Shelter Six:  Consumer Confidence Surges

September 3, 2018 by · Leave a Comment 

1. Optimism remains strong for the U.S. economy as Consumer Confidence figures surged last week far more than expected and to the highest level since 2000.

2. A strong labor market, solid economic growth, and record stock prices have contributed to the high level of optimism.

3. July Retail Sales, excluding the volatile auto component, rose .6% from June but the June results were revised lower offsetting the surge.

4. Inflation continues to push higher but remains within the Fed’s stated target level of 2%.

5. Shelter’s new SmartTrac program is designed for borrowers who have had a Bankruptcy or Short Sale over one year ago or multiple late mortgage payments within the last year.

6. SmartTrac requires 20% down and a 620 credit score, offers an interest-only feature, and doesn’t require a prepayment penalty.

Rate Update

An easing of U.S. trade tensions last week prompted investors to shift from safer to riskier investments, which had the effect of pushing mortgage rates slightly higher.

This Week

Employment figures are due out on Friday, but not before the ISM National Manufacturing Index on Tuesday and the ISM National Services on Thursday.  News on the trade deals could continue to influence rates as well.

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.

Shelter Six:  Home Prices Continue to Surge

July 30, 2018 by · Leave a Comment 

1. The Metro Atlanta median sales price surged to an all-time high of $251,250 in June, 7.4% higher than a year ago, according to the AJC.

2. The number of homes listed for sale was down to only a 2.3 months supply in June, down from 2.9 months a year ago, according to the AJC.

3. Mortgage insurance giant MGIC is following a recent trend of tightening up the debt ratio and now will only insure loans with debt ratios over 45% when credit scores are over 700.

4. The U.S. and European Union (EU) agreed last week to not escalate their trade dispute as neither will impose tariffs while the two sides attempt to work out their differences.

5. If the U.S. and EU can come to terms, there would be tremendous optimism that the same could be done with other countries, notably China.

6. Shelter’s “Dream Big” Jumbo 30-year fixed-rate loan allows up to $3M in financing with as little as 10% down with a minimum 680 credit score.

Rate Update

Investors reacted to the reduced chance of a tariff trade war last week by shifting money from bonds to riskier stocks, which had the effect of pushing mortgage rates higher.

This Week

The Core PCE Price Index is due out on Tuesday, the ISM National Manufacturing Index on Wednesday, and Employment figures on Friday.  The Fed also meets on Wednesday but no change in rates is expected this time.

Shelter Six:  Retail Sales Remain Strong

July 23, 2018 by · Leave a Comment 

1. Retail Sales unexpectedly turned negative for 3 months during the winter creating doubts about the strength of the economy. Since then, however, sales have been very strong.

2. June Retail Sales were up .5% from May influencing the Atlanta Fed to bump up the 2nd Quarter GDP forecast to 4.5%, more than double the 1st Quarter’s 2%.

3. June Housing Starts fell 12% from May. Single-family starts reached a 10-year high in November 2017, but they have fallen steadily since.

4. Despite a huge need for more inventory of homes, higher labor, land, and material costs are some of the reasons cited by homebuilders for the slowdown in new construction.

5. The government agency formerly known as the CFPB is now officially known as the BCFP, which stands for the “Bureau of Consumer Financial Protection.”

6. Acting Director, Mick Mulvaney, recently changed the name to reflect the way the name officially reads in the 2010 Dodd-Frank Act, which created the agency.

Rate Update

Last week was relatively quiet for mortgage rates. The major economic data was mixed and rates ended the week a bit higher.

This Week

Existing Home Sales will be released on Monday, New Home Sales on Wednesday, Durable Orders on Thursday.

Shelter Six:  Strong U.S. Economy Only Getting Stronger

July 16, 2018 by · Leave a Comment 

1. The U.S. economy continues to be strong and resilient.  Some good info below that is very encouraging that the strength will continue.

2. In a recent interview, Warren Buffet and Jamie Dimon (CEO JP Morgan Chase) said the economy is strong and still has steam.  This quote from Dimon:

3. “Business sentiment is almost at the highest level it’s ever been, consumer sentiment is at its highest levels, markets are wide open, housing’s in short supply and my guess is mortgage credit will expand a bit.”

4. Evidence of ongoing strength in the labor market, last week’s JOLTS report revealed there were 6.1M unemployed people in the labor force seeking 6.6M open positions.

5. Last week’s CPI figures revealed that inflation continues to rise and the 2.3% increase in June was the highest since Jan 2017.

6. Easing regulations and a stronger economy are key reasons why 60% of economists surveyed by Wall Street Journal expect moderately stronger growth in the medium term.

Rate Update

Last week was one of the quietest of the year.  The major economic data generally matched the expected levels and mortgage rates ended nearly unchanged.

This Week

Retail Sales will be released on Monday, Industrial Production on Tuesday, and Housing Starts on Wednesday.

Shelter Six:  Economy Still Steaming Ahead

July 9, 2018 by · Leave a Comment 

1. The economy added 213K jobs in June, a little more than expected.

2. The economy has averaged 215K new jobs per month this year, up from 182K per month this time last year.

3. The Unemployment Rate now stands at 4%, up from last month’s 18-year low of 3.8%.  The main reason for the increase though was a surge of workers entering the labor force.

4. Minutes from last week’s Federal Reserve Meeting indicate that Fed members believe recent tax cuts will support economic growth over the next few years.

5. Fed members’ biggest economic concern is increased trade tensions slowing future investment activity.

6. An interesting fact that supports ownership, the Fed estimates that homeowners’ net worth has ranged between 31 and 46 times more than that of renters between 1998 and 2013.

Rate Update

After shooting up about .5% over the first quarter of the year, mortgage rates have been flat and mostly unchanged since.

This Week

The Producer Price Index (PPI) measures the price increase of “intermediate” goods used by companies to produce finished products and is due out on Wednesday.  The Consumer Price Index (CPI) looks at the price change for finished goods and is due out on Thursday.

Shelter Six:  Looser Mortgage Guidelines Leading to More Home Sales

July 2, 2018 by · Leave a Comment 

1. A recent CoreLogic analysis of Conventional loans revealed that looser Fannie Mae / Freddie Mac mortgage guidelines are leading to more loans being approved.

2. As Fannie and Freddie have promoted more 3% down programs, the share of Conventional purchase loans with < 5% down has surged from < 2% in 2014 to 9% in the 1st Qtr of 2018.

3. Also, as Fannie and Freddie have allowed for higher debt ratios, 20% of all loans in the 1st Quarter of 2018 had a debt ratio over 45%, up from only 5-7% in 2012.

4. Despite more loans being approved, the average Conventional credit score has remained unchanged at 755 from the 1st Quarter of 2018 compared to the previous year.

5. A big reason that the Federal Reserve has been raising short-term rates over the last year is that inflation has moved higher in recent months.

6. After holding steady around 1.5% for nearly a year, the Core PCE Price Index spiked up the last 3 months and in May was 2% higher than a year ago, the largest increase since 2012.

Rate Update

There were few surprises with last week’s economic data and mortgage rates fell slightly.

This Week

The mortgage markets will close early on Tuesday and all day Wednesday in celebration of Independence Day.  The ISM National Manufacturing Index will be released on Monday, the ISM National Services Index on Thursday, and Employment figures on Friday.

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