Looking at this week’s reports on mortgage rates, today’s home buyers are starting the home buying process correctly, the latest Fed Beige Book and if the housing market is slowing down, weekly jobless claims plus more!
Freddie Mac reported:
- 30-year fixed-rate mortgages averaged 4.60% with an average 0.5 poin
- This is up from last week when it averaged 4.54%
- Last year at this time, 30-year fixed-rate mortgages averaged 3.78%
- 15-year fixed-rate mortgages averaged 4.06% with an average 0.5 point
- This is up from last week when it averaged 3.99%
- Last year at this time, 15-year fixed-rate mortgages averaged 3.08%
This is the 3rd consecutive week of increases reported by Freddie Mac! Also, this is the biggest year-over-year increase for 30-year fixed-rate mortgages since 2014.
Looking at the chart above, you can see that mortgage rates have been steadily climbing this year.
The Mortgage Bankers Association reported:
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($453,100 or less) increased to 4.84% from 4.80%, 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) increased to 4.72% from 4.67%, with points increasing to 0.47 from 0.30 (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 4.28% from 4.23%, with points increasing to 0.47 from 0.45 (including the origination fee) for 80% loan-to-value ratio (LTV) loans.
The MBA also reported that new home purchase mortgage applications decreased 4.6% year-over-year. This may be due to the lack of affordable new homes more than the increases in mortgage rates/home prices.
I know I sound like a broken record but please remember that mortgage rates are STILL historically low. And once again, these are the average mortgage rates and may not reflect what is possible for you!
Remember that one of the very first steps of home buying is…
Starting the Home Buying Process Correctly
If I had a dime for every time I said that the first step of home buying is figuring out your financing, I could probably retire. So it is good news to me that a recent survey shows that 73.5% of home buyers said they figured out their financing options BEFORE they began looking for a home.
Even better news is that 85.1% of first-time home buyers are starting out on the right path by figuring out their financing FIRST!
The Fed’s Beige Book
Highlights from the latest Beige Book:
Reports from the Federal Reserve Districts suggested that the economy expanded at a moderate pace through the end of August.
Home construction activity was mixed but up modestly, on balance. However, home sales were somewhat softer, on balance–in some cases due to reduced demand, in others due more to low inventories.
Labor markets continued to be characterized as tight throughout the country, with most Districts reporting widespread shortages.
Employment grew modestly or moderately across most of the nation…
Wage growth was mostly characterized as modest or moderate…
Prices of final goods and services continued to rise at a modest to moderate pace in most Districts, though there were some signs of a deceleration.
Tariffs were reported to be contributing to rising input costs, mainly for manufacturers. Businesses’ input costs have generally been rising more rapidly than selling prices, though there have been increased efforts to pass along cost hikes to customers.
Pretty good report other than rising costs due to the tariffs. Interesting that the Fed is saying lower home sales is due to reduced demand and low inventories.
Is demand reduced because of the low inventories? Or is the decreasing number of homes being sold a combination of rising mortgage rates, increasing home prices and low inventories?
I would say it is the combination of affordability and inventory more than anything else. Let’s look at some of the reports that are used to measure home buyer activity:
Foot Traffic climbed 3.2 points to 55.8 mid-summer in July. Additionally, the diffusion index is higher than last year by 13.5 points. Despite a healthy economy and labor market, supply and new construction remains unable to keep up with buyer demand.
NAR is reporting that home buyer demand is still strong but NAR tends to be overly optimistic…
Showing activity throughout the country increased by 0.3 percent year over year in July, the third consecutive month that the U.S. ShowingTime Showing Index recorded buyer interest deceleration compared to the previous year. The June 2018 figures revealed a 0.0 percent change in showing traffic from 2017, while May showed a 1.2 percent year-over-year increase. The 12-month average year-over-year increase was 4.6 percent.
Showing Time is a service that Realtors use to schedule showing on listings so this is pretty accurate way to track buyer activity. That being said, it is indicating a slowdown…
REALTORS reported slower homebuying activity in July 2018…The REALTORS® Buyer Traffic Index registered at 62, down from the same month one year ago (69). This is the fifth straight month (since March 2018) that Realtors reported a decline in buyer activity compared to conditions one year ago.
The Realtors Confidence Index is a survey of Realtors so it it is not as accurate as the ShowingTime Showing Index in my opinion. That being said, it also shows a decrease PLUS it showed the 5th consecutive month of decreases!
The Real Estate Broker Survey in the ‘Z’ Report by Zelman and Associates (subscription only)
While we continue to expect a resumption of growth in resale transactions on the back of easing inventory in 2019 and 2020, our real-time view into the market through our Real Estate Broker Survey does suggest that buyers have grown more discerning of late and a level of “pause” has taken hold in many large housing markets. Indicative of this, our broker contacts rated buyer demand at 69 on a 0-100 scale, still above average but down from 74 last year and representing the largest year-over-year decline in the two-year history of our survey.
This is a survey of real estate executives and as much as I hate to include anything that is behind a pay wall, it is a respected source. That being said, it also showed a slow down.
I know many will want to panic after seeing 3 out of 4 reports of slowing home buyer activity. We have been in such a strong seller’s market for so long that we should NOT be surprised if things start to return to “normal”.
A healthy, balanced market is neither a sellers market or a buyers market. It is a delicate balance between the two and I think we are moving towards a more balanced market.
If you want, I can spin how current market conditions make now a great time to buy or sell. But I will spare you the sales driven BS and just say remain calm…
Should Candidates Release Tax Returns?
From The Hill:
Sen. Ben Sasse (R-Neb.) said he plans to introduce an ethics reform bill requiring presidential and vice presidential candidates to release their tax returns.
Sasse on Wednesday said President Trump’s refusal to release his tax returns, a break from longstanding tradition, has soured public trust in Washington.
This is just 1 of 5 ethics reform bills that Sasse has proposed. I commend him for this but it could be career suicide PLUS getting these proposals to actually become laws may be impossible.
Weekly Jobless Claims Decrease Again
In the week ending September 8, the advance figure for seasonally adjusted initial claims was 204,000, a decrease of 1,000 from the previous week’s revised level. This is the lowest level for initial claims since December 6, 1969 when it was 202,000.
The 4-week moving average was 208,000, a decrease of 2,000 from the previous week’s revised average. This is the lowest level for this average since December 6, 1969 when it was 204,500.
Incredibly good news!
Well not just 1 thing but several as we are “celebrating” 10 years since the crash:
Open your mind and pour yourself a big refreshing beverage before you check these must read articles out! You will find yourself enlightened, educated and better informed…