1. Metro Atlanta residential real estate closings were up 8.7% for the first nine months of this year compared to 2015.
2. The average Metro Atlanta sales price is up 4.9% over last year and on track to beat the record level of 2006.
3. Metro Atlanta home values are now up 60% from the March 2012 bottom. (Case-Shiller Index)
4. After two months of declines, Retail Sales, minus the volatile auto component, rebounded nicely in September and were up .5% from August.
5. The Retail Sales figures are very important as consumer spending accounts for nearly 70% of U.S. economic activity.
6. The latest data on weekly jobless claims was also encouraging as the number of people applying for unemployment benefits matched the lowest level since 1973.
After increasing the week before, mortgage rates saw little net change last week. There were no surprises in the Fed minutes or from other central banks. The major economic data mostly matched expectations and had little impact.
Industrial Production is due out today, the Consumer Price Index (CPI) on Tuesday, Housing Starts on Wednesday, and Existing Home Sales on Thursday. The next European Central Bank (ECB) meeting will also take place on Thursday. Any guidance on future monetary policy could have an impact on global markets.
1. Metro-Atlanta home prices are up 5.4% over the past year, a little greater than the 5% pace of the other 19 largest cities around the country. (S&P Case-Shiller House Price Index)
2. Since hitting bottom in 2012, Metro-Atlanta prices are up 60.5%, but still 2.9% below the peak of 2007.
3. Friday’s Employment Report came in very close to expectations and caused little change in mortgage rates. Against a forecast of 170K, the economy added 156K jobs in September.
4. The Unemployment Rate increased to 5% from 4.9%. This was viewed as a sign of strength, however, because the increase was due to the entrance of 444K people to the workforce.
5. The labor force participation rate rose to 62.9%, up half a point from a year ago. Average hourly earnings matched expectations and were 2.6% higher than a year ago.
6. Early morning wires and minimal funding docs lead to quick closings. When you want it done right, use Shelter and get on with your day!
Comments from the European Central Bank last week were perceived as negative for mortgage rates and contributed to mortgage rates ending the week slightly higher.
The most significant report this week will be Retail Sales on Friday. The Job Openings & Labor Turnover Rate Report (JOLTS) is also due out on Wednesday, as are minutes from the September’s Fed meeting. The markets will be closed today in observance of Columbus Day.
1. There has been a lot of media focus on student loan debt, but MGIC reports that young homebuyers are more likely to buy a house and get a mortgage if they have student loan debt.
2. Conforming loan guidelines no longer require a Buyer to come up with 5% of their own funds when putting less than 20% down.
3. If a mortgage foreclosure was discharged through a bankruptcy, the shorter, more lenient bankruptcy period applies on Conforming loans.
4. For FHA financing, however, the foreclosure and bankruptcy events have to be looked at separately, so the longer, foreclosure timeframe will most likely apply.
5. Friday’s inflation data showed a slight uptick in August with the Core PCE Price Index 1.7% higher than a year ago.
6. While Core PCE remains steady and at levels below the Fed’s target of 2%, investors will be watching to see if the August data marks the start of a trend toward rising inflation.
A couple of global events caused a moderate amount of volatility for stocks and bonds over the past week, but the effects were offsetting and mortgage rates finished the week with little change.
Lots of economic reports due out this week with ISM National Manufacturing Index and Construction Spending out on Monday, ADP Employment Change, Factory Orders, and the ISM National Services Index out on Wednesday, and the Employment Report out on Friday.
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.
Investors liked the Fed’s decision to leave rates unchanged and, as a result, mortgage rates ended the week slightly lower.
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.
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!
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.
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.
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.
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.
Retail Sales and Industrial Production reports are both due out on Thursday with the Consumer Price Index (CPI) due out on Friday.
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.
Despite the lower than expected Employment and ISM Manufacturing Index figures, mortgage rates have been remarkably flat over the last month and remain unchanged.
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.
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.
Yellen’s speech on Friday caused a little rate volatility but had little net impact on mortgage rates, which ended the week slightly lower.
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.
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.
Last week’s economic data had little impact but mixed messages from various Federal Reserve members stimulated mortgage rates slightly higher.
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.
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.
Slower economic growth reduces the outlook for future inflation, so the slow Retail Sales data was positive for mortgage rates.
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.