Discussing this week’s reports on mortgage rates, why waiting to buy could be costly, jobless claims, home builder confidence and much much more!
Freddie Mac reported:
- 30-year fixed-rate mortgages averaged 4.38% with an average 0.6 point
- This is up from last week when it averaged 4.32%
- Last year at this time, 30-year fixed-rate mortgages averaged 4.15%
- 15-year fixed-rate mortgages this week averaged 3.84% with an average 0.5 point
- This is up from last week when it averaged 3.77%
- Last year at this time, 15-year fixed-rate mortgages averaged 3.35%
Check out the chart showing the dramatic increases in mortgage rates recently:
The MBA reported:
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($453,100 or less) increased to its highest rate since January 2014, 4.57%, from 4.50%, with points increasing to 0.59 from 0.57 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans.
The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances (greater than $453,100) increased to its highest rate since January 2014, 4.55%, from 4.47%, with points increasing to 0.47 from 0.44 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans.
The average contract interest rate for 15-year fixed-rate mortgages increased to its highest rate since April 2011, 4.00%, from 3.92%, with points increasing to 0.65 from 0.65 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans.
Ouch! Remember that these are the average rates and home buyers must talk to a real live mortgage professional to discuss their options and what is possible for them.
But what if you decided to wait to buy a home? The cost of waiting to buy refers to the additional money it will take to buy a home if mortgage rates and home prices continue to increase.
If we take Freddie’s prediction of rates climbing to 5.1% by 2019 and CoreLogic’s prediction that home prices will increase by 4.3% in the next year, we see how expensive waiting can be:
While you may not be planning on spending this much, the math still works out that waiting will be very costly. If you have any questions about buying a home in the Anderson SC area, please Contact Me!
Weekly Jobless Claims Increase
In the week ending February 10, the advance figure for seasonally adjusted initial claims was 230,000, an increase of 7,000 from the previous week’s revised level. The previous week’s level was revised up by 2,000 from 221,000 to 223,000. The 4-week moving average was 228,500, an increase of 3,500 from the previous week’s revised average. The previous week’s average was revised up by 500 from 224,500 to 225,000.
While the number of people filing for unemployment increased from last week’s incredible low, it is still at a very very low level. This is the 154th consecutive week that claims have been below 300,000.
This indicates a very strong labor market and the unemployment rate is at a super low 4.1%. Hopefully, we will see wage growth due to the strength of the job market and the economy.
Home Builder Confidence Stays Healthy
Builder confidence in the market for newly-built single-family homes remained unchanged at a healthy level of 72 in February on the National Association of Home Builders/Wells Fargo Housing Market Index (HMI). Demand conditions are positive, but supply-side construction hurdles need to be managed, as scarce labor and building material price increases remain top concerns.
Good news other than the difficulty that home builders are having finding qualified workers. And the increases in building materials will be passed onto buyers which will add to the way home prices are increasing.
Banks Need More Skin in the Housing Finance Game
From American Banker:
We all know it was a really bad idea in the last cycle to concentrate so much of the credit risk of the huge American mortgage loan market on the banks of the Potomac River — in Fannie Mae and Freddie Mac.
But the concentration is still there, a decade later.
The Fannie- and Freddie-centric U.S. housing finance system removes credit risk from the original lenders, taking away their credit skin in the game. It puts the risk instead on the government and the taxpayers.
The housing finance system should promote, not discourage, mortgage lenders staying in the credit business. Regulators, legislators, accountants and financial actors should undertake to reform regulatory, accounting and legal obstacles to the right alignment of incentives and risks. The Federal Housing Finance Agency should be pushing Fannie and Freddie to structure their deals to encourage originator retention of credit risk.
The result will be to correct, at least in part, a fundamental misalignment that the Fannie and Freddie model foisted on American housing finance.
All very true but if we do see GSE reform at this time, it probably will not be anything that the banks do not like. And we must worry about the possible impact on the housing market, home prices and credit availability for ALL credit worthy Americans.
Mortgage Debt Increases Substantially
From NY Fed:
Total household debt increased by $193 billion (1.5%) to $13.15 trillion in the fourth quarter of 2017. This report marks the fifth consecutive year of positive annual household debt growth.
Mortgages are the largest form of household debt and their increase of $139 billion was the most substantial increase seen in several quarters. Unlike overall debt balances, which last year surpassed their previous peak reached in the third quarter of 2008, mortgage balances remain 4.4% below it.
Mortgage balances increased substantially, and the median credit score of borrowers for new mortgages decreased slightly.
Increasing debt isn’t good but we can be glad that the median credit score for new mortgages decreased. Also, mortgage balances are still below the previous peaks in the states that were hardest hit by the Great Recession.
Rail Traffic Increases
The Association of American Railroads reported that for the week ending February 10, 2018, , total U.S. weekly rail traffic was up 1.6% compared with the same week last year. Total carloads was down 0.5% compared with the same week in 2017, while U.S. weekly intermodal volume was up 3.7% compared to 2017.
Not exactly great but not bad so we will call it good…
Wells Fargo Screws Customers Yet Again, Now Failing to Make Right on Abuses
Wells Fargo is still up to no good…
Wells Fargo is getting yet more deserved bad press. Gretchen Morgenson and Emily Glazer of the Wall Street Journal reported Tuesday that the bank was making a hash of the customer restitution it had promised to make in connection with its various scandals. Even though the press firestorm last fall was over the bank’s “fake accounts,” the much bigger payments to customers, and the ones it is messing up involve the force placing of auto insurance, which in over 20,000 cases led to car repossessions, and charging unjustified fees in connection with mortgages.
Just a tiny smidgen from an absolute must read! Why anyone would want to do business with companies that act in this way? Follow the link and get your blood pressure up reading about this despicable behavior…
Remodeling Activity Continues to Climb on Solid Economy and Wages
The Residential Remodeling Index closed out 2017 on a strong note, reaching a new all-time high of 111.3 in the fourth quarter. The latest reading marked a year-over-year increase of 4.9 percent and a steady 1.2 percent gain from the previous quarter. The RRI has now experienced twenty-three consecutive quarters of year-over-year gains since the bottom of remodeling activity in 2011.
The forecast for 2018 has strengthened, reflecting the strong economy and increased demand in areas that were hit by 2017’s natural disasters. The RRI is projected to average year-over-year gains of 5.2 percent throughout 2018, up from expectations of 4.7 percent in Metrostudy’s previous release. Longer term, the RRI is forecast to continue reaching new highs through 2020.
Excellent news. But we must remember that some of this is due to some people deciding to stay put instead of selling their home. While it is a great time to sell a home, many are scared of the tight inventory.
A Warning About Rising Interest Rates
From Northman Trader:
The US is drowning in debt and as long as rates are low it’s all fun and giggles, but there is a point where it cramps on growth and the simple question is when and where. In recent weeks we have had a nasty correction coinciding with technical overbought readings and both bonds and stocks testing 30 year old trend lines.
In the meantime we continue to get data that keeps sending the same message: It’s a debt bonanza that keeps expanding and is unsustainable. Janet Yellen a few months ago said the debt to GDP ratio keeps her awake at night. Yesterday the Director of National Intelligence came out and described the national debt on an unsustainable path and a national security threat. This is literally where we are as a nation.
What’s Congress’s and the White House’s response? Spend more and blow up the deficit into the trillion+ range heading toward 2-3 trillion.
Another must read and I hope you will take the time to read it!
Well that is all I have time for today! Be sure to hit the share buttons if you enjoyed this post and please consider subscribing so you will be notified by email of new posts!