The Chairperson of the Board of Governors of the Federal Reserve System, Janet Yellen, recently caused quite a debate in the markets with a recent speech indicating that she believed the case for an increase in the federal funds rate has strengthened in recent months. The debate not only centered around whether a rate increase was justified based upon the strength of the economy, but also when the increase might happen. For example, while the latest data have indicated some strength within areas such as consumer spending, we are still talking about an economy which has grown at a 1.0% annual rate thus far this year.
These types of speeches by the Fed are supposed to contribute to the organization’s transparency so that the markets are not surprised by Fed activity such as increasing rates. More often than not, the statements in these speeches just create confusion, especially when the economy’s performance is as muddled as it is at the present time. Yellen did not say a rate increase was coming this month, but certainly the markets saw the possibility of a September increase on the rise.
Certainly, Friday’s jobs report had the potential to go a long way to clarify the situation. While the numbers were not earth-shattering in either direction, the addition of just over 150,000 jobs was certainly not a strong enough showing to increase the chances for a rate hike this month. The growth in hourly wages was also less than expected and without any evidence of wage inflation, the Fed has more leeway with regard to holding off for now.
The Markets. Rates were slightly higher in the past week. For the week ending September 1, Freddie Mac announced that 30-year fixed rates were at 3.46%, moving up from 3.43% the week before. The average for 15-year loans rose to 2.77% and the average for five-year adjustables increased to 2.83%. A year ago, 30-year fixed rates were at 3.89%, almost one-half of one percent higher than today’s levels. Attributed to Sean Becketti, Chief Economist, Freddie Mac –“The 10-year Treasury yield inched up in response to Fed Chair Janet Yellen’s speech last Friday and then settled near last week’s average. The rate on 30-year fixed mortgages rose 3 basis points to 3.46 percent. Rates on home loans have hovered between 3.41 and 3.48 percent for the past ten weeks.” 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 September 2, 2016
|Daily Value||Monthly Value|
|6-month Treasury Security||0.47%||0.40%|
|1-year Treasury Security||0.60%||0.51%|
|3-year Treasury Security||0.91%||0.79%|
|5-year Treasury Security||1.18%||1.07%|
|10-year Treasury Security||1.57%||1.50%|
|12-month LIBOR||1.432% (July)|
|12-month MTA||0.507% (July)|
|11th District Cost of Funds||0.693% (July)|
|Prime Rate||3.50% (Dec)|
According to the National Association of Realtors®, 25% of primary home buyers are single. Some of these non-married buyers, statistics show, buy homes jointly with other non-married buyers such as boyfriends, girlfriends or partners. If you’re a non-married, joint home buyer, before signing at your closing, you’ll want to protect your interests. Different from married home buyers, non-married buyers get almost no estate-planning protection on the state or federal level which can be, at minimum, an inconvenience and, at worst, result in foreclosure. Thus, the process should start with an experienced real estate attorney to draft the following two documents:
- Cohabitation Agreement
- Property Agreement
The Cohabitation Agreement is a document which describes each person’s financial obligation to the home. It should include details on which party is responsible for payment of the mortgage, real estate taxes and insurance; the downpayment made on the home; and necessary repairs. It will also describe the disposition of the home in the event of a break-up or death of one party which, unfortunately, can happen. The second document, the Property Agreement, describes the physical property which you may accumulate while living together, and its disposition if one or both parties decide to move out. A well-drafted Property Agreement will address furniture and appliances, plus other items brought into the joint household, and any items accumulated during the period of co-habitation. Source: The Mortgage Reports
Consumers took full advantage of extremely low interest rates and continued monetary policy inaction from the Federal Reserve in July, as new home sales unexpectedly soared to their highest point since October 2007, according to a report published by the Census Bureau. Sales of new single-family homes in July clocked in at an impressive annualized rate of 654,000 – up 12.4 percent over the month and 31.3 percent over the year. Analysts had actually expected a slight downtick in sales over the month, due mostly to strong performance in June and a general shortage of new housing options on the market. “July’s surge in new home sales continues to support the sentiment that demand for homes is strong despite homebuyers facing low existing inventory,” Ralph McLaughlin, chief economist at real estate hub Trulia, wrote in a research note. Home sales were likely bolstered by interest rates that plummeted to near-record lows in July, shortly after the United Kingdom announced its Brexit vote. In the financial market chaos that ensued, investors flocked to U.S. assets that were generally considered safe from volatility, like mortgage-backed securities. Source: US News and World Report