Shelter Six:  Fed Cuts Short-Term Rates to Zero

March 16, 2020 by · Leave a Comment 

With the coronavirus posing a dire threat to economic growth, the Federal Reserve took the dramatic step on Sunday of slashing the Fed Funds Rate by 1% to 0%.

The Fed Funds Rate is the overnight rate at which banks lend money to each other and does NOT directly affect mortgage rates, which move in correspondence to the bond market.

To keep rates low and markets fluid, the Fed also announced it will purchase $200B of mortgage-backed securities and $500B of Treasury securities over the next few months.

Mortgage rates are responding to the Fed stimulus by dropping on Monday, but this is after mortgage rates spiked to the highest level in months to close out last week.

After falling to an all-time low last Monday, mortgage rates surged throughout the week as lenders experienced capacity issues after a surge in mortgage applications.

Markets are clearly not functioning as normal, evidenced by the gap between the 10-year treasury yield and the 30-year mortgage, which is at the widest margin since 2009.

Rate Update

The coronavirus dominated financial market news last week and caused nearly unprecedented daily movements.  While stocks posted enormous losses, bonds lost some of their appeal as an alternative, and mortgage rates rose sharply.

This Week

The coronavirus will remain the main focus for investors.  The biggest economic report will be Retail Sales on Tuesday.  News about the US elections could have an influence.

Shelter Six:  Coronavirus Fears Drive Rates to All-Time Lows

March 9, 2020 by · Leave a Comment 

Short-term and long-term interest rates of all kinds dropped to all-time lows last week due to ongoing global coronavirus fears.

The Federal Reserve slashed short-term rates .5% in an “emergency” rate-cut last week and may do the same at next week’s scheduled meeting.

Recent economic data has shown that the U.S. economy was performing very well prior to the outbreak of the coronavirus.

The economy gained a massive 273K jobs in February (175K expected).  Average job gains have been an enormous 243K over the past three months.

The February Unemployment Rate unexpectedly declined from 3.6% to 3.5%, while average hourly earnings were 3% higher than a year ago.

Be aware that VA appraisal time frames are running at least two weeks right now and the VA appraisers don’t take rushes.

Rate Update

In a week where the coronavirus completely overshadowed Super Tuesday and key Employment figures, mortgage rates essentially dropped to all-time lows.

This Week

The coronavirus will remain the main focus for investors.  Expect the European Central Bank to slash rates on Thursday.  Consumer Price Index figures are due out on Wednesday.

Shelter Six:  Mortgage Rates Plummet to Lowest Level in Eight Years

March 2, 2020 by · Leave a Comment 

The coronavirus has led to a massive drop in mortgage rates because global activity has slowed reducing the outlook for future inflation.

In response to the uncertainty, investors have shifted holdings from the stock market to the safer bond market, which has influenced rates lower.

The latest report on inflation revealed that it was already holding steady at low levels in January even before the emergence of the coronavirus.

Low inflation and the uncertain economic impact of the disease have significantly raised expectations that the Fed will cut rates at their upcoming March 18 meeting.

The housing sector was a source of good news last week as the sale of new homes in January rose far more than expected to the highest level since 2007.

Since new home sales measure contracts signed, they are viewed as the most current indicator of housing market activity.

Rate Update

Last week, concerns about the coronavirus caused the stock market to post enormous losses leading mortgage rates to drop to the lowest levels in eight years.

This Week

The coronavirus will remain the main focus for investors.  The ISM National Manufacturing Index will come out on Monday, the ISM National Services Index on Thursday, and Employment figures on Friday.

Shelter Six:  Coronavirus Contributing to Low Mortgage Rates

February 24, 2020 by · Leave a Comment 

Lots of uncertainty remains around how much the coronavirus will adversely affect the global economy.

Investors have responded by transferring money from the stock to the safer bond market, which has led to a sharp reduction in mortgage rates early in 2020.

January Existing-Home Sales matched expectations with a slight decline from December but still were 10% higher than a year ago.

National median existing-home prices were up 7% in January from a year ago.

National home inventory was at just a 3.1-month supply, 11% lower than a year ago. Inventory is now near the lowest levels since tracking began in 1982.

Housing Starts, however, have started out the new year significantly stronger than in 2019, while January Building Permits increased to the highest level since March 2007.

Rate Update

Last week’s economic data caused little reaction and mortgage rates remained mostly flat and near the low point of the last four years.

This Week

New Home Sales will be released on Wednesday, Pending Home Sales on Thursday, Durable Orders on Thursday, and the Core PCE Price Index on Friday.

Shelter Six:  U.S. Consumers Remain Very Optimistic

February 17, 2020 by · Leave a Comment 

U.S. consumers are still buying at a fast pace as evidenced by January Retails Sales figures, which were up .3% from December and 4.4% from a year ago.

U.S. consumers also remain very optimistic as last week’s Consumer Sentiment survey was at the highest point in nearly two years.

Federal Reserve Chairman Powell didn’t give any new guidance in his testimony to Congress last week and the markets had little reaction.

VA remains a great 100% loan option for eligible veterans thanks to great rates, low fees, and flexible guidelines (go down to 580-credit score, and up to 59% debt ratio).

The maximum VA loan amount has traditionally matched the Conventional limit but, effective in 2020, VA no longer sets loan limits allowing the Veteran’s qualification to dictate how much they can buy with the 100% benefit.

Also effective January 1, the VA Funding Fee increased from 2.15% to 2.3% for first-time users and from 3.3% to 3.6% for subsequent users.

Rate Update

It was a quiet week for mortgage markets.  The major economic data was right in line with expectations, and rates ended the week nearly unchanged.

This Week

Housing Starts will be released on Tuesday, the Producer Price Index (PPI) on Wednesday, and Existing Home Sales on Friday.

Shelter Six:  Economy Adds 225K Jobs in January

February 10, 2020 by · Leave a Comment 

The economy added an impressive 225K jobs in January, a good bit higher than the 160K forecasted.

The Unemployment Rate unexpectedly increased from 3.5% to 3.6%, but this was due to additional workers entering the labor force which is a sign of strength.

Average hourly earnings slightly exceeded expectations and were 3.1% higher than a year ago, and up from 3% last month.

Further proof that the economy is thriving, both the ISM National Manufacturing and Services Indexes shot up more than expected last week.

Fair Isaac Corporation is getting a lot of notice in the media for introducing new FICO credit scoring models this summer that incorporate “trended” data.

The mortgage industry, however, will not be using the newer FICO models in the short-term but continuing to rely on the FICO model used since 2004.

Rate Update

Strong economic data was offset last week by continued uncertainty around the coronavirus keeping mortgage rates unchanged and near the lowest levels since 2016.

This Week

The JOLTS report is due out on Tuesday, the Consumer Price Index (CPI) on Thursday, and Retail Sales on Friday.

Shelter Six:  Mortgage Rates Fall as Coronavirus Expands

February 3, 2020 by · Leave a Comment 

Investors have responded to the coronavirus outbreak by shifting portfolios to the safety of the U.S. bond market, causing mortgage rates to fall to the lowest levels since 2016.

Gross Domestic Product (GDP), the broadest measure of economic activity, increased 2.1% during the 4th Quarter of 2019, which was the same growth rate as the 3rd Quarter.

Early estimates for 1st Quarter GDP are for it to drop slightly, partly due to an expected slowdown from the coronavirus.

The Federal Reserve kept short-term rates unchanged last week.  Fed policy is unlikely to change any time soon, barring any major new economic developments.

According to the U.S. Census Bureau, the national homeownership rate increased slightly in the 4th Quarter to 65.1%, up from 64.8% the previous quarter.

The U.S. homeownership rate peaked at 69% in the 3rd Quarter of 2006 and then bottomed out at 62.9% in 2016.

Rate Update

Last week’s major economic data came in right on target, but the spread of the coronavirus outbreak influenced rates to move lower.

This Week

The ISM National Manufacturing Index will be released on Monday with both the ISM National Services Index and Employment figures due out on Friday.

Shelter Six:  Low Mortgage Rates Stimulate Home Sales

January 27, 2020 by · Leave a Comment 

December existing-home sales increased more than expected and were 11% higher than a year ago.

December national median existing-home prices were up 8% over a year ago.

The number of homes for sale in December fell to just a 3-month supply nationally, well below the 6-month supply considered a healthy balance between buyers and sellers.

Inventory is now at the lowest levels since tracking began in 1982.

Shelter’s “SmartSelf” program allows self-employed buyers’ income to be calculated exclusively from bank statement deposits rather than tax returns.

The program requires only 10% down without PMI while allowing credit scores down to 620 and the number of financed properties up to 15.

Rate Update

Concerns around a new virus in China leading to slower economic growth led to mortgage rates falling to the lowest point of 2020.

This Week

New Home Sales will be released on Monday, GDP figures on Thursday, and the Core PCE Price Index on Friday. The Federal Reserve will also be meeting on Wednesday.

Shelter Six:  Housing Starts Surge 41%

January 20, 2020 by · Leave a Comment 

A lack of inventory has been holding back home sales, so last week’s report on home construction was very encouraging.

In December, housing starts rocketed 17% from November, which completely blew away the consensus forecast, and was the best level since 2006.

Housing starts were a massive 41% higher than a year ago and the strength was seen across the board in both single-family and multi-family units.

Since consumer spending accounts for about 70% of all economic activity in the US, the monthly retail sales data is a key indicator of growth.

December Retail Sales figures were up 5.8% over last year revealing that consumer spending remained solid during the important holiday shopping season.

As expected, inflation held steady in December as CPI core inflation figures were 2.3% higher than a year ago, the same annual rate of increase as last month.

Rate Update

There were no significant new developments with China or Iran last week, and the reaction to the U.S. economic data was small. As a result, rates ended the week nearly unchanged.

This Week

It will be a very light week for economic data with Existing Home Sales released on Wednesday. Beyond that, news regarding Iran or trade negotiations with China could have an influence.

Shelter Six:  Bankruptcy to a Mortgage in Only One Year

January 13, 2020 by · Leave a Comment 

January’s Employment Report was a little weaker than expected with the economy adding 145K new jobs (160K were expected).

Despite the January setback, job gains have averaged a very impressive 184K per month over the last three months.

The report indicated that hiring is very strong right now in retail and construction, but weaker in manufacturing and transportation.

The weakest part of the report was average hourly earnings, which were down from last month and just 2.9% higher than a year ago.

Buyers with significant credit problems can still get a mortgage. Shelter’s SmartTrac program requires only one year of seasoning for a Bankruptcy or Short Sale, and only two years for a Foreclosure.

The program requires 15% down and allows for multiple mortgage late payments over the last year, credit scores down to 620, and up to 15 financed properties.

Rate Update

Weaker than expected labor market data was offset with an easing of tensions with Iran, and rates ended last week nearly unchanged.

This Week

The Consumer Price Index (CPI) is due out on Tuesday, Retail Sales on Thursday, and Housing Starts will come out on Friday. In addition, news about Iran or the trade negotiations with China could have an influence.

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