Talking about the latest mortgage rate reports and how good rates are compared to the past, several positive economic reports, rising wages and home buyers, how much you need to earn to buy an average home in your state plus more!
Time once again to check on this week’s mortgage rate reports!
Freddie Mac reported:
- 30-year fixed-rate mortgages averaged 4.40% with an average 0.5 point
- This is down from last week when it averaged 4.44%
- Last year at this time, 30-year fixed-rate mortgages averaged 4.10%
- 15-year fixed-rate mortgages averaged 3.87% with an average 0.4 point
- This is down from last week when it averaged 3.90%
- Last year at this time, 15-year fixed-rate mortgages averaged 3.36%
Len Kiefer, Freddie’s Deputy Chief Economist, said:
After dropping earlier this week on trade-related anxiety in financial markets, the benchmark 10-year Treasury stabilized on Wednesday, but at a level slightly lower than from the start of last week. Mortgage rates followed and fell for the second consecutive week; the U.S. weekly average 30-year fixed mortgage was 4.4 percent in our survey this week.
Though rates on the 30-year fixed mortgage are up 0.3 percentage points from the same week a year ago, a robust labor marking is helping home purchase demand weather modestly higher rates. The Mortgage Bankers Association reported in their latest Weekly Mortgage Applications Survey that the Purchase Index was up 5 percent from a year ago indicating that this spring is on track for a modest expansion in purchase mortgage activity.
The Mortgage Bankers Association reported:
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($453,100 or less) remained unchanged at 4.69%, with points remaining unchanged at 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 4.56% from 4.60%, with points decreasing to 0.27 from 0.36 (including the origination fee) for 80% loan-to-value ratio (LTV) loans.
The average contract interest rate for 15-year fixed-rate mortgages remained unchanged at 4.09%, with points decreasing to 0.42 from 0.46 (including the origination fee) for 80% loan-to-value ratio (LTV) loans.
The MBA did not report decreases like Freddie BUT at least they did not report increases. The recent decreases may be fallout from the tariffs.
While these decreases are welcome news, it could be an indicator that investors are spooked about the increasing friction between the US and China. While we want a level playing field, we do not want a trade war that will hurt the economy.
Especially since it has been doing so well for so long…
Reuters reported San Francisco Fed President John Williams said:
Although the rhetoric on tariffs so far has been more extreme than the actions taken, he loses sleep over the prospect of an actual trade war, which he warned could result in slower growth, an inflationary spike and lower productivity.
I wonder if we will see this turn into a more serious situation?
Federal Reserve Chairman Jerome Powell said:
As long as the economy continues broadly on its current path, further gradual increases in the federal funds rate will best promote these goals.
Hard to say what will happen with the economy because of the tariffs. But if the effects are minimal, it appears the Fed is going to continue raising rates.
Which should cause mortgage rates to start increasing again. I know this sounds bad but it could be much worse…
Mortgage rates were around 4% for most of 2017. The low mortgage rates helped buyers deal with increasing house prices. The mortgage rate you get affects your monthly mortgage payment and how much you will pay for your home over the life of the mortgage.
Like I said, things could be much worse. Check out this chart showing mortgage rates over the past 45 years:
While the recent increases in mortgage rates and the predictions of more rate increases is scary, looking back in time shows that home buyers can still get a historically LOW mortgage rate!
Service Sector Growth Continues
Economic activity in the non-manufacturing sector grew in March for the 98th consecutive month, say the nation’s purchasing and supply executives in the latest Non-Manufacturing ISM® Report On Business®.
CEO Confidence Increased Again
From The Conference Board:
The Conference Board Measure of CEO Confidence™, which rebounded in the fourth quarter of 2017, made further gains in the first quarter of 2018. The Measure now reads 65, up from 63 in the fourth quarter of 2017 (a reading of more than 50 points reflects more positive than negative responses).
Lynn Franco, Director of Economic Indicators at The Conference Board, said:
CEO confidence improved further in the first quarter of 2018, following a rebound in late 2017. CEOs remain positive about short-term growth prospects in the U.S., and to a lesser degree, about prospects in other mature and emerging markets. Hiring plans have eased compared to last year, with more than half of CEOs anticipating an increase in employment levels in their industry. However, close to 40 percent say finding qualified workers remains a major obstacle to hiring.
More good news! Every time I hear about problems finding qualified workers, I wonder if a higher starting wage would help?
The Association of American Railroads (AAR) today reported U.S. rail traffic for last week. They said that U.S. railroads originated 1,050,653 carloads in March 2018, up 3.6 percent from March 2017.
U.S. railroads also originated 1,082,239 containers and trailers in March 2018, up 6.5 percent from the same month last year. Combined U.S. carload and intermodal originations in March 2018 were up 5 percent from March 2017.
AAR Senior Vice President of Policy and Economics John T. Gray said:
Railroads are a derived-demand industry. Their level of business depends to a large degree on what’s happening elsewhere in the economy. There’s always some economic uncertainty — today that involves, among other things, trade relations, commodity prices, and what the Fed will do about interest rates — but economic signals today are mostly positive. Rail traffic in March was largely positive too, at least in terms of traffic segments that are most sensitive to what’s going on in the economy.
Very good news and Gray’s comment helps to explain why I watch rail traffic. While not directly related to housing, it does give us a very good indicator about the health of the economy.
Steady Gains in Construction Employment But Still Below Peak
A new construction employment analysis from the National Association of Home Builders (NAHB) shows that 9.8 million people worked in construction in 2016, and more than 3.8 million of them worked in residential construction. These numbers reflect modest but steady job gains since 2011, when construction employment bottomed out. However, employment levels remain below the peaks reached during the housing boom in 2006, when more than 11 million worked in construction, and home building employed more than 5 million people.
With the strong demand, you would think we would see even more robust growth in construction employment.
Construction Unemployment Rate at Lowest Level Ever for Month of March
Construction employment increased by 228,000 jobs over the past year despite a weather-related dip last month, and the industry’s unemployment rate fell to 7.4 percent, the lowest yet for March, according to an analysis of new government data by the Associated General Contractors of America. Association officials called for revitalizing and adequately funding career and technical education and training programs to ensure that employment in the high-paying industry would continue to grow.
Ken Simonson, AGC’s chief economist, said:
Construction employment indicators are still signaling strong demand on an annual basis, even though unusually bad weather in several regions probably depressed hiring in March. Employment is rising twice as fast as for the overall economy, pay rates and growth are outpacing the private sector as a whole, and the industry’s unemployment rate was the lowest ever for March.
I have to strongly agree that funding training and education for careers in construction is needed very badly.
Rising Wages Help Home Buyers But Will It Continue?
Today, the Bureau of Labor Statistics released the employment situation report for March. Here are the headlines. Total non-farm payroll jobs increased by 103,000 in March. Total non-farm payroll jobs have increased every month since October 2010. Since that date, the U.S. economy has added more than 17.5 million jobs. The unemployment rate remained again unchanged at 4.1 percent, a 17-year low, and average hourly earnings are up 2.4 percent over a year ago for production and non-supervisory employees. While the number of jobs created may seem disappointing, the data continues to paint a positive picture of the economy, but those are not the numbers that really matter.
Faster rising wages increases the pace of household income growth and improves consumer house-buying power. But, how do we know if wage growth is likely to continue? Is there an indicator we can monitor for insight?
Fleming says we should be considering the prime-age labor force participation rate and makes a pretty good argument as to why. I have said for years that we need strong wage growth for ALL Americans in order to have a strong economy and housing market.
How Much You Need to Buy the Average Home in Your State
From How Much:
The housing market has not only recovered its pre-recession levels, but some observers are actually starting to worry about yet another housing bubble. Housing prices are on the rise, thanks in large part to extremely tight inventory, so it’s worth asking: are potential home buyers getting priced out of the market? The answer depends on where they live and how much money they make.
We collected average home prices for every state from Zillow which we then plugged into a mortgage calculator to figure out monthly payments. Remember, mortgage payments consist of both the principal and the interest for the loan.
Interesting little study but remember that this is assuming you put down 10% and pay a 4 to 5% interest rate. Most buyers will put down different amounts and will also not be buying an average home.
In South Carolina, they said you need to earn $58,840 to buy an average house. I would caution you that this may discourage some and encourage some that should NOT a buy a home.
Talking to a mortgage professional, your financial advisor, tax person and doing some long hard thinking is strongly advised before you take on the wealth building opportunity of home ownership. I suggest you read Should You Rent or Buy a Home
Well that is all for today! Be sure to hit share on Facebook, Twitter or Google if you enjoyed this post!