units last month amid continued recovery in areas in the South ravaged by Hurricanes Harvey and Irma, and solid gains in other parts of the country. That was the highest level since December 2006 and marked the third straight monthly rise. Economists had forecast home sales rising only 0.9 percent to a 5.52 million-unit rate in November. Source: Reuters
Though many are stuck renting out of financial necessity, millennials show the same desire for homeownership as their parents and grandparents—and traditional suburban properties appeal to them more than renting or buying in cities, Bloomberg reports. Many economists have acknowledged that the slow path to homeownership for young adults is contributing to record-low homeownership rates. But for two consecutive quarters, the homeownership rate among those ages 35 and younger has been on the rise. Some economists predict that millennials will eventually own homes at similar rates as their parents. Rents, however, are taking a bigger bite out of household budgets, making it difficult for young adults to save enough for a down payment. Young adults who are ready for homeownership are also facing a shortage of homes in the market. “The result is that price gains continue to exceed income growth through scarcity, particularly in that smaller home market, which is the hardest market for a builder to essentially reach and build to these days,” Robert Dietz, chief economist at the National Association of Home Builders, told Bloomberg. Overall, though, economists seem to be upbeat about millennials. They’re getting married and having children later than their parents did, but they are starting to “cross barriers typically associated with buying,” Bloomberg reports. “Right now, probably a third of our housing business is young couples coming out of the apartments,” Chris Nelson, a builder in Simsbury, Conn., told Bloomberg. “We really think that’s just the beginning—that over the next three to five years, we’re going to see a ton of people coming out of the apartments, buying homes.” Source: Bloomberg
America’s seniors are increasingly opting to stay in their own homes as they get older, which will generate home refinances and HELOCs. A survey by HomeAdvisor found that aging homeowners are taking steps such as installing smart thermostats and replacing appliances to make their homes more efficient and easier to live in, rather than age-specific enhancements. "By taking a holistic approach to home improvement, homeowners will get their homes in good working order before aging-specific home improvements become necessary," said Marianne Cusato, Adjunct Associate Professor at the University of Notre Dame's School of Architecture. "Take the front walkway for example. If there are cracks or dips in the concrete, homeowners need to address those existing safety issues before completing a project like adding grab bars, which they may or may not need in the future." The HomeAdvisor Aging in Place Report 2017 reveals that many seniors have watched friends or relatives struggle with living in their own homes as they age and are determined not to face the same issues. Almost half of the over 75s polled said they have renovated their homes in anticipation of getting older. Source: Mortgage Professional America