Discussing relocating and the cost of living, mortgage rates, affordability and home prices, the possibility of a housing market correction and more…
Relocation and the Cost of Living
If you are thinking about relocating, one of the things to consider is the cost of living. Check out this map showing the cost of living by state:
There are many different factors to consider when relocating. Climate, schools, crime, quality of life, cost of living and more. When you start looking at all of the variables, South Carolina looks pretty nice…
Rail Traffic Increases
For the week ending August 5, 2017, total U.S. weekly rail traffic was 554,822 carloads and intermodal units, up 4.3 percent compared with the same week last year.
Total carloads for the week ending August 5 were 273,199 carloads, up 1.9 percent compared with the same week in 2016, while U.S. weekly intermodal volume was 281,623 containers and trailers, up 6.8 percent compared to 2016.
Hopefully the trend of increasing rail traffic will continue.
Freddie: 30 Year Mortgage Rates Decrease
From Freddie Mac:
- 30-year fixed-rate mortgages averaged 3.90% with an average 0.5 point
- This is down from last week when it averaged 3.93%
- Last year at this time, 30-year fixed-rate mortgages averaged 3.45%
- 15-year fixed-rate mortgages this week averaged 3.18% with an average 0.5 point
- This is the same as last week
- A year ago at this time, 15-year fixed-rate mortgages averaged 2.76%
Sean Becketti, chief economist, Freddie Mac said:
After holding relatively flat last week, the 10-year Treasury yield fell 4 basis points this week. The 30-year mortgage rate moved in tandem with Treasury yields, dropping 3 basis points to 3.90 percent. Earlier this week, Federal Reserve officials highlighted the influence of continued weak inflation data on rates.
While low mortgage rates are great, I worry the Fed will do something stupid because of the low level of inflation.
MBA: Mortgage Rates Decrease
From the MBA:
Mortgage applications increased 3.0 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending August 4, 2017.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($424,100 or less) decreased to 4.14% from 4.17%, with points increasing to 0.38 from 0.36 (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 $424,100) decreased to 4.07% from 4.11%, with points increasing to 0.26 from 0.25 (including the origination fee) for 80% loan-to-value ratio (LTV) loans.
The average contract interest rate for 15-year fixed-rate mortgages decreased to 3.41% from 3.45%, with points decreasing to 0.41 from 0.44 (including the origination fee) for 80% loan-to-value ratio (LTV) loans.
With both Freddie and the MBA both reporting that rates decreased, I think about the experts that have predicted rates would increase this year…
How Rising Interest Rates Can Decrease Affordability More Than Home Price Increases
While the recent decreases in mortgage rates is nice, do not fool yourself and think we can be assured it will continue. Because as the economy continues to improve, mortgage rates should increase.
The rate on your mortgage has a bigger influence on what you can afford than the way home prices are increasing.
Consider this snippet from a recent article by CoreLogic:
Rising home prices and relatively stagnant wage growth have combined to create affordability headwinds for many Americans. Until recently, however, historically low mortgage interest rates have been one of the few tailwinds helping the average homebuyer. But what will happen now that rates are rising again?
The change in the typical mortgage payment over the past year illustrates how it can be misleading to simply focus on the rise in home prices when assessing affordability. For example, in March of this year the median sale price was up 5.9 percent from a year earlier in nominal terms, but the typical mortgage payment was up 12.6 percent because mortgage rates had increased 0.5 percentage points in that 12-month period.
For those thinking about buying a home, waiting or delaying their decisions could prove to be expensive…
Is the Housing Market Headed for a Correction?
From Value Insured:
Although Americans are committed to homeownership, their confidence in buying now, and their expectation that homes will hold their current value, has measurably declined. Fifty-seven percent of American homeowners surveyed believe that homes in their area are overvalued and that current prices are unsustainable. That segment is up 7 percentage points since last quarter.
Do you think that homes in your area are overvalued?
I don’t think this is the case in the Anderson SC area but we must not forget the painful lesson of the housing meltdown. While home prices did decrease, if you rode out the storm, you should have regained any lost value.
This is part of the reason I say that real estate is not a get rich quick scheme. If you buy a home, you need to plan on staying for many years.
The last time I checked, the average home owner stays in their home for 7 years. However, look at the 2 most popular mortgages: 30 year and 15 year.
This is an indicator that you need to think in terms of decades and not years when it comes to home ownership.
U.S. Economic Expansion to Last Another 2 Years or More
The U.S. economic expansion will last at least another two years, according to a majority of economists polled by Reuters who also forecast growth will not accelerate the way the Trump administration has predicted.
The recovery from the devastating 2007-2009 financial crisis has been unusually lengthy. The latest growth stretch has already lasted 96 months, and if the poll predictions come true it would mark the longest economic expansion in more than 150 years. Growth has still not picked up as quickly as thought recently, leading forecasters to lower expectations again slightly in the poll of more than 100 economists taken Aug. 7-10.
Will we see the economy improving at a much slower pace in the coming years?
So many variables and unknowns. As I always say hope for the best but plan for the worst.
US Housing Supply Remains Well Below Longterm Averages
Current supply and demand trends in the U.S. multifamily and single-family markets are sending some confounding signals to investors.
On the one hand, U.S. apartment construction has reached a post-recession peak, driven by demand for high-end luxury properties in the largest CBDs. On the other hand, both multifamily and single-family housing stock remain well below long-term averages that are not nearly enough to house the millions of millennials now entering their 30s and starting families — not to mention the empty nest baby boomers who are increasingly opting for smaller, more conveniently located quarters in downtown apartment rentals.
Yet an other confirmation that we are facing an extreme lack of supply both now and in the coming years.
Strange that this is widely known yet we are not seeing even more construction…
Spring is historically the most popular time of the year for real estate. A new report from CoreLogic reveals that despite the fact that prospective buyers showed up in force, sellers didn’t in the second quarter of this year.
Frank Nothaft, Chief Economist for CoreLogic said:
The growth in sales is slowing down, and this is not due to lack of affordability, but rather a lack of inventory. As of Q2 2017, the unsold inventory as a share of all households is 1.9 percent, which is the lowest Q2 reading in over 30 years.
Wow! The lowest in 30 years! No wonder we are experiencing such an issue with inventory in many areas of the US.
Frank Martell, CoreLogic’s President & CEO, said:
Home prices are marching ever higher, up almost 50 percent since the trough in March 2011.
While low mortgage rates are keeping the market affordable from a monthly payment perspective, affordability will likely become a much bigger challenge in the years ahead until the industry resolves the housing supply challenge.
The inventory of homes for sale in the US is down for the 25th consecutive month according to the latest NAR existing home sales report. There is only a 4.3 month supply of homes for sale across the US now. A balanced market will have 6 months of inventory.
This is talking about the entire US and does not reflect what is happening in each and every local market. You can read about market conditions in the Anderson SC area by checking out the Weekly Market Reports
Home buyers are out in force. This means it could be a great time to sell your home. If you are in the Anderson area, you can shoot me an email with your specific questions!
The Biggest Landlord
From Globe Street:
Among single-family rental landlords, the post-merger Invitation Homes will overshadow the current top dog, American Homes 4 Rent (AMH), by more than half. It will control about 82,000 rental properties, compared to the 49,000 now owned by AMH.
Beyond potentially representing the SFR sector’s debut in the S&P 500—the merger of Invitation Homes and Starwood Waypoint Homes will create a REIT with an enterprise value just behind that of HCP—the deal announced Thursday may signpost a broader trend. That is to say, further inroads by large institutional players into what remains a sector largely in the hands of small-scale, local operators.
While it is interesting to see the growth in large corporate rental companies, the vast majority of rentals are still owned by smaller local investors.
And the real lesson is that the big money Wall Street types recognize the value of owning rentals…
So if they see the value of owning rentals, should you also consider owning real estate?
FHFA Will Not Build Short-Term Capital Buffer for GSEs
From ABA Banking Journal:
In a letter to the National Association of Realtors yesterday, FHFA Director Mel Watt signaled that the agency would not move to establish a short-term capital buffer for Fannie Mae and Freddie Mac when the current capital buffer put in place under the terms of the Senior Preferred Stock Purchase Agreements with the Treasury Department expires on Jan. 1, 2018.
Watt’s letter came in response to calls from NAR to establish a short-term “mortgage market liquidity fund,” where the GSEs could deposit a portion of their profits to cover future losses and reduce risk to taxpayers. Watt responded that while FHFA remains concerned about the expiration of the capital buffer, any changes to housing reform should come through Congress.
Strange that this article refers to a letter to NAR but I could not find anything on it from NAR?
We are way overdue on meaningful reform of the GSEs and I am glad NAR is at least suggesting some options…
Can we rely upon Congress to get anything done? Congress seems unable to do anything except kick the can down the road or bicker and grandstand.
Well, that is is for today! Please share or subscribe!