Discussing the latest Chicago Fed National Activity Index, closing cost surprises, Americans have too much debt, Freddie’s outlook for housing and much more!
Chicago Fed National Activity Index Increased
From Chicago Fed:
Led by improvements in production-related indicators, the Chicago Fed National Activity Index (CFNAI) moved up to +0.17 in September from –0.37 in August. All four broad categories of indicators that make up the index increased from August, and three of the four categories made positive contributions to the index in September. The index’s three-month moving average, CFNAI-MA3, was unchanged at –0.16 in September.
Very nice! This is also up compared to last September!
Over Half of Home Buyers Surprised By Closing Costs
ClosingCorp recently performed a study that found more than 50 % of home buyers are surprised by how much closing costs are needed to get a mortgage.
The survey of 1,000 home buyers found that 17% were shocked to discover that closing costs were required at all! It blows my mind that some people were making such a huge financial decision and did not know this.
ClosingCorp also said that 35% were surprised because the closing costs were greater than anticipated. The cost of mortgage insurance was the number one unpleasant surprise for those surveyed. Following mortgage insurance were bank fees and points, taxes, title insurance and appraisal fees.
The map below was created using Bankrate.com data from mortgage lenders across the country. The map shows the average closing costs in each state for a $200,000 mortgage with a 20% down payment:
Average Closing Costs Per State
Bankrate said the average closing costs for South Carolina is $2213. Remember these are the averages and may not reflect what it will cost every home buyer to get a mortgage!
Freddie Mac says that home buyers should expect closing costs to be between 2% and 5% of their purchase price. Buyers MAY be able to negotiate so the sellers will help with the buyer’s closing costs.
One of the reasons why Realtors will ask if a buyer has a Pre-Approval letter is so they know the buyer is properly prepared. This includes knowing how much cold hard cash they need for closing costs.
I have heard too many horror stories about buyers finding out they need several thousand dollars a week or two before closing. Home buyers need to discuss closing costs with their lender at the BEGINNING of their home search.
Americans Have More Debt Than Ever Before
From Business Insider:
A new International Monetary Fund report finds that high levels of household debt can deepen recessions. US households are more indebted than ever.
US household debt is at pre-Great Recession levels. Household debt jumped by over $500 billion in the second quarter to $12.84 trillion. A scary little statistic is buried beneath the US economy’s apparent stability: Consumer-debt levels are now well above those seen before the Great Recession.
Michael Lebowitz, the cofounder of the market-analysis firm 720 Global, said:
Most consumers, especially those in the bottom 80%, are tapped out. They have borrowed about as much as they can. Servicing this debt will act like a wet towel on economic growth for years to come. Until wages can grow faster than our true costs of inflation, this problem will only worsen.
Remember, bad things happen to good people. Hope for the best but plan for the worst!
I have been preaching for several years that we need wage growth for ALL Americans. Yet the politicians and policy makers seem only concerned about Wall Street, the banks and big business.
Our Biggest Economic, Social, and Political Issue
Snippet from MUST read article by Ray Dalio, Chairman & Chief Investment Officer at Bridgewater Associates:
To understand what’s going on in “the economy,” it is a serious mistake to look at average statistics. This is because the wealth and income skews are so great that average statistics no longer reflect the conditions of the average man. For example, as shown in the chart below, the wealth of the top one-tenth of 1% of the population is about equal to that of the bottom 90% of the population, which is the same sort of wealth gap that existed during the 1935-40 period.
Average statistics camouflage what is happening in the economy, which could lead to dangerous miscalculations, most importantly by policy makers. For example, looking at average statistics could lead the Federal Reserve to judge the economy for the average man to be healthier than it really is and to misgauge the most important things that are going on with the economy, labor markets, inflation, capital formation, and productivity, rather than if the Fed were to use more granular statistics. That could lead the Fed to run an inappropriate monetary policy. Because the economic, social, and political consequences of an economic downturn would likely be severe, if I were running Fed policy, I would want to take this into consideration and keep an eye on the economy of the bottom 60%.
Dalio knocks it out of the park with this article. Please follow the link and read it!
Treasury Opposes Consumer Bureau Arbitration Rule
From The Hill:
The Treasury Department on Monday criticized the Consumer Financial Protection Bureau’s (CFPB) rule on arbitration, claiming it would impose “extraordinary costs” based on flimsy proof.
In a report released Monday morning, the department argued that CFPB failed to consider cheaper, more effective options for consumers than what it included in the controversial rule.
The CFPB said Treasury’s report “rehashes industry arguments that were analyzed in depth and solidly refuted in the final rule.”
“Banks, credit unions, and other companies file class action lawsuits to pursue justice when they are harmed as a group, and our rule restores consumers’ right to do the same.”
I just mentioned politicians and policy makers siding with Wall Street, banks and big business…
Hidden Danger of Ecological Collapse
From Counter Punch:
A recent landmark study that investigated alarming loss of insects is leaving scientists dumbfounded, deeply troubled, potentially the biggest-ever existential threat, risking ecosystem collapse too soon for comfort. In contrast to global warming, this may be much more imminently dangerous across-the-board to terrestrial life. An enormous loss of insect population, almost decimation in some parts of the world, threatens the life-giving structure of the ecosystem. This is a deadly serious problem!
If we lose the insects, then everything is going to collapse… there has been some kind of horrific decline. According to the new study, insect abundance has fallen by 75% over the past 27 years.
I am not a tree hugger but this decrease is troubling if you understand the basics of the food chain and how many insects ( such as bees ) are very important to our survival.
Freddie’s Outlook October 2017
Freddie just released their Outlook for October 2017:
The second quarter real gross domestic product (GDP) estimate was strong at 3.1 percent. Inflation remains a sore spot with the Consumer Price Index (CPI) coming in at 1.9 percent year-over-year through August 2017. Despite losing 33,000 jobs in September, the labor market remains strong with the unemployment rate at 4.2 percent. The loss of jobs is largely attributable to a steep month-over-month decline in the leisure and hospitality industry employment, almost certainly an effect of recent storms.
The housing market remains unchanged. Home prices appreciated at a stronger-than-expected rate of 6.3 percent in July. The already tight supply of homes was exacerbated by the hurricanes, with total home sales for August at a weak 5.9 million units (SAAR). Mortgage rates continue to remain favorable. Starts and permits were a bright spot in the housing market with both numbers coming in above expectations.
As the chart shows, Freddie is expecting mortgage rates, home sales and prices to all keep increasing. However, the rate that home prices has been increasing is projected to slow down.
Remember this is just Freddie’s prediction and not a guarantee. It seems reasonable to think that both home prices and mortgage rates will continue to rise if nothing crazy happens.
Well that is it for today! Please share and subscribe so you never miss another post!