September 12, 2016:
The initial reaction with regard to the slightly disappointing August jobs numbers, was speculation that a rate hike was less likely to result from the meeting of the Federal Reserve Board’s Open Market Committee next week. Keep in mind that many are speculating that the Fed will be reticent to take any actions at the following meeting, which takes place a few days before the Presidential election. The Fed is not likely to admit that the date of an election would be reason to hold off on taking necessary fiscal action, but logic tells us that the Fed will not want to be perceived as having any influence in the political process, speculative or not.
If we are correct in this assumption, the Fed might look long and hard at their meeting next week, if indeed their next chance to raise rates will be in December. And if that happens, that will mean the Fed will have raised rates two Decembers in a row. Certainly, this schedule would fit the definition of “gradual” rate increases, which we have been hearing about for quite some time.
Though we can’t predict what will happen next week, let alone at the next two meetings, we can say that a lot can happen between now and December, including some sort of shock which influences the economy. Shocks can take the form of natural disasters, political upheaval, terrorist activity or more. And history tells us that shocks typically affect the economy negatively. Thus, if the Fed does not move next week, they will need to see continued improvement in the economy and no major shocks which provide risks to the downside.
The Markets. Rates continued to hold steady near record lows in the past week, staying in the same range for almost three months. For the week ending September 1, Freddie Mac announced that 30-year fixed rates were at 3.44%, moving slightly down from 3.46% the week before. The average for 15-year loans fell one tick to 2.76% and the average for five-year adjustables decreased to 2.81%. A year ago, 30-year fixed rates were at 3.90%, almost one-half of one percent higher than today’s levels. Attributed to Sean Becketti, Chief Economist, Freddie Mac –“The rate on 30-year fixed home loans fell 2 basis points to 3.44 percent this week. As rates continue to range between 3.41 and 3.48 percent, many are taking advantage of the historically low rates by refinancing. Since the Brexit vote, the refinance share of residential finance activity has remained above 60 percent.” 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.
Current Indices For Adjustable Rate Mortgages
Updated September 9, 2016
|Daily Value||Monthly Value|
|6-month Treasury Security||0.50%||0.45%|
|1-year Treasury Security||0.57%||0.57%|
|3-year Treasury Security||0.91%||0.85%|
|5-year Treasury Security||1.19%||1.13%|
|10-year Treasury Security||1.61%||1.56%|
|12-month LIBOR||1.557% (Aug)|
|12-month MTA||0.523% (Aug)|
|11th District Cost of Funds||0.693% (July)|
|Prime Rate||3.50% (Dec)|
Are you or is someone you know needlessly missing the action, leaving near-historically low money on the table? You might be, if you fit this profile:
- You’re renting, although your goal is to buy a home. You assume you can’t qualify for a home loan because today’s underwriting rules are so strict and inflexible.
- You don’t have a lot of extra cash in the bank, and you doubt that you could scrape together enough money for a down payment.
- Your credit scores aren’t great — just under 700 FICO — but that’s mainly because you’re young and don’t have a deep credit history.
Sound familiar? Well, here’s good news. Giant mortgage investors Fannie Mae and Freddie Mac have low-down-payment plans known as HomeReady and Home Possible Advantage. Either one could be key to your getting out of your rental apartment and buying a house or condo sooner than you think. Check out the basics of Fannie’s program: Start with the 3 percent down payment. There’s no minimum cash contribution requirement out of your wallet. You can supplement your cash on hand with gifts from relatives or other sources. You can also increase your effective income for qualification purposes by including so-called “boarder” or in-house rental payments. Another point of flexibility: Say you are part of an extended family, and there will be other household members living in the house with you who earn incomes but don’t want to be a co-borrower. You can use their documented earnings to increase the maximum debt-to-income ratio (DTI) you’re allowed on your loan. As you might suspect, that kind of underwriting flexibility comes with some requirements. HomeReady and Home Possible Advantage are targeted at moderate-income primary residence buyers — first-timers, minority purchasers, extended family groups and other “underserved” borrowers — so not everybody can participate. In designated low-income census tracts, there is no income limitation. Both programs also require some form of homeownership credit education: either an online course or, under Fannie’s latest version, counseling sessions with any of a network of housing counselors around the country. Source: Ken Harney, The Nation’s Housing
Americans want bigger houses. Or at least that’s what they’re getting. The median size of a new single-family house was 2,467 square feet last year, the biggest on record, according to recently released Census Bureau data. With all that floor space, homes are 61% larger than the median from 40 years earlier and 11% larger than a decade earlier. “McMansion” may not be a popular term post-housing bust. But American homes have not only been getting larger, they’re also including more bathrooms and amenities such as air conditioning. Some 93% of new houses had air conditioning in 2015 compared with 46% in 1975. About 96% of new homes last year had at least two bathrooms versus 60% four decades earlier. That may go some way toward explaining rising prices. The median sales price of a new home was $296,400 last year, according to Census, a new high. Even when adjusted for inflation, new-home prices hit a record last year. Source: The Wall Street Journal