June 27, 2017 – 

 

We are approaching the half-way point of 2017. We can make an observation that it has been a very strange year. And we are not just talking about the political turmoil. For example, despite the fact that the Federal Reserve Board has raised short-term interest rates for the third consecutive quarter, we still do not have a fix on how strong the economy is right now. In their statement accompanying the increase two weeks ago, the Fed expressed optimism that the economy was getting stronger. Yet, every economic report released that week was disappointing, including readings on retail sales and industrial production.

Even though just about everyone was expecting rates on home loans to rise significantly this year, this uncertainty is one reason that mortgage rates are lower than the analysts expected. One would hope that the upcoming June jobs report would lend some certainty to the equation, but thus far this year, we have even seen ambiguity within the employment sector. The unemployment rate is dropping, but the pace of jobs added has not accelerated from last year.

Despite this uncertainty, the stock market has remained strong this year as the post-election rally has continued. Does this mean that the markets are optimistic that it is only a matter of time before the economy shows signs that it is picking up? Or is this rally merely a reaction to improved corporate profits? We feel that the picture will become clearer over the next several weeks, as we see additional jobs reports and a reading on the growth of the economy for the second quarter. For now, the lower long-term rates should be helping the economy in conjunction with higher stock prices.

 

The Markets. Rates were stable last week, again remaining near their lowest levels of the year. For the week ending June 22, Freddie Mac announced that 30-year fixed rates fell one tick to 3.90% from 3.91% the week before. The average for 15-year loans also fell slightly to 3.17%, and the average for five-year adjustables moved down one tick to 3.14%. A year ago, 30-year fixed rates averaged 3.56%. Attributed to Sean Becketti, chief economist, Freddie Mac — “Following last week’s sharp decline, the 10-year Treasury yield rose 3 basis points this week. The rate on 30-year fixed loans remained relatively flat, falling 1 basis point to 3.90 percent. Rates on home loans are continuing to hold at year-to-date lows amidst ongoing economic uncertainty.” 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. 

	Daily Value	Monthly Value
	June 22	May
6-month Treasury Security	1.10%	1.04%
1-year Treasury Security	1.22%	1.12%
3-year Treasury Security	1.48%	1.48%
5-year Treasury Security	1.76%	1.84%
10-year Treasury Security	2.15%	2.30%
12-month LIBOR		1.724% (May)
12-month MTA		0.776% (May)
11th District Cost of Funds		0.645% (Apr)
Prime Rate		4.25% (June)

  You’ve found the house you want. Now, where do you go for a home loan? If you’re buying a brand-spanking-new place, do you go with the builder’s in-house lender? His reason for being so magnanimous: He wants to keep your deal in-house so he can be on top of it and make sure everything goes according to Hoyle. If you’re buying an existing house, do you go with the lender your real estate agent recommends? After all, your agent has just as much riding on your deal as you do. If it doesn’t close because you can’t get a loan or something falls through at the last minute, he/she doesn’t get paid. Experienced agents know who handles glitches the best and who gets loans to the settlement table with as few blips as possible. Or do you listen to Mom and Dad’s advice? After all, they’ve probably done this a few times in their lives, so they should know what they are talking about. Shouldn’t they? As it turns out, buyers who chose a lender because of financial incentives provided by their builders were only marginally satisfied with their experiences. That’s according to the National Borrower Satisfaction Index produced by the Stratmor Group, a Colorado-based consulting firm. Those who listened to their realty agents were more satisfied, and those who paid heed to advice from their folks, a friend or another relative were even happier with their choices. But the borrowers who were most fulfilled were those who made a connection of their own with their loan agent. Their antennae wiggled. They hit it off. He or she was personable, but also took the time to answer all their questions, listen to their concerns and work with them every step of the way. In the Stratmor study, 31 percent of the huge 10,000-borrower sample chose their officer based on “loan officer interaction.” And that group reported a 95 out of 100 when asked about their overall “borrower satisfaction.” “Their loan officers engaged with them and made them feel comfortable,” says the company’s senior partner, Garth Graham. It’s why he believes that loan officers — also known as “humans” — remain a central part of the loan process. Source: Lew Sichelman, uExpress

 

In some of the hottest housing markets in the US, renters are looking outside of the city as urban renting is becoming more expensive, according to a new report from Zillow. For the first time in four years, the monthly cost of suburban rent is rising faster than the cost of urban rent. The monthly cost of rent in the suburbs is up 2.5%, versus a 2.3% increase in urban rent. “An increase in multifamily construction has slowed rent growth across the country, with rents rising at their slowest pace in five years. The suburbs often offer larger apartments and more single-family homes for rent with more space – about 19% of all single-family homes in the US are rentals, up from 13% in 2005,” the report said. Zillow Chief Economist Svenja Gudell listed hardship in rental affordability, an inclination to newer apartments and preference for the spatial capacity of single-family homes in the suburbs as some of the reasons for this new trend. “Rents themselves are still lower in the suburbs, but if demand keeps growing for suburban rentals and supply continues to lag, that will also start to change,” Gudell said. “As more formerly urban renters move to the suburbs in coming years, we’ll likely start seeing more apartment buildings and walkable amenities popping up in those communities.” Source: Zillow

For the first time in years, home sizes are getting smaller. That’s the main finding of the U.S. Census Bureau in its annual report on characteristics of new housing. The report said the median home size fell to 2,422 square feet in 2016, down from a record high 2,467 feet in 2015. Relatively speaking, however, home prices are still 8 percent higher than the pre-crisis peak in 2007 and nearly 50 percent bigger than in 1978. The report said the share of new homes in excess of 3,000 feet declined; the share of new homes under 2,000 feet increased. Source: The MBA