Let’s take a break from speaking about the Federal Reserve for a week and talk about a more pleasant topic. Thus far this year, the real estate market has been strong. This year continues the sector’s recovery from the recession we suffered almost a decade ago. It has been a long, hard road for the recovery and real estate in particular, but we have seen a slow and steady recovery in the sector for some time. Last month we saw existing real estate sales dip by almost five percent from the previous month, but sales are still up over six percent year-over-year.
We are now in the fall real estate season and it seems that the most important factor holding back sales is lack of inventory in some areas of the country. This lack of inventory makes the ability of builders to gear up to increase production very important. And their major concerns are lack of affordable land and lack of skilled labor. Though lack of inventory, affordable land and skilled workers are real problems, they demonstrate that we have come very far in our recovery.
Instead of complaining about lack of confidence, jobs and available credit, as we were just a few years ago, the problems we face are very different today. They are problems that a stronger economy face. Today, if an attractive home goes on the market at a reasonable price, it more than likely will sell. Thus, if you are thinking about listing your home, conditions are favorable. And if you are thinking about purchasing, today’s low rates still make ownership a bargain. Next week we are sure to be talking about the Federal Reserve again, as the jobs report is released on Friday.
The Markets. Rates on home loans were lower in the wake of the Federal Reserve Board’s decision not to raise short-term rates. Freddie Mac announced that for the week ending September 24, 30-year fixed rates fell to 3.86% from 3.90% the week before. The average for 15-year loans decreased to 3.08%. Adjustables were also down, with the average for one-year adjustables falling to 2.53% and five-year adjustables down to 2.91%. A year ago, 30-year fixed rates were at 4.20%, over one-third of one percent higher than today’s levels. Attributed to Sean Becketti, chief economist, Freddie Mac — “Global growth concerns and lackluster inflation convinced the Fed to defer a hike in the Federal funds rate. In response, Treasury yields fell about 9 basis points over the week, with some larger day-to-day swings along the way. In response, the interest rate on 30-year fixed rate loans dropped by 5 basis points to 3.86 percent. Rates on home loans have remained below 4 percent for 9 consecutive weeks and have remained range-bound between 3.8 and 4.1 percent since May. These low rates have supported strong home sales, and 2015 is on pace to have the highest home sales total since 2007.” Rates indicated do not include fees and points and are provided for evidence of trends only. They should not be used for comparison purposes.
Updated September 25, 2015
|Daily Value||Monthly Value|
|6-month Treasury Security||0.09%||0.22%|
|1-year Treasury Security||0.32%||0.38%|
|3-year Treasury Security||0.97%||1.03%|
|5-year Treasury Security||1.44%||1.54%|
|10-year Treasury Security||2.13%||2.17%|
|12-month LIBOR||0.843% (Aug)|
|12-month MTA||0.221% (Aug)|
|11th District Cost of Funds||0.643% (July)|
Here comes the Truth-in-Lending/Real Estate Protection Act Integrated Disclosure Rule (TRID) effective date. What does that mean for the consumer and those working within the real estate industry? Starting with applications received on October 3rd of this year, the final closing costs on a home loan must be made available to a consumer purchasing or refinancing a home three business days before closing. This means that all parties must do a much more judicious job of planning a purchase or refinance transaction. Want to go to closing quickly after signing a contract? The best avenue would be to make sure your application is fully pre-approved by your lender’s underwriters before you make an offer. This strategy also has the potential to make your offer more enticing to sellers because they know you are a serious buyer. It will also be important to make sure all issues are resolved early in the process. Last minute changes to the contract are much more likely to cause a delay in the settlement date. It is all-important for everyone who is part of the process to work as a team to insure that the transaction flows smoothly without delays. Contact us for an article explaining the full scope of the changes, including the new integrated disclosures.
The median size of U.S. homes dropped slightly in the second quarter, edging back from a record set in the previous quarter, the Commerce Department reported. In the second quarter, the median size of a new home was 2,479 square feet – about 40 square feet smaller than the record high set in the first quarter. The smaller size may be a sign that builders are starting to focus on building more entry-level homes. The National Association of Home Builders has predicted that first-time home buyers, who most often purchase entry-level homes, will comprise 18 percent of new-home sales this year, up from 16 percent last year. Still, that is far short of the 25 percent to 27 percent share of buyers that first-time home buyers comprised in the market from 2001 to 2005. At that time, the median size of new homes ranged from 2,051 to 2,263 square feet. But anticipating the return of first-time buyers, some builders have announced efforts to focus on the entry-level market. Source: The Wall Street Journal
According to a recent survey, fewer people looking to choose a new location for their post-work life are interested in multifamily arrangements, than those looking for a more traditional set-up. Eighty-three percent of the magazine’s subscribers say they would most likely choose a single-family home in retirement. “We hear time and again from the people we interview that moving to a traditional single-family home in retirement allows them to maintain their autonomy while still choosing the size—smaller or larger—of their new home to suit their new chapter in life,” says Where to Retire editor Annette Fuller. However, as they seek to preserve their autonomy, many of those prospective retirees want to live in areas that offer the benefits of communal living. Seventy percent of respondents say they are most interested in a master-planned community. “Many opt to live in an active-adult master-planned community—a concept made popular by Del Webb in the 1960s and still thriving today—which gives retirees the opportunity to take advantage of all the benefits of single-family home living while enjoying the camaraderie of peers as well as amenities and activities geared toward them,” says Fuller. The study, conducted by Readex Research, also found that 62 percent of the magazine’s subscribers are planning on buying, rather than renting, and that potential buyers plan to spend an average of $263,000. Source: Where to Retire Magazine