Discussing the latest reports on mortgage rates, GDP, consumer sentiment, GSE reform, rent growth resumes and more!
Time once again to check out the average mortgage rates reported by Freddie and the MBA!
The MBA reported that 2 out 3 of the rates I normally report increased:
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($424,100 or less) increased to 4.18% from 4.14%, with points decreasing to 0.42 from 0.44 (including the origination fee) for 80% loan-to-value ratio (LTV) loans.
The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances (greater than $424,100) decreased to 4.11% from 4.13%, with points decreasing to 0.24 from 0.32 (including the origination fee) for 80% loan-to-value ratio (LTV) loans.
The average contract interest rate for 15-year fixed-rate mortgages increased to 3.48% from 3.45%, with points decreasing to 0.40 from 0.43 (including the origination fee) for 80% loan-to-value ratio (LTV) loans.
Freddie Mac also reported increases:
- 30-year fixed-rate mortgages averaged 3.94% with an average 0.5 point
- This is up from last week when it averaged 3.88%
- Lasy year at this time, 30-year fixed-rate mortgages averaged 3.47%
- 15-year fixed-rate mortgages averaged 3.25% with an average 0.5 point
- This is up from last week when it averaged 3.19%
- Last year at this time, 15-year fixed-rate mortgages averaged 2.78%
Yes rates have increased but remember these are the average rates. In other words, buyers need to talk to the lender of their choice to determine exactly what they can expect.
GDP Increased at 3%
Good news from the BEA:
Real gross domestic product (GDP) increased at an annual rate of 3.0 percent in the third quarter of 2017 (table 1), according to the “advance” estimate released by the Bureau of Economic Analysis. In the second quarter, real GDP increased 3.1 percent.
The increase in real GDP in the third quarter reflected positive contributions from personal consumption expenditures (PCE), private inventory investment, nonresidential fixed investment, exports, and federal government spending. These increases were partly offset by negative contributions from residential fixed investment and state and local government spending. Imports, which are a subtraction in the calculation of GDP, decreased.
This is faster than expected but did you notice that residential fixed investment was a negative contributor?Sadly, real estate or housing isn’t as strong as we would want or need…
Still this is good considering the numbers may have been impacted by the hurricanes.
Consumer Sentiment Decreased Slightly
Surveys of Consumers chief economist, Richard Curtin said:
Consumer sentiment slipped ever so slightly in late October, despite remaining at its highest monthly level since the start of 2004. This is only the second time the Sentiment Index has been above 100.0 since the end of the record 1990’s expansion, and its average during the first ten months of 2017 has been the highest since 2000. The October gain was reflected in more favorable consumers’ assessments of current economic conditions as well as expected economic prospects.
Great news and check out the chart showing how things have been improving for the past several years:
Hopefully the upcoming holiday season will be strong and we will see more economic improvements in 2018.
Rail Traffic Increases
For this week, total U.S. weekly rail traffic was 559,989 carloads and intermodal units, up 3 percent compared with the same week last year.
Total carloads for the week ending October 21 were 268,943 carloads, up 0.2 percent compared with the same week in 2016, while U.S. weekly intermodal volume was 291,046 containers and trailers, up 5.6 percent compared to 2016 and the most for any week in history.
Very good news and we have been seeing YoY increases for this economic indicator for quite some time.
GSE Reform Essential to Stability of Housing Finance
Brenda Hughes, senior vice president and director of mortgage and retail lending for First Federal Savings of Twin Falls, Idaho, testified on behalf of ABA to the House Financial Services Committee this week. Here are some snippets from her testimony:
The American Bankers Association, through input and deliberation from banks of all sizes and from all parts of the country, has developed a set of principles to guide the reform of Fannie Mae and Freddie Mac, which, as you know, have been in conservatorship since 2008. We appreciate the work this committee has done thus far, as well as the opportunity to share our views with you today.
On GSE reform, and on the importance of preserving access for lenders of all sizes and in all regions of the country, ABA believes that:
Key shared principles should guide reform efforts;
Without legislative reform, past abuses may be repeated, or new ones may arise which imperil the mortgage markets and put taxpayers at risk;
Reform need not be radical or extreme, but should be comprehensive
I hope you will read this and it is good to see the ABA is pushing for something to finally be done about the GSEs. I am not sure that I 100% support their proposals but at least they are trying to get DC to do something…
U.S. Rent Growth on the Rise Again
According to Zillow Research, U.S. rent growth is picking up again. The annual pace of rent growth in the U.S. has picked up in each of the past five months compared to the month prior, growing 2.1 percent year-over-year in September.
Remember, home owners with a fixed rate mortgage have the same payment year after year. Renters can expect their rent to increase every time they renew their lease…
Home owners build wealth and equity while renters help their landlords build wealth…
Would Cutting Corporate Taxes Raise Workers’ Incomes?
While there is uncertainty and debate regarding the extent to which lowering statutory corporate taxes to 20 percent might boost worker wages, the CEA’s claim that workers’ income would rise by $4,000 to $9,000 is well above the top of the range of consensus estimates. And one can recount examples of countries that lowered corporate tax rates without a resulting rise in wages, such as the experience of the United Kingdom, which, as a large open economy, is in many ways comparable to the United States. If one goal of tax reform is to raise worker incomes, there are much more direct ways to go about doing so. We know that workers pay all of the payroll tax and that they receive most of the benefit from the Earned Income Tax Credit, so focusing on those areas provides a more direct benefit to workers.
Still, there are good reasons to reform the United States corporate tax system. Ideally, corporate tax reform should not have an adverse effect on government revenue, should reduce distortions that make people respond to tax incentives rather than underlying economic considerations, and should eliminate current incentives that discourage companies from distributing their profits to their shareholders. An ideal corporate tax reform would likely combine a lower tax rate with a broader tax base (including steps to combat profit shifting) and a more even treatment of different types of investment. But deficit-financed corporate tax cuts are more likely to hurt workers than help them.
A very good look at this questions and a must read!
Slower Growth in the Carolinas During October
From the Richmond Fed:
Reports from firms in North Carolina and South Carolina indicated slower growth in October, according to the most recent survey by the Federal Reserve Bank of Richmond. The general business conditions and sales indexes remained positive, but dropped below September’s values. Particularly noticeable was a drop in the sales index from 23 in September to 11 in October.
Firms in the Carolinas also saw slower employment growth in October, accompanied by little change in the average workweek and a drop in availability of skills needed (from 4 to −9). However, survey respondents did report increased spending growth in October.
Firms observed more price growth in October than in September for both inputs and outputs. Businesses in the Carolinas expect growth in prices to continue to increase in the next six months.
Ouch! Not good and hopefully not a sign of what we can expect in the coming months…
Will the AI Jobs Revolution Bring About Human Revolt, Too?
From The Conversation:
As artificial intelligence technology becomes more capable, it threatens more types of jobs – like lawyers, bureaucrats and managers. What social upheaval will happen if those people can’t find work?
Unlike other worker revolts, a white-collar rebellion could move the levers of power so as to uproot the underlying problem: a politico-economic system that concentrates wealth, increases inequality, protects corporations from public accountability and fails to separate wealth and state.
I tell you what would happen: things will start to get interesting! And not in a good way…
That’s it for today! Please share or subscribe!