Shelter Six: Fed Funds Rates Left Unchanged

1. As expected, the Federal Reserve did not raise short-term rates last week.

2. Fed members are more divided than normal on when a rate hike should occur with three members for a rate hike now, three against it, and four neutral.

3. The housing data released last week was mixed. After reaching a multi-year high this summer, sales of existing homes declined in August for a second straight month.

4. According to NAR, low levels of inventory are holding back home sales in many regions. Inventories of homes for sale are down 3% from July and 10% from a year ago.

5. On a positive front, building permits for single-family homes increased 3.7% in August, the largest monthly increase since June 2014.

6. The NAHB Home Builder Confidence Index also jumped to 65 in September, the highest reading since 2005.

Rate Update

Investors liked the Fed’s decision to leave rates unchanged and, as a result, mortgage rates ended the week slightly lower.

This Week

New Home Sales are due out on Monday, Durable Orders on Wednesday, both Pending Home Sales and a revised estimate of 2nd Qtr GDP on Thursday, and Core PCE Price Index on Friday.

September 26, 2016 by · Leave a Comment

Shelter Six: Retail Sales Lower Than Expected

1. After a strong spring and early summer, Retail Sales during August were down more than expected for the second straight month.

2. Consumer spending accounts for a staggering 70% of U.S. economic output with Retail Sales being a key indicator.

3. August’s Consumer Price Index (CPI) report revealed higher than expected levels of overall inflation.

4. While the weaker than expected Retail Sales data favors a slower pace of Fed interest rate hikes, the inflation data supports the opposite, tighter monetary policy.

5. These key influences offset each other and are why many investors see just a small chance that the Fed will raise short-term rates at Wednesday’s Fed meeting.

6. A quick reminder that Shelter is a direct lender in control of all steps of the loan process enabling you to meet deadlines and close on time with the least amount of hassle. What we do best is minimize the mortgage mess!

Rate Update

Shifts in expectations for Fed policy were the main influence on the financial markets last week. A wide range of released economic data had little impact and mortgage rates stay mostly unchanged as they have over the last few months.

This Week

The main event this week will be Wednesday’s Federal Reserve meeting. The Fed statement and press conference often cause a large reaction in financial markets. Before that, Housing Starts will be released on Tuesday and Existing Home Sales on Thursday.

September 19, 2016 by · Leave a Comment

Shelter Six: Metro Atlanta Home Prices Continue to Soar

1. Metro Atlanta home prices rose 5.8% over the past year, faster than the 5.1% national pace. (S&P Corelogic Case-Shiller Price Index)

2. Since the March 2012 market bottom, Metro Atlanta home prices are now up 59.9%! (S&P Corelogic Case-Shiller Price Index)

3. Unfortunately, much of the strong price appreciation is due to low inventory as aggressive buyers continue to bid up the price of homes.

4. About 67% of Millennials (18-35 years old) say they are motivated to improve their credit score out of a desire to buy a home, surpassing Gen Xers at 53% and Baby Boomers at 52%! (Chase Slate 2016 Credit Outlook)

5. A little bit of economic concern last week as the ISM National Services Index unexpectedly declined to the lowest level since February 2010.

6. Higher rates may be in store as a key Fed member now believes a case can be made for raising short-term rates this fall, and the European Central Bank appears done with providing additional monetary stimulus.


Rate Update

Last week, mortgage rates initially moved lower on the news of weak U.S. economic data, but reversed direction and finished the week higher after hawkish comments from Fed and European Central Bank members.

This Week

Retail Sales and Industrial Production reports are both due out on Thursday with the Consumer Price Index (CPI) due out on Friday.

September 12, 2016 by · Leave a Comment

Shelter Six: U.S. Economic Data Lower Than Expected

1. Friday’s Employment report was mildly disappointing with 151K jobs added in August (175K had been expected). The unemployment rate remained at 4.9%.

2. The ISM National Manufacturing Index also came in lower than expected signaling slowness in the U.S. manufacturing sector.

3. These two reports did little to settle the question of whether the Fed will raise rates at the Fed’s September 24th meeting (investors have assigned about a 25% chance of a rate hike).

4. NAR President, Tom Salone, recently commented that “an issue seen earlier in the housing recovery may be reemerging. Realtors are indicating appraisal complications are appearing more frequently as the reason why some home settlements are being delayed…”

5. He continued, “Appraisal-related contract issues have notably risen over the past year, and were the root cause of over a quarter of contract delays in the past three months… Realtors are carefully monitoring this trend.”

6. It is more important than ever to work with lenders who use only the very best local appraisers.


Rate Update

Despite the lower than expected Employment and ISM Manufacturing Index figures, mortgage rates have been remarkably flat over the last month and remain unchanged.

This Week

The ISM National Services Index will be released on Tuesday and the Job Openings & Labor Turnover Rates Report on Wednesday. The European Central Bank will also be meeting on Thursday.

September 2, 2016 by · Leave a Comment

Shelter Six: Yellen Implies Short-Term Rate Hike Coming

1. Federal Reserve Chair, Janet Yellen, referred to the “solid performance of the economy” in a speech last week making a case for an increase in short-term rates.

2. Many experts predict the Fed will increase rates before the year is out, however, Yellen provided no indication as to the timing of the expected increase in her speech.

3. July Existing Home Sales dropped 3% from the multi-year high seen in June. This was the first monthly decline since February.

4. Contracts signed for New Homes jumped 12% in July to the highest level since October 2007, far exceeding expectations.

5. Millennials have been delaying buying homes but, according to a Harvard University study, the next ten years will show a shift in this trend with Millennial households increasing by 2 million per year.

6. In all, Millennial-headed households are expected to grow from 16 million in 2015 to about 40 million in 2025, according to the report.


Rate Update

Yellen’s speech on Friday caused a little rate volatility but had little net impact on mortgage rates, which ended the week slightly lower.

This Week

Core PCE Price Index is due out on Monday, Pending Home Sales on Wednesday, ISM National Manufacturing Index on Thursday, and, the biggest report of the month, the Employment Report, on Friday.

August 29, 2016 by · Leave a Comment

Shelter Six: FHA Now Counting Deferred Student Loan Payments

Effective June 30, FHA made it harder to qualify for a mortgage by changing how student loan payments are viewed in underwriting.

Gone is a rule that allowed lenders to NOT count student loan payments deferred for more than one year. Now, deferred payments must be included in the debt ratio calculation.

For deferred payments, the lender has to use the greater of the payment showing on the credit report or 1% of the outstanding student loan balance. The lender can use a payment of less than 1% only if the lender can document the payment and prove it will fully amortize over the student loan term.

The U.S. Census Bureau reports that the homeownership rate in the U.S. is down to 62.9%, the lowest level since the bureau began tracking the rate in 1965.

The main reason for the drop is most likely a factor of demographics and the result of the slow start it has taken many Millennials to buy a home.

Encouraging are survey results from Fannie Mae that show over 90% of Millennials are optimistic they will eventually own a home, pointing toward a trend reversal and higher future homeownership rates.


Rate Update


Last week’s economic data had little impact but mixed messages from various Federal Reserve members stimulated mortgage rates slightly higher.

This Week

The New Home Sales Report is due out on Tuesday, the Existing Home Sales Report on Wednesday, Durable Orders on Thursday, and the second estimate of 2nd Qtr GDP on Friday.

August 22, 2016 by · Leave a Comment

Shelter 6: Retail Sales Plummet

1. Retail Sales have been very strong this year but were much lower than anticipated in July, despite strong car sales.

2. Consumer spending accounts for about 70% of U.S. economic output, so the Retails Sales figure is critical to the economy.

3. Retail Sales were one of the bright spots for the economy in the 2nd Quarter, so investors will be watching this very closely throughout the fall.

4. Foreclosure inventory declined yet again in June to the lowest rate since August 2007 and are down 19% over a year ago.

5. The median existing single-family home price increased in 83% of measured markets in the 2nd Quarter.

6. Supply levels continue to hold back real estate sales.  National listing inventory is hovering around 4.7 months.


Rate Update:

Slower economic growth reduces the outlook for future inflation, so the slow Retail Sales data was positive for mortgage rates.

This Week:

The Consumer Price Index and Housing Starts are due out on Tuesday.  In addition, the minutes from the July 24th Fed Meeting will come out on Wednesday.

August 15, 2016 by · Leave a Comment

Shelter Six: Special Report on the Appraisal Process

Shelter Mortgage only uses the very best local appraisers, but why is this so important?

Big banks and brokers are required to and many other mortgage companies choose to use Appraisal Management Companies (AMC’s).

AMC’s draw from a huge network of appraisers.  Whoever accepts the order first ususally gets the appraisal.  This creates a very impersonal process with little accountability to the real estate agent or Loan Officer involved in the transaction.

Often times, the AMC appraiser will drive from a long distance to complete the appraisal. The result is they often don’t know the area well.

AMC’s drive up the cost of appraisals because a 3rd party is involved, however, the appraisers typically get a pay cut as they only get about half of the collected fee.  Thus, many appraisers feel forced to rush orders just so they can make a similar amount of money.

The AMC’s quality control department can also be very strict and most appraisers fear this.  The result is usually a very conservative appraised value. Stick with Shelter and avoid the AMC headache!


Rate Update

Two highly anticipated economic events last week caused significant, but offsetting, reactions to mortgage rates. The Bank of England announced a new bond purchase program to stimulate economic atvitivy that was well received and influenced rates lower. Friday’s employment report, however, was much stronger than expected showing 255K jobs being added to the economy in July and moved mortgage rates slightly higher for the week.

This Week

Second Quarter Productivity will be released on Tuesday, the Job Openings and Labor Turnover Rates Report on Wednesday, and Retail Sales on Friday.

August 8, 2016 by · Leave a Comment

Shelter Six: Fed Holds Rates Steady

1. The Federal Reserve elected to leave short-term interest rates unchanged at last week’s meeting.

2. The Fed report was less upbeat than expected but recognized strength and growth in both the labor market and consumer spending.

3. Consumer spending was higher than expected in the second quarter, but business investment and the overall GDP both lower than expected.

4. Housing remains strong. June New Home Sales were the best in about eight years and Pending Home Sales also showed a small increase.

5. First-time home buyers now account for 33% of existing home sales, the highest percentage since July 2012.

6. Housing has been a lead driver of economic growth for the last five years and could easily remain in the driver’s seat for the next five years!


Rate Update

Mortgage rates fell last week mostly due to a lackluster Fed report and disappointing GDP data (third straight quarter of growth below 2.0%).

This Week

The ISM National Manufacturing Index is due out on Monday, Core PCE Price Index on Tuesday, ISM National Services Index on Wednesday, and Employment figures on Friday.

August 1, 2016 by · Leave a Comment

Shelter Six: FHA Student Loan Payment Changes Now in Effect

1. FHA is implementing major student loan payment calculation changes effective June 30. Deferred student loan payments must now be included in a Borrower’s debt ratio.

2. If the lender can’t document the actual payment via a statement, then the formula to calculate the student loan payment is the greater of 1% of the outstanding loan balance or the monthly payment reported on the Borrower’s credit report.

3. Did you know? Jumbo fixed-rate financing now only requires 5% down!

4. Sales of existing homes rose in June for the fourth month in a row to an annualized rate of 5.6 million units, the best since February 2007!

5. The strong June sales volume was achieved despite a very low supply of homes available for sale, just 4.6 months (6 months is considered healthy).

6. Home builders are certainly aware of the lack of supply as they have ramped up construction. The Commerce Department reports that there were more houses under construction at the end of June than at any time in the last eight years.


Rate Update

Mortgage rates ended last week a little higher mostly due to the European Central Bank’s decision to not make any changes in monetary policy.

This Week

New Home Sales are due out on Tuesday with Pending Home Sales and Durable Orders on Wednesday. The Federal Reserve also meets again on Wednesday. No change in rates is expected, but the statement from the Fed could have a significant impact on mortgage rates.

July 25, 2016 by · Leave a Comment

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