Shelter Six:  Mortgage Rates Shoot Up

U.S. consumer spending remains strong as evidenced by the August Retail Sales figures, which were up .4% from July and double the amount expected.

Although the manufacturing sector continues to struggle mostly due to increased tariffs, consumers have shown few signs of slowing down heading into the important holiday shopping season.

Mortgage rates spiked higher as last week’s inflation data came in higher than expected as the August Core CPI figures were at the highest level since 2008.

The news that the U.S. and China will be delaying tariffs also pushed rates higher as both countries expressed a willingness to work together on trade negotiations that will start back in early October.

To help stimulate economic growth, the European Central Bank cut rates last week and announced that it will resume a bond buying program which had ended in December.

The Federal Reserve meets again on Wednesday with most investors expecting a .25% rate cut.

Rate Update

Mortgage rates spiked higher last week as a result of stronger than expected inflation data, reduced trade tensions with China, and a mixed message from European Central Bank officials.

This Week

Housing Starts will also be released on Wednesday and Existing Home Sales on Friday.

September 16, 2019 by · Leave a Comment

Shelter Six:  U.S. Economy Continues to Show Strength

Last week’s Employment Report showed the economy adding 130K jobs in August, a solid gain but a little lower than the 150K new jobs expected.

Unemployment remained at 3.7% but Average Hourly Earnings rose more than expected and were up a strong .4% from July.

The U.S. economy is still clearly going strong with particular strength in the Services sector and Retail Sales, which have now been higher than expected for five straight months.

Around the world, however, there is a lot more uncertainty as business investment has slowed.

Manufacturing is also slowing down as the trade tensions with China continue to be a drag on the economy and a cloud over the future.

Encouraging news last week though as U.S. and China officials announced that additional trade talks will take place in early October.

Rate Update

Last week’s economic data contained mixed results and the net effect on mortgage rates was small.

This Week

The Consumer Price Index is due out on Thursday and Retail Sales on Friday.  The European Central Bank meets on Thursday and the U.S. Federal Reserve on September 18.

September 9, 2019 by · Leave a Comment

Shelter Six:  Mortgage Delinquencies at Historically Low Levels

Trade negotiations between the U.S. and China took a turn for the friendlier last week as both sides expressed more willingness to work with each other.

For the fifth straight month, inflation was lower than the Fed’s stated target level of 2% as the July Core PCE Price Index came in just 1.6% higher than a year ago.

July Pending Home Sales fell 2.5% from June but were still at approximately the same rate as a year ago.

In a startling new study just released by two U.S. Census Bureau workers, homeowners were found to have median net worth 80 times that of renters!

Mortgage Bankers Association reports that seriously delinquent mortgages (90 days past due) dropped to only 1.95% in the 2nd Quarter, the lowest level since the 2nd Quarter of 2006.

FHA mortgage delinquencies were down to 3.43%, the lowest level since the 3rd Quarter of 2000!

Rate Update

The final week of August was relatively quiet for mortgage rates but what a month it was as rates fell to and maintained the lowest levels seen since 2016.

This Week

The mortgage markets will be closed on Monday in observance of Labor Day.  The ISM National Manufacturing Index is due out on Tuesday, the ISM National Services Index on Thursday, and the Employment Report on Friday.

September 2, 2019 by · Leave a Comment

Shelter Six:  Fed Chairman Hints at Future Rate Cuts

Speaking from the Jackson Hole Global Economic Summit last week, Fed Chairman Jerome Powell said that the Fed will “act as appropriate to sustain the expansion.”

Powell noted the biggest risks to economic growth include trade tensions, slowing global economic activity, political unrest in Hong Kong, Brexit, and Italian elections.

Powell hinted that the Fed would continue to cut short-term interest rates to address these issues, but he did not pinpoint how many cuts or the specific timing of them.

July Existing Home Sales rose a solid 3% from June.  Inventory remains the primary trouble spot as the number of homes for sale is at just a 4.2-month supply nationally (6 months is considered normal).

July New Home Sales fell a shocking 13% from June, however, this was very misleading as there had been a massive upward revision in June.

June figures had been revised to the highest level since 2007, and the large decline in July simply brought New Home Sales back near levels seen for most of this year.

Rate Update

Despite a highly anticipated speech from Fed Chair Powell, ongoing tensions in trade negotiations with China, and a wave of economic data, rates ended last week unchanged.

This Week

Durable Orders are due out on Monday, the second estimate of 2nd Quarter GDP on Thursday, and Core PCE price index on Friday.

August 25, 2019 by · Leave a Comment

Shelter Six:  FHA Issues More Liberal Condo Eligibility Rules

FHA released new, more liberal condo approval rules last week, which are drastically needed as only 6.5% of 150K+ condo projects in the U.S. are currently FHA approved.

The old FHA rules were very restrictive because of the extremely cumbersome process that forced condo communities to submit a pile of paperwork that was thoroughly scrutinized.

The new rules, effective October 15, allow for the return of “spot” approvals where individual units can be approved for an FHA loan even if the condo project is not.

Spot approvals will be allowed if the condo project is not currently approved and if no more than 10% of the units carry FHA loans (max 2 FHA loans if project has less than 10 units).

FHA will require a minimum of 50% of units to be owner-occupied, insure no more than 50% of the total number of units, and restrict commercial space to no more than 35% of the project’s total floor area.

It is projected that an additional 20-60K condo units will become available for FHA’s more lenient mortgage financing.

Rate Update

Ongoing concerns about global economic growth led to a sell-off in the stock market last week which led to mortgage rates falling to the lowest point in three years.

This Week

Existing Home Sales are due out on Wednesday and New Home Sales on Friday.

August 19, 2019 by · Leave a Comment

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

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