Mortgage Business

The Best of ALL Worlds?

 January 27, 2015


For the past few months we have been alluding to a scenario in which our economy could be experiencing the best of both worlds. For years we have been wading through a very slow and tedious recovery from the deep recession. We knew at some point we would reach a tipping point which is called the “virtuous cycle.” It now appears that we may be at the beginning of this virtuous cycle and the first measure of economic growth for the fourth quarter last year — which is released on Friday — will be a good indicator of whether we are closer to this cycle, since it follows a very strong reading for the third quarter of last year.

The weak retail sales report for December gives us some concern about this economic release since this report covers the holiday season. Despite this, we are expecting the economy to eventually shine. What we were not expecting was the potential for lower interest rates and dramatically lower oil prices at the same time. Theoretically, when the economy gets stronger, rates and oil prices should rise. As we have mentioned, international factors have contributed to a changing of the paradigm from our Nation’s perspective. And we must say, the American consumer deserves some better than expected times after several years of recession and a tediously slow recovery.

So, the next question is, how long would these good times last? We can’t predict how strong the economy will get and for how long. But the more the economy heats up, the more likely that rates and oil prices will rebound. For now, it is a good time to take advantage of this situation, whether you are thinking about purchasing or refinancing real estate or purchasing a car. If you do, we have a feeling that you will not be alone.

The Markets.   Fixed rates on home loans were down again in the past week. Freddie Mac announced that for the week ending January 22, 30-year fixed rates decreased to 3.63% from 3.66% the week before. The average for 15-year loans fell to 2.93%. Adjustables were mixed, with the average for one-year adjustables remaining at 2.37% and five-year adjustables falling to 2.83%. A year ago, 30-year fixed rates were at 4.39%, which continues to be 0.75% higher than today’s levels. Attributed to Frank Nothaft, vice president and chief economist, Freddie Mac — “Rates on home loans continued to fall, albeit at a slower pace, with the 30-year fixed rate loan averaging 3.63 percent this week. Housing starts picked up in December coming in at a seasonally adjusted 1.089 million unit pace and beating market expectations. Meanwhile, the drop in energy prices pushed the Producer Price Index down 0.3 percent for December and the Consumer Price Index fell 0.4 percent.”  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 January 23, 2015
Daily Value Monthly Value
January 22 December
6-month Treasury Security  0.08%  0.11%
1-year Treasury Security  0.17%  0.21%
3-year Treasury Security  0.90%  1.06%
5-year Treasury Security  1.39%  1.64%
10-year Treasury Security  1.90%  2.21%
12-month LIBOR  0.602% (Dec)
12-month MTA  0.121% (Dec)
11th District Cost of Funds  0.686% (Nov)
Prime Rate  3.25%

For many Americans, the jump into the new year marks an important step forward toward achieving a New Year’s resolution, and saving for a down payment to buy a home may be among them. But that goal can take some time, and lots of savings commitment. Thirty-seven percent of recent home buyers say it took them six months or less to save for a down payment to buy a home; 15 percent saved for six to 12 months; and 10 percent say they saved for 12 to 18 months for a down payment, according to the 2014 Profile of Home Buyers and Sellers Survey, published by the National Association of Realtors®. Saving for home ownership often requires some sacrifices too, recent buyers reported. Seventy-two percent of home buyers say they cut spending on luxury or non-essential items in order to save for a down payment, 56 percent reduced their spending on entertainment, and 45 percent trimmed their clothing budget in order to save more. But there is hope: Many buyers often find out they may not need as much down payment as they originally thought to purchase a home. For first-time home buyers, the median down payment is 6 percent, and 13 percent for repeat buyers. “There’s still misperception out there that a much higher down payment is needed, while that’s not the reality,” said Lawrence Yun, NAR’s chief economist. What’s more, for Americans who are able to save for a down payment to purchase a home, they often find meeting this New Year’s resolution has a big payoff in the end. “Seventy-nine percent of recent buyers believe their home is a good financial investment, and many believe it is a better financial investment then stocks,” Yun notes about NAR’s survey findings at a recent blog post at NAR’s Economists’ Outlook blog. Source: NAR There are many low down payment options available. Contact us for more information on the programs you or someone you know might qualify for.

Single-family housing production is poised to surge in 2015, as the economy picks up and a rise in household formations mixed with low rates unleash pent-up demand in the sector, according to economists speaking during the National Association of Home Builders’ 2014 Fall Construction Forecast Webinar. Single-family builders are feeling good. They are not overly confident, but confident enough to keep moving forward,” says NAHB Chief Economist David Crowe. The single-family sector is expected to finish out the year stronger than the beginning of 2014, which will set the stage for a much more active 2015. “This is mostly due to significant pent-up demand and steady job and economic growth that will allow trade-up buyers who have delayed home purchases due to job insecurity to enter the marketplace,” Crowe says. NAHB is forecasting 991,000 total housing starts in 2014, up 6.6 percent from 930,000 units in 2013. Single-family starts are expected to rise 2.5 percent this year and increase an additional 26 percent next year to 802,000. Single-family production is expected to reach the 1.1 million mark in 2016. The multifamily market is also expected to stay strong with a continued growth in renters. The multifamily sector is expected to rise 15 percent in 2014 to 356,000 units, and hold mostly steady into next year. Source: NAHB

While single-family homes have been getting larger, the lots these homes sit on have been getting smaller, according to the U.S. Census Bureau’s Characteristics of New Single-Family Houses Sold. Indeed, the median lot size of a new single-family detached home sold from 1992 through 1995 was 10,000 square feet. By 2013, that median lot size was down to 8,720 square feet, one of the smallest numbers (along with 2012’s median lot size of 8,687) recorded by the Census. The median lot size for 2013 is about one-fifth of an acre. Townhomes tend to have smaller lots, with the median lot size for single-family attached homes at 2,984 square feet. Meanwhile, the median lot size for custom single-family detached homes is bigger, at about 39,204 square feet in 2013. The National Association of Home Builders, on its Eye on Housing blog, decided to put that lot size into a football perspective. How many single-family detached homes built for sale with a median lot size could builders squeeze on a standard American football field between the goal lines? About 5.5 single-family detached homes, the NAHB estimates. Source: National Association of Home Builders Eye on Housing Blog

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