Talking about rising home equity, hints from Yellen about the Fed raising their benchmark rate and much more…
From Yellen’s remarks to the Committee on Financial Services, U.S. House of Representatives, on February 15, 2017:
Turning to monetary policy, the FOMC is committed to promoting maximum employment and price stability, as mandated by the Congress. Against the backdrop of headwinds weighing on the economy over the past year, including financial market stresses that emanated from developments abroad, the Committee maintained an unchanged target range for the federal funds rate for most of the year in order to support improvement in the labor market and an increase in inflation toward 2 percent. At its December meeting, the Committee raised the target range for the federal funds rate by 1/4 percentage point, to 1/2 to 3/4 percent. In doing so, the Committee recognized the considerable progress the economy had made toward the FOMC’s dual objectives. The Committee judged that even after this increase in the federal funds rate target, monetary policy remains accommodative, thereby supporting some further strengthening in labor market conditions and a return to 2 percent inflation.
At its meeting that concluded early this month, the Committee left the target range for the federal funds rate unchanged but reiterated that it expects the evolution of the economy to warrant further gradual increases in the federal funds rate to achieve and maintain its employment and inflation objectives. As I noted on previous occasions, waiting too long to remove accommodation would be unwise, potentially requiring the FOMC to eventually raise rates rapidly, which could risk disrupting financial markets and pushing the economy into recession. Incoming data suggest that labor market conditions continue to strengthen and inflation is moving up to 2 percent, consistent with the Committee’s expectations. At our upcoming meetings, the Committee will evaluate whether employment and inflation are continuing to evolve in line with these expectations, in which case a further adjustment of the federal funds rate would likely be appropriate.
Remember that while the Fed does NOT set or control mortgage rates, what they do can affect mortgages rates quickly and dramatically.
Two Republican lawmakers introduced Tuesday companion bills to eliminate the Consumer Financial Protection Bureau (CFPB), the controversial watchdog agency long targeted by the GOP.
Republicans have long sought to eliminate or drastically reform the CFPB, but Cruz and Ratcliffe’s approach goes further than current GOP proposals to reshape the bureau.
I am not a fan of the CFPB or bureaucracy BUT I ask that you think about the NAME of this government agency…
Do we really want to eliminate an agency whose goal is to protect consumers?
Or should we look to refine and improve it so it protects consumers while not restricting economic growth?
In testimony before the Senate Banking Committee on February 14, Democrats asked Yellen whether US President Donald Trump and his fellow Republicans’ claim that the new rules were hurting lending and growth had any merit.
She was unequivocal, pointing to a survey of small businesses that shows just 4% are having trouble getting credit.
“Lending has expanded overall by the banking system, and also to small businesses,” she said. “US banks are generally considered quite strong relative to their counterparts. They’ve built up quite a bit of capital, partly as a result of our insistence that they do so.”
More broadly, she pushed back against the notion that the new rules had encumbered the economy, arguing instead that they have made the financial system safer and Americans more confident.
“We lived through a devastating financial crisis. Most members of Congress and the public came away from that experience feeling that it was important to take a set of steps that would result in a safer and stronger financial system,” she said. “I feel that we have done that.”
It shocked me to hear Yellen say anything that might be against the wishes of the big banks or Wall Street. Is this simply some misdirection to ensure that deregulation DOES occur? Or Yellen wanting to have plausible deniability later on if the shit hits the fan?
From the NFIB:
The Index of Small Business Optimism rose 0.1 points to 105.9, the highest reading since December 2004, sustaining the remarkable surge in optimism that started post-election. Five of the 10 Index components posted a gain and 5 declined, but all by just a few points. After the stunning increases seen after the election, all of the Index components held near their record high levels. Job openings and job creation plans both posted small gains, confirmed by a huge increase in the net number of jobs added by the average firm, a gain subsequently confirmed by the BLS in its February jobs report. As “good feelings” are translated into actual hiring and spending, GDP growth should see an uptick. The inflation outlook remained stable, there was no surge in reports of higher selling prices.
Good to see small business optimism remain at a healthy level. This should mean we will see strong economic growth in 2017.
National home prices have crept upward at a pace of 0.9% over the last quarter, a rate that’s holding steady since last month. Despite an expected winter slowdown in real estate activity, nationwide annual price growth has actually increased 0.3% since last month to 6.1%, the highest reported year-over-year price growth since February 2015.
Excellent news! Remember this is a national report and may not reflect what is happening in your local market.
A third of all U.S. consumers households surveyed in 2016 were non-homeowners (34 percent), which is a sizable number of people who want to own a home but haven’t found a path to homeownership just yet. Of non-owners, 26 percent were renters and 11 percent were those living with someone else without paying rent. The typical non-owner is under 34 years of age (59 percent), has an income of less than $50,000 (64 percent), and lives in suburban areas (43 percent).
Non-owners could benefit from increased education on downpayment assistance. In the third quarter of 2016, survey respondents were asked questions related to downpayments. Of the non-owners, 39 percent believe they need more than 20 percent for a downpayment and 87 percent believe they need more than 10 percent.
If you want to buy a home, please understand that there are ways to buy a home that do NOT require a huge down payment. If you are interested in learning more, talk to your preferred mortgage professional about USDA Rural mortgages.
The gap between homeowner estimates and appraiser opinions has widened. Quicken Loans’ National Home Price Perception Index (HPPI) showed the average appraisal value was 1.47 percent below what owners expected in January.
It amazes me how far off some people can be about the value of their home. Some are low, some are high, some think they can rely upon websites such as Zillow.
If you are selling a home, selecting the correct list price is essential to your success. The list price will affect how much your home sells for and how quickly it sells.
Between October-December 2016, for the eleventh straight quarter, a greater number of mortgage lenders reduced their loan approval standards than those which increased them. It points to why more mortgage loans are being approved than during any period in recent history.
If you think you cannot get a mortgage but have always wanted to buy a home, then I STRONGLY suggest you speak to a local lender. You could be pleasantly surprised.
And if you cannot be approved, a GOOD lender will be able to tell you why and what you need to do so you can get a mortgage.
Between 2000 and 2014, 6.5% of homes built before 2000 and 10.3% of homes built in the 1990s went from owner-occupied to rental status, RIHA found in a new study authored by Syracuse University professor Stuart Rosenthal. On average, roughly 2% of the housing stock makes that transition over a decade.
Rosenthal examined different factors that contribute to the transitions between owner-occupied and rental status. One major factor that he found contributed to more homes becoming rental properties was their equity status.
Many home owners were underwater or had negative equity after the housing market crashed. The nice thing is that because of increasing home prices, most home owners have equity in their homes today.
This means many home owners can either sell or refinance to take advantage of the historically low mortgage rates available today.
Housing equity is the primary form of collateral that households use for borrowing. This makes it a potentially important source of consumption funding, especially for younger households. In a previous post we showed that owner’s equity in residential real estate has finally, thanks to increasing home prices, rebounded to and essentially re-attained its 2005 peak level. Yet in spite of a gain of more than $7 trillion in housing equity since 2012, so far homeowners haven’t been tapping this equity at anything like the pace we witnessed during the housing boom that ended in 2006.
It is good to see that the painful lessons about using the equity in a home as an ATM has changed home owner behavior. If you are thinking about using the equity in your home, you need to look at the horror stories from just a few years ago.
Well that is it for today!