Mortgage Business

Polar Vortexes and Predictions

20140309-080351.jpgWe have had some pretty optimistic projections recently from economists. For example, the following is from the Wall Street Journal’s monthly survey of economists …Faster job growth and stronger consumer confidence are already putting the U.S. expansion on a steady trajectory heading into 2015 and falling energy prices are offering another boost… While we share this enthusiasm, we also must remember that absolutely the same predictions were made at the end of last year. What happened? It was the weather. By the time America dug out from all the snow, it seemed the economy was playing “catch-up” all year.

Well, the weather this November reminded us how important Mother Nature can be. Just ask Buffalo, the recipient of five to eight feet (that is feet, not inches) in a week. Of course, we are hoping that winter is over in December and it is not just starting! On the other hand, the weaker start to the economy was not just about the weather. The real estate recovery also took a pause in 2014. The early bad weather hurt, but in reality slower real estate sales were not just about a weaker market. The real estate statistics were pumped up previously by investors buying foreclosures — many times in bulk.

As foreclosures have decreased, so did these sales. Meanwhile, real estate sales have been increasing steadily during the second half of the year despite the loss of this segment of the business. In essence, the market is normalizing and we fully expect that the first time homebuyer will again replace the investor as the most important segment of the real estate market. It will take some time, but the fundamentals are in place. Meanwhile, this week we get another important reading on the employment sector. This will tell us if we will continue to have momentum heading into the new year and whether the Polar Vortex is providing another temporary respite from the recovery.


The Markets. Fixed rates on home loans were stable and slightly lower for the third straight week. Freddie Mac announced that for the week ending November 26, 30-year fixed rates fell to 3.97% from 3.99% the week before. The average for 15-year loans remained at 3.17%. Adjustables were also unchanged, with the average for one-year adjustables stable at 2.44% and five-year adjustables staying at 3.01%. A year ago, 30-year fixed rates were at 4.29%, which continues to be higher than today’s levels. Attributed to Frank Nothaft, vice president and chief economist, Freddie Mac — “Fixed rates on home loans were little changed for the week, with 30-year fixed-rates declining to 3.97 percent. This comes during a week of uplifting economic news heading into the holiday; GDP growth was revised up in the third quarter from 3.5 percent to 3.9 percent, while existing homes sold at a 5.26 million unit pace in October, topping expectations of 5.15 million units.”  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 November 28, 2014

Daily Value Monthly Value
Nov 26 October
6-month Treasury Security 0.07%  0.05%
1-year Treasury Security 0.14%  0.10%
3-year Treasury Security 0.93%  0.88%
5-year Treasury Security 1.56%  1.55%
10-year Treasury Security 2.24%  2.30%
12-month LIBOR  0.552% (Oct)
12-month MTA  0.113% (Oct)
11th District Cost of Funds  0.663% (Sept)
Prime Rate  3.25%

  Housing cost burdens fell for the third consecutive year, according to the U.S. Census’ 2013 American Community Survey. Last year, 39.6 million households spent more than 30 percent of their income on housing, which is a decrease from 40.9 million in 2012 and down from the peak of 42.7 million in 2010. However, housing cost burdens are mostly dropping among home owners, while they continue to strain renters, according to a recent analysis by the Harvard Joint Center for Housing Studies of the data. In 2013, 26 percent of home owners were considered burdened by household expenses (i.e.: spending more than 30 percent of their income on housing), compared to half of all renters at 49 percent. The number of renter households is on the rise, which partially explains why renter cost burdens are escalating, JCHS notes. But this group is also plagued by rising rents that are not matching up to incomes. Median renter costs were up about 5 percent in 2013 compared to 2001, even though median incomes were nearly 11 percent lower, according to the report. That’s contributed to more renters being “severely burdened” by household costs. In 2013, 11.2 million renters were in this category, meaning they were paying more than 50 percent of their incomes toward housing costs. “If past patterns hold and income growth remains stagnant and rental costs continue to climb, then rental cost burdens will only continue to grow,” JCHS researcher Ellen Marya writes on the group’s Housing Perspectives blog. Meanwhile, the number of cost-burdened home owners is dropping. “After surging during the housing bubble, inflation-adjusted owner costs have dropped about 2.5 percent below their 2001 level,” Marya writes. Source: The Harvard Joint Center for Housing Studies’ Housing Perspectives Blog

For years, international buyers have looked to buy properties in markets like Miami, Aspen and Palm Springs when searching for the perfect place for their “holiday.” According to new data from Trulia, international house hunters are shifting their focus away from traditional vacation areas to dense, urban areas. “Foreign interest in U.S. real estate remains highly concentrated in mostly urban neighborhoods, particularly in Miami, Los Angeles, and New York, and is increasingly shifting toward high-density urban areas and away from vacation spots,” said Trulia’s chief economist Jed Kolko. Trulia analyzed the site’s searches from January through May and found that 4% of the searches came from outside the U.S. That’s slightly down from 4.2% during the same time period last year. Canada (18.5%), United Kingdom (10.6%), and Germany (5.5%) remain the top three countries outside the U.S. for home searches on the site. Trulia found that international searches are tending to focus more on urban areas as opposed to areas that are traditionally thought of as vacation areas. “In general, these two types of places tend to get more foreign interest than the U.S. overall does: foreign searches accounted for 4.0% of searches for U.S. homes overall, 4.7% of searches in vacation areas, and 9.4% of searches in the densest urban neighborhoods,” Kolko said. Source: HousingWire

Married couples with children continue to be the leading demographic for the single-family, home-buying market here and across the nation. But some singles, especially young singles, recognize that a mortgage payment on a house can often be the same or less than what they would spend on rent. The barriers to homeownership that many in their 20s and 30s face — higher unemployment, lower wages and student debt — have made it less likely for people in that age group to be owners than in previous generations. For as long as the National Association of Realtors has been tracking data on married couples and single buyers — since 1981 — the percentage of single homebuyers has historically hovered around 20 percent to 25 percent. It fell nationally from 28 percent in 2011 to 25 percent in 2013, according to NAR. “One of the things we have seen is that single men homebuyers are about half the share of single female homebuyers,” said Jessica Lautz, director of member and consumer research for the National Association of Realtors. “Single females make up the largest share of single buyers. Single female homebuyers are second only to married couples.” Many singles enter the real estate market following major family changes, such as death and divorce. Single homebuyers come to the market from all walks of life, and for different reasons that often extend beyond the financial ones. Some want an investment that will pay off down the road, while others are looking for a place to live that suits their lifestyle. Source: The Pittsburgh Post-Gazette

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s