Discussing how many people still see buying a home as a priority, mortgage delinquencies, pending home sales, the effect of tax reform on home prices and more!
75% Say Buying a Home is a Priority
Despite concerns over down payments and maintenance costs, Americans are optimistic about buying a home, seeing the investment potential in those four walls.
Buying a home is an expensive decision and one that can be quite stressful, with home prices that seem to have no ceiling and a purchasing process that can confound even the savviest buyer.
Still, 75% of Americans say buying a home is a priority, according to a new NerdWallet survey conducted online by Harris Poll.
Encouraging! However, the survey also points out that some people are not thinking about the costs of maintenance, property taxes and insurance.
This is why you need to adjust your monthly housing budget to include more than just the mortgage payment!
Freddie Mac’s Serious Mortgage Delinquency Rate Increased
Freddie Mac just reported that their single-family seriously delinquent rate increased from 95 basis points in November to 108 basis points in December 2017. This is also higher than the 100 basis points back in December 2016.
This could be more fall out due to the hurricanes but I hate how every hiccup in housing is blamed on the weather. Remain calm and we will have to keep our eyes on mortgage delinquencies…
Pending Home Sales Increase in December
Pending home sales were up slightly in December for the third consecutive month, according to the National Association of Realtors®. In 2018, existing-home sales and price growth are forecast to moderate, primarily because of the new tax law’s expected impact in high-cost housing markets.
Check out this map showing the impact of tax reform on home prices according to NAR:
I am not convinced yet that the changes to the tax laws will hurt housing as much as NAR is projecting. Besides, you can see that NAR is predicting that home prices in South Carolina will rise by 3.5% in 2018!
Lawrence Yun, NAR chief economist, said:
Another month of modest increases in contract activity is evidence that the housing market has a small trace of momentum at the start of 2018. Jobs are plentiful, wages are finally climbing and the prospect of higher mortgage rates are perhaps encouraging more aspiring buyers to begin their search now.
Sadly, these positive indicators may not lead to a stronger sales pace. Buyers throughout the country continue to be hamstrung by record low supply levels that are pushing up prices — especially at the lower end of the market.
First, Yun is talking about national housing market and not local real estate market conditions. It is more of a big picture look at the national housing market and the economy. Always rely upon what is happening locally by working with an experienced local Realtor!
The tight inventory is being blamed for the lack of home sales nationally. But in the Anderson area, buyers can still find a home if they are properly prepared and professionally represented by a Realtor.
You may find competition and experience frustrations or even a bidding war. Just remain calm, stick to your budget and listen to your Realtor’s advice!
It is better to NOT buy a home than it is to spend more than you should. You may have found a home you think you love but truly loving a home comes AFTER you have lived in it and created memories.
Weekly Initial Unemployment Claims Decrease
In the week ending January 27, the advance figure for seasonally adjusted initial claims was 230,000, a decrease of 1,000 from the previous week’s revised level. The 4-week moving average was 234,500, a decrease of 5,000 from the previous week’s revised average.
Good that the 4-week moving average is still below 250,000.The lack of claims should indicate that the labor market is strong.
But it is today’s jobs report that we need to also consider. It was strong and I will discuss it more tomorrow after digging into the stats more and digesting what I find.
Let’s see what Freddie and the MBA had to report this week!
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 level since March 2017, 4.41%, from 4.36%, with points increasing to 0.56 from 0.54 (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 $453,100) increased to its highest level since March 2017, 4.34%, from 4.31%, with points increasing to 0.40 from 0.38 (including the origination fee) for 80% loan-to-value ratio (LTV) loans.
The average contract interest rate for 15-year fixed-rate mortgages increased to its highest level since April 2011, 3.85%, from 3.81%, with points increasing to 0.60 from 0.52 (including the origination fee) for 80% loan-to-value ratio (LTV) loans.
Freddie Mac Reported:
- 30-year fixed-rate mortgages averaged 4.22% with an average 0.5 point
- This is up from last week when it averaged 4.15%
- Last year at this time, 30-year fixed-rate mortgages averaged 4.19%
- 15-year fixed-rate mortgages this week averaged 3.68% with an average 0.5 point
- This is up from last week when it averaged 3.62%
- Last year at this time, 15-year fixed-rate mortgages averaged 3.41%
Check out the chart:
While rates are increasing, look at how much lower they are now compared to back in 2008 to 2010…
Len Kiefer, Deputy Chief Economist at Freddie Mac, said:
The Federal Reserve did not hike rates this week, but the market views future hikes as a near certainty. The expectation of future Fed rate hikes and increased borrowing by the U.S. Treasury is putting upward pressure on interest rates. The 30-year fixed rate mortgage is up over a quarter of a percentage point (27 basis points) from the first week of the year. 30-year fixed mortgage rates have increased for four consecutive weeks and are now slightly above where they were last year at this time.
Since Kiefer brought up the Fed, let’s talk about what they said in the latest FOMC statement:
Information received since the Federal Open Market Committee met in December indicates that the labor market has continued to strengthen and that economic activity has been rising at a solid rate. Gains in employment, household spending, and business fixed investment have been solid, and the unemployment rate has stayed low. On a 12-month basis, both overall inflation and inflation for items other than food and energy have continued to run below 2 percent. Market-based measures of inflation compensation have increased in recent months but remain low; survey-based measures of longer-term inflation expectations are little changed, on balance.
The Committee expects that, with further gradual adjustments in the stance of monetary policy, economic activity will expand at a moderate pace and labor market conditions will remain strong. Inflation on a 12‑month basis is expected to move up this year and to stabilize around the Committee’s 2 percent objective over the medium term.
In view of realized and expected labor market conditions and inflation, the Committee decided to maintain the target range for the federal funds rate at 1-1/4 to 1‑1/2 percent.
OK but what does this mean for the housing market. We can still expect mortgage rates to increase because the Fed said that they think “further gradual” rate increases will be warranted in 2018.
NAR Chief Economist Lawrence Yun said:
The Fed will not be on standby for the remainder of the year. A total of three short-term rate hikes are likely. The series of rate hikes will nudge up mortgage rates, though not in one-to-one fashion. Moreover, the Fed’s quantitative un-easing of selling the bonds and mortgage-backed securities into the market (after having purchased in the recent past years) will also force up longer-term interest rates, including mortgage rates. Expect mortgage rates to reach 4.5% by the second half of the year.
The Fed’s previous statement had said they expect inflation to stay below 2% but now they think inflation “is expected to move up this year and to stabilize around the committee’s 2 percent objective over the medium term”.
In other words, we should expect to see the Fed increase their benchmark rate in March. While the Fed does not directly set mortgage rates, it does affect them!
Economic activity in the manufacturing sector expanded in January, and the overall economy grew for the 105th consecutive month, say the nation’s supply executives in the latest Manufacturing ISM® Report On Business®.
U.S. Consumer Comfort Highest Since 2001 on Optimism for Economy
U.S. consumer confidence, along with a measure of Americans’ views of the economy, advanced last week to the highest levels in nearly 17 years, the Bloomberg Consumer Comfort Index showed Thursday.
Really nice to hear this!
Train Traffic Increases
The Association of American Railroads (AAR) on U.S. rail traffic for the week ending January 27, 2018:
For this week, total U.S. weekly rail traffic was 543,515 carloads and intermodal units, up 4 percent compared with the same week last year.
Total carloads for the week ending January 27 were 260,993 carloads, up 1.1 percent compared with the same week in 2017, while U.S. weekly intermodal volume was 282,522 containers and trailers, up 6.9 percent compared to 2017.
More excellent news!
That is all I have time for today. Please subscribe so you are notified via email of new posts!