Discussing mortgage rates, the possible tax cuts and their effect on real estate, a housing bubble, home ownership and more!
Mortgage Rates This Week
Time once again to look at the mortgage rate reports from Freddie and the MBA!
Freddie Mac Said Mortgage Rates Dipped Slightly
- 30-year fixed-rate mortgages averaged 3.90% with an average 0.4 point
- This is down from last week when it averaged 3.94%
- Last year at this time, 30-year fixed-rate mortgages averaged 3.57%
- 15-year fixed-rate mortgages averaged 3.24% with an average 0.5 point
- This is down from last week when it averaged 3.27%
- Last year at this time, 15-year fixed-rate mortgages averaged 2.88%
The MBA Also Reported Decreases
From the MBA:
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($424,100 or less) decreased to 4.18% from 4.22%, with points decreasing to 0.38 from 0.43 (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 4.12% from 4.16%, with points decreasing to 0.24 from 0.27 (including the origination fee) for 80% loan-to-value ratio (LTV) loans.
The average contract interest rate for 15-year fixed-rate mortgages decreased to 3.51% from 3.52%, with points remaining unchanged at 0.44 (including the origination fee) for 80% loan-to-value ratio (LTV) loans.
Great news but remember these are the average mortgage rates and may not reflect what is possible for every home buyer. If you are interested in buying a home, talking to the mortgage professional of your choice is the best way to find out what is possible or realistic for you.
More Americans Think Wealthy, Not Middle class, Will Benefit From Tax Reform
Americans are more likely to believe the wealthy will benefit most from the tax reform currently being pushed in the U.S. Congress by Republicans who insist their goal is to help the middle class, according to a Reuters/Ipsos opinion poll released on Thursday.
Despite an insistence by Republicans that their goal is help the middle class, only 8 percent of Americans think that demographic will benefit the most, the poll, which was conducted Nov. 3-8, found.
It is still up in the air as to what changes will be in the tax reform. And it is really hard to say what is really the intention or the effect of any changes…
Relax, The Housing Market Will Be Fine After Tax Reform
The prospect of major tax reform that broadens the tax base and lowers tax rates has the residential housing industry in panic mode. The National Association of Realtors recently called the House tax bill “an outright assault on homeownership in America.” Separately, a study commissioned by the Realtors warns that comprehensive tax reform would result in an average drop in home values of 10%. But the reality is that the housing market will be fine if the House Republican tax plan is enacted.
Yes, the number of taxpayers who choose to itemize their deductions would decline as a result of the House GOP tax plan, which nearly doubles the standard deduction and repeals or limits other itemized deductions. But to jump from that to warnings of a precipitous housing market decline demonstrates a lack of understanding of the effect of existing tax policy on the housing sector.
As I said before, we do not know exactly what the final tax reform will be. According to Bloomberg, the House bill caps the Mortgage Interest Deduction at $500K and limits it to just one house but the Senate version maintains the $1 million cap.
Because of the HUGE differences in median property values and incomes across the country, should the cap be set by some calculation based on the median home value for the area the home is in?
I know that home values in areas that are dominated by second homes could be hurt by this. If the Mortgage Interest Deduction is supposed to help home ownership, should we consider some way to help people that do not already own a home?
From what I have read, the impact of the possible changes to the Mortgage Interest Deduction and the property tax deduction will be greatest in luxury housing markets. It just breaks my heart that some rich people will be hurt by this…
However, I can’t help but thinking it will only be a trade-off for the rich finding another way to pay less on their taxes.
And will these proposed tax cuts lead to economic growth?
Or is this just a big tax cut scam:
I can’t help shake this sinking feeling: This tax cut package that is being peddled by the current administration is a scam. Why? Because the entire narrative is dishonest and predicated on false, make belief premises.
Rich guys giving themselves tax cuts telling you it’ll trickle down & economic growth will be nothing but milk and honey & it will all pay for itself
Let’s start with the obvious: The very people that are pushing for it have an inherent conflict of interest. Everyone of these people stands to gain personally from the very tax cuts they are pushing
I know some will want to believe this because of their political beliefs and some will be opposed for the same reason.
It is so hard to determine what the truth is but if someone is going to benefit from the changes, you have to question their motives…
The “B” Word in Housing
With the way that home prices have been increasing the past several years, it isn’t surprising that we have heard the word bubble. But are we in a bubble?
Not according to Freddie Mac:
The evidence indicates there currently is no house price bubble in the U.S., despite the rapid increase of house prices over the last five years. However, the housing sector is significantly out of balance. The incomplete recovery in residential construction following the crisis of the last decade has created several years of pent-up demand for household formation. What we can’t predict is how this imbalance will eventually be resolved. Will there be a gradual restoration of a normal balance between supply and demand? Alternatively, will the rate of home building remain stubbornly low, exacerbating the income and wealth inequality that followed the Great Recession? Another bubble appears to be a less probable scenario, but not an impossible one.
Encouraging BUT they also said the experts at the Fed failed to recognize the bubble before the Great Recession. What have some other experts said?
Rick Sharga, Executive VP at Ten-X said:
We’re definitely not in a bubble. We have a handful of markets that are frothy and probably have hit an affordability wall of sorts but…while prices nominally have surpassed the 2006 peak, we’re not talking about 2006 dollars.
Christopher Thornberg, Partner at Beacon Economics said:
There is no direct or indirect sign of any kind of bubble. Steady as she goes. Prices continue to rise. Sales roughly flat.…Overall this market is in an almost boring place.
Bill McBride, at Calculated Risk said:
I wouldn’t call house prices a bubble. So prices may be a little overvalued, but there is little speculation and I don’t expect house prices to decline nationally like during the bust.
David M. Blitzer, Managing Director and Chairman of the Index Committee at S&P Dow Jones Indices said:
Housing is not repeating the bubble period of 2000-2006. Price increases vary unlike the earlier period when rising prices were almost universal; the number of homes sold annually is 20% less today than in the earlier period and the months’ supply is declining, not surging.
Bing Bai & Edward Golding, at the Urban Institute said:
We are not in a bubble and nowhere near the situation preceding the 2008 housing crisis. Despite recent increases, house prices remain affordable by historical standards, suggesting that home prices are tracking a broader economic expansion.
I also do not think we are in a bubble but you need to remember that real estate is NOT a get rich quick scheme.
You make your money in real estate when you buy and you need to plan on owning for a long time to reap the rewards. You need to hope for the best but plan for the worst.
Home Ownership is Still Part of the American Dream
It appears that whether you are a Republican or Democrat, owning a home is still a part of the American Dream according to Zillow:
Homeownership is an American value that transcends political parties, according to the Zillow Housing Aspirations Report. The biannual survey found that 68.7 percent of Republicans and 65.1 percent of Democrats see owning a home as essential to living the American Dream.
About two-thirds of self-identified Republicans and Democrats agreed that homeownership is key to a higher social status, and close to three-quarters of respondents who identified with either party also believe that being a homeowner increases standing in the local community.
Strange that eliminating the Mortgage Interest Deduction would be discussed by politicians if so many people feel this way…
Steven Mnuchin, Foreclosure King of America
Interesting article about Treasury Secretary Steven Mnuchin from Counter Punch:
Mnuchin, a former Goldman Sachs partner, arrived in Washington with a distinct reputation. Back in 2009, he had corralled a bundle of rich financiers to take over California’s IndyMac bank, shut down amid the 2008 foreclosure crisis by the Federal Deposit Insurance Corporation (FDIC). Bought for $13.9 billion (but only $1.3 billion in actual cash), Mnuchin turned it into a genuine foreclosure machine, in the process sealing his own fate when it came to his future reputation. At the time, he didn’t appear concerned about public approval. Something far more valuable was at stake: the $200 million that, according to Bloomberg News, he raked in personally, thanks to the deal.
Is this really the type of person we want running the Treasury?
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