September 26, 2017 – 

Earlier this month, the bull market in stocks became the second strongest in history with a gain of over 260% from the bottom reached in 2009. It was already the second longest bull market in history. This is still way short of the strongest bull market in history, which achieved gains of almost 600% for the period of 1987 to 2000, but still very, very impressive. The secret to this market’s success? Steady growth with low inflation. Of course, you can also add that this bull market followed precipitous drops during the financial crisis and thus much of it was clawing its way back up.

Regardless of where it has come from, stocks have moved a long way through significant challenges and the question on everyone’s mind is — how long can this rally go on? As you would guess, there are opinions on both sides, with many analysts saying there is room to run, and others saying that stocks are being inflated by artificially low rates courtesy of the Federal Reserve Board.

The Fed met last week amid this rally, but at the same time also had to consider additional challenges, such as national disasters and a ramp-up of international tensions. The Fed’s decision to keep short-term interest rates unchanged and begin the paring of assets in October was right in line with pre-meeting expectations, though some had hoped for a delay based upon the recent challenges. Is the Fed justified in keeping rates so low, or should they hold off on the next hike expected in December — until they see how well our economy recovers longer-term from the hurricanes which have hit so hard? Only time will tell, as we cannot predict the future any better now than we could in 2009.

The Markets. As we predicted last week based upon trends, rates on 30-year fixed loans rose from their lowest levels of the year. For the week ending September 21, Freddie Mac announced that 30-year fixed rates rose to 3.83% from 3.78%. The average for 15-year loans increased to 3.13%, and the average for five-year adjustables moved up to 3.17%. A year ago, 30-year fixed rates averaged 3.48%. Attributed to Sean Becketti, chief economist, Freddie Mac — “The 10-year Treasury yield continued its upward trend, rising 7 basis points this week. As we expected, the rate on 30-year loans followed suit, increasing 5 basis points to 3.83 percent. This week’s uptick in the 30-year rate ends a nearly two-month streak of declines.” 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
	Sept 21	August
6-month Treasury Security	1.19%	1.13%
1-year Treasury Security	1.31%	1.23%
3-year Treasury Security	1.59%	1.48%
5-year Treasury Security	1.89%	1.78%
10-year Treasury Security	2.27%	2.21%
12-month LIBOR		1.712% (Aug)
12-month MTA		0.944% (Aug)
11th District Cost of Funds		0.707% (July)
Prime Rate		4.25% (June)

  National residential lenders are easing credit standards to keep the housing market moving, though the changes bring lending nowhere near the ultra-loose credit environment that sparked the financial crisis. Fannie Mae and Freddie Mac – the government-controlled companies that purchase home loans from lenders to keep the market on even keel – are rolling out new programs to encourage homeownership. Earlier this year, the GSEs flagged affordability challenges as the biggest barrier to housing growth. In response, Fannie Mae is now allowing borrowers to have higher debt levels and still qualify for a home loan. This includes raising the debt-to-income ratio limit to 50% of pre-tax income from 45% previously for manually underwritten loans — loans not approved through their automated underwriting system. The nation’s three major credit agencies – Equifax, TransUnion and Experian – are also dropping tax liens and civil judgments from some consumers’ credit profiles. This will enable more Americans to qualify for a home loan. More recently, Fannie Mae and Freddie Mac also announced programs to allow for purchase loans without appraisals, although the loans that qualify are limited to start out with. Sources: GoRion, Fannie Mae and Freddie Mac 

Immigration is among the most hotly debated issues in America right now, but regardless of the political arguments about how to manage the country’s borders, there’s no denying that an uptick in foreign residents in the U.S. is a boon for real estate, according to Alex Nowrasteh, immigration policy analyst with the Cato Institute’s Center for Global Liberty and Prosperity. “No other market is more affected by immigration than real estate,” Nowrasteh said at a session called “Housing Markets Are International” at the Realtors® Legislative Meetings & Trade Expo. “The effect of immigration on the labor market is, at worst, one-tenth the size that it is on real estate.” He noted that immigrants gravitate toward construction jobs at a much higher rate than American-born citizens. When immigration rates increase, the homebuilding industry may benefit. Nowrasteh also said the Cato Institute research has shown that on a local level, a 1 percent rise in the immigrant population corresponds to a 1 percent hike in rental rates. And with 22.6 percent of the U.S. population—or 43.3 million people—being foreign-born, according to Census Bureau data, the economy is getting a huge influx of cash. In 2012, Nowrasteh noted, immigrants added $3.1 trillion to U.S. housing wealth, mostly in mid- to low-income counties. According to the NAR’s latest research on international buying activity in the U.S. in 2016, foreign buyers purchased $102.6 billion worth of U.S. real estate. Source: Realtor® Magazine.

A Redfin report said for every dollar of home equity single men earned over five years, single women earned just 92 cents. Redfin examined nearly 200,000 home sales in 18 large metros in 2012, of which nearly 40 percent were purchased by single women. On those home purchases, women earned a median $171,313 of home equity over five years, compared to $186,403 of equity earned by men–a difference of $15,090 or 8.1 percent. Redfin Chief Economist Nela Richardson attributed the disparity in home equity to gaps in pay, lower down payments made by women and higher student debt among women. “Despite differences in equity appreciation, purchasing a home can help level the playing field between men and women,” Richardson said. “In addition to setting labor standards that encourage pay equity, more can and should be done at the federal and local levels to support female homeownership through affordable housing policies like down payment assistance.” Redfin blogger and editor Natalie Schwab said the first major cause behind the home equity accumulation gap is income. She noted women’s median income has flattened since 1979, according to the National Bureau of Economic Research. Coupled with a continuing gender pay gap in the workplace, women are typically unable to save and therefore spend as much as men on housing. Source: The MBA