Mortgage Business

No More Excuses

20140309-080351.jpgOver five years ago we suffered the worst recession since the great depression almost 100 years ago. Since then our economic recovery has been the weakest of all recoveries as well. There are many reasons for the weak recoveries. The fact that our real estate market was devastated and needed years to recover was certainly a main factor. But there were other reasons for the stops and starts which were external. We had domestic and world-wide natural disasters from hurricanes and super storms to tsunamis. We will not get into a debate as to whether global warming is causing these extreme weather events but we will acknowledge that they were very, very extreme and caused major damage to populations and property.

There were events that were not weather related, of course. There was the fiscal crisis in Europe and political crises at home. We had wars being fought and terrorist events. Many of these events prolonged the recovery and made us wonder whether we would suffer a double dip recession, which never came. 2014 has certainly not been smooth sailing with our famously cold winter and the crisis in Ukraine. However, we believe our economy has recovered to the point that we no longer talk about slipping back in recession. The drop in the economic growth in the first quarter is a testament to that confidence. Economists shrugged off the down quarter almost universally. So what comes next?

The sun is shining and there is no more cold winter. We are running out of excuses for the economy being so lackluster during a recovery period. The employment report released on Friday showed continued progress in that regard. The last two months has seen a significant pickup in hiring but the employment report also shows how far we need to go. We have recovered all the jobs lost during the recession, but accounting for population growth during the past six years, we have seven million jobs to go. Economists surveyed by CNN/Money indicate that it would take two years or more at this pace for the unemployment rate to reach 5.5% and wage growth is still anemic. The good news? A slow recovery continues to support low interest rates and hopefully the Federal Reserve Board agrees with that assessment when they meet shortly.

Weekly Interest Rates OverviewThe Markets. Rates rose for the first time in almost two months this past week, but the increase was slight. Freddie Mac announced that for the week ending June 5, 30-year fixed rates increased slightly to 4.14% from 4.12% the week before. The average for 15-year loans rose to 3.23%. Adjustables fell marginally in the past week with the average for one-year adjustables falling slightly to 2.40% and five-year adjustables decreasing to 2.93%. A year ago 30-year fixed rates were at 3.91%. Attributed to Frank Nothaft, vice president and chief economist, Freddie Mac — “Rates on home loans were little changed amid a week of light economic reports. Of the few releases, the economy was revised down to a -1.0 percent growth rate in the first quarter of 2014. ADP Research Institute estimated the private sector added 179,000 jobs in May, which followed a slight downward revision of 5,000 jobs in April. Meanwhile, the Institute for Supply Management reported the manufacturing industry saw a slight acceleration in monthly growth for May.” Rates indicated do not include fees and points and are provided for evidence of trends only. They should not be used for comparison purposes.

Current Indices For Adjustable Rate Mortgages Updated June 6, 2014

  Daily Value Monthly Value
  June 5 May
6-month Treasury Security 0.06%  0.05%
1-year Treasury Security 0.10%  0.10%
3-year Treasury Security 0.82%  0.83%
5-year Treasury Security 1.63%  1.59%
10-year Treasury Security 2.59%  2.56%
12-month LIBOR    0.538% (May)
12-month MTA    0.122% (May)
11th District Cost of Funds    0.682% (Apr)
Prime Rate    3.25%

Real Estate NewsRates on home loans have dropped so much this year – falling about one-third of a percentage point — that the low levels could “stimulate” the housing market, Nobel Prize-winning economist and home-price expert Robert Shiller said. “These declines matter,” Shiller said in a CNBC interview. “People are watching interest rates.” Shiller’s remarks echo comments earlier this year from Federal Reserve Chairwoman Janet Yellen, who said that low rates “should serve as a stimulus to people coming back into the housing market.” Buyers faced a double whammy to affordability over the past year. Rates started rising in May 2013 as the market speculated about when the Federal Reserve would start pulling back on its massive asset-purchase program that exerted downward pressure on long-term rates. At the same time, builders and home owners cranked up asking prices, enabled by a low number of homes on the market. As a result, recent home-sale readings are trailing year-earlier results. But sales conditions are improving. Rates dropped this year on a string of weak economic reports. A combination of lower rates, slower price growth and an improving economy may lead to faster home sales this year. Source: Market Watch

Consumers are more committed to buying or selling this year, according to Prudential Real Estate’s Consumer Outlook Survey. Of the 2,500 consumers surveyed, 78 percent held a favorable view of real estate, a five-point jump from the previous quarter and 15 points higher than at the end of 2012. Sixty-three percent said they were more committed to buying and selling in 2014. One generation in particular has a favorable perception of real estate right now: Millennials. The generation peaked at 87 percent with a favorable perception of real estate in the latest survey. “Consumers understand that the U.S. economy and residential real estate continue moving in positive directions,” says Earl Lee, CEO of HSF Affiliates LLC. “Accordingly, they’re feeling much better about their personal situations and want to take advantage of attractive home prices in many markets and interest rates that remain low by historical standards.” While they’re optimistic, consumers are also realistic, believing that the rate of appreciation of U.S. home values will slow after a strong run in 2013. They say their No. 1 concern about the housing market is “decreasing home values,” followed by “saving enough for a down payment.” Respondents to the survey also say that tight housing inventories would likely impact their home-buying decisions this year, and 67 percent expect to face more buyer competition. “Normalcy is returning to residential real estate,” says Lee. “People are seeking homes for all the right reasons: to gain shelter and security, raise a family, and generate long-term wealth.” Source: Realtor Magazine

Americans are much less mobile than we think. Almost 70 percent of us who were born in the U.S. still live in the state of our birth, as only 1.5 percent of population moves across state borders, a rate lower even than that of our parents. When we do move, it is most often in search of a new job, less expensive housing or a warmer climate — and not, as is often suggested, to find a state with lower or no income taxes. What is the primary driver? One force, especially for older people, is the sun. Over the past two decades, cold-weather states such as Ohio, Pennsylvania, New Jersey and Michigan have lost a significant share of population to sun-belt states. A second motivator is housing; people who move from cities in California or New York to those in Texas or North Carolina typically benefit from substantially lower housing costs. The biggest draw of all for someone of working age, though, is a job. Nearly a third of Americans who relocate across state lines say they are moving for a “new job or job transfer.” Source: Bloomberg

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