September 27, 2016:
After much speculation on both sides, the Federal Reserve Board’s Open Market Committee met last week and made their decision regarding interest rates. The markets experienced significant volatility leading up to the meeting as stocks pulled back, interest rates rose and oil prices fell. With the volatility, none of these moves came in a straight line, especially with regard to the stock market.
As we have previously noted, the markets often start bouncing back from their pre-meeting movements as the event gets closer. This time the markets stabilized somewhat before the meeting and, immediately after the meeting, we saw a moderate rally in stocks and a moderate drop in long-term rates. Why the subdued reaction? Even though the Fed declined to raise rates, there were three votes in dissention. The markets initially interpreted these votes as an indication that the Fed is moving closer to raising rates, most likely at their December meeting.
On the other hand, according to the New York Times — Chairwoman Janet Yellen, said she saw no reason to rush. “The economy keeps bubbling along without boiling over. We are generally pleased with how the economy is doing,” she said at the news conference after the meeting. “The economy has a little more room to run than might have previously been thought. That’s good news.” Thus, while the economy is growing moderately without exacerbating inflation, there are some who think the Fed is waiting too long to make a move, including some members of the organization.
The Markets. Rates on home loans eased down a bit in the past week. For the week ending September 22, Freddie Mac announced that 30-year fixed rates decreased to 3.48% from 3.50% the previous week. The average for 15-year loans fell one tick to 2.76% and the average for five-year adjustables also decreased to 2.80%. A year ago, 30-year fixed rates were at 3.86%, approximately one-third of one percent higher than today’s levels. Attributed to Sean Becketti, Chief Economist, Freddie Mac — “The 10-year Treasury yield declined after last week’s post-Brexit high in anticipation of the Fed’s September policy meeting. The rate on 30-year fixed home loans followed Treasury yields, falling 2 basis points and settling at 3.48 percent. Despite the decrease in rates, the Refinance Index moved 8 percent to its lowest level since June.” 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 23, 2016
|Daily Value||Monthly Value|
|6-month Treasury Security||0.39%||0.45%|
|1-year Treasury Security||0.60%||0.57%|
|3-year Treasury Security||0.91%||0.85%|
|5-year Treasury Security||1.18%||1.13%|
|10-year Treasury Security||1.63%||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)|
Borrowers who use the U.S. Department of Agriculture’s Rural Housing Service to get a home loan could soon pay significantly less for their loan, as the USDA announced that it is about to cut its loan fees for lenders who use the USDA’s Single Family Housing Loan Guarantee Program. In an announcement sent to lenders, the USDA said that it is cutting its fees beginning on Oct. 1, 2016, the first day of fiscal year 2017. According to the announcement, the USDA is set to cut its upfront guarantee fee from 2.75% of the loan-at-close amount to 1%. Additionally, the USDA is cutting its annual fee from reduced from 0.50% of the unpaid principal loan balance to 0.35%. So, what’s the reason for the cut? Better borrower performance, according to a USDA official. According to the official, the USDA is able to cut its upfront and annual fees because borrower delinquency and foreclosure rates have reached “historic lows” since the beginning of the housing crisis. Additionally, the official said that successful partnerships between the USDA and the lenders who participate in its loan programs have resulted in “very strong” performance within this program. “When our borrowers succeed, the program succeeds,” USDA Rural Housing Service Administrator Tony Hernandez said in a statement provided to HousingWire. “Excellent overall performance in our Single Family Housing Guaranteed Loan Program means we can charge less for the life-changing opportunity to own a home.” Source: HousingWire
Many older adults say they want to stay put in their homes as they age. But how many older adults will actually be able to do so is another question. Indeed, “a recent AARP study … showed that 71 percent of 50 to 64 year olds want to stay in their homes and their current communities,” says Rodney Harrell, director of Livability Thought Leadership at AARP. “But communities as we build them often don’t have the options that people need to age well. The idea of a livable community is one that has housing, transportation, and other options that allow people to stay and thrive in their homes.” AARP has launched a Livability Index to help older adults search for the right home. It factors in seven categories of livability in judging neighborhoods, including housing, transportation, environment, health, engagement, and more. If people do desire to age in place, they must carefully assess a home when they buy in the first place whether it will meet their needs as they grow older and under several scenarios too. “If you are on that cul de sac and your spouse has passed, your kids live elsewhere and your income is much lower and you are no longer driving, then suddenly that dream house, which wasn’t planned for long term, is isolating,” says Harrell. “You may no longer be able to access the second floor and the functionality and usefulness of the house is suddenly gone.” Source: BUILDER
In a data analysis that may give the Property Brothers heartburn, Zillow has number crunched the financial considerations surrounding fixer-upper homes and has determined that they rarely offer a significant value. In a national analysis of 70,000 listings for fixer-uppers, Zillow has concluded that fixer-upper homes list for a mere eight percent less than market value, which for the median fixer-upper would save buyers only $11,000 for renovations. In some areas, the savings are miniscule, while in pricier real estate markets buyers see a greater cash savings. “Fixer-uppers can be a great deal, and they allow buyers to incorporate their personal style into a home while renovating, but it’s still a good idea to do the math before making the leap,” said Svenja Gudell, Zillow chief economist. “While an 8 percent discount or $11,000 in upfront savings on a fixer-upper is certainly a good chunk of change, it likely won’t be enough to cover a kitchen remodel, let alone structural updates like a new roof or plumbing, which many of these properties may require.” Source: National Mortgage Professional