Discussing the Atlanta Fed raising their GDP forecast, what will happen to all the empty retail stores, mortgage rates, over 100 experts predict home prices will increase, pending home sales drop again and much more!
The GDPNow model forecast for real GDP growth (seasonally adjusted annual rate) in the second quarter of 2017 is 3.8 percent on May 30, up from 3.7 percent on May 26. The forecast for second-quarter real consumer spending growth increased from 2.9 percent to 3.3 percent after this morning’s personal income and outlays release from the U.S. Bureau of Economic Analysis.
How much will this weigh on the Fed’s decision to raise their benchmark rate?
The Federal Reserve has intimated that it intends to keep pulling back on economic stimulus in 2017, both by raising short-term interest rates and by shrinking its holdings of long-term assets. These steps have little to do with controlling inflation. Instead, they are part of a systematically anti-growth approach that the Fed adopted four years ago — an approach that should be abandoned as soon as possible.
Interesting look at what the Fed has been doing and plans to do. I often wonder if the Fed has any idea of what they are doing or if they are just “mashing buttons” to see what they do…
Depending on who you ask, estimates of the number of retail stores that will close in 2017 range from 7,000 to 10,000. Given the retail climate, the number of new store openings is likely to be much lower. If you walk in almost any shopping area now, you see vacancies. They’re an eyesore, they make people less likely to shop, they ruin the adjacencies that spur shoppers to buy and they limit the incomes of store employees, retailers and landlords.
Retail real estate doesn’t vanish if you don’t use it, so what will happen to all those empty stores? No one knows for sure but there are some things we’re seeing now that are important indicators of where all that retail space will go.
I can’t even tell you the last time I went to a mall. I am VERY concerned about commercial real estate considering the rapidly changing state of retail. I am also concerned about the impact to the economy from retail changing to predominantly online and commercial real estate prices dropping.
Nationally, interest rates on conventional purchase-money mortgages decreased from March to April, according to several indices of new mortgage contracts.
The National Average Contract Mortgage Rate for the Purchase of Previously Occupied Homes by Combined Lenders Index was 3.97 percent for loans closed in late April, down 15 basis points from 4.12 percent in March.
The average interest rate on all mortgage loans was 3.98 percent, down 14 basis points from 4.12 in March.
The average interest rate on conventional, 30-year, fixed-rate mortgages of $424,100 or less was 4.04 percent, down 20 basis points from 4.24 in March.
The effective interest rate on all mortgage loans was 4.10 percent in April, down 15 basis points from 4.25 in March. The effective interest rate accounts for the addition of initial fees and charges over the life of the mortgage.
The average loan amount for all loans was $311,600 in April, down $1,100 from $312,700 in March.
Remember these are average rates and will not reflect what is possible for every home buyer. Also, this for April so let’s look at something more up to date…
Mortgage applications decreased 3.4 percent from one week earlier according the latest Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($424,100 or less) remained unchanged at 4.17%, with points decreasing to 0.32 from 0.39 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans.
The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances (greater than $424,100) remained unchanged at 4.11%, with points decreasing to 0.30 from 0.31 (including the origination fee) for 80 percent LTV loans.
The average contract interest rate for 15-year fixed-rate mortgages decreased to 3.42% from 3.45%, with points increasing to 0.39 from 0.38 (including the origination fee) for 80 percent LTV loans.
Again these are the average rates. Still it is good news that rates did not increase…
The latest Zillow® Home Price Expectations Survey surveyed 106 experts between April 24 and May 8, 2017. The survey was conducted by Pulsenomics LLC on behalf of Zillow, Inc. and asked the experts about their expectations for the housing market.
Expectations for overall home price growth are stronger now than they were a year ago. A year ago, panelists predicted that home prices would rise 3.4% in 2017. Now, they expect to see a 4.8% increase. On average, panelists said they expected U.S. median home values to grow 3.65% in 2018.
Panelists said they expected them to continue growing at a healthy pace into the next decade. Panelists expected cumulative home value growth from 2017 through 2021 to total almost 17.9 percent, on average.
Before you start crying that this is coming from Zillow, it is not relying upon data from Zillow. These are the average of the predictions of 106 experts.
Pending home sales in April slumped for the second consecutive month and were down year-over-year nationally and in all four major regions, according to the National Association of Realtors®.
The Pending Home Sales Index decreased 1.3% in April from the level in March. After last month’s decline, the index is now 3.3% below a year ago, which is the first year-over-year decline since last December and the largest since June 2014 (7.1%).
While this is talking about pending home sales for the entire US, it is still bad news. Tight inventory and rising home prices were mentioned as the main reasons for the decrease.
Warren Buffett once said investors should be “Fearful when others are greedy and greedy when others are fearful.”
While others are not taking advantage of the still low mortgage rates or thinking they cannot buy, I suggest being bold. Well, be bold if buying a home makes sense for you at this point in your life.
But if you are thinking of selling, maybe it is time to list your home…
Why You Should List Your Home Now
If you’re thinking about listing your home this year, the lack of inventory is the number 1 reason to go for it!
Home buyers still outnumber the inventory of homes for sale.
Recently, NAR’s Chief Economist Lawrence Yun talked about the lack of inventory:
Last month’s dip in closings was somewhat expected given that there was such a strong sales increase in March at 4.2 percent, and new and existing inventory is not keeping up with the fast pace homes are coming off the market.
Demand is easily outstripping supply in most of the country and it’s stymieing many prospective buyers from finding a home to purchase.
It isn’t just the Pending Home Sales Index that shows a lack of inventory. The latest Existing Home Sales Report reveals that there is a 4.2-month inventory of real estate listings. This is under the 6-month supply needed for a balanced housing market. Plus this is 4.6% below last year’s level.
The graph below shows the year-over-year inventory shortages we have seen during the last year:
Any time we have under a six-month inventory of homes for sale it is regarded as a seller’s market. If it is a seller’s market, then it means that sellers have the upper hand!
The misconception about down payments continue to hinder millennials from the possibility of owning a home.
An outlook study conducted by United Shore Financial Services along with Michigan State University found out that a whopping 96% of its respondents became more interested in purchasing a home after finding out that down payment could actually be the same as two months’ worth of rent.
Industry professionals at a recent Mortgage Bankers Association (MBA) conference cited the belief that a 20% down payment was required to get a mortgage as “the greatest cause of confusion among first-time homebuyers.” This was evident in United Shore’s survey, as 67% of millennials thought the 20% down was indeed necessary, while only 7% were aware that a down payment can be 5% or less.
As I have repeatedly stated, there are mortgage options that do not require 20% down. With home prices rising and predicted to continue rising, it could be a smart move for some people to buy a home.
I strongly suggest thinking about buying a home before home prices rise even more…
With a new administration in office, members of Congress have awakened once again to the unsolved problem of Fannie Mae and Freddie Mac — the country’s two government-sponsored enterprises (GSEs) that have been in a conservatorship since 2008, when they were bailed out by American taxpayers.
Once again members of Congress are pledging to work together to develop a workable housing finance system to replace the two GSEs. We are skeptical about the success of these efforts. Too many in Congress believe that only a government program can produce both affordable housing and a 30-year fixed-rate mortgage.
A good read other than taking a swing at Realtors for making more money if home prices increase. And can we really expect Congress to get any facts straight?
Responding to concerns over the limited availability of state-certified and -licensed appraisers, particularly in rural areas, the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, the National Credit Union Administration, and the Office of the Comptroller of the Currency today issued an advisory that highlights two options to help insured depository institutions and bank holding companies facilitate the timely consideration of loan applications.
Their 2 suggestions for the shortage of appraisers:
The first option highlighted in the advisory, temporary practice permits, allows appraisers credentialed in one state to provide their services on a temporary basis in another state experiencing a shortage of appraisers, subject to state law. The advisory also discusses reciprocity, in which one state allows appraisers that are certified or licensed in another state to obtain certification or licensing without having to meet all of the state’s certification or licensing standards.
The second option, temporary waivers, sets aside requirements relating to the certification or licensing of individuals to perform appraisals under Title XI of FIRREA in states or geographic political subdivisions where certain conditions are met. Temporary waivers may be granted when it is determined that there is a scarcity of state-certified or -licensed appraisers leading to significant delays in obtaining an appraisal.
The shortage of appraisers is a major concern since it puts additional burdens and costs on home buyers. Sadly, there are no easy answers or fast solutions to this issue…
Economic Outlook from Freight’s Perspective – Cautiously Continuing to Improve
From the latest Cass Freight Index Report:
Both the Shipments and Expenditures Indexes have now been positive for four months in a row. Throughout the U.S. economy, there is a growing number of data points suggesting that the economy continues to get slightly better. Some data points are simply less bad, but an increasing number of them are better, and even a few are becoming outright strong. The 4.0% year-over-year (YoY) increase in the April Cass Shipments Index is yet another data point which suggests that the first positive indication in October may have indeed been a change in trend.
Excellent news! Let’s hope the positive economic news continues!
That’s it for today!