Discussing higher mortgage rates effect on buyers, the Fed increasing their rate and the national debt, a retail apocalypse, higher fees for Fannie and Freddie, Small Business Optimism, mortgage delinquencies and foreclosures
Here’s What a 5% Mortgage Rate Would Mean to Buyers
The average rate on the popular 30-year fixed is now right around 4.50 percent, still low when looking historically, but buyers over the past six years have gotten more used to rates in the 3 percent range. Mortgage rates have not been at 5 percent since 2011.
A 5 percent rate would cause more than a quarter of today’s homebuyers to slow their plans, according to a Redfin survey of 4,000 consumers at the end of last year. Just 6 percent said they would drop their plans to buy altogether. About one-fifth of consumers said 5 percent rates would cause them to move with more urgency to purchase a home, fearing rates would rise even further. Another fifth said they would consider more affordable areas or just buy a smaller home.
Forewarned is forearmed…
Four Rate Hikes in 2018 as US National Debt Will Spike
From Wolf Street:
It didn’t take long for rate-hike expectations to be jostled further by last week’s “monster” two-year budget bill that Congress passed with its usual gyrations, including a government mini-shutdown, and that Trump signed into law on Friday. The bill increases spending caps by $300 billion over the next two years. It includes an additional $165 billion for the Pentagon and $131 billion for non-defense programs.
The bill comes after the tax cuts slashed expected revenues by $1.5 trillion of the next ten years. So pretty soon this is starting to add up.
Going forward, the US gross national debt will likely balloon at a rate of over $1 trillion a year, every year, even during the best of times. It’s $20.5 trillion currently [update 3 hours later, after debt ceiling suspended: $20.7 trillion]. It will likely be over $21.5 trillion a year from now – and this when the US economy is expected to boom. Any downturn will cause the debt to spike.
Four rate hikes this year – that’s what Credit Suisse’s US economists said in a research note on Monday. Previously, they’d expected three rate hikes for 2018.
So is Credit Suisse correct and the Fed will raise their benchmark rate 4 times this year? If they do, it will put even more upward pressure on mortgage rates…
We have to wonder if higher mortgage rates will cause the rate that home prices have been increasing to slow down even more. I think it will but I do not think we will see home prices decrease unless the entire economy hits the skids.
And is the massive increase in national debt going to cause massive economic pains further down the road? I think so but I am not psychic and cannot say what the future holds.
Is America in a Retail Apocalypse?
Things did not appear to go well for retail landlords in 2017. Big chains announced thousands of store closings and filed for Chapter 11 bankruptcy protection at a record rate, leading analysts to predict that hundreds of malls were on the verge of closing. The forecasts for the future proved even more grim than the present.
There were about 1,070,000 retail stores in the U.S. in 2015, according to census data that includes the types of stores you find in shopping malls as well as big box stores, gas stations, and other retailers. That’s up slightly from a recession-era low of 1,063,000 in 2011. The problem is that the data lags, so it leaves out any carnage from the last two years.
There’s another way to measure recent retail closings: Ask Yelp.
So what does Yelp’s data say about the retail apocalypse? Stores closed at a faster pace than they opened in 2017, the only time that happened in the four years of data that the company provided to Bloomberg. For mall owners and others in retail, that has to sting worse than a one-star review.
Interesting way to look at the state of retail. I wonder how accurate it is but considering the many reports about how the internet will destroy brick and mortar, we do have cause for concern.
Fannie and Freddie Mortgages Face Higher Fees Under Trump Budget
The Trump Administration has said it wants to get Fannie Mae and Freddie Mac out of government control, but in the meantime it’s not being shy about seeking to use revenue from the U.S.-backed mortgage guarantors to reduce the deficit.
In its 2019 spending plan released Monday, the administration asked Congress to raise the fees Fannie and Freddie charge to back payments on mortgage-backed securities by 0.1 percentage point, a move it said would reduce the federal budget deficit by $25.7 billion over the next decade.
While there is no guarantee that this will happen, if it does, you can be guaranteed that the cost for this increase will be paid by home buyers…
If this change does happen, it could make the percentage of new mortgages originated by the GSEs shrink. That should help the banks and Lord knows, they need all the help they can get…
Small Business Optimism Index Hits Record High
The Small Business Optimism Index jumped two points to 106.9 in January and set a record with the number of small business owners saying Now Is a Good Time to Expand, according to the latest NFIB Small Business Economic Trends Survey.
NFIB President and CEO Juanita Duggan said:
Main Street is roaring. Small business owners are not only reporting better profits, but they’re also ready to grow and expand. The record level of enthusiasm for expansion follows a year of record-breaking optimism among small businesses.
Great news and hopefully this will lead to even more economic growth. And higher wages since finding qualified workers is the number one concern for small businesses now.
Mortgage Delinquencies and Foreclosure Rate Decreases
CoreLogic just reported in their latest Loan Performance Insights Report that mortgage delinquencies in November 2017 were down 0.1% YoY. They also said that the foreclosure inventory rate was down 0.2% from the level in November 2016.
While this is a national report, it is still great news.
Well that all I have time for today but be sure to check back tomorrow as I have lots more to share!