Discussing mortgage rates, housing starts and building permits, home builder confidence, jobless claims, CEO economic outlook, banking reform, tax reform, home owner and appraiser opinions of value, new home purchase mortgage applications, serious mortgage delinquencies and foreclosures plus more!
From Freddie Mac:
- 30-year fixed-rate mortgages averaged 4.44% with an average 0.5 point
- This is down from last week when it averaged 4.46%
- Last year at this time, 30-year fixed-rate mortgages averaged 4.30%
- 15-year fixed-rate mortgages averaged 3.90% with an average 0.5 point
- This is down from last week when it averaged 3.94%
- Last year at this time, 15-year fixed-rate mortgages averaged 3.50%
Len Kiefer, Deputy Chief Economist at Freddie Mac, said:
Tuesday’s Consumer Price Index report indicated inflation may be cooling down; headline consumer price inflation was 2.2 percent year-over-year in February. Following this news, the 10-year Treasury fell slightly. Mortgage rates followed Treasurys and ended a nine-week surge. The U.S. weekly average 30-year fixed mortgage rate fell 2 basis points to 4.44 percent in this week’s survey, its first decline this year.
The small decreases are welcome news for home buyers that have not found a home yet. But did the Mortgage Bankers also report decreases?
The MBA reported:
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($453,100 or less) increased to 4.69%, from 4.65%, with points decreasing to 0.45 from 0.58 (including the origination fee) for 80% loan-to-value ratio (LTV) loans. This is its highest level since January 2014!
The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances (greater than $453,100) decreased to 4.55% from 4.56%, with points decreasing to 0.33 from 0.52 (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 4.07% from 4.11%, with points decreasing to 0.46 from 0.64 (including the origination fee) for 80% loan-to-value ratio (LTV) loans.
We will call 2 out of 3 not bad but remember these are the average mortgage rates being reported by the MBA. The rates reported by the MBA and Freddie Mac may not reflect exactly what rate you will qualify for!
ALL home buyers need to speak with a mortgage professional to determine what their options are. Home buyers need to get Pre-Approved and understand how much they need for closing costs and down payment BEFORE they start looking at homes.
Also, home buyers must determine their home buying budget before they start looking at homes. Discussing all the possible options could save home buyers a bunch of money!
Housing Starts Decrease
From the Census Bureau:
Privately-owned housing units authorized by building permits in February were 5.7% below the revised January rate but 6.5% above the February 2017 rate. Single-family authorizations in February were 0.6% below the revised January figure. Authorizations of units in buildings with five units or more were at a rate of 385,000 in February
Privately-owned housing starts in February were 7.0% below the revised January estimate and 4.0% below the February 2017 rate. Single-family housing starts in February were 2.9% above the revised January figure. The February rate for units in buildings with five units or more was 317,000.
Most of the decreases were due to declines in multifamily so I would not panic. Slow and steady wins the race but as you can see, we are still much lower than in the past:
That being said, this is not a bad report! It could be better but we all know it could be much much worse…
Home Builder Confidence Solid
Builder confidence in the market for newly-built single-family homes edged down one point to a level of 70 in March from a downwardly revised February reading on the National Association of Home Builders/Wells Fargo Housing Market Index (HMI) but remains in strong territory.
NAHB Chairman Randy Noel said:
Builders’ optimism continues to be fueled by growing consumer demand for housing and confidence in the market. However, builders are reporting challenges in finding buildable lots, which could limit their ability to meet this demand.
NAHB Chief Economist Robert Dietz said:
A strong labor market, rising incomes and a growing economy are boosting demand for homeownership even as interest rates rise. With these economic fundamentals in place, the single-family sector should continue to make gains at a gradual pace in the months ahead.
Excellent news and hopefully the impact of the tariffs on steel and aluminum will not hurt home building. Only time will tell…
Jobless Claims Decrease
In the week ending March 10, the advance figure for seasonally adjusted initial claims was 226,000, a decrease of 4,000 from the previous week’s revised level. The previous week’s level was revised down by 1,000 from 231,000 to 230,000. The 4-week moving average was 221,500, a decrease of 750 from the previous week’s revised average. The previous week’s average was revised down by 250 from 222,500 to 222,250.
This is the 3rd time that jobless claims have fallen in 4 weeks and the number of jobless claims is still close to the lowest level in 48 years. The low level of claims suggests few layoffs and this was lower than many expected.
The strong labor market could lead to more wage growth and that could help to fuel more home buying. Sadly, that will take time and the pace of income growth has been weak for far too long.
Something else to consider is that the Federal Reserve will be looking at jobless claims as they make up their mind about raising their benchmark rate. A good jobless claims report could be the motivation they need to raise rates!
CEO Economic Outlook Index Reaches Highest Level in 15 Years
From the Business Roundtable:
The Business Roundtable Q1 2018 CEO Economic Outlook Index – a composite of CEO projections for sales and plans for capital spending and hiring over the next six months – increased to 118.6 in the first quarter of 2018, the highest level since the survey began in the fourth quarter of 2002. The survey was conducted between February 7 and February 26, 2018. Results reflect renewed CEO optimism and confidence following passage of the Tax Cuts and Jobs Act, but do not capture effects of President Trump’s March 8, 2018, announcement of steel and aluminum tariffs.
The Q1 2018 Index exceeded its previous high point of 113 in 2011. The Index has significantly surpassed its historical average level of 81.2.
All three components of the Index reached record highs, signaling a positive direction for the U.S economy.
- CEO plans for hiring rose to 98.5, up 22.8 from the previous quarter
- Plans for capital investment rose to 115.4, up 22.7 from Q4 2017
- Expectations for sales reached 141.9, an increase of 19.9 from the last quarter
Great news but as they point out, this is from before POTUS Trump announced tariffs on steel and aluminum. Many economists are saying the tariffs will hurt instead of help the economy.
As I discussed earlier, these tariffs could hurt the housing market, home builders and buyers. Consider this snippet from City Lab:
Americans need more affordable housing. Steel and lumber tariffs are not going to help.
As the nationwide housing affordability crisis deepens, the Trump administration is moving to adopt steel and aluminum tariffs that will make it worse, particularly in dense urban cities. This move follows new tariffs on Canadian lumber late last year and harsher enforcement on the migrant workers from Mexico and Central America who are essential to the industry. The combined effect could mean higher rents and more expensive housing in the years to come.
Sadly, many will either criticize or praise the tariffs without looking at the facts simply because of their opinions on Trump. I suggest that everyone try to remove themselves from a self-induced bubble of similar viewpoints before making a decision about this or any other issue.
Any time a business is faced with higher costs, whether it is from taxes, regulations, tariffs or whatever, the consumer is who will eventually pay more. And in a housing market that is faced with a shortage of affordable housing, this is not a good thing!
Deja Moo: Banking Reform and Repeating Mistakes
The National Association of REALTORS® has expressed support for the Economic Growth, Regulatory Relief and Consumer Protection Act, S. 2155, a banking reform bill the Senate plans to take up this week. The bill could open up more lending to households aspiring to become homeowners, NAR says.
The bill balances consumer protections with changes that could make home lending more readily available to people who need it, including renters struggling to acquire a mortgage because they haven’t yet amassed a conventional credit history. The bill includes a requirement that Fannie Mae and Freddie Mac, the country’s largest source of home mortgage funds, accept rent and utility payment history as part of loan applicants’ credit scores.
The bill also reduces some regulatory burdens on credit unions and smaller community banks, which are often the main source of home mortgage financing in rural areas.
The bill would also hold Property Assessed Clean Energy—or PACE—loans more accountable and improve access to manufactured housing. Homeowners use PACE loans to make their property energy-efficient, including by installing a solar panel system. But the loans are considered problematic because they typically are put in a first-lien position, which can make them incompatible with mortgage loans.
I am not 100% sold that this change is all for the good. Some ( but not all ) banks and other financial institutions will be looking for anyway they can to maximize profits regardless of the risk it puts on the US and world economy.
While regulatory reform is much needed, we must make sure it does not cause us to repeat the mistakes of the past.
I strongly suggest that you read 9 controversial provisions in Dodd-Frank reform bill for a better idea of the areas that may not be ideal!
How Will Changes to Taxes Affect Housing?
From First American:
As part of our quarterly First American Real Estate Sentiment Index (RESI), we recently surveyed title insurance agents and real estate professionals across the nation for their perspective on how the new tax code may impact house prices, housing supply (the willingness of homeowners to sell) and housing demand.
Of the respondents, 27 percent believe that the tax code could negatively impact house price appreciation, 35 percent believe it will not do so, 35 percent were neutral on the topic.
The good news for the housing market is 46 percent, almost half of all respondents, did not believe the new tax code will significantly reduce existing homeowners’ willingness to sell. Another 37 percent of respondents thought there would be no impact at all. In fact, only 17 percent of respondents thought that the tax code would significantly reduce homeowners’ willingness to sell.
More than 75 percent of survey respondents indicated that the tax code changes would not significantly reduce demand (45 percent) or would have no impact on demand at all (32 percent). Only 23 percent of title agents and real estate professionals surveyed believed that the tax code changes will reduce demand.
I do not not think the tax reform will hurt home prices, the willingness of owners to sell or reduce demand. What do you think?
Since we are talking about tax reform…
$16 Billion in ‘Tax Extenders’ for Special Interests
Congressional Republicans and Democrats agree on this much: giving narrow special interests temporary — and often retroactive — tax breaks is an awful way to conduct government business.
Wednesday’s hearing of the Ways and Means Tax Policy Subcommittee came a day after a Center for Public Integrity investigation revealed how Congress filled February’s Bipartisan Budget Act of 2018 with numerous temporary tax provisions that benefited special interests — sometimes, extremely narrow ones, such as race horse owners and tuna canners.
These interests often sought such favors on Capitol Hill armed with lobbying might and campaign cash. And the tax provisions they’ve won aren’t cheap: the latest round included in the February budget bill will cost the U.S. Treasury about $16 billion over the next decade.
If Democrats and Republicans agree that giving tax breaks to narrow special interests is an awful way to conduct government business, why are they allowing it to happen? Why aren’t they making sure the American people are aware of this behavior?
It isn’t what you say as much as what you do that matters sometimes…
The Wealthy Can’t Be Corrupt Because They’re Wealthy
And sometimes, what you say will speak volumes! Consider this snippet from CNBC’s Larry Kudlow:
Wealthy folks have no need to steal or engage in corruption.
I must call BS on this. For some, they will never be satisfied with how much money they have. Look back at history and you can find many examples of corruption and crime committed by the rich.
This the type of arrogant elitist attitude is not what we need in a time of rising income inequality and social unrest.
Home Owner and Appraiser Opinions of Value Get Closer
From Quicken Loans:
The trend of home value opinions from appraisers and owners moving ever-closer together resumed in February, after taking a step back the previous month. The National Quicken Loans Home Price Perception Index (HPPI) showed appraisal values in February were an average of 0.53 percent below homeowner estimates. This is the fifth consecutive month the gap between the two values has been less than 1 percent.
The Quicken Loans HVI reported that annual home equity continued its ascent in February, but the pace slowed slightly. Appraisal values increased 6.37 percent compared to February 2017, despite a monthly decrease of just 0.07 percent.
Remember that it is critical that you select the correct price when selling a home. Working with an experienced local Realtor is essential to understanding local market trends and data!
The most activity happens in the first 2 weeks of a new listing. Overpriced homes tend to take longer to sell and sell for less when or IF they do sell.
New Home Purchase Mortgage Applications Increase
From the MBA:
The Mortgage Bankers Association (MBA) Builder Applications Survey (BAS) data for February 2018 shows mortgage applications for new home purchases increased 4.6 percent compared to February 2017. Compared to January 2018, applications increased by 3 percent.
Lynn Fisher, MBA Vice President of Research and Economics, said:
Mortgage applications for new homes continued to grow in February on a year over year basis, although at a slower pace of just under 5 percent, as brisk activity in January likely pulled forward some buyer activity. Combined, applications in January and February were up by 11 percent relative the same period last year. On a seasonally adjusted annual basis, our February estimate of new home sales based on mortgage applications came in at 632,000, ahead of the January Census estimate of 593,000 new homes sales, and back on trend following an uptick from hurricane-related rebuilding.
Good to see the despite rising mortgage rates and limited inventory, new home mortgage applications increased year-over-year.
More Millennials Are Moving to Small Towns
It turns out that millennial home buyers are increasingly moving to small towns, according to the 2018 Home Buyer and Seller Generational report from the National Association of Realtors®. About a fifth of those aged 37 and under, 21%, bought homes in a small town compared with 16% in the previous year, according to the report. That’s compared with 15% who moved to urban areas, which has been the same for the past two years.
This is just a sliver of the tasty info in this must read post. I enjoyed living in a large metropolitan area when I was younger but there is no way I would consider living in one now.
The traffic, the crowds, the crime and all of the other negatives cannot make up for the positives for me. But YOU must decide what is best for you and your budget and lifestyle!
Serious Delinquency and Foreclosure Inventory Rates Declined
According to the latest CoreLogic Loan Performance Insights Report:
5.3 percent of US mortgages were in some stage of delinquency (30 days or more past due, including those in foreclosure) in December 2017. This represents no change in the overall delinquency rate compared with December 2016 when it was also 5.3 percent.
As of December 2017, the foreclosure inventory rate, which measures the share of mortgages in some stage of the foreclosure process, was 0.6 percent, down 0.2 percentage points from 0.8 percent in December 2016. Since August 2017, the foreclosure inventory rate has been steady at 0.6 percent, the lowest level since June 2007, when it was also 0.6 percent. This past December’s foreclosure inventory rate was the lowest for the month of December in 11 years; it was also 0.6 percent in December 2006.
The serious delinquency rate – defined as 90 days or more past due, including loans in foreclosure – was 2.1 percent in December 2017, up from 2 percent in November 2016 and down from 2.3 percent in December 2016. The December 2017 serious delinquency rate was the lowest for the month of December since December 2006, when it was 1.5 percent.
While this is a national report, this is still great news! While we will always have some foreclosures, it is good to see these numbers decrease to a healthier level.
Does Welfare Really Make People Lazy?
From The Atlantic:
“Welfare makes people lazy.” The notion is buried so deep within mainstream political thought that it can often be stated without evidence. It was explicit during the Great Depression, when Franklin D. Roosevelt’s WPA (Works Progress Administration) was nicknamed “We Piddle Around” by his detractors. It was implicit in Bill Clinton’s pledge to “end welfare as we know it.” Even today, it is an intellectual pillar of conservative economic theory, which recommends slashing programs like Medicaid and cash assistance, partly out of a fear that self-reliance atrophies in the face of government assistance.
Many economists have for decades argued that this orthodoxy is simply wrong—that wisely designed anti-poverty programs, like the Earned Income Tax Credit, actually increase labor participation. And now, across the world, a fleet of studies are converging on the consensus that even radical welfare programs—including basic-income programs and what are called conditional cash transfers—don’t make people any less productive.
The problem with welfare programs are the very few that will abuse the system. As with most things in life, it only takes a few bad eggs to ruin things for everyone.
If those found guilty of abusing welfare or other government assistance programs were punished severely, then I feel we would see less abuse or fraud. Sadly, critics of government assistance rather eliminate these programs than adequately punish the abusers IMHO.
The Association of American Railroads (AAR) reported U.S. rail traffic for the week ending March 10, 2018. They said that total U.S. weekly rail traffic was up 6.2 percent compared with the same week last year.
They also reported that total carloads were up 1.6 percent compared with the same week in 2017, while U.S. weekly intermodal volume was up 10.8 percent compared to 2017.
Excellent news! It appears the economy is like the big engine that thinks it can and will!
Huge post today but I have been super busy spending time with visitors from out of town. If you enjoyed this post, please hit those share buttons and subscribe so you get email notifications of new posts!