Shelter Six:  July Home Sales Drop Slightly

August 27, 2018 by · Leave a Comment 

1. July New and Existing Home Sales both decreased a little from June, while national inventory also dropped slightly from June to a 4.3 month supply.

2. With low inventory and a healthy economy, builders are diligently trying to ramp up production to meet the housing demand.

3. For decades, single-family housing starts averaged about 1.1M a year, hit a low of 350K in 2009, and are now holding steady around 850K.

4. Builders attribute the flat new construction figures to rising land, material, and labor costs.

5. Shelter’s SmartVest program is a great financing solution for experienced real estate investors who may have complex finances.

6. With SmartVest, income is calculated via a cash-flow analysis rather than the traditional Debt Ratio, no tax returns are required, and up to 15 financed properties are allowed.

Rate Update

Last week’s speech by Federal Reserve Chairman Jerome Powell contained no surprises and mortgage rates ended the week slightly lower.

This Week

Pending Home Sales will be released on Wednesday and the Core PCE Price Index on Thursday.

Shelter Six:  Labor Market Remains Strong

August 20, 2018 by · Leave a Comment 

1. The JOLTS report measures job openings and labor turnover rates.  Fed officials and investors value this data to help assess the strength of the labor market.

2. In June, there were 6.7M job openings, but only 6.6M people who reported that they were looking for work that month.  It is rare to see more job openings than people seeking work.

3. Another sign of labor market strength is that a large number of workers willingly left their jobs in June, which normally only happens if one is transitioning to a better job.

4. After reaching a 10-year high in November of last year, single-family homebuilding has lost some momentum mostly due to a shortage of skilled labor and rising material costs.

5. July Housing Starts were up a modest 1%, but an encouraging sign is that Building Permits were up 1.3M and 4.2% higher than last July.

6. Shelter’s SmartSelf program allows borrowers to document income with bank statements rather than tax returns, requires only 10% down, no PMI, and a credit score of only 620.

Rate Update

Increased concerns about Turkey last week offset stronger than expected economic data pushing mortgage rates down slightly.

This Week

Existing Home Sales will be released on Wednesday, New Home Sales on Thursday, and Durable Orders on Friday.  News about Turkey or tariffs could also influence rates.

Shelter Six:  Surging Home Prices Equal Lower Affordability

August 13, 2018 by · Leave a Comment 

1. Inflation is a major factor on interest rates and continues to gradually climb higher.  In July, Core PPI was up 2.7% while Core CPI was up 2.4%, the highest level since Sept 2008.

2. Metro Atlanta home prices have climbed 5.6% over the past year, according to the latest S&P CoreLogic Case-Shiller Index.  Nationally, home prices are up 6.4%.

3. This is the 22nd straight month with prices rising more than 5%, however, this home appreciation is occurring at 2-3 times the inflation rate.

4. An ongoing related problem is that average hourly pay nationally adjusted for inflation has not changed over last year according to Bureau of Labor.

5. The surge in home prices at a rate greater than inflation with flat consumer income has, unfortunately, led to lower home buyer affordability.

6. Shelter’s new piggyback 2nd mortgage program allows a home buyer to avoid PMI or a more restrictive Jumbo loan by obtaining two mortgages with only 5% down.

Rate Update

Mortgage rates tend to benefit when big, scary stuff shakes global economic confidence and that is what happened with last week’s debt crisis in Turkey.  As a result, rates moved to the lowest level in weeks.

This Week

Housing starts are due out Tuesday with both Retail Sales and Industrial Production due out on Wednesday.

Shelter Six:  Economy Continues to Be Strong and Add Jobs

August 6, 2018 by · Leave a Comment 

1. The economy added 157K new jobs in July and has now gained an average of 215K per month so far this year, up from 184K per month this time last year.

2. The Unemployment Rate decreased from 4% to 3.9%, matching expectations.

3. As expected, the Fed did not increase short-term rates at Wednesday’s meeting but did note that household spending and business investment are growing “strongly.”

4. Investors expect that the Fed will raise the Federal Funds for the third time this year at the next meeting on September 26.

5. Shelter’s new “Smart Self” program is for self-employed borrowers or employees who primarily receive tip income and allows income to be calculated from bank statements rather than tax returns.

6. Smart Self requires only 10% down with no PMI, goes down to a 620 credit score and up to a 50% debt ratio, and is very friendly for a cash-out refi, multi-unit or investment property, or closing in the name of an LLC.

Rate Update

With no significant surprises last week, mortgage rates were mostly flat and ended the week slightly higher.

This Week

The JOLTS report is due out on Wednesday and the Consumer Price Index (CPI) on Friday.