Friday we saw a very important economic release. Actually, the jobs report is very important every month. But this month it was even more important than usual. Why? For one, it follows a fairly weak report from last month as well as an entire month of weak economic data. Couple this with the fact that the Federal Reserve Board has said time and time again that they are going to raise rates this year, and you can see why this report is so important.
Basically, this report and the next month’s jobs data are the most important releases we will see to let the Fed know how the economy is going before they meet for a final time in December. And not just the amount of jobs created, but the measurement of wage inflation as well. The only other data which might come close would be a strong revision of the third quarter’s numbers on economic growth which were initially disappointing. So how did the numbers come out?
They were the exact opposite of last month’s weak numbers. In October almost 300,000 jobs were created and the unemployment rate fell to 5.0%, the lowest since April of 2008. In addition, hourly wage growth was higher and this wage growth is something the Fed is watching very closely. Thus, unless we see a complete reversal next month, the odds for a rate increase in December has gone up significantly and rates have already started up in anticipation of the now imminent Fed move.
The Markets. Rates on home loans rose in reaction to the Fed’s statement after their most recent meeting. Freddie Mac announced that for the week ending November 5, 30-year fixed rates rose to 3.87% from 3.76% the week before. The average for 15-year loans increased to 3.09%. Adjustables were also higher, with the average for one-year adjustables rising to 2.62% and five-year adjustables rising to 2.96%. A year ago, 30-year fixed rates were at 4.02%, close, but still higher than today’s levels. Attributed to Sean Becketti, chief economist, Freddie Mac — “Treasury yields climbed nearly 20 basis points over the past week, capturing the market movement following last week’s FOMC meeting. In response, the 30-year fixed rate experienced its largest increase since June, up 11 basis points to 3.87 percent. Recent commentary suggests interest rates may rise in the near future. Janet Yellen referred to a December rate hike as a ‘live possibility’ if incoming information supports it. The October jobs report to be released this Friday will be one crucial factor influencing the FOMC’s decision.” 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 6, 2015
|Daily Value||Monthly Value|
|6-month Treasury Security||0.27%||0.11%|
|1-year Treasury Security||0.42%||0.26%|
|3-year Treasury Security||1.16%||0.93%|
|5-year Treasury Security||1.65%||1.39%|
|10-year Treasury Security||2.26%||2.07%|
|12-month LIBOR||0.838% (Oct)|
|12-month MTA||0.256% (Oct)|
|11th District Cost of Funds||0.651% (Sep)|
A vast majority of Americans believe that buying a home is a solid financial decision, and most believe they could sell their home for at least its initial purchase price, according to a new survey from the National Association of Realtors (NAR) in the 2015 National Housing Pulse Survey. The Survey also found that a preponderance of Americans think that now is a good to buy a home. The Survey, which measures consumers’ attitudes and concerns about housing issues in the nation’s 50 largest metropolitan statistical areas, found that more than eight in 10 Americans believe that purchasing a home is a good financial decision, and 68 percent believe that now is a good time to buy a home. Seventy-one percent believe they could sell their house for what they paid for it, a jump of 16 percentage points from 2013. When asked for reasons about why homeownership matters to them, respondents’ answers did not change significantly from past years. Building equity, wanting a stable and safe environment, and having the freedom to choose their neighborhood remain the top three reasons to own a home. The number of renters who are now thinking about purchasing a home has increased since the last survey in 2013, up from 36 percent to 39 percent. Sixty-one percent of renters stated that owning a home is a priority for their future. Source: NAR
Lawrence Yun, chief economist for the National Association of Realtors, believes home construction will, in the next two years, finally return to normal levels for the first time since the recession. “The principal reason for the inventory shortage is the cumulative impact of homebuilders not being in the market for well over five years,” Yun wrote in his most recent economic update. “Homebuilders typically put up 1.5 million new homes annually.” And with each year trending higher, Yun believes 2017 may be the year construction levels finally return to normal. “Builders will construct more homes. By 1.1 million in 2015 and 1.4 million in 2016,” Yun wrote. “New home sales will follow this trend. This rising trend will steadily relieve housing shortage.” And while home building in general is expected to return to historical norms in the next 24 months, Yun says construction for apartments has returned to normal levels. Source: Mortgage Professional America
The housing market is ignoring the largest pool of prospects: Boomerang buyers, according to Daren Blomquist, vice president of RealtyTrac. Boomerang buyers are former home owners who lost their home to a foreclosure or short sale. After sitting out of the market for several years to rebuild their credit, these buyers may be inching back to the market looking for a second chance at home ownership. There are an estimated 7.3 million potential boomerang buyers, Blomquist says. “If we magically had 7.3 million more home owners, the home owner rate would be back to historic norms,” he notes. Boomerang buyers mostly consist of Generation Xers and Baby Boomers. “They are the ones who are likely to come back and become home owners again than the millennials,” Blomquist says. In a report earlier this year, RealtyTrac noted that Generation X and Baby Boomer “boomerang buyers” could “represent a massive wave of potential pent-up demand that could shape the housing market in the short term even more dramatically” than the millennials’ entrance into home ownership. “The markets most likely to see the boomerang buyers materialize are those where there are a high percentage of housing units lost to foreclosure but where current home prices are still affordable for median income earners and where the population of Gen Xers and Baby Boomers … have held steady or increased during the Great Recession,” RealtyTrac notes in its report. Source: RealtyTrac