Shelter Six:  Fed Leaves Rates Unchanged

May 6, 2019 by · Leave a Comment 

As expected, the Federal Reserve made no change to the Fed Funds Rate last week.

Inflation continues to run below the Fed’s target of 2%, which has stirred increased expectations that the Fed might actually cut rates before the year is out.

Fed Chair Powell addressed this speculation, however, by stating that Fed officials “don’t see a strong case for moving rates in either direction.”

The economy added 263K jobs in April, well above the 190K forecasted.  The Unemployment Rate unexpectedly declined from 3.8% to 3.6%, the lowest level since 1969!

Shelter has just launched a Temporary Buydown program, which allows for the reduction in the Borrower’s mortgage payment by 2% in the 1st year and 1% in the 2nd year of the loan.

This program can be invaluable for advertising listings as the Buydown fee can be paid for by the Seller.  This program is for Conventional Conforming Fixed-rate purchase loans only.

Rate Update

There was a lot of economic news last week that led to a lot of rate volatility, but the various influences were offsetting and mortgage rates ended the week nearly unchanged.

This Week

The JOLTS report will be released on Tuesday and the Consumer Price Index (CPI) on Wednesday. Investors also will be watching for news about the trade negotiations between the U.S. and China.

Shelter Six:  1st Quarter GDP Much Stronger Than Expected

April 29, 2019 by · Leave a Comment 

1st Quarter GDP was up an astounding 3.2%, much stronger than expected and significantly higher than the 4th Quarter’s 2.2%.

In fact, this was the best 1st Quarter since 2015, and came despite the government shutdown and severe weather across the country.

March Existing Home Sales were disappointing and 5% lower than a year ago.

March New Home Sales, however, were stronger than expected and at the highest level since November 2016.

An industry-wide event will take place over the next couple of years as the London Interbank Offered Rate (LIBOR), the leading index for ARM’s, is scheduled to terminate at the end of 2021 and be replaced with the Secured Overnight Financing Rate (SOFR).

Shelter’s Smart Series portfolio loan program now offers a 95% option with no PMI as well as a 40-Year Fixed-Rate Interest-Only option.

Rate Update

Rates normally shoot up when strong economic news is released, but actually fell last week despite the strong GDP figures because inflation was much tamer than expected.

This Week

The Core PCE Price Index is due out on Monday, the ISM National Manufacturing Index on Wednesday, and both the ISM National Services Index and Employment figures on Friday.  The next Fed meeting also takes place on Wednesday.

Shelter Six:  Retail Sales Surge

April 22, 2019 by · Leave a Comment 

March Retail Sales jumped a whopping 1.6% from February, which was far greater than forecasted and the largest monthly increase since 2017.

Retail Sales had actually declined slightly in February, so the March figures were particularly impressive.

The reason for the wide swings is probably mostly attributed to the government shutdown and the unusual volatility in the stock market at the end of last year.

Another factor is the size and pace of tax refunds.  Changes in the withholding tables have resulted in smaller refunds on average, and the IRS has been a little slower with distributions.

Home builder confidence is on the rise as the latest survey from the National Association of Home Builders was very strong relative to the weaker surveys from the end of last year.

A CNBC survey of Wall Street experts indicated that 96% do not anticipate a recession over the next year, with 70% optimistic about the economy and 30% neutral.

Rate Update

Despite unexpected strength in consumer spending, mortgage rates finished last week nearly unchanged.

This Week

Existing Home Sales will be released on Monday, New Home Sales on Tuesday, Durable Orders on Thursday, and First Quarter GDP on Friday.

Shelter Six:  Home Buying and Selling Optimism Explodes

April 15, 2019 by · Leave a Comment 

The weather warms up, spring begins to bloom, and Fannie Mae’s National Housing Survey shoots up a solid 7% on the buying side and 13% on the selling side in March.

After a winter of relative consumer pessimism, Fannie Mae’s Home Purchase Sentiment Index hit a low-point in December and had risen only slightly since.

But thanks to slowing home price appreciation and falling interest rates, 56% of respondents now think it is a good time to buy and 43% think it is a good time to sell.

Inflation continues to trend lower.  Core CPI rose less than expected in March at a pace of only 2% higher than a year ago, which is its lowest level in more than a year.

Low inflation along with weak global growth, trade tensions, and Brexit concerns have all contributed to central banks in both the U.S. and Europe delaying plans to increase short-term rates.

European leaders agreed last week to postpone Brexit until October 31, which removes the immediate economic risk but does not solve the long-term problem.

Rate Update

Mortgage rates have maintained their aggressive drop in March and remain in the low 4’s.

This Week

Retail Sales will be released on Thursday and Housing Starts on Friday.  Mortgage markets will close early on Thursday and all day on Friday in observance of Good Friday.

Shelter Six:  Economy Adds 196K Jobs in March

April 8, 2019 by · Leave a Comment 

A slowdown in the pace of wage growth offset stronger than expected job gains in Friday’s key Employment report, and the net impact to rates was small.

After rising steadily for the last several months, average hourly earnings unexpectedly reversed in March and were just 3.2% higher than a year ago, down from 3.4% last month.

On the other hand, job gains surpassed expectations.  Against a consensus forecast of 170K, the economy added 196K jobs in March.

Strength was seen in the Health Care and Leisure & Hospitality sectors.  The unemployment rate remained at 3.8%.

Another closely watched economic report released this week remained volatile.  Retail Sales declined a bit from the previous month, while the consensus was for a modest increase.

Retail Sales have been affected by a number of temporary factors including unusually high stock market volatility, the government shutdown, and delays in tax refunds.

Rate Update

After rates fell in March the most of any month in over a decade, the first week of April ended with rates bouncing a little higher.

This Week

Wednesday will be the big day with the next European Central Bank (ECB) meeting taking place, CPI figures being released, and minutes from the March 20 Fed meeting coming out.

Shelter Six:  New Consensus that No More Rate Hikes Needed in 2019

March 25, 2019 by · Leave a Comment 

Comments from Federal Reserve Members after last week’s Fed meeting surprised many as the new consensus is that no more short-term rate hikes will be needed this year.

The Fed also surprised by announcing that it will slow the pace of its bond repurchase program and end it altogether in September.

Fed officials also modestly lowered the outlook for U.S. economic growth in 2019 from 2.3% to 2.1%.

February Existing Home Sales jumped 12% from January, far more than expected.

February’s inventory of homes for sale was at a 3.5-month supply, 3% higher than a year ago but still below the 6-month healthy balance between buyers and sellers.

February’s median existing-home price was 4% higher than a year ago.

Rate Update

Big announcements from the Fed along with a lower outlook for global economic growth contributed to mortgage rates dropping sharply last week to the lowest levels in over a year.

This Week

Housing starts will be released on Tuesday, Pending Home Sales on Thursday, and both New Home Sales and Core PCE Price Index on Friday.

Shelter Six:  Three Straight Years of More Buyers Than Renters

March 18, 2019 by · Leave a Comment 

A vote passed last week extending the Brexit departure date from March 29 to June 30, but there continues to be great uncertainty around if and when the UK will leave the EU.

Last week’s inflation news was very positive as the latest Consumer Price Index figures increased less than expected.

According to the U.S. Census Bureau, there were 1.6M owner-occupied households formed in 2018, the largest annual increase since 2004.

After a nine-year stretch from 2007 to 2016 where the number of new renters exceeded the number of new buyers each year, we have now had three straight years of more buyers!

The surge in new buyers has fortunately led to a spike in the homeownership rate to 64.8% in the 4th Quarter of 2018, up from the low point of 62.9% in the 2nd Quarter of 2016.

With appreciation moderating, mortgage rates declining, and wage growth strengthening, the MBA’s latest projection is for purchase origination volume to increase 4% per year in both 2019 and 2020.

Rate Update

Mortgage markets remain jittery around the uncertainty of Brexit.  Along with last week’s weaker-than-expected inflation data, this led to rates falling to the low point in over a year.

This Week

It will be a light week for economic data.  The big story will be the Fed meeting on Wednesday.  The most significant economic report will be Existing Home Sales on Friday.

Shelter Six:  Wages Continue to Rise

March 11, 2019 by · Leave a Comment 

February Wage Growth reached the highest level since April 2009 as average hourly earnings were up 3.2% from January and 3.4% from a year ago.  Rising incomes are always good for home sales.

The Unemployment Rate declined from 4% to 3.8%, with much of the reduction due to workers returning to the workforce after the end of the government shutdown.

The economy added just 20K jobs in February, well less than expected with much of the shortfall attributed to poor weather across the country.

The Chief Economist for Freddie Mac, Len Kiefer, recently shared his viewpoint that although home prices have risen greatly, we are not in a housing bubble similar to 2008.

Kiefer emphasized that the market is not driven by the speculative mortgage products that existed in 2008 nor is today’s mortgage default potential very high.

Kiefer predicts the economy will experience modest growth in ‘19, mortgage rates will gradually rise capping at 5%, and home prices will moderate substantially over the next few years.

Rate Update

Mortgage rates slipped last week on news that the European Central Bank sharply reduced the economic outlook for Europe while announcing some new stimulus programs.

This Week

Retail Sales will be released on Monday, the Consumer Price Index on Tuesday, and Durable Orders on Wednesday.  Investors also will be watching for signs of progress in the trade talks between the U.S. and China.

Shelter Six:  National Homeownership Rate Up to 64.8%

March 4, 2019 by · Leave a Comment 

Housing demand continues to be strong.  For the third straight year, there was growth in homeownership and 2018 ended up being the strongest year for owner household formation since 2004.

National Homeownership Rate up.  The Census Bureau reported last week that the national homeownership rate rose in the 4th Quarter to 64.8%, the highest level since 2014.

The largest gains came from the 35-44 age group (up 1.2% to 61.1%) and the under 35 age group (up .5% to 36.5%).

GDP continues to be strong and was up more than expected over the 4th Quarter (2.6%), with unexpected strength seen in business investment and exports.

2018 GDP ended the year at a solid 2.9%, the highest level since 2015.  2019 forecasts are for slower growth (2.5%) as the tax cut stimulus fades and the economy struggles overseas.

Negotiations with China progress.  The U.S.’s plan to increase tariffs on Chinese goods on March 1 was postponed last week as talks with China continue.

Rate Update

Stronger than expected economic growth data along with progress in trade negotiations with China put upward pressure on mortgage rates last week.

This Week

The ISM National Services Index is due out on Tuesday with the Employment Report due out on Friday.

Shelter Six:  Long-Term Economic Outlook Favorable

February 25, 2019 by · Leave a Comment 

The bad news.  Existing Home Sales declined in January for the 6th straight month, were 11% lower than a year ago, and down to the lowest level since November 2015.

The reason why.  Home Sales have been affected over the last few months by one-time events like the government shutdown, stock market volatility, and the election that should all be things of the past.

Good inventory news.  Inventory is finally on the rise climbing for the 4th straight month and 6.4% higher than a year ago.

Favorable outlook.  The longer-term outlook with home sales is favorable as employment is strong, incomes are rising, interest rates are holding steady, and more Millennials are buying.

A major international concern has been trade tensions between the U.S. and China.  The U.S. was scheduled to increase tariffs on Chinese goods 10-25% on Saturday.

After a weekend of “substantial progress”, however, President Trump has agreed to postpone raising tariffs in hopes of negotiating a more comprehensive trade agreement.

Rate Update

There were few surprises in the world of economic news last week and mortgage rates have stayed virtually unchanged throughout all of February.

This Week

Housing Starts are due out on Tuesday, Pending Home Sales on Wednesday, GDP on Thursday, and ISM National Manufacturing Index and Core PCE Price Index on Friday.

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