Shelter Six: Fed’s Commitment to Buying Bonds Should Keep Rates Low

Investors are clearly very optimistic that government stimulus and vaccines are going to lead to a fast economic recovery.

December Retail Sales fell a disappointing.7% from November. Retail Sales plunged after the pandemic, then rallied for two months, but have been more-or-less flat since.

Recent upward pressure on rates stems from the new bonds that will need to be issued to fund government stimulus, which is believed will cause inflation to rise.

There was evidence last week that inflation is not an issue yet, however, as December’s Core Consumer Price Index was just 1.6% higher than a year ago and unchanged from November.

The Fed clarified last week that it does not plan to slow down its level of bond buying until employment is stronger and inflation is rising at a more substantial level.

The Fed’s commitment to buying bonds should keep rates down around 3% for some time.

Rate Update

Despite growing market volatility and headlines that rates are rising, rates were actually unchanged last week.

This Week

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

January 18, 2021 by · Leave a Comment

Shelter Six: Strong Economic Data Overshadows Weak Jobs Report

The economy lost 140K jobs in December. This was more than expected as 75K jobs had been expected to be gained.

The Unemployment Rate remained at a flat 6.7%.

Average Hourly Earnings rose .8% from November to an impressive 5.1% higher than a year ago.

The ISM National Manufacturing Index jumped to 60.7 in December, well above the consensus forecast of 56.5, and to the highest level since August 2018.

The ISM National Services Index rose to 57.2, well above the consensus forecast of 54.5, and near the levels seen early in the year prior to the pandemic. Readings above 50 indicate that the sector is expanding.

MBA Forbearance figures remained at 5.53% of all loans, as of Dec 27 (they peaked at 8.55% on June 7). This represents about 2.7M loans actively in forbearance.

Rate Update

Mortgage rates pushed up .125% last week but, with no changes to the Fed’s bond purchase program in sight, rates are expected to stay near low levels in 2021.

This Week

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

January 11, 2021 by · Leave a Comment

Shelter Six: Cash Sales Drop to Lowest Level in 13 Years

Last week, Congress passed a $900B Covid Relief Bill which includes supplemental unemployment benefits of $300 per month and direct payments to qualifying individuals of $600 per month.

With vaccines already rolling out and more economic stimulus expected, the financial markets remain optimistic about the future, as evidenced by a rising stock market.

Pending home sales slid for the 3rd straight month in November, but the small 2.6% decline was largely due to the shortage of inventory and fast-rising home prices.

According to Lawrence Yun, NAR’s chief economist, “It is important to keep in mind that the current sales and prices are far stronger than a year ago.”

The share of cash sales was down to 24% in 2020, the lowest level in 13 years according to a new report from Redfin.

Over the last 20 years, the lost point for cash sales was 20.7% in 2006 and the high point was 34% in 2013. The main reason for the decline is people taking advantage of low rates.

Rate Update

Mortgage rates remain near all-time lows and, with no changes to the Fed’s bond purchase program in sight, rates are expected to stay near low levels over the 1st Quarter.

This Week

The ISM National Manufacturing Index will be released on Tuesday, the ISM National Services Index on Thursday, and the monthly Employment figures on Friday.

January 4, 2021 by · Leave a Comment

Shelter Six: Existing-Home Sales 26% Higher Than a Year Ago

The President signed the $900B Covid-19 Relief Bill into law on Sunday, keeping the US Government running, including USDA programs, through next September.

November Existing-Home Sales, after five months of healthy gains, decreased 2.5% from October to an annual rate of 6.69M, 26% higher than a year ago.

November New-Home Sales fell .9% to 845K units.

National Listing Inventory dropped to a record-low 2.3-month supply, 22% lower than a year ago.

National days-on-the-market slipped to 21 days, down from 38 days last November (73% of homes sold were on market for less than a month).

The National Median Existing-Home Price surged to $310,800, 15% higher than a year ago (105th straight month of year-over-year appreciation).

Rate Update

Mortgage rates continue to hold steady near all-time lows and this week between Christmas and New Year’s should be a quiet one.

This Week

The October S&P Case-Shiller Home Price Index will be released on Tuesday, the Pending Home Sales Index on Wednesday, and Jobless Claims on Thursday.

December 28, 2020 by · Leave a Comment

Shelter Six: Fed Meeting Brings Little Drama to Markets

Last week’s Federal Reserve Meeting produced little drama and reaction as it contained no significant market-moving announcements.

November Retail Sales were down 1.1% from October as rising coronavirus cases halted consumer spending early in the crucial holiday shopping season.

November Single-Family Housing Starts were up 22% over a year ago and at the best level since 2007.

New Construction continues to become more expensive and a primary reason is the price of lumber, which presently sits about twice as high as before the pandemic.

According to Ellie Mae’s Origination Insight Report, the time to close a mortgage industry-wide increased in October to 49 days for a purchase and 59 days for a refi.

Shelter’s turn times continue to run 25-30 days for a purchase around 40 days for a refinance. We would love to help you with your refi while rates are still low!

Rate Update

Amazingly, mortgage rates have trickled down even further over the last week to yet a new all-time low level.

This Week

Existing Home Sales will be released on Tuesday and both New Home Sales and the Core PCE Price Index will come out on Wednesday.

December 21, 2020 by · Leave a Comment

Shelter Six: Mortgage Rates Approach Lows Only Seen in August

Mortgage rates have been resiliently low most of the year but, at some point, they will push higher. There are three primary threats to low rates at this time.

The first is if a potential new stimulus bill ends up being larger than the $1 Trillion bill that investors currently believe is going to soon pass.

A second threat is that the Fed will announce a reduction in the level of bonds that they purchase moving forward. There is a big Fed meeting on Wednesday of this week.

A third threat, and one we would happily live with, is that Covid cases drop significantly which boosts employment and the economy.

A key November inflation index indicated inflation was only 1.6% higher than a year ago, which continues to be less than the Fed’s target of 2%.

The CFPB issued a new QM rule last week which prevents the Debt Ratio on Conforming and Government loans from being capped at 43% beginning in January.

Rate Update

Mortgage rates fell further last week hitting all-time low levels previously seen only in August of this year.

This Week

The Federal Reserve meets on Wednesday. Retail Sales will be released on Wednesday and Housing Starts on Thursday.

December 14, 2020 by · Leave a Comment

Shelter Six: FHA Loan Limits Increase for 2021

The maximum FHA loan limit for Metro Atlanta has increased from $401,350 to $412,850 for single-family properties.

The FHA limits have also increased to $528,500 for 2-Unit, $638,850 for 3-Unit, and $793,950 for 4-Unit properties.

The maximum Conforming loan limit increased last week from $510,400 to $548,250.

In November, the economy gained 245K jobs and has now recovered more than half of the 22 million jobs lost in March and April. The consensus forecast was for 450K jobs.

The Unemployment Rate fell from 6.9% in October to 6.7%, matching expectations.

Average Hourly Earnings rose 0.3% from October, above the consensus for an increase of 0.1%, and were an impressive 4.4% higher than a year ago.

Rate Update

The 30-year hit a record low 2.71% in last week’s Freddie Mac mortgage rate survey.  There has never been a better time to lock in a rate – for a purchase or a refinance.

This Week

The Consumer Price Index (CPI) is due out on Thursday. CPI is a widely followed monthly inflation report that looks at the price change for goods and services.

December 7, 2020 by · Leave a Comment

Shelter Six: Conforming Loan Limit Shoots Up to $548,250

The 2021 Maximum Conforming loan limit for loans purchased by Fannie Mae and Freddie Mac is increasing 7.42% from $510,400 to $548,250.

The 2-Unit limit is increasing to $702,000, the 3-Unit limit to $848,500, and the 4-Unit limit to $1,054,500.

October New Home Sales remained steady around 1M units for the fourth straight month.

The October Core PCE Price Index was just 1.4% higher than a year ago, down from last month’s 1.5%, and well below the Fed’s stated target of 2%.

Great news for 2021 home sales, a recent Lending Tree survey found that 46% of Americans are thinking about moving within the next year.

Respondents indicated that 44% are seeking a reduction in living expenses, 27% a larger home, 27% different home features, and 12% a different part of town in which to live.

Rate Update

There has never been a better time to lock in a rate as pandemic and economic concerns have driven rates back down near all-time lows and well under 3%.

This Week

The highly anticipated monthly Employment figures are due out on Friday.

November 28, 2020 by · Leave a Comment

Shelter Six: October Home Sales Surge to Best Level Since 2006

October economic reports released last week painted a strong picture of recovery starting with Existing-Home Sales, which were 4% higher than the previous month and to the best level since 2006.

The Median Existing-Home Price was 16% higher than a year ago and up to a record $313K.

Retail Sales increased for the 6th straight month and were .3% higher than in September.

Single-family Housing Starts rose 6% from September, were 29% higher than a year ago, and are now up to the highest level since 2007.

Builder Confidence surged to a record high level for the 3rd straight month.

Housing Inventory levels were down 20% from a year ago to just a 2.5-month supply nationally, well below the 6.0-month supply considered a healthy balance between buyers and sellers.

Rate Update

Last week’s positive news about progress on a Covid vaccine was offset by rising coronavirus cases with the net result being rates remaining unchanged and near all-time lows.

This Week

New Home Sales, Durable Orders, and the Core PCE Price Index, the inflation indicator favored by the Fed, will all be released on Wednesday.

November 23, 2020 by · Leave a Comment

Shelter Six:  Mortgage Rates Holding Steady

Pfizer’s vaccine report last week caused rates to immediately shoot up .125%, however, this week’s equally optimistic Moderna vaccine report didn’t cause rates to budge.

October Consumer Price Inflation figures were just 1.6% higher than a year ago, a little higher than the last few months but still far below 2.3% pre-pandemic readings.

Fannie Mae’s October Home Purchase Sentient Index rose for the fifth time in six months as respondents claiming it is a good time to buy increased 9% from September.

Respondents claiming it is a good time to sell increased 6% from September.

After peaking in June at 8.55%, forbearance figures decreased to only 5.2% of all mortgages, as of Nov 10 per Black Knight.

The maximum Conforming loan limit is expected to increase over the next few weeks from $510,400 to somewhere between $545K and 555K.

Rate Update

Rates ended the week with little change and near record lows. The main thing driving rates right now is the pandemic. Pessimistic concerns influence rates lower, and vice versa.

This Week

Retail Sales will be released on Tuesday, Housing Starts on Wednesday, and Existing Home Sales on Thursday.

November 16, 2020 by · Leave a Comment

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