Discussing this week’s reports on mortgage rates, the latest from the Federal Reserve, how the shrinking middle class will affect housing plus much more!
From Freddie Mac:
- 30-year fixed-rate mortgages averaged 4.55% with an average 0.5 point
- This is down from last week when it averaged 4.58%
- Last year at this time, 30-year fixed-rate mortgages averaged 4.02%
- 15-year fixed-rate mortgages averaged 4.03% with an average 0.4 point
- This is up from last week when it averaged 4.02%
- Last year at this time, 15-year fixed-rate mortgages averaged 3.27%
A welcome small decrease in mortgage rates!
Sam Khater, Freddie Mac’s chief economist, said:
While mortgage rates have increased by one-half of a percentage point so far this year, it has not impacted home purchase demand, which continues to grow this spring. The observed buyer resiliency in the face of higher rates reflects the healthy economy and strong consumer confidence, which are important drivers of home sales activity.
It’s also good news that first-time buyers appear to be having more success so far this year – despite higher borrowing costs and home prices. Our data through April show that first-timers represent 46 percent of purchase loans, up from 43 percent over the same period a year ago.
Very encouraging news from Freddie, especially about the percentage of first time home buyers. Let’s look at what the MBA 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 September 2013, 4.80%, from 4.73%, with points increasing to 0.53 from 0.49 (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, 4.69%, from 4.64%, with points increasing to 0.42 from 0.39 (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, 4.21%, from 4.13%, with points decreasing to 0.49 from 0.52 (including the origination fee) for 80% loan-to-value ratio (LTV) loans.
Not as good as the news from Freddie. Remember these are the average mortgage rates and will not reflect what is possible for every buyer.
The best thing for any serious home buyer to do is to talk to several mortgage professionals to see what their options are. Especially since home buyers need to know exactly how much they can afford and how much they need for closing costs and down payment.
Something else to consider is the news from the Federal Reserve this week…
Highlights from the FOMC Minutes
From the Federal Reserve:
Information received since the Federal Open Market Committee met in March indicates that the labor market has continued to strengthen and that economic activity has been rising at a moderate rate. Job gains have been strong, on average, in recent months, and the unemployment rate has stayed low. Recent data suggest that growth of household spending moderated from its strong fourth-quarter pace, while business fixed investment continued to grow strongly. On a 12-month basis, both overall inflation and inflation for items other than food and energy have moved close to 2 percent. Market-based measures of inflation compensation remain low; survey-based measures of longer-term inflation expectations are little changed, on balance.
In view of realized and expected labor market conditions and inflation, the Committee decided to maintain the target range for the federal funds rate at 1-1/2 to 1-3/4 percent. The stance of monetary policy remains accommodative, thereby supporting strong labor market conditions and a sustained return to 2 percent inflation.
The Committee expects that economic conditions will evolve in a manner that will warrant further gradual increases in the federal funds rate; the federal funds rate is likely to remain, for some time, below levels that are expected to prevail in the longer run. However, the actual path of the federal funds rate will depend on the economic outlook as informed by incoming data.
So the Fed did not raise their benchmark rte this time but we can tell that they are planning on raising rates again. Exactly when is unknown but we could expect it to happen after their June meeting since it will be followed by a press conference.
While the Fed does not directly set mortgage rates, any increase by the Fed could cause mortgage rates to increase.
The Shrinking Middle Class and Housing
The widening gap in income distribution trends in the US has significant implications for home buying activity and homeownership. The shrinking size of the American middle class (those who make between two-thirds and double the median US household income*) has resulted in:
- More rental demand
- More demand for homes at the highest and lowest price points
- Less demand for median-priced homes
The decrease in the percentage of middle class households is disturbing and does not bode well for the future of many Americans. Check out this chart from the post showing the shift:
The key thing is that we cannot rely on the government or ANY politician to help us. We cannot rely on any job to be there in the future or to continue paying us a decent wage.
It is up to us to make our lives better.We must do what is best for us and work hard everyday to make our lives better.
The increasing demand for rental homes is an opportunity for those interested in becoming an owner of income producing properties. While this isn’t for everyone, owning rental properties can be a great way to build a better financial future.
And this is only part of what you could do to prepare for the future. For most, the best things to do include building an emergency fund, reducing your spending and saving more while paying off debt.
While it could sound impossible or just plain boring to do these things, it is a must in a world that favors the rich over everyone else. You MUST do what is best for you and your future!
How to Pay for a $31,000 Table and Chairs?
The Secretary of Housing and Urban Development (HUD), Ben “I’ve Never Had to Worry about Affording Housing” Carson, wants to triple the rent that low-income American families pay for federally subsidized housing.
Yep, this is the same guy who spent $31,000 of taxpayer money on a table and chairs. He’s trying to make it harder for low-income families who shop at Bob’s Discount Furniture to afford a stable housing situation.
I know I have mentioned this proposed change to federally subsidized housing. It just sickens me that the elderly and disabled would be hit by these changes.
I know some people think that everyone in government housing is working the system. Instead of hurting everyone, I think IF someone is guilty of using government housing improperly, they should be prosecuted to the fullest extent of the law.
I would say that the punishment for those abusing government assistance should be increased dramatically. This includes government housing, unemployment insurance, etc etc.
Punishing everyone does not seem to be right to me. I understand why people might think this change would be good.
But why punish the elderly and disabled by raising their rents? Is this how the greatest country in the world should treat the elderly and disabled?
U.S. railroads originated 1,051,026 carloads in April 2018, up 3.3 percent, or 34,020 carloads, from April 2017. U.S. railroads also originated 1,099,000 containers and trailers in April 2018, up 6.8 percent, or 69,630 units, from the same month last year. Combined U.S. carload and intermodal originations in April 2018 were 2,150,026, up 5.1 percent, or 103,650 carloads and intermodal units from April 2017.
AAR Senior Vice President of Policy and Economics John T. Gray said:
Total U.S. rail traffic so far this year is a shade below where it was in 2015, but otherwise is higher than it’s been in the last ten years. Additionally, 15 of the 20 commodity categories we track had higher carloads in April 2018 than in April 2017, the most since January 2015. That’s good news for railroads and good news for the economy.
Yes this is excellent news and hopefully it will continue!
Construction Employment Increases
Construction employment increased by 17,000 jobs in April and by 257,000 jobs over the past year while firms boosted pay to help recruit new workers, according to an analysis of new government data by the Associated General Contractors of America. Association officials noted that the increases in pay appear to be attracting more former construction workers back into the job market, but cautioned that labor conditions remain extremely tight.
Stephen E. Sandherr, the association’s chief executive officer said:
Many firms are boosting pay and taking other steps to compete for a relatively small pool of available, qualified workers to hire. While these steps appear to be luring more construction workers back to the job market, firms report they would hire even more workers if they could find enough qualified candidates.
Good news and the increased wages is just a sign of the tight labor market. All employers, regardless of the industry, are finding they must pay employees more and must pay more to recruit new employees.
I have been saying we need better incomes for ALL Americans since the economy crashed several years ago. While higher incomes are great, we all know that the costs for higher wages will be eventually paid by consumers.
That is all for today! If you enjoyed this article, please share it on Facebook, Twitter or Google! And you may want to also sign up for the FREE email subscription so you are notified when there are new posts!