Shelter Six:  Mortgage Rates Fall to the Lowest Point in Nearly 3 Years

The financial markets went on a wild roller-coaster ride last week after China retaliated to higher U.S. tariffs by allowing its currency to weaken.

Initially, there was a massive stock sell-off as money transferred into the safer U.S. bond market, which caused mortgage rates to drop to the lowest level in nearly three years.

As the week played out, however, investors concluded that the developments would not have as much of an impact as anticipated and the stock and bond markets reversed most of their movement.

Incredible news for self-employed buyers as there is now a mortgage alternative that does not require tax returns nor literally any traditional income documentation.

Shelter’s “SmartSelf” program allows self-employed buyers’ income to be calculated exclusively from bank statements.

The program requires only 10% down with no PMI, credit scores as low as 620, up to 15 financed properties, and a Bankruptcy or Foreclosure as recent as only two years ago.

Rate Update

Trade negotiation developments with China led to mortgage rates plummeting early last week only to bump up later in the week but still finish with a small net decline.

This Week

The Consumer Price Index (CPI) will come out on Wednesday, Retail Sales on Thursday, and Housing Starts on Friday.

August 12, 2019 by · Leave a Comment

Shelter Six:  Trade Tension with China Leads to Lower Rates

In an effort to curb a further slowdown in the economy, the Federal Reserve cut short-term rates as expected by .25% last week, the first reduction since 2008.

Comments from Fed Chair Powell after the meeting, however, made investors question if this was a one-time cut rather than part of a series of cuts.

The rate cut was already priced into mortgage rates but additional tariffs placed on Chinese goods last week were not and caused mortgage rates to drop to the lowest point in years.

The increased trade tensions with China reduce the outlook for global economic activity, which always points to lower rates.

Last week’s Employment Report was strong and right in line with expectations with 164K new jobs added.

The Unemployment Rate remained near 50-year lows at 3.7%, and Average Hourly Earnings were a solid 3.2% higher than a year ago.

Rate Update

Unexpected news about the trade negotiations with China led to the nosedive in rates.  The Mortgage Bankers Association’s revised mortgage rate forecast now has rates projected to hold steady around 4% for the next several years.

This Week

The ISM National Services Index will be released on Monday, the JOLTS report on Tuesday, and the Producer Price Index (PPI) on Friday.

August 5, 2019 by · Leave a Comment

Shelter Six:  Federal Reserve Expected to Cut Rates on Wednesday

Statements from key Fed members suggest there will be a .25% interest-rate cut at Wednesday’s Fed meeting.

Just three months ago, none of the Fed’s17 members predicted lower rates in 2019, yet rates are about to be cut despite a strong labor market, massive consumer spending, and a surging stock market.

The main catalyst for the rate cut is softening U.S. business investment stemming from slower global growth with much hinging on the U.S.’s trade deal with China.

Last week’s GDP figures are a good case-in-point revealing modestly stronger growth of 2.1% during the 2nd Quarter, but down from a much stronger 3.1% during the 1st Quarter.

Things change fast though and, if the U.S. and China work out a trade deal, then the Fed may not need to further cut short-term rates and mortgage rates would surely surge.

On the other hand, if negotiations with China aren’t productive, then the Fed may need to cut rates more than .5% between now and the end of the year.

Rate Update

Mortgage rates stayed mostly flat last week as there were few economic surprises and most of the attention was focused on this week’s Fed Meeting.

This Week

The Fed meets on Wednesday.  In addition, the Core PCE Price Index will be released on Tuesday, the ISM National Manufacturing Index on Thursday, and Employment figures on Friday.

July 29, 2019 by · Leave a Comment

Shelter Six:  Rate Cut Coming Despite Strong Economic Data

Comments from Federal Reserve officials have left the markets expecting a .25% rate cut on July 31 and possibly another .25% before the end of the year.

Last week brought three reports showing the economy doing quite well.  June Retail Sales were up a solid .4% from May and have been unusually stable over the last three months.

The June Philly Fed Regional Manufacturing figures were also very strong, which was not expected with the ongoing tough trade negotiations with China.

June Single-Family Housing Starts also posted solid gains despite weakness from the multi-family sector.

Last week’s only area of concern was June Building permits, which dropped 6% from May to the lowest level since May 2017.

New construction continues to face rising labor and land costs as well as a shortage of skilled workers.

Rate Update

Rising expectations of rate cuts in both the U.S. and Europe outweighed the stronger than expected economic data last week and mortgage rates ended the week a little lower.

This Week

Existing Home Sales will be released on Tuesday, New Home Sales on Wednesday, and Gross Domestic Product on Friday.

July 22, 2019 by · Leave a Comment

Shelter Six:  Fed Chairman Confirms Rate Cut Coming

Twice a year, the head of the Federal Reserve provides an update to Congress and then answers questions.

During last week’s testimony, Fed Chair Jerome Powell reinforced recent investor outlook that the Fed will cut rates at the next meeting on July 31.

The main reasons Powell gave for the eminent rate cut were slowing business investment, uncertainty about global economic activity, and trade tensions.

Overall, his comments were in line with expectations, and the main question for investors going forward is whether there will be additional rate cuts later in the year.

The latest inflation report showed inflation increasing at a higher rate than expected.

June’s Core Consumer Price Index was up .3% from May above the expected .2%.

Rate Update

Stronger than expected inflation data was unfavorable for mortgage rates last week.  The highly anticipated testimony from Fed Chair Powell caused some volatility, but its net effect was small.  As a result, rates ended the week higher.

This Week

Retail Sales and Industrial Production will be released on Tuesday while Housing Starts will come out on Wednesday.

July 12, 2019 by · Leave a Comment

Shelter Six:  Strong Employment Report Pushes Rates Higher

After a disappointing May where less than 100K new jobs were added, the economy added a powerful 224K jobs in June, well above the consensus forecast of 160K.

The Unemployment Rate unexpectedly increased from 3.6% to 3.7%, but this was primarily due to additional people entering the labor force, which is a sign of strength.

June Average Hourly Earnings, an indicator of wage growth, fell slightly short of expectations and were 3.1% higher than a year ago.

The strong employment figures pushed rates higher because the outlook for inflation was raised while the expectation of Fed interest rate cuts this year was reduced.

Shelter’s SmartVest program allows an experienced real estate investor to buy up to 15 financed investment properties without income documentation or a debt ratio calculation.

SmartVest loan qualification is based on the property’s cash-flow.  The program also allows an interest-only feature as well as investors closing in the name of an LLC.

Rate Update

Last week was a light week with the July Fourth holiday.  Rates fell slightly early in the week but spiked up sharply on Friday after the strong Employment Report.

This Week

The JOLTS report is due out on Tuesday, the minutes from the June 19th Fed meeting on Wednesday, and the Consumer Price Index (CPI) on Thursday.

July 8, 2019 by · Leave a Comment

Shelter Six: Specialty Loan Requires Only 12 Months Since Bankruptcy

The latest data released last week showed that inflation remained well contained in May.

After ending 2018 near the Fed’s stated target level of 2%, this is the fourth straight month that inflation registered lower than expected and a huge reason rates have plummeted.

This week contains some of the most important economic reports in the monthly rotation that will go a long way to dictating which way rates move next, especially Friday’s Employment report.

President Trump agreed to halt increased tariffs on Chinese goods while talks resume.  This is potentially good economic news but an agreement could cause rates to go up.

Shelter’s SmartTrac program is perfect for Buyers who have had serious credit difficulty in the past but are seeking to become a homeowner in the near future.

The program requires 20% down, a 620 credit score, and only 12 months to have passed since a Bankruptcy or Short Sale and 24 months since a Foreclosure.

Rate Update

Last week’s economic data and news on trade negotiations caused some volatility but interest rates remain flat and still below 4%.

This Week

The ISM National Manufacturing Index will be released on Monday, the ISM National Services Index on Wednesday, and the monthly Employment Report on Friday.

July 1, 2019 by · Leave a Comment

Shelter Six:  Rates Projected to be Cut in both U.S. and Europe

Last week’s Federal Reserve Meeting brought no surprises.  As expected, the Fed left rates unchanged and its statement was right in line with investor expectations.

Nearly half of Fed officials now predict, however, that there will be a rate cut by the end of the year and some investors project a .25% cut on July 31 and another .25% in September.

The main catalyst for a rate cut is an uncertain economic outlook due to a weakening global economy as well as stalled out trade negotiations.

The European Central Bank also unexpectedly announced last week that it very well may start cutting rates as soon as next month.

Strong housing news for May came out last week showing Existing Home Sales up 3% from April and Housing Starts also higher than projected.

National housing inventory now stands at a 4.3-month supply, which is on the way up but still well less than the 6-month supply considered healthy.

Rate Update

Mortgage rates ended last week at the lowest levels in more than two years as more projections mount for rate cuts both in the U.S. and in Europe.

This Week

New Home Sales are due out on Tuesday, Durable Orders on Wednesday, and the Core PCE Price Index on Friday.

June 24, 2019 by · Leave a Comment

Shelter Six:  Don’t Count the Mortgage Payment for Home Buyer is Selling

Conventional guidelines now allow Shelter to not count a mortgage payment for a Buyer’s current home if the home is under contract and financing contingencies have been cleared.

Shelter’s SmartEdge program allows self-employed borrowers to qualify using only one year of tax returns if the business is two or more years old.

Now that proposed tariffs with Mexico have been averted, focus has shifted to negotiations with China with talks expected to resume on June 28 at the G20 Summit.

May Retail Sales were very strong and up .5% from April.  Despite the strength in consumer spending, inflation continues to be lame and rose less than expected in May.

One of the main reasons housing has struggled recently is that home prices have risen twice as fast as inflation.  In the last 12 months, the S&P Corelogic Case-Shiller National Index is up 3.7%, double the 1.9% inflation rate.

Measured in real, inflation-adjusted terms, home prices today are rising at a 1.8% annual rate compared to a 1.2% rate since 1975.

Rate Update

Despite the volatility in the markets over the last week, the net effect was minimal for mortgage rates, which ended up just slightly higher and still near two-year lows.

This Week

Housing Starts will be released on Tuesday and Existing Home Sales on Friday.  The Federal Reserve will also meet on Wednesday with no change in rates expected.

June 17, 2019 by · Leave a Comment

Shelter Six:  Deal with Mexico Puts Upward Pressure on Rates

The agreement reached between the U.S. and Mexico to avert higher tariffs has eased some of the tensions in the market causing both stocks and rates to push higher early this week.

Last week ended with some bad economic news as only 75K new jobs were added in May, much lower than the forecasted 180K new jobs.

Thanks to a softening economy, low inflation, and ongoing trade disputes, prevailing sentiment now points to at least one short-term rate cut by the Fed by the end of the year.

The VA has recently given updated appraisal process guidelines clarifying that a Certificate of Eligibility has to be requested before a VA appraisal can be ordered.

The guidelines also make it clear that a VA appraiser is required to make contact and schedule an appointment within two business days of receiving the order from the lender.

The VA appraiser is also required to give the lender an opportunity to provide additional comps before completing an appraisal where the value coming in lower than Sales Price.

Rate Update

Weaker than expected employment figures and dovish comments from Federal Reserve board members last week influenced mortgage rates to the lowest levels in nearly two years.

This Week

The Consumer Price Index (CPI) will come out on Wednesday and Retail Sales on Friday.  All eyes will also be on the U.S.’s ongoing negotiations with China.

June 10, 2019 by · Leave a Comment

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