Discussing this week’s reports on mortgage rates, how rising rates affects your monthly payment, an interesting survey of Realtors, home prices growing rapidly but it’s may not be as bad as you think, home owners confident about their home’s value, consumer sentiment and more!
Time once again the check out this week’s mortgage rate reports!
Freddie Mac reported:
- 30-year fixed-rate mortgages averaged 4.66% with an average 0.4 point
- This is up from last week when it averaged 4.61%
- Last year at this time, 30-year fixed-rate mortgages averaged 3.95%
- 15-year fixed-rate mortgages averaged 4.15% with an average 0.4 point
- This is up from last week when it averaged 4.08%
- Last year at this time, 15-year fixed-rate mortgages averaged 3.19%
Sam Khater, Freddie Mac’s chief economist, said:
Mortgage rates so far in 2018 have had the most sustained increase to start the year in over 40 years. Through May, rates have risen in 15 out of the first 21 weeks (71 percent), which is the highest share since Freddie Mac began tracking this data for a full year in 1972.
At a time when housing inventory remains extremely low, it’s worth watching whether these higher borrowing costs lead some would-be sellers to stay put in their current home. Inventory shortages would likely worsen if more homeowners decide not to sell out of reluctance of having a new mortgage with a higher rate.
Ouch! After several years of hearing that mortgage rates would rise, it appears to actually be happening…
The Mortgage Bankers 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 April 2011, 4.86%, from 4.77%, with points increasing to 0.52 from 0.50 (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 September 2013, 4.81% from 4.73%, with points increasing to 0.42 from 0.35 (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 February 2011, 4.31% from 4.20%, with points increasing to 0.56 from 0.53 (including the origination fee) for 80% loan-to-value ratio (LTV) loans.
Sorry but no fancy chart for the mortgage rates from the MBA. Still, you don’t need a chart to see that the MBA is also reporting increasing rates.
As always, these are the average rates and ALL serious buyers must sit down with the lender of their choice to discuss their options and what is possible/realistic.
Check out this chart showing the impact of higher mortgage rates on monthly mortgage payments:
I realize that not everyone is buying a home as expensive as the prices in this chart but I think you get the point. With each quarter of a percent increase in your mortgage rate, how much home you can afford decreases by 2.5 percent!
Buying now instead of later means a lower mortgage rate. Experts are saying that rates will continue to climb. As you can see, a small increase in rates will have an impact on your monthly mortgage payment!
Realtor Confidence Index Survey April 2018
Highlights from this survey of Realtors:
- Properties were typically on the market for 26 days (29 days in April 2017)
- 88% said that home prices remained constant or rose in April 2018 compared to April 2017
- First-time buyers accounted for 33% of sales (34%t in April 2017)
- Cash sales made up 21% of sales (21 percent in April 2017)
- 18% of sellers offered incentives such as paying for closing costs or a warranty
- From February–April 2018, 78% of contracts settled on time (72%t in April 2017)
- In April 2018, 75% of sales had contract contingencies
- “Low inventory” and “interest rates” were the major issues in April 2018
Check out some of the charts:
While this is a national report, there is some good information in this report. In South Carolina, buyer traffic is very strong and home prices are expected to grow 4.01% to 5% in the next 12 months.
Of course that prediction for home price growth is from a survey and no one has a crystal ball. But unless the economy hits the skids, I expect home prices to continue growing in the Anderson SC area.
Steady AD&C Loan Growth
From Eye On Housing:
The volume of residential construction loans increased by 1.8% during the first quarter of 2018, marking 20 consecutive quarters of growth. Furthermore, recent stabilization of year-over-year growth rates is an indicator of continued, modest growth for single-family construction.
Modest growth is better than no growth and 20 consecutive quarters of growth is impressive. The key is what type of homes are being built: affordable or McMansions…
Home Values Climbing at Fastest Rate in 12 Years
The median U.S. home value rose 8.7 percent to $215,600 in April, the fastest year-over-year climb since June 2006, when the housing market was slowing from its bubble-driven, double-digit growth.
Remember this is a national report and ALL buyers and sellers must not let national reports fool them about what is happening in their local market. The key to being successful when buying or selling is working with an experienced local Realtor!
Home Price Growth Not as Bad as You Think?
From First American:
Even though unadjusted house prices are higher today than ever before, consumer house-buying power remains strong, so real house prices aren’t even close to their historical peak.
While unadjusted house prices have been on the rise since the end of 2011, nearly a seven-year run, consumer house-buying power has also increased by 14.3 percent over the same period. House-buying power, how much one can buy based on changes in income and interest rates, has benefited from a decline in mortgage rates since 2011, and the more recent slow, but steady growth of household income.
Still, we cannot ignore the way that home prices and mortgage rates are increasing. Things may not be as bad as some might think but…
Waiting could mean paying more or having to buy a less expensive/less desirable home!
Economy Still Growing in the Carolinas
From the Richmond Fed’s latest Carolinas Survey of Business:
The Carolinas economic expansion continued in May, according to the latest survey results from the Richmond Fed. Firms reported improved business conditions and higher sales as indexes for both rose to 22, from 18 and 17, respectively. Corresponding expectations metrics show that an even greater share of firms expect conditions and sales to improve further in the next six months.
While survey results suggest that firms’ expenditures were up, on balance, the indexes reflecting capital and services spending decreased in April. Meanwhile, the employment and wages metrics suggest continued growth in the Carolinas, but results indicate that worker shortages persisted. Many firms expect these trends to continue in the coming months.
Firms reported that input prices increased at a faster pace, on average, but growth of prices received slowed for the second consecutive month. Firms expect growth of prices paid to continue outpacing that of prices received, but also anticipate that the gap between the two will narrow in the coming months.
Good news for our economy! There are some issues such as the shortage of qualified workers but overall, still a positive report.
More Home Owners Confident About Their Home’s Value
Home values are on the rise and more homeowners than ever are breathing a sigh of relief that the value of their property outweighs their mortgage.
A new Rasmussen Reports national telephone and online survey finds that 66% of American Homeowners now say the value of their home is worth more than the amount they owe on their mortgage, the highest result in nine years of surveying. Just 24% now say their home is not worth more than what they still owe on it, but 10% are not sure.
Certainly good news but what a home is actually worth does not always coincide with what the owner thinks.
Speaking of what people are thinking…
Consumer Sentiment Decreased
Consumer sentiment slipped by less than an Index-point from last month. Since Trump’s election, the Sentiment Index has meandered in a tight eight-point range from 93.4 to 101.4, with the small month-to-month variations indicating no emerging trend.
Consumers have remained focused on expected gains in jobs and incomes as well as anticipated increases in interest rates and inflation during the year ahead. As past expansions have shown, rising interest rates do not suppress spending gains as long as they are accompanied by more substantial increases in incomes.
The May survey, however, found that consumers anticipated smaller income gains than a month or year ago, even though they anticipate the unemployment rate to stabilize at its current eighteen year low. Importantly, references to discounted prices for durables, vehicles, and homes fell to decade lows.
Coupled with higher interest rates, it is likely that the pace of growth in personal consumption will remain at about 2.6% during the year ahead.
While the decrease isn’t good, a quick glance at this chart of consumer sentiment clears things u:
Consumers are feeling much better now than compared to the past. The economy is doing pretty good. The unemployment numbers are good.
Sure there are things that could be better. That is always true and it has to do with whether you see the glass as half full or half empty.
Higher Interest Rates
From Mauldin Economics:
There is a playbook for when interest rates go up. Rising interest rates do not necessarily cause a recession per se, but they are usually found at the scene of the crime. There was no recession in 1994, but the financial world shivered. Today, we have rising rates and a more-hawkish Fed which has shown no signs of letting up.
Everyone knows that when mortgage rates go up, it makes it more expensive to buy a house. The first thing people say to me is that the US housing market will crash.
No. At least, not everywhere.
We won’t get a housing crash in the US, but a slowdown could take a full percentage point off of GDP.
A very interesting read. I do see people claiming that rising mortgage rates will cause all sorts of calamity in the housing market. It may cause a lower number of sales or even more competition for lower priced homes.
As of now, I do not think we will see home prices decrease or a housing market meltdown. But no one knows what the future holds and painful lessons were learned from the Great Recession.