July 25, 2017 –

The Federal Reserve Board meets this week to decide what to do with short-term interest rates. With Chairperson Yellen having testified before Congress recently, the tone of her remarks has led the markets to believe that there is little chance of a rate hike this time around. However, analysts will be watching for any wording in the announcement regarding the Fed starting to sell off their bond and mortgage assets later this year. As usual, the Fed is trying to maneuver through a delicate balancing act.

Recent moves to raise short-term rates demonstrate that the Fed is comfortable with the current state of the economy. However, if the Fed floods the market with their assets, this could cause a rise in long-term rates, which might in turn slow down the economy. Thus, the Fed will need to carefully divest itself of these assets taken on during the recession and long recovery. Just as Yellen has indicated that the Fed is looking to raise rates gradually, the selling of these assets will need to follow the same course.

The good news is that recent economic reports have shown inflation to be under control. Absent the threat of increased inflation, the Fed can be more deliberate when implementing these actions. At this point, there seems to be no sign that the economy is quickly gaining steam. Of course, with the first reading on the second quarter economic growth and the August employment report coming out shortly, the balance we currently are seeing could change very quickly.

 

The Markets. Rates moved back down last week after rising the previous two weeks. For the week ending July 20, Freddie Mac announced that 30-year fixed rates fell to 3.96% from 4.03% the week before. The average for 15-year loans decreased to 3.23%, and the average for five-year adjustables moved down to 3.21%. A year ago, 30-year fixed rates averaged 3.45%. Attributed to Sean Becketti, chief economist, Freddie Mac — “Continued economic uncertainty and weak inflation data pushed rates lower this week. The 10-year Treasury yield fell 5 basis points this week. The rate on 30-year fixed loans moved with Treasury yields, dropping 7 basis points to 3.96%.” 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
	July 20	June
6-month Treasury Security	1.12%	1.11%
1-year Treasury Security	1.22%	1.20%
3-year Treasury Security	1.51%	1.49%
5-year Treasury Security	1.82%	1.77%
10-year Treasury Security	2.27%	2.19%
12-month LIBOR		1.738% (June)
12-month MTA		0.830% (June)
11th District Cost of Funds		0.648% (May)
Prime Rate		4.25% (June)

  Homeowners who seek an estimate of their home’s value online often find that it doesn’t match the actual value. You need to know how to talk to your clients about this discrepancy, and the Economists’ Outlook blog, which is run by the National Association of Realtors®, recently offered tips from data scientist Karen Belita. She notes that Automated Valuation Models, or AVMs, are based on computer algorithms and calculations that “take different sets of property data and look for patterns and relationships between property value and the input data.” This allows web visitors to find a home value estimate easily and quickly by just searching an address. But these estimates should not be confused or used as a substitute for appraisals, Belita notes. Appraisals use comparative market analyses and in-depth expertise of real estate professionals to draw a conclusion on the value of the property. Another caveat with AVMs is that they fail to take into account the unique qualities of a home, neighborhood, or local market. “As technologies advance and more data becomes available, the number of sites that provide home value estimates may grow,” Belita writes. “With the knowledge of where to find home value estimates online, it is important to note that these home value estimates are not interchangeable with formal appraisals, comparative market analyses, and they cannot be used as a basis for a loan approval.” Source: National Association of Realtors® Economists’ Outlook Blog

In a poll of 3,350 buyers and sellers, 33 percent of respondents said they made an offer sight unseen; in a similar survey released a year ago, that level was 19 percent. Among Millennials, 41 percent said they made an offer without first visiting the property. The Redfin survey also determined that affordability was the primary economic concern of 40 percent of buyers, with 21 percent admitting to searching in other metro areas where home prices were lower. The survey also touched on some sensitive issues related to sociopolitical issues: 41 percent of buyers expressed apprehension about moving to an area where people have different political views from their own, while 45 percent of minority buyers felt sellers and their brokers might have been less enthused to work with them due to racism. Source: Redfin

Many people seek to downsize their home in retirement—but not their homebuying wish list. Retirees reportedly are flocking to smaller newly built homes that are customized to their personal needs and tastes. One advantage older home buyers find with these custom homes is that they can be built to accommodate medical conditions or physical restrictions, such as wider hallways to accommodate mobility devices. The home also can be outfitted with age-in-place features such as outdoor ramps and lower kitchen cabinets. Retirees are looking to cut back on home maintenance and repairs, which is why their preferences are straying away from larger, older homes. However, building a custom home can be stressful because of the wide availability of options. Real estate experts recommend researching building plans and contractors carefully to make sure buyers get the type of craftsmanship they seek. Source: RIS Media