Mortgage Business

The Oil Dilemma

20140309-080351.jpgIf you read the analyst’s projections, you get the impression that the price of oil should be falling because there is excess supply on the horizon. Demand is slowing in developed countries such as ours and new technology is helping us find oil where we have never gone before. “Tightening fuel efficiency standards for automobiles and changing consumer preferences look set to send U.S. gasoline demand back on the declining course on which it embarked in 2007,” the Paris-based International Energy Agency said in its latest forecast published recently. Of course, this report can’t predict political and other turmoil that occurs around the world.

The conflict in Iraq has contributed to a spike in oil prices and because it heated up as the summer driving season was getting underway, there is a concern that gas prices will also spike. Gas price increases can affect consumer spending and with the economy recovering from the winter slowdown, the timing for price increases is not great. Although we are not sure that there is ever a good time for higher energy prices. Any data which could lead to a long-term increase in inflationary expectations can affect interest rates as well. In this case, the “long-term” projections from the International Energy Agency represent good news. In the short run we will always have to deal with interruptions in supply. Some of these may be caused by natural disasters which are never predictable. Remember, we are about to enter hurricane season.

This week we will get a reading which will tell us how well we are recovering from the cold winter. The employment report is released early because of the 4th of July Holiday. We have some momentum in the employment sector and most are expecting this good news to continue at least moderately. Any surprise to the upside or downside could affect the stock and bond markets and thus the economy. What is interesting is the fact that this report will be released right before the holiday weekend. The markets are typically quiet during this summer holiday period but this week could be an exception.

Weekly Interest Rates OverviewThe Markets. Rates slipped a bit again in the past week and are now lower than they were at this point last year. Freddie Mac announced that for the week ending June 26, 30-year fixed rates decreased to 4.14% from 4.17% the week before. The average for 15-year loans fell more precipitously to 3.22%. Adjustables were also lower in the past week with the average for one-year adjustables falling slightly to 2.40% and five-year adjustables decreasing to 2.98%. A year ago 30-year fixed rates were at 4.46%. Attributed to Frank Nothaft, vice president and chief economist, Freddie Mac –“Rates on home loans were down following the release of the first quarter real GDP final estimate, which fell at a 2.9 percent annualized rate, a steeper than expected decline and the worst reading since the first quarter of 2009. Also, the seasonally-adjusted S&P/Case-Shiller 20-city home price index was up only 0.2% in April from the previous month. On a year-over-year basis, prices remained strong in April up 10.8%, but slower than the 12.3% in March.” 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 27, 2014

  Daily Value Monthly Value
  June 26 May
6-month Treasury Security 0.06%  0.05%
1-year Treasury Security 0.11%  0.10%
3-year Treasury Security 0.90%  0.83%
5-year Treasury Security 1.64%  1.59%
10-year Treasury Security 2.53%  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%

20140309-080538.jpgOf the 16.4 million active-duty service members and military veterans with home loans, less than 12% have a loan guaranteed by the Department of Veterans Affairs. Some blame this low participation rate on a lack of promotion for the VA home loan program, which was created in 1944. Many loan officers don’t even ask potential clients if they are veterans. And many veterans don’t know enough about the program to ask for a VA loan. Others blame lenders and real estate agents who have preferred the loan products guaranteed or purchased by Fannie Mae, Freddie Mae and the Federal Housing Administration. But things are looking up for VA lending as specialists in the product redouble their efforts to get the word out and other low-down-payment products grow more expensive. A sharp increase in Federal Housing Administration insurance premiums is making VA more competitive, according to Megan Booth, senior policy representative at the National Association of Realtors. “There is not a Realtor alive today that thinks FHA is a better deal” for veterans, Booth said. “That is helping the VA grow and it will continue to help the VA grow.” VA lenders originated a record 629,300 single-family loans in fiscal 2013, which ended Sept. 30. So far, VA endorsements have held up well this fiscal year and 63% of VA loans are going to homebuyers rather than for refinancing, according to agency officials. The Veterans Association of Real Estate Professionals, a trade group launched in 2011 to promote the VA program, held its first Washington conference recently. “There are a lot of misconceptions about the VA home loan program among real estate, lending and housing professionals,” says Son Nguyen, the group’s co-founder and president. “We want to change that through education and outreach.” VA officials told the conference they will be issuing a proposal soon that will clarify the agency’s rules on negotiating fees with sellers. VA rules currently limit the amount veterans can be charged for closing costs and fees for termite and other inspections. Real estate agents have been pressing VA for a clarification because veterans are often disadvantaged when competing with non-veterans to buy a house, particularly when there are multiple bidders. Source: National Mortgage News  Note: We are dedicated to making sure that veterans are aware of their VA loan benefits.

Home owners are remodeling their homes to increase the value, but they also are showing more desire to stay and enjoy their remodels before they move on. Fifty-three percent of U.S. home owners say they are remodeling to increase the resale value of their home, but they have no plans to move in the next five years, according to a new Houzz & Home survey of more than 135,000 respondents. Sixteen percent of remodelers say they plan to sell their home in the next two years. One in five — or 22 percent — of the remodelers surveyed say they feel home prices are rising too quickly to consider moving yet. Twenty-four percent of respondents say they would prefer to move, but remodeling their home makes more economic sense. The Millennial generation of home owners seem to be the most apt to move within the next five years, according to the survey. Thirty-six percent of them say they are remodeling to increase their home’s value with the intent to move to their next home soon. Overall, the most popular renovation projects are bathroom remodels or additions and kitchen remodels. Home owners continue to devote the highest share of dollars to kitchen remodels, spending an average of $26,172. That can vary drastically by region, however. Home owners in the Northeast and West tend to spend the most on their renovation projects at an average of $32,155 and $29,411, respectively, on their kitchens (compared to $23,946 in the Midwest and $21,894 in the South), according to the survey. The most popular replacement projects are flooring/paneling/ceiling, followed by windows/doors and roofing. Source: Houzz After a sluggish start to 2014, new-home sales posted a strong rebound in May. Sales of newly built single-family homes soared to the highest rate since May 2008, jumping 18.6 percent last month, according to data released June 24 by the U.S. Department of Housing and Urban Development and the U.S. Census Bureau.” This increase is a welcome sign after a slow start to 2014,” says David Crowe, chief economist of the National Association of Home Builders. “As job creation continues, we can expect further release of pent-up demand and continued gradual growth in the housing recovery. Across the country, regions posted big gains in new-home sales, with the Northeast leading the pack. Sales of new-homes jumped 54.5 percent in the Northeast, 34 percent in the West, 14.2 percent in the South, and 1.4 percent in the Midwest. Inventory levels mostly stayed flat, as builders continue to be cautious about overbuilding. The inventory of new homes for sale held steady at 189,000 units in May, representing a 4.5-month supply at the current sales pace. Source: National Association of Home Builders

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