Discussing mortgage rates this week, home prices, mortgage delinquencies, foreclosure starts and several very good economic reports!
Mortgage Rates This Week
Freddie Mac reported:
- 30-year fixed-rate mortgages averaged 3.94% with an average 0.5 point
- This is up from last week when it averaged 3.93%
- Last year at this time, 30-year fixed-rate mortgages averaged 4.30%
- 15-year fixed-rate mortgages averaged 3.38% with an average 0.5 point
- This is up from last week when it averaged 3.36%
- Last year at this time, 15-year fixed-rate mortgages averaged 3.52%
Len Kiefer, Deputy Chief Economist at Freddie, said:
The majority of our survey was completed prior to the surge in long-term interest rates that followed the passage of the tax bill. If those rate increases stick, we’ll likely see higher mortgage rates in next week’s survey. But even with yesterday’s increase, the 10-year Treasury yield is down from a year ago, and 30-year fixed mortgage rates are 36 basis points below the level we saw in our survey last year at this time. Mortgage rates are low.
Yes mortgage rates could increase BUT remember that mortgage rates are STILL LOW! Now let’s look at what the MBA reported…
The Mortgage Bankers Association reported:
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($424,100 or less) decreased to 4.16% from 4.20%, with points decreasing to 0.35 from 0.39 (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) increased to 4.14% from 4.11%, with points increasing to 0.30 from 0.28 (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 3.60% from 3.61%, with points decreasing to 0.39 from 0.44 (including the origination fee) for 80% loan-to-value ratio (LTV) loans.
No huge changes from either Freddie or the MBA. But these are the average mortgage rates AND these rates were from before the tax reform was passed.
It could get interesting as the economy starts to react to the changes from the tax reform. My advice is to talk to the lender of your choice. Discuss what is possible for you and all of your various mortgage options.
Architecture Billings Index Increase Shows Broad Strength
Even with the uncertainty related to pending tax reform legislation that likely will have a mixed effect on the construction industry, design services at architecture firms remains in high demand. The American Institute of Architects (AIA) reported the November ABI score was 55.0, up from a score of 51.7 in the previous month. This score reflects an increase in design services provided by U.S. architecture firms (any score above 50 indicates an increase in billings). The new projects inquiry index was 61.1, up from a reading of 60.2 the previous month, while the new design contracts index rose slightly from 52.8 to 53.2.
Kermit Baker, AIA Chief Economist, said:
Not only are design billings overall seeing their strongest growth of the year, the strength is reflected in all major regions and construction sectors. The construction industry continues to show surprising momentum heading into 2018.
A great sign for the economy. The Architectural Billings Index measures mainly nonresidential construction spending activity but is an important indicator for the economy.
Rail Traffic Increases Again
For this week, total U.S. weekly rail traffic was up 5.9% compared with the same week last year. Total carloads were up 4.1% compared with the same week in 2016, while U.S. weekly intermodal volume was up 7.6% compared to 2016.
Another positive signal that 2018 could be a great year for the economy.
Initial Unemployment Claims Increase Slightly
In the week ending December 16, the advance figure for seasonally adjusted initial claims was 245,000, an increase of 20,000 from the previous week’s unrevised level of 225,000. The 4-week moving average was 236,000, an increase of 1,250 from the previous week’s unrevised average of 234,750.
While an increase is bad news, the low level of claims is good news. Anytime claims are below 250,000 it is considered a good report.
Mortgage Delinquencies Still Being Affected by the Hurricanes
From Black Knight:
90-day delinquent mortgage inventory spiked 13 percent in November, the largest monthly increase since 2008 as the financial crisis began to unfold. Over 85 percent of the new severely delinquent loans can be attributed to hurricanes Harvey and Irma.
While the increase is bad, not all of the news from Black Knight is bad. There were 47,800 foreclosure starts in the US. This is down 4.78% MoM and 20.86% YoY.
Not surprising to see an increase in mortgage delinquencies due to the hurricanes. Check out the chart:
US Home Prices Increase 6.6%
The FHFA reported this week that U.S. house prices increased 0.5%from the previous month in October 2017. From October 2016 to October 2017, house prices were up 6.6 percent.
Check out the chart:
Remember this is talking about the entire country and you must discuss what is happening in your local market with your Realtor.
Looking locally at what happened during October 2017 in Anderson County SC:
|Homes Sold||Average Price||Median Price|
A Big Comfy $3 Billion Dollar Cushion
The Federal Housing Finance Agency (FHFA), as conservator of Fannie Mae and Freddie Mac, and the Department of the Treasury have agreed to reinstate a $3 billion capital reserve amount under the Senior Preferred Stock Purchase Agreements for each Enterprise beginning in the fourth quarter of 2017. While it is apparent that a draw will be necessary for each Enterprise if tax legislation results in a reduction to the corporate tax rate, FHFA considers the $3 billion capital reserve sufficient to cover other fluctuations in income in the normal course of each Enterprise’s business. We, therefore, contemplate that going forward Enterprise dividends will be declared and paid beyond the $3 billion capital reserve in the absence of exigent circumstances.
This “cushion” is due to the tax reform and the decline in the corporate tax rate will require Fannie and Freddie to write down the value of tax-deferred assets they hold.
This could be the start of many consequences from the tax reform that were not considered while it was being rushed into law…
The Conference Board Index for the US Increased Again
From the Conference Board:
The Conference Board Leading Economic Index® for the U.S. increased 0.4% in November, following a 1.2% increase in October, and a 0.1% increase in September.
3 months in a row is nothing to sneeze at and certainly a very good indicator for the economy.
Ataman Ozyildirim, Director of Business Cycles and Growth Research at The Conference Board said:
The U.S. LEI rose again in November, suggesting that solid economic growth will continue into the first half of 2018. In recent months, unemployment insurance claims have returned to pre-hurricane levels. In addition, improving financial indicators, new orders in manufacturing and historically high consumer sentiment have propelled the U.S. LEI even higher.
Will the economy continue to grow in 2018? Let’s hope so!
Well that is all I have time for today! I hope you have a very Merry Christmas!