It is interesting. For years we have gone through a very slow recovery from the recession. Yet the stock market has kept moving up each year for over five years with few interruptions. And now that we seem to be on the verge of gaining economic momentum, the stock market is acting like it needs to take a breather, a correction or something more severe. Why the glum news at a time we should be celebrating? There are plenty of theories. Perhaps the stock market may just need a breather which it has earned. Perhaps it is a “sell on the news” phenomenon. Other theories include the hypotheses that the markets are worried about events overseas or investors are afraid interest rates will rise soon because of the good economic news.
We have had plenty of bad spells in the past five years and the stock market seems to bounce back up each time. On the other hand, if it is a true correction, we have to say that the stock market has earned a breather after five strong years. What is also interesting is that oil prices and interest rates have fallen significantly in tandem with stocks. Lower oil prices are not typically the norm when we have a war going on in the Middle East. And rates should not be lower when the economy starts to accelerate. In this respect, lower rates could be another indication of global concerns.
The truth is that we rarely have markets moving where they are expected to move. Nor can we predict whether any of these numbers will hold. What we can tell you is that lower gasoline prices and lower interest rates are both good for the economy in the short run. Thus, if the economy is about to accelerate, a lower stock market may actually be adding fuel to this recovery. For now we will enjoy the good news regarding rates and oil prices while hoping that stocks are just experiencing a well-deserved rest.
The Markets. Rates fell to their lowest level in more than a year in the past week. Freddie Mac announced that for the week ending October 16, 30-year fixed rates fell to 3.97% from 4.12% the week before. The average for 15-year loans decreased to 3.18%. Adjustables were also down, with the average for one-year adjustables falling to 2.38% and five-year adjustables decreasing to 2.92%. A year ago, 30-year fixed rates were at 4.28%, higher than today’s levels. Attributed to Frank Nothaft, vice president and chief economist, Freddie Mac — “Rates on home loans were down sharply following the decline in the 10-year Treasury yield for the second straight week. Rates are at their lowest levels since June 2013 amidst continued investor skepticism regarding the precarious economic situation in Europe.” 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 October 17, 2014
|Daily Value||Monthly Value|
|6-month Treasury Security||0.05%||0.04%|
|1-year Treasury Security||0.10%||0.11%|
|3-year Treasury Security||0.75%||1.05%|
|5-year Treasury Security||1.39%||1.77%|
|10-year Treasury Security||2.17%||2.53%|
|12-month LIBOR||0.578% (Sept)|
|12-month MTA||0.115% (Sept)|
|11th District Cost of Funds||0.667% (Aug)|
In the past two weeks, economic events around the world have caused interest rates to hit their lowest levels in more than a year. For those who are thinking about refinancing their present home or purchasing, now is the time to act as there is no way to tell how long today’s low rates will last. The markets are very volatile, so those who hesitate may miss out on a golden opportunity. Even more good news, some credit standards have loosened and home prices have increased such that some who couldn’t refinance the last time rates hit this level may be able to do so now. In addition, the government program for underwater mortgages (HARP) has been extended and may help you even if your loan balance is more than the value of your home. These rates and higher home prices may enable you to eliminate costly mortgage insurance; reduce your payments or build equity faster with a 15 year mortgage. Whatever your goals, now is the time to get a consultation with your lender and act quickly if you can benefit from today’s low rates. Note: A consultation will take only a few minutes and it may result in significant savings. Please contact me quickly before the market turns again.
In the age of “selfies,” the majority of adults are sticking to themselves. Single Americans now make up more than half of the adult population, the first time the number of singles has passed the 50 percent mark since the government began tracking such data in 1976. About 124.6 million Americans indicated they were single in August; 50.2 percent were age 16 or older, according to new data from the Bureau of Labor Statistics. The percentage has been gradually trending upward since the beginning of 2013. The rise of single households has “implications for our economy, society, and politics,” writes Edward Yardeni, president of Yardeni Research Inc., in a report called “Selfies.” He called the proportion of singles today “remarkable.” What are the implications for real estate? Singles, particularly younger professionals, are more likely to rent than own a home. They are less likely to have children, and the growth in single households likely will exaggerate income inequality, Yardeni notes. “While they have less household earnings than married people, they also have fewer expenses, especially if there are no children in their households,” Yardeni writes in his report. The number of never-married adult Americans has been on the rise, too, increasing to 30.4 percent from 22.1 percent in 1976. The number of divorced, separated, or widowed adults also has risen up to 19.8 percent from 15.3 percent. Some real estate analysts are expecting an increase in singles heading into home ownership in the coming years. For example, single women make up the second largest segment of home purchases, with one out of every five homes purchased by a single woman, according to National Association of Realtor® data. Some builders are even catering to this growing segment, reportedly adding two master bedrooms to appeal to the 40 percent of single women who choose to have non-romantic roommates, according to AARP surveys. Source: Bloomberg Financial and NAR
Stronger job creation in the United States is making economists more optimistic about the outlook for home resales over the next two years, according to a Reuters poll that showed little change to expectations for house price rises. The annual pace of existing home sales will likely rise to 5.25 million units in the first three months of 2015 from 5.09 million in the current quarter, according to the poll’s median forecast. In May, economists expected much slower gains, with 5.1 million resales expected in the first quarter of next year. Much of the added optimism draws from the six consecutive months through July in which U.S. employers added more than 200,000 jobs. The median says the annual pace of home resales will rise to 5.29 million in the second quarter of next year. Investors and economists polled by Reuters generally expect the Federal Reserve will begin to slowly increase its benchmark interest rate around the middle of next year after holding it near zero since 2008. Most analysts saw rates rising more slowly than they did in the last Reuters housing market poll in May. “If a rise in rates comes with a stronger economic recovery, the housing market will be able to absorb it,” said Alexander Lin, an analyst at Bank of America Merrill Lynch. Source: Reuters