Shelter Six:  April Housing Starts Down

1. April Housing Starts declined 3% from March, which was well below what was expected.  Much of this, however, was due to weakness in the volatile multi-family segment.

2. A recent survey conducted by Genworth found that 39% of mortgage professionals believe that first-time home buyer demand is being restricted by consumers’ lack of knowledge.

3. The biggest misconception that potential home buyers have is related to the minimum required down payment to obtain a mortgage.

4. The mortgage professionals polled indicated that many home owners believe that they must put 20% down.

5. It is more important than ever that we communicate to potential clients that the required down payments are only 3% for Conventional, 3.5% for FHA, 0% for VA and USDA, and 5% for Jumbo.

6. Shelter’s closings are the fastest and smoothest in town because we always wire the money over first thing the morning of closing, and we only require three funding docs!

Rate Update

Political uncertainty last week influenced investors to transfer money into the bond market, which led to a drop in mortgage rates.  Recent economic data has had little impact.  Mortgage rates are down to the best levels since before the November Presidential election.

This Week

Political news may continue to influence mortgage rates.  Also, New Home Sales will be released on Tuesday and Existing Home Sales on Wednesday. The second estimate of first quarter GDP and Durable Orders will also come out on Friday.

May 22, 2017 by · Leave a Comment

Shelter Six:   More People Plan to Buy Homes Over Next Five Years

1. According to a Gallup poll, 49% of those who don’t own a home say they expect to purchase a home within the next five years, and 10% say they plan to buy within the next year.

2. The same poll from a year go indicated only 41% intended to buy a home within the next five years, so the trend is favorable.

3. Who plans to buy over the next five years?  52% of those 18-34, 58% of those 35-54, and 30% of those over 55.

4. Inflation is subsiding.  April’s CPI figures were lower than expected.  For most of 2016, inflation appeared to be trending higher, but it has reversed direction so far this year.

5. April Retail Sales were up a little from March but still well below the expected level.  Weak consumer spending was a big factor in the slow GDP growth seen during the first quarter.

6. Don’t forget that Shelter only uses the best local appraisers, who are always willing to go the extra mile!

Rate Update

A victory by Emmanuel Macron in the French election influenced mortgage rates higher last week, but weaker than expected U.S. economic data had the opposite effect.  These influences were roughly offsetting, and mortgage rates ended the week with little change.

This Week

It will be a light week for economic data.  The NAHB Housing Confidence Index will be released on Monday, Housing Starts and Industrial Production on Tuesday, and the Philadelphia Fed Regional Manufacturing Index on Thursday.

May 15, 2017 by · Leave a Comment

Shelter Six:   French Election Results Calm the Markets

1. Emmanuel Macron’s victory in the French Presidential election has eased concerns about France leaving the European Union, which has calmed the markets and reduced mortgage rate volatility.

2. As expected, the Federal Reserve made no change to the Federal Funds rate last week.

3. Fed officials stated they think that the weak economic growth seen earlier in the year was temporary and it does not change the schedule of rate hikes planned for later this year.

4. April Employment figures came in right on target with the economy adding 211K jobs, while the Unemployment Rate declined from 4.5% to 4.4%, the lowest level since May 2007.

5. The House passed sweeping legislation last week that would undo much of the Dodd-Frank law repealing about 40 provisions.

6. The bill would also remove some of the CFPB’s power and transfer its guaranteed funding plan from the Fed to the discretion of Congress.  The bill now moves on to the Senate.

Rate Update

Over the past week, the Federal Reserve meeting, the French election, and Friday’s Employment report all influenced rates, which ended the week a little higher.

This Week

Retail Sales figures as well as the Consumer Price Index (CPI) are both due out on Friday.  In addition, there will be Treasury auctions on Tuesday, Wednesday, and Thursday.

May 8, 2017 by · Leave a Comment

Shelter Six:  French Election Pushes Rates Down and then Back Up

1. Mortgage rates had dropped lower when it looked like that the French election may lead to France leaving the European Union (EU).  Rates have pushed back up now that it looks like the pro-EU candidate will win.

2. GDP data indicates that the First Quarter had the slowest growth in three years, mostly due to weak consumer spending and a decline in inventories.

3. Many economists believe that the weakness during the First Quarter will simply carry over to later quarters.  As a result, the report had little impact on mortgage rates.

4. You might expect millennials, the most tech-savvy generation, to shun the personal approach to home buying in favor of impersonal websites or smartphone apps.

5. However, data from a recent survey conducted by financial wellness organization CentSai showed that 75% of millennials aged 18 to 34 said they would rather use a local real estate agent than an online one.

6. The survey also indicated that 71% polled prefer a local lender and, despite the cheaper prices of online agents, 91% said they would only use an online site or a mobile app to research communities, home prices and potential houses.

Rate Update

Over the past week, mortgage rates were influenced mainly by events in Europe. The outcome of Sunday’s French election was bad for mortgage rates, while Thursday’s European Central Bank meeting was mildly positive. The U.S. economic data had little impact and mortgage rates ended the week a little higher.

This Week

The next Fed meeting will take place on Wednesday.  No change in rates is expected, but investors will be eager for guidance on the pace of future tightening.  The key monthly Employment report will be released on Friday with important data on inflation, manufacturing, and services to be released earlier in the week.

April 30, 2017 by · Leave a Comment

Shelter Six:  Dodd-Frank Changes to be Proposed

1. The chairman of the House Financial Services Committee says he’ll unveil a new draft of a bill to overhaul the Dodd-Frank Act by the end of the month.

2. The revised bill is expected to drastically slash the authority of the CFPB placing it more under White House control while eliminating a single director in favor of a commission.

3. The first round of the French Presidential election took place over the weekend with two finalists now headed for a May 7th runoff.

4.  The French election is significant because France is a key member of the European Union (EU) and it is uncertain what a France exit from the EU would mean to the global economy.

5. The first round leader, Emmanuel Macron, supports France sticking with the EU, which is good for political stability but bad for U.S. mortgage rates, which most likely would go up as investors shift back to riskier assets.

6. Friday’s housing market data was encouraging as March Existing Home Sales rose 4% to the highest level since February 2007.  The median price was also 7% higher than a year ago and properties stayed on the market for only 34 days, down from 45 days in February.

Rate Update

Last week was a volatile one for mortgage rates ahead of yesterday’s French election.  The daily movements were offsetting, however, and mortgage rates ended the week with little change, remaining near the best levels of the year.

This Week

New Home Sales will be released on Tuesday, Durable Orders and Pending Home Sales on Thursday, and the first reading for 1st Quarter GDP on Friday.

April 24, 2017 by · Leave a Comment

Shelter Six:  Trump Comments Point to Lower Rates

1. Last week, President Trump said that the U.S. dollar is “getting too strong” and that he likes “a low-interest rate policy.”  Since Trump appoints the Fed Chair, his support for looser monetary policy caused mortgage rates to decline.

2. The first round of the French election is April 23 with the second round two weeks later.  The current leader in the polls favors a French exit from the European Union, which could lead to further major changes in Europe.

3. The First Quarter of 2017 is history and the news for Metro Atlanta Real Estate is good with closings up 4.3% and Pending Sales up 6.8% over the first three months of last year.

4. The Metro Atlanta March Average Sales Price is up to $290,000, 6.6% higher than last year and on a record-breaking pace.

5. Metro Atlanta March Inventory is up 5% from February but still down 4.6% from last year as the overall months of supply is down to only 2.9 months (six months considered normal).

6. Despite global uncertainties around the world, the University of Michigan Consumer Sentiment Index actually moved slightly higher sustaining post-election levels.

Rate Update

Comments from President Trump, concerns about the election in France, and the conflicts in Syria and North Korea all contributed to investors seeking the safety of the U.S. bond market, which has led to lower rates approaching the best levels of the year.

This Week

The NAHB Housing Confidence Index will be released on Monday, Housing Starts and Industrial Production on Tuesday, and Existing Home Sales on Friday.  Geopolitical events could continue to influence U.S. markets as well.

April 17, 2017 by · Leave a Comment

Shelter Six:  Automated Underwriting to be Made Available for Those without Traditional Credit

1. Starting in June, Freddie Mac is going to allow automated underwriting for borrowers who lack credit scores but have non-traditional sources of credit.

2. The key will be borrowers being able to document timely housing payments over the previous year.

3. Freddie Mac currently allows lenders to “manually” underwrite loans for borrowers without credit scores, but automation stands to streamline the process and make it more mainstream.

4. A National Association of Realtors study found that 87% of non-homeowners think they need at least a 10% down payment to buy a home.  Realtors and lenders must work together to change this thinking.

5. Friday’s key Employment Report showed that the economy added just 98,000 jobs in March, well below the consensus forecast of 180,000 jobs.

6. Incredibly warm weather likely boosted the number of jobs in February, while a severe storm seems to have slowed hiring in March.

Rate Update

Mortgage rates fell last week to near the best levels of the year as Thursday’s U.S. missile strike in Syria caused investors to shift money to the safer U.S. bond market.  The weaker Employment Report and comments from House Speaker Paul Ryan that tax reform will take longer to accomplish also contributed.

This Week

Investors will continue to keep a close eye on events in Syria.  The JOLTS Report is due out on Tuesday, the Producer Price Index (PPI) on Thursday, and both Retail Sales and the Consumer Price Index (CPI) on Friday, a day that the financial markets will be closed for Good Friday.

April 10, 2017 by · Leave a Comment

Shelter Six: Special Report on Student Loan Payments

1. Over the past  year, there have been lots of changes with how student loan payments affect a borrower’s qualification.  Below is a quick overview for each of the major types of loans available today.

2. Freddie Mac (Conforming) uses the actual student loan payment documented from either the credit report or the student loan company, unless it is unknown, and then 1% of the outstanding balance is used.

3. Fannie Mae (Conforming) uses the greater of the actual documented payment or 1% of the balance; however, if the actual payment is less than 1%, then it can be used with proof that the loan is fully-amortizing.

4. FHA previously did not require student loan payments to be counted at all if the loan was deferred for at least a year, but now FHA uses the greater of 1% of the balance or the monthly payment shown on the credit report with proof the loan is fully-amortizing.

5. VA remains the most friendly as payments do not have to be counted if the loan is deferred at least 12 months beyond the closing date.  Otherwise, the payment has to be calculated using a more complex calculation that is more or less the higher of the payment on the credit report or 5% of the outstanding balance (divided by 12).

6. USDA uses the greater of the monthly payment shown on the credit report or 1% of the balance.

Rate Update

There were two main influences on mortgage rates last week.  The canceled health care bill vote was positive for mortgage rates, while an impressive rise in consumer confidence was negative.  The net effect is mortgage rates staying mostly flat with little change.

This Week

The ISM National Manufacturing Index and Construction Spending will be released on Monday, the ADP Employment Change and the ISM National Services Index on Wednesday, and Employment figures on Friday.

April 3, 2017 by · Leave a Comment

Shelter Six:  Political Policy Concerns Lead to Lower Rates

1. The health care bill not getting passed as expected last week has investors concerned about whether Trump “pro-growth” policy changes, such as tax cuts, deregulation, and infrastructure spending, will stall out as well.

2. The strong recent economic outlook has led to a surge in the stock market, bond yields, and mortgage rates.  If the outlook weakens, expect stocks to as well, and mortgage rates to potentially fall back.

3. February ‘Existing Home Sales’ fell off from January’s strong pace but, according to NAR, this was mostly due to a shortage of inventory.  February ‘New Home Sales’ rose to the highest level in months.

4. Buyer demand remains very strong.  Nationally, ‘Days on the Market’ dropped to only 45 days in February, down from 59 days last February.

5. According to the Mortgage Bankers’ Association, the Adjustable Rate Mortgage (ARM) share of mortgage applications has increased to 7.2% of all applications, led by the 7/1 ARM with the 5/1 and 10/1 ARM’s close behind.

6. Historically, the ARM share has increased when rates rise as home buyers tend to look for ways to extend their purchasing power, and ARM’s are one way of doing that.


Rate Update

Increased concerns over President Trump’s ability to deliver pro-growth policy changes as quickly as expected was favorable for mortgage rates, which ended the week slightly lower.

This Week

Pending Home Sales will be released on Wednesday while both the Core PCE Price Index and Personal Income will roll out on Friday.  There will also be Fed speakers each day this week as well.

March 27, 2017 by · Leave a Comment

Shelter Six:  The Fed Increases Short-Term Rates as Expected

1. As expected, the Federal Reserve raised the Federal Funds Rate by .25% last week.  Fed Chair Janet Yellen said that “the simple message is the economy’s doing well.”

2. Another big factor influencing the Fed is that inflation is “moving close” to the Fed’s target level of 2% after falling short for years.

3. February single-family housing starts and building permits both rose to the highest levels since 2007.  In addition, the March National Association of Home Builders Housing Index showed that home builder confidence jumped to the highest level in over a decade.

4. Per the Consumer Data Industry Association, starting this summer the three major credit-reporting firms will stop collecting and reporting many tax liens and civil judgments, thereby omitting negative information from their reports.

5. This is mainly a response to regulatory concerns and a solution to the sloppy credit reporting that has plagued the industry for years.

6. The removal of this derogatory information will boost credit scores and make more people eligible for loans, but the reduced information will make it more difficult for lenders to measure borrowers’ default risks.

Rate Update

Over the last few weeks, mortgage rates have pushed higher in anticipation that the Fed would announce a plan that short-term rates would go up more quickly in 2017.  Rates stabilized and dropped slightly last week when these fears were not realized.

This Week

Economic reports released this week include Existing Home Sales on Wednesday, New Home Sales on Thursday, and Durable Orders on Friday.

March 20, 2017 by · Leave a Comment

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