May 10, 2016 –
Just one week after the Federal Reserve Board decided not to raise rates for the first time in 2016, the all-important jobs report was released. The Fed’s statement regarding the industry was a mixed message. On the positive side of the coin, the statement indicated that international factors were not as grave a threat to the economy as feared earlier in the year. On the other hand, the Fed acknowledged that economic growth continues to be weak.
This weakness was confirmed the last week in April, as the first estimate for economic growth for the initial quarter of 2016 came in below consensus estimates at 0.5%. Even though this number will likely be revised upward in the coming months, it is clear that the economy is as weak as the Fed has indicated. Thus far this year, the greatest areas of strength the economy has been displaying is within the areas of the creation of jobs and the real estate sector.
Which brings us back to the employment report. On Friday, the Labor Department indicated that the economy had produced 160,000 jobs in April, less than expected. However, the average hours worked was higher and so were wages. The unemployment rate came in unchanged at 5.0%. What does this mean? The economy has produced approximately 800,000 jobs in the first four months of 2016, which is pretty impressive. The best chance for a revival of economic growth is continued growth in consumer spending and to do that, we need to create jobs. Thus far this year, we are doing just that; however, we will want to make sure that the slower economy will not filter down to employment growth.
The Markets. Rates fell back near its three-year low in the past week. Freddie Mac announced that, for the week ending May 5, 30-year fixed rates fell to 3.61% from 3.66% the week before. The average for 15-year loans was also lower, moving to 2.86%. The average for five-year adjustables decreased to 2.80%. A year ago, 30-year fixed rates were at 3.80%, a bit higher than today’s levels. Attributed to Sean Becketti, chief economist, Freddie Mac — “The Fed’s decision to stand pat, followed by a week of assorted unsettling news drove Treasury yields lower. As a consequence, the 30-year fixed rate drifted down to 3.61 percent, just 3 basis points above the low for the year. Since the start of February, rates on home loans have varied within a narrow range providing an extended period for house hunters to take advantage of historically low rates.” Note: 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 May 6, 2016
|Daily Value||Monthly Value|
|6-month Treasury Security||0.39%||0.37%|
|1-year Treasury Security||0.51%||0.56%|
|3-year Treasury Security||0.87%||0.92%|
|5-year Treasury Security||1.20%||1.26%|
|10-year Treasury Security||1.76%||1.81%|
|12-month LIBOR||1.230% (Apr)|
|12-month MTA||0.438% (Apr)|
|11th District Cost of Funds||0.678% (Mar)|
|Prime Rate||3.50% (Dec)|
Deciding what to do with the house can be a major quandary for couples getting a divorce, particularly when they share a home loan. When there is equity in the home, each spouse typically wants to take a share as part of the settlement agreement. But if one person wants to remain in the home, rather than sell it and split any profit, then that spouse will likely have to qualify for a home loan on his or her own. Spouses who choose to stay may have to refinance their loan in order to cash out enough equity to pay off an ex. But even a spouse who has the financial resources for a buyout without drawing on home equity will still probably have to get a loan in his or her name. “The person walking away wants their share of the equity, but also wants their name off the loan as soon as possible,” said Kathleen B. Connell, a family law lawyer and lecturer in Atlanta. The obligation can tie up that person’s credit, and “if there’s a default,” Ms. Connell added, “the lender is going to sue them both, regardless of what the divorce agreement says.” One of the first questions to be answered, then, is whether a spouse who wants to keep the house or apartment can qualify for a home loan independently. And if so, would that spouse be able to afford all the other expenses associated with living in that home? “The really important thing for both parties is to flesh out all of their expenses — how much it really costs,” said Cynthia Thompson, the founder of Divorce Planning Solutions, a financial planning firm in White Plains, N.Y. Ideally, this preparation should happen early on in the divorce process — too often, Ms. Thompson said, people are “arguing, litigating, fighting, having no idea of the whole picture.” Ms. Thompson frequently advises her clients to find out how much loan they can qualify for while divorce negotiations are ongoing. This information can be key: If they discover, for example, that cashing out equity will raise the loan to an unaffordable level, they might instead seek to divide some other asset differently to compensate for the equity share. “The important point to be made is that working with a qualified mortgage professional during the settlement process can help identify many of the hurdles,” she said. Source: The New York Times Contact us for a free article that explains what the options are for homes which are part of a divorce.
Purchasing a leisure residence is no longer just for the rich and famous. According to the National Association of Realtors®, vacation home sales topped out at 920,000 in 2015. As the economy improves, incomes are increasing and so are real estate values. Buying a second home is again viewed as a solid investment for the average family. Some buyers pay cash, but others finance their new vacation spot with a new loan, either on the new home or a home they already own. Today’s marketplace offers a number of different loans and strategies to purchase that vacation, weekend, or otherwise part-time home. The good news is — a second home is often within reach for the average homeowner. Source: The Mortgage Reports
Insurance firm Travelers has revealed the most common and costliest claims made by homeowners. The report, based on US home insurance claims from 2009-2015, shows that exterior wind damage is the most frequent cause of a claim (25 per cent) followed by non-weather related water damage (19 per cent), hail (15 per cent), weather-related water damage (11 per cent) and theft (6 per cent). “Any number of things can go wrong with a home, and it’s impossible to predict them all,” said Pat Gee, Senior Vice President, Personal Insurance Claim, Travelers. “But if consumers focus on these particularly common risks and take preventive steps and perform routine maintenance, it may help lessen the likelihood of damage.” Fire causes the most expensive claims and were often caused by appliances being misused or failing, electrical problems or cooking. Source: Mortgage Professional America