The Fed Moves Nowhere

It was no surprise to the markets that the Federal Reserve Board did not decide to raise or lower interest rates at their meeting last week. After three decreases this year, the Fed had given plenty of signals that they have moved into neutral mode as they await further changes in the economy. From the sidelines we can see that there has been plenty of evidence that the economy is still growing -- witness the latest upward revision in the measure of third quarter economic growth.

But there is also evidence that the economy is indeed slowing down. In early December, we saw weak readings on the manufacturing sector and for construction spending. The jobs report for November gave us additional evidence that the economy is still sound. Thus, it makes sense that the Fed will remain on the sidelines, at least until sometime next year.

The next Fed meeting is scheduled for late January and that is just about the time that we will get the first reading of economic growth for the fourth quarter of the year. By then they will have also seen the last jobs report for 2019 and can assess a full year of job growth. Whether this data will be enough to entice the Fed to make a move -- which would be a change in their stance -- remains to be seen. Right now, we are ending the year with much lower interest rates than we envisioned at the beginning of 2019.

  

The Markets. Rates ticked up in the past week in the aftermath of the strong employment report. For the week ending December 12, Freddie Mac announced that 30-year fixed rates rose to 3.73% from 3.68% the week before. The average for 15-year loans moved up to 3.19% and the average for five-year ARMs moved down to 3.36%. A year ago, 30-year fixed rates averaged 4.63%, almost 1.0% higher than today. Attributed to Sam Khater, Chief Economist, Freddie Mac --"With Federal Reserve policy on cruise control and the economy continuing to grow at a steady pace, rates on home loans have stabilized as the market searches for direction. The risk of an economic downturn has receded and, combined with the very strong job market, it should lead to a slightly higher rate environment. Since early September, when rates on home loans posted the year low of 3.49 percent, rates have moved up to 3.73 percent this week. Often, while higher rates are deleterious, improved economic sentiment is the reason that these higher rates have not impacted housing demand so far."  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. 

	Daily Value	Monthly Value
	Dec 12	November
6-month Treasury Security	1.57%	1.59%
1-year Treasury Security	1.55%	1.57%
3-year Treasury Security	1.69%	1.61%
5-year Treasury Security	1.73%	1.64%
10-year Treasury Security	1.90%	1.81%
12-month LIBOR		1.950% (Nov)
12-month MTA		2.146% (Nov)
11th District Cost of Funds		1.100% (Oct)
Prime Rate		4.75% (Oct)

 Generation Z, which comprises the youngest potential consumers in the housing market, is bullish on homeownership. Freddie Mac researchers conducted a survey of consumers ages 14 to 23 and found they tend to have more positive perceptions of what it means to be a homeowner than millennials did at that same age. Eighty-six percent of Gen Zers say they want to own a home someday. They also hope to purchase sooner in their lives than millennials did. Gen Z survey respondents say they plan to own a home by the time they turn 30, which is three years younger than the current median age of first-time buyers. The homeownership desires of Gen Z center on having more privacy, control, and independence than renting offers, Freddie Mac’s research shows. They also feel like homeownership is a sign of success, something to be proud of, and provides stability as well as financial security, the survey shows. “The data show that while members of Gen Z clearly aspire to homeownership, they are realistic about potential barriers,” says Freddie Mac CEO David Brickman. “Although these results are good news for the housing market, they also highlight the challenges many in Gen Z will face as they enter the market to rent or buy.” Source: Freddie Mac

The best days of the year to buy a home all fall in the month of December, according to a new analysis released by ATTOM Data Solutions, a real estate data firm. Buyers who close on a home purchase the day after Christmas—Dec. 26—will likely realize the biggest discounts below full market value compared with any other day of the year, according to the study of more than 23 million single-family home and condo sales over the past six years. “Closing on a home purchase the day after Christmas or on New Year’s Eve can be one of the most financially beneficial holiday-season gifts you can get,” says Todd Teta, chief product officer with ATTOM Data Solutions. “While lots of folks are shopping the day-after Christmas sales or getting ready to ring in the New Year, our data shows that buyers and investors are buying homes on those days at a discount. That’s a far cry from buying during June, when they are likely paying about a 7 percent premium.” ATTOM researchers pegged Dec. 26, Dec. 31, and Dec. 4, in that order, as the best days for home buyers to grab the biggest discounts on their home sale. Source: ATTOM

Double master bedrooms are proving to be a growing trend in new luxury developments. As more homeowners want to live near their families and multigenerational households become more common, relatives and adult children move in together; as a result, more household members want to call dibs on the owners’ suite, which is often the largest bedroom in the house with an attached bathroom. Builders are responding by adding two master suites into more floor plans, whether it’s a single-family home or condo. K. Hovnanian Homes offers several townhouse communities with two master bedrooms. The rooms include large bathrooms attached and walk-in closets. Some builders are adding a dual master bedroom on the main level of the home with a separate entrance. “We include features like secondary master suites so that families and loved ones can maintain close connections as they grow,” Gregory Malin, CEO and founder of Troon Pacific indicated. “These spaces also allow the owners to age in place, as they can maintain their independence while having their children just steps away.” Source: Forbes