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

Shelter Six:  Mortgage Rates Drop to Lowest Level in Over a Year

Inflation continues to help keep mortgage rates low.  April’s Core PCE Price Index was just 1.6% higher than a year ago and well below the Fed’s 2% target.

Tame inflation, along with uncertainty on the trade front, have contributed to falling rates and inspired the Federal Reserve to now contemplate a rate cut by the end of the year.

A sign of economic strength.  According to the Mortgage Bankers Association, the overall mortgage delinquency rate is down to 4.42%, a very low number historically.

Traditional Conventional and FHA guidelines prevent many people who have the ability to repay from buying a home and that is where Shelter’s SmartEdge program comes in.

SmartEdge is an excellent financing alternative for customers who just miss out on Conventional or FHA loans and requires only 10% down (15% for an investment property).

SmartEdge allows for a higher debt ratio, has an interest-only feature, and is particularly helpful in situations where income from one borrower is very recent or difficult to document.

Rate Update

Mortgage rates dropped last week to the lowest level in well over a year mostly due to the increased trade tensions with China and Mexico, which could slow down global economic activity.

This Week

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

June 3, 2019 by · Leave a Comment

Shelter Six:  Mortgage Rates Down to Lowest Level in a Year

Due to trade tensions with China and political upheaval in Britain, money flowed out of the riskier stock market and into the safer bond market last week pushing mortgage rates to the lowest point in over a year.

Economic news was mixed over the last week with New Home Sales and Housing Starts coming in stronger than expected, while Existing Home Sales and Retail Sales came in weaker than expected.

Shelter’s new Peak 100 Conventional loan requires no money down and no PMI through a creative combination of a 97% 1st mortgage and a 4% 2nd mortgage.

The Peak 100 1st mortgage is a traditional, fully-amortizing 30-year fixed-rate loan that requires only 3% down.  The rate is about 1% higher than prevailing rates.

The Peak 100 2nd mortgage is a 30-year interest-only, fixed-rate loan that provides the 3% down payment as well as an additional 1% toward closing costs.  The rate is the same as the 1st mortgage.

The program is for single-family purchases only and allows credit scores down to 660.  Homebuyer education is required and income can’t exceed 140% of the area median income.

Rate Update

Mortgage rates fell to the lowest levels in 16 months following increased international trade tensions, political uncertainty in the U.K., and weak manufacturing data in the U.S.

This Week

Pending Home Sales and the 2nd Estimate of 1st Quarter GDP will be released on Thursday and the Core PCE Price Index on Friday.

May 27, 2019 by · Leave a Comment

Shelter Six:  100% Conventional Loan Now Available

Millennials now represent the largest generational group in the history of the U.S. with a population of nearly 84 Million.

The largest segment of Millennials will turn 30 over the next 1-2 years and are expected to dominate home purchases over the next decade.

Surprisingly, according to a recent Freddie Mac survey, many potential home buyers have misinformation regarding what it will take to buy a home.

Nearly a third of those surveyed falsely think a 20% down payment is required to buy a home and that all of the down payment needs to come from personal savings.

The reality is that there are many loan programs that require only 0-5% down and that the down payment can often come from a gift.  Real estate agents and mortgage professionals everywhere need to do a better job of getting this word out.

The Shelter Peak 100 is a Conventional purchase program that requires no money down, a 660 credit score, and income that doesn’t exceed 140% of the Area Median Income.

Rate Update

Weaker than expected economic data was modestly positive for mortgage rates last week. Headlines about the trade negotiations between the U.S. and China caused some volatility but had little net effect.

This Week

Existing Home Sales will be released on Tuesday, New Home Sales on Thursday, and Durable Orders on Friday. In addition, news about the status of the trade negotiations between the U.S. and China could influence mortgage rates.

May 20, 2019 by · Leave a Comment

Shelter Six:  Trade Tensions with China Actually Good for Rates

Trade tensions with China escalated at the end of last week with the U.S. more than doubling a tariff on Chinese imports.

China retaliated this morning by increasing tariffs on U.S. imports, and the result was a huge drop in the stock market.

Trade restrictions reduce the outlook for inflation, so any escalation in a trade war will actually be good for mortgage rates pushing them lower.

Before the drama with China, last week’s inflation news was already very good as the April Consumer Price Index increased less than expected.  Inflation continues to be a non-issue.

The Mortgage Credit Availability Index published by the Mortgage Bankers Association (MBA) indicates that credit availability has more than doubled since late 2012.

The index, however, is still only one-fifth of where it was at the height of the market in mid-2006, but the MBA expects credit availability to continue to grow as we move forward.

Rate Update

Both a lack of progress in Chinese trade talks along with weak inflation data contributed to mortgage rates falling modestly last week.

This Week

Retail Sales and Industrial Production figures are both due out on Wednesday with Housing Starts due out on Thursday.  Investors will also be watching for more news about the trade negotiations between the U.S. and China.

May 13, 2019 by · Leave a Comment

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