Discussing this week’s mortgage rate reports and the cost of waiting, DTI is increasing, rising rents and incomes, the increase in part time jobs and much more!
Mortgage Rates This Week
Freddie Mac reported:
- 30-year fixed-rate mortgages averaged 4.42% with an average 0.4 point
- This is up from last week when it averaged 4.40%
- Last year at this time, 30-year fixed-rate mortgages averaged 4.08%
- 15-year fixed-rate mortgages averaged 3.87% with an average 0.4 point
- This is the same as last week
- Last year at this time, 15-year fixed-rate mortgages averaged 3.34%
Len Kiefer, Freddie Mac Deputy Chief Economist, said:
Mortgage rates have been holding steady over the past two months. The U.S. weekly average 30-year fixed mortgage rate was 4.42 percent in this week’s survey. Rates have bounced around 4.4 percent since mid-February. Rates could break out and head higher if inflation continues to firm.
If inflation continues to trend higher, we may see two or three more rate hikes from the Fed this year, and mortgage rates could follow. For now, mortgage rates are still quite low by historical standards, helping to support homebuyer affordability as the spring homebuying season ramps up.
Kiefer hits it out of the park when he says that mortgage rates are still low by historical standards. How much longer this remains true is hard to say.
The Mortgage Bankers Association reported:
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($453,100 or less) decreased to 4.66% from 4.69%, with points increasing to 0.46 from 0.43 (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) decreased to 4.53% from 4.56%, with points increasing to 0.31 from 0.27 (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 4.08% from 4.09%, with points increasing to 0.50 from 0.42 (including the origination fee) for 80% loan-to-value ratio (LTV) loans.
The decreases reported by the MBA are better than the news from Freddie Mac BUT remember these are the average rates. Since the beginning of the year, mortgage rates have increased from 3.95% in the first week of January to 4.40% in the first week of April according to Freddie Mac.
It is understandable that the way that mortgage rates have increased so far this year would cause some people to freak out. But the truth is that mortgage rates have actually started to settle down.
The chart above shows mortgage rates for the past year but the chart below shows mortgage rates since the beginning of 2018. You can see the spike and then rates have settled down:
It is good news that mortgage rates have settled down. Can we expect rates to stay at about the same level in the coming months?
If we look at the monthly mortgage rate predictions from Freddie, Fannie, the MBA, and the NAR we see that they are all expecting rates to increase. If we average their predictions for Q2 2018, it looks like mortgage rates will increase to about 4.48% by June.
And if we look at their predictions for the rest of the year, we could see mortgage rates hit 4.73% by the end of 2018!
With home prices and mortgage rates increasing, waiting or delaying could prove to be very expensive. I am not saying anyone should rush their decisions or the home buying process.
You need to be aware of how much more you will spend IF rates increase as projected. If you buy a $125,000 home, it will cost you roughly $24.60 more per month if you wait until the end of the year.
That adds up to $8,850 by the time you pay off a 30-year mortgage. While $25 per month does not sound like much, it adds up over 30 years.
Of course, these numbers are based on the predictions of the “experts”. Ignoring the way that home prices have been increasing and the opinions of the experts could be VERY costly!
Debt-to-Income Ratios Rising Among Buyers
From Realtor Magazine:
About one in five conventional mortgage loans issued this winter went to borrowers who spent more than 45 percent of their monthly incomes on their mortgage payment and other debts. This is the highest proportion since the housing crisis, according to CoreLogic, a real estate data firm. Further, that is nearly triple the proportion of such loans issued in 2016 and the first half of 2017.
Not good at all! I understand that homes are not affordable in many ares but this does not mean someone should overspend.
Have Incomes Kept Up with Rising Rents?
While renters’ median housing costs rose, in real terms, by 11 percent between 2001 and 2016, their incomes fell by two percent, according to our latest America’s Rental Housing report. Moreover, these changes were unevenly distributed across renter households, primarily affecting those who are least able to afford it. Housing costs (rents plus utilities) consumed an increasing portion of household income for renters who made less than the median income for all households. In contrast, incomes increased more than housing costs for higher-income renter households
Spending too much for housing is not good whether someone is renting or owns. This drives home why we need more affordable housing in many areas of the US.
We need more affordable homes for people to buy AND more affordable rentals. We need a logical and sustainable way to ensure that more affordable housing is being built.
I am not suggesting changes that cause speculation or another housing bubble. A sensible reduction in the laws that cause higher costs for home builders could be a good place to start.
Do U.S. Oligarchs Exist? Not in Mainstream Media
From Counter Punch:
TV news shows are good at getting viewers riled up. Day and night, I hear the anchors on CNN and MSNBC getting us riled up about the schemes of this or that “Russian oligarch with links to the Kremlin.” I’ve heard that phrase incessantly in recent weeks
And plenty of others have heard the “Russian oligarch” phrase. Merriam-Webster.com reported that “oligarch” was one of its most searched-for words on April 5th “following reports that Robert Mueller had questioned Russian businessmen to whom this descriptor applies.”
But here’s a phrase I haven’t heard from any of the purportedly progressive hosts on MSNBC: “A U.S. oligarch with links to Washington.”
That avoidance is revealing when one considers an indisputable fact: U.S. oligarchs have done far more to undermine U.S. democracy than any Russian.
It is sad to see so many not realize that there are also oligarchs in the US…
But to get a more accurate and complete view of the workings of the U.S. political system (aka “U.S. oligarchy”), I have a suggestion: Disconnect from MSNBC, CNN, Fox and other corporate news sources and turn instead to high-quality, independent progressive media.
If you do, you’ll see that the problems plaguing U.S. democracy and the U.S. economy are definitely the work of oligarchs. But they don’t speak Russian.
I would also add that you should ignore some of the BS you will see on social media. Too often people blindly repeat or share stuff because it is negative about someone or an issue that they do not like.
Take some time and do your own fact checking with an open mind.
Is Involuntary Part-Time Work Here to Stay?
Despite a tight labor market, an unusually large number of workers who want full-time positions are still stuck in part-time jobs. Rather than reflecting lingering effects from the past recession, this appears to be a permanent shift arising from changes in the types of jobs that are available.
During early 2018, involuntary part-time work was running nearly a percentage point higher than its level the last time the unemployment rate was 4.1%, in August 2000. This represents about 1.4 million additional individuals who are stuck in part-time jobs. These numbers imply that the level of IPT work is about 40% higher than would normally be expected at this point in the economic expansion.
How many people are working 2 part time jobs because they cannot find a good full time job? Even if you have a good full time job, the days of depending on it to always be there are over.
This is why the issue of overspending on housing I just mentioned MUST be addressed. On a personal level, every person must remember to make sound financial decisions and always save every dollar they can.
Are Regulators Fueling Another Housing Boom?
From American Banker:
Just 11 years after the last housing bubble burst, the United States is in the midst of yet another boom — both caused by errant federal housing policy and inflated by regulatory malpractice.
For decades, Congress has mandated any number of credit-easing policies because they appear to make buying a home more affordable at seemingly no cost. But, as the last housing bust proved, there is no free lunch. These mandates result in unsustainable price increases and price volatility by increasing demand when supply is constrained. This same process is being repeated today. But the cost is anything but free as these mandates make housing less affordable and promote instability.
Regulators enforce these mandates by requiring agencies like the government-sponsored enterprises Fannie Mae and Freddie Mac to loosen credit standards in order to garner more business with higher risk borrowers. In the last boom, the Department of Housing and Urban Development forced the GSEs to compete for subprime borrowers with both the Federal Housing Administration and private lenders.
Are regulators encouraging another housing boom and bust? Hard to say but I have been hearing more talk about how lending standards should be loosened to help the housing market.
This does not make much sense as the main problem in housing today is low inventory and not tight lending standards.
Here is the thing for home buyers to remember: You must be educated about the entire home buying process and investigate all of your mortgage options.
Becoming an educated buyer and working with an experienced Realtor and mortgage professional is how you successfully buy a home.
Pepper Your Angus: Trillion Dollar Deficits Coming
From Bipartisan Policy Center:
The 2017 year-end tax cuts and the spending increases in last month’s budget (busting) deal added insult to injury for the country’s already ominous fiscal outlook, the Congressional Budget Office (CBO) confirmed in its most recent report. When combined with an aging population and increasing interest payments on the federal debt, the U.S. government will soon be running trillion-dollar deficits. And this time – absent serious action by our elected leaders – they’re here to stay.
This is NOT good and should be one of the top priorities in Washington. How long could any of us spend more than we make?
The government isn’t any different!
Weekly Unemployment Claims Decrease
In the week ending April 7, the advance figure for seasonally adjusted initial claims was 233,000, a decrease of 9,000 from the previous week’s unrevised level of 242,000. The 4-week moving average was 230,000, an increase of 1,750 from the previous week’s unrevised average of 228,250.
The small decrease from the previous week is good but remember that it is the 4-week moving average that we need to watch. The number of initial jobless claims have been below 300,000 for 162 weeks which is the longest streak since 1967.
In other words, this is very good news!
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