November 22, 2016 –
Thanksgiving arrives this week. Every year, this is the day we reserve for giving thanks. Certainly, in our country we have much to be thankful for. We are one of the richest countries of the world when you measure by per-capita income, and perhaps the richest when you measure per-capita income against the size of our population. But it is not all about riches. It is also about our freedom and democracy. Yes, the recent political campaign turned a lot of people off, but how many would opt for the alternative of not having the right to vote?
On the other hand, it is easy to look at the aggregate numbers and forget that these averages can hide the millions who are not as fortunate residing right in our own country. And certainly, Thanksgiving is the time that our focus upon charity is also renewed. What makes our country great is not only our riches, but also that we are a leader with regard to charitable giving as well. Thus, we hope everyone will take some time to share, donate or volunteer during Thanksgiving week.
As important as Thanksgiving is, the economy marches on in the wake of the election and with an important meeting of the Federal Reserve Board’s Open Market Committee meeting coming in December. The recent spike in long-term interest rates has been concerning for many market watchers, especially since this spike is accompanied by concern that inflation will be on the rise. The question is whether this rise in rates is an overreaction to the surprise result of the election, or are their more fundamental long-term changes coming our way? This will be a topic we will analyze during the coming weeks.
The Markets. Rates rose sharply in the past week, reflecting the sharp increase which has taken place since the election. For the week ending November 17, Freddie Mac announced that 30-year fixed rates rose to 3.94% from 3.57% the week before. The average for 15-year loans increased to 3.14%, and the average for five-year adjustables moved up to 3.07%. A year ago, 30-year fixed rates were at 3.97%, virtually the same as today’s levels. Attributed to Sean Becketti, Chief Economist, Freddie Mac — “Last week’s election fell in the middle of our survey week, making it impossible to determine how closely the rates on home loans would track the post-election sell-off in the Treasury market. This week, the verdict is in — over the last two weeks the rate on 30-year fixed loans jumped 40 basis points to 3.94 percent, almost identical to the 39 basis point increase in the 10-year Treasury yield. If rates stick at these levels, expect a final burst of home sales and refinances as ‘fence sitters’ try to beat further increases, then a marked slowdown in housing activity.” 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 November 18, 2016
|Daily Value||Monthly Value|
|6-month Treasury Security||0.61%||0.48%|
|1-year Treasury Security||0.77%||0.66%|
|3-year Treasury Security||1.31%||0.99%|
|5-year Treasury Security||1.73%||1.27%|
|10-year Treasury Security||2.29%||1.76%|
|12-month LIBOR||1.575% (Oct)|
|12-month MTA||0.574% (Oct)|
|11th District Cost of Funds||0.601% (Sep)|
|Prime Rate||3.50% (Dec)|
Between now and 2018, up to 43% of US homeowners will be affected by a home equity line of credit reset — but according to a study by TD Bank, many are unprepared. “Many HELOCs allow borrowers to draw for 10 years and make interest-only payments,” said Mike Kinane, senior vice president of home equity at TD Bank. “When this draw period ends, borrowers are required to pay principal and interest, which may increase their monthly payments. It’s important that HELOC borrowers plan ahead and review their contract to determine the best course of action based on their current and future financial situations.” Many homeowners used HELOCs during the housing boom to finance large expenses like home renovations and college tuition. With home values rising, HELOCs were a good way to consolidate debt. But now, with the 10-year interest-only period drawing to a close, many of these homeowners are going to see their payments spike. And a good many of them are unprepared, according to TD Bank. The bank’s study found that 23% of surveyed homeowners didn’t have financial plans in place to handle the end of their draw periods. Many were unaware of the reset date described in their HELOC contracts, and just 19% understood that a HELOC reset would increase their monthly payments. Thirty-four percent thought a reset would actually reduce their monthly payments. Perhaps more worrying, 60% of respondents who said they had no plan for their HELOC resets also said they had no plan to seek guidance from a lending professional. Source: MPA — Want to go over alternatives if you have experienced a reset or see one coming? Contact us.
The Urban Institute’s Housing Finance Policy Center released a new study proving what we already know to be true: women are better at paying their loans than men. In order to drive the point home, the Urban Institute conducted a study using public data filed under the Home Mortgage Disclosure Act, the federal law that requires all but the smallest lenders to report annually, and CoreLogic, a provider of consumer, financial and property information, analytics and services. From 2011 to 2014, female-only borrowers carried a FICO score of 741, versus male-only FICOs around 739. This is true even though women earn an annual income of $70,160 and men earn an annual income of $97,670. So, while men make much more money each year on average, women were still better able to keep up with their credit scores. Source: HousingWire
Builders are creating housing developments that offer a small-town feel — which they believe many buyers are seeking in a community nowadays. A growing number of traditional neighborhood developments are looking to recreate village life, offering up old-style communities with “leafy streets of historic-looking homes with porches and sidewalks, shared green spaces and shops.” This marks a shift away from posh, gated golf-course communities. Instead, builders say they want to give home owners a stronger sense of home and a community that fosters greater mingling with neighbors and community, with neighborhood coffee shops and the town dentist all within walking distance of residences — “Picture Andy Griffith’s Mayberry with high-speed Internet.” Source: The Wall Street Journal