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.

Shelter Six:  Home Sales Down Slightly but Inventory Up Slightly

June 25, 2018 by · Leave a Comment 

1. May Existing Home Sales decreased slightly from April and were 3% lower than a year ago.

2. National home inventory was up 3% from April to a 4.1-month supply (6 months is considered healthy), but still 6% lower than a year ago.

3. Home builders may be helping to address the shortage of inventory as May Housing Starts jumped higher than expected (5%) from April, to the highest level since July 2007.

4. The Trump Administration formally rolled out a plan last week to massively reorganize the federal government including several significant changes to housing and finance.

5. One big logical change would be USDA loans moving from being under the Department of Agriculture to HUD.  A similar proposal to move VA under HUD was rejected.

6. The biggest overhaul would be Fannie Mae and Freddie Mac transitioning to fully private entities that still had access to a federal guarantee but with greater competition, transparency, and accountability, as well as less risk of a taxpayer-funded bailout.

Rate Update

After an extremely quiet week, mortgage rates remain unchanged.

This Week

New Home Sales will be released on Monday, both Durable Orders and Pending Home Sales on Wednesday, and Core PCE on Friday.

Shelter Six:  Federal Reserve Bumps up Rates .25%

June 18, 2018 by · Leave a Comment 

1. As expected, the Federal Reserve increased short-term rates by .25% last week.  The net effect on mortgage rates was minimal.

2. For the third straight month, Retail Sales were much higher than expected with solid gains in May.

3. After weak Retail Sales reports over the first quarter of the year, investors’ concerns about the economy have eased.

4. Self-employed buyers now have a mortgage alternative without the need for tax returns or income documentation.

5. Shelter’s “SmartSelf” program allows a self-employed buyer’s income to be calculated exclusively from bank statements.

6. The program requires only 10% down with no PMI and a 620 credit score while allowing for a Bankruptcy or Foreclosure as recent as two years ago and up to 15 financed properties.

Rate Update

Both Federal Reserve and European Central Bank meetings last week influenced rates slightly with mortgage rates ending the week a little lower.

This Week

It is a light week for economic reports with Housing Starts due out on Tuesday, Existing Home Sales on Wednesday, and the Philly Fed Regional Manufacturing Index on Thursday.

Shelter Six:  Free Credit Report Freeze Coming This Fall

June 11, 2018 by · Leave a Comment 

1. Thanks to recent legislation, this September Americans will be able to freeze their credit at all three credit bureaus free of charge.

2. This will be a great way to protect personal information from credit fraud and identity theft thanks to the Economic Growth, Regulatory Relief & Consumer Protection Act signed in May.

3. A credit freeze means no one can access credit to fraudulently open a new account in your name.  The charge has typically been $3-5 per credit bureau per person.

4. Since record keeping began in 2000, April is the first month ever where the number of job openings exceeded the number of job seekers.

5. The “JOLTS” report measures job openings and labor turnover rates, and the Fed closely monitors this data.

6. In April, job openings unexpectedly jumped to 6.7 million, a record high level, and there were just 6.3 million unemployed people in the labor force that month.

Rate Update

Mortgage rates moved up last week as a result of strong economic reports.

This Week

The next U.S. Fed meeting will take place on Wednesday, and investors widely expect a .25% drop in short-term rates.  The Consumer Price Index (CPI) will also be released on Tuesday and Retail Sales on Thursday.

Shelter Six:  Very Strong May Employment Report

June 4, 2018 by · Leave a Comment 

1. The U.S. added a very strong 223K jobs in May, much higher than expected.

2. The U.S. economy has now added an average of 207K jobs per month so far this year.

3. The Unemployment Rate is now down to 3.8%, the lowest level since 2000.

4. Fannie Mae’s Home Purchase Sentiment Index measures consumer confidence in the U.S. housing market and hit an all-time high in April.

5. The U.S. Energy Information Administration has forecasted gas prices to average $2.90/gallon this summer, almost 50 cents higher than last summer.

6. The higher forecasted gas prices are due to a tightening market, Iran sanctions, and other geopolitical concerns across the globe.

Rate Update

Mortgage rates dropped last week as investors bought U.S. bonds out of concern that Italy’s newly formed coalition government may eventually leave the European Union.

This Week

Factory Orders will be released on Monday, the ISM National Services Index on Tuesday, and the JOLTS Report on Wednesday.  News about Italy could also influence mortgage rates again this week.

Shelter Six:  Regulatory Relief Act Signed Into Law

May 29, 2018 by · Leave a Comment 

1. On Thursday, President Trump signed the Economic Growth, Regulatory Relief, and Consumer Protection Act into law.

2. This act represents the largest rollback of bank regulations since the financial crisis, improves consumers’ access to credit, and streamlines mortgage TRID requirements.

3. Italy formed a new government last week increasing uncertainty around whether the country will remain in the European Union (EU).

4. April Existing Home Sales fell a bit from March but were close to last year’s level, while New Home Sales also fell a little from March but were 11.6% higher than a year ago.

5. April’s inventory of Existing Homes was at a 4-month supply (6.3% lower than a year ago), while New Homes was at a 5.4-month supply (12.4% higher than a year ago).

6. Mortgage rates have now increased 15 out of the first 21 weeks of 2018, which is the most weeks with an upward increase since Freddie Mac began tracking this data in 1972.

Rate Update

Uncertainty with Italy forming a new government and the U.S. cancelling a summit with N. Korea influenced mortgage rates lower last week and down from recent 7-year highs.

This Week

The Core PCE Price Index is due out on Thursday while both the Employment Report and the ISM National Manufacturing Index are due out on Friday.

Shelter Six:  No Tax Returns Required for Investment Property loan

May 21, 2018 by · Leave a Comment 

Shelter’s new SmartVest program allows an experienced real estate investor to buy up to 15 financed investment properties with no income documentation or debt ratio calculation.

The qualification on a SmartVest loan is based on a property cash-flow analysis and allows investors to close in the name of an LLC with interest-only loan options.

Consumer spending accounts for about 70% of US economic activity and Retail Sales is the key economic report that investors watch each month that monitors spending.

Following the hurricanes last fall, Retail Sales showed strong gains for 3 months before posting 3 months of losses causing investors to worry that economic growth was slowing.

Last week’s Retail Sales report bucked the recent trend and showed a very healthy .3% increase in April spending from March.

The market is now pricing in a near 100% probability that the Fed will increase short-term rates by .25% in June with a 70% probability of another .25% hike in September.

Rate Update

A speech last week from the governor of the Bank of France hinting that a European rate hike might come sooner than expected was the catalyst for mortgage rates jumping to the highest level in seven years.

This Week

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

Shelter Six:  Home Price Appreciation Continues to Surge

May 14, 2018 by · Leave a Comment 

1. Metro Atlanta home prices surged 6.5% in February outpacing the national average of 6.3%, according to the latest S&P CoreLogic Case-Shiller Index.

2. March Existing Home Sales were up 1% from February and were about the same as this time last year.

3. March New Home Sales were up 4% from February, were 9% higher than a year ago, and now make up 11% of the total market.

4. New Home Sales peaked as a percentage of the market at a high point of 17% in June 2003 during the building boom and bottomed out at 5.4% in 2010 during the foreclosure crisis.

5. Inventory was down to a 3.6 month supply in March with 1.67M homes for sale, down 7.2% from a year ago and at the lowest level since data was kept in 1999, according to NAR.

6. Despite a small pool of unemployed workers to choose from, March job openings jumped to a record level of 6.55M, a significant sign of strength for the labor market.

Rate Update

With little major news last week and not much reaction to the economic data, mortgage rates ended the week slightly higher.

This Week

Retail Sales will be released on Tuesday with Industrial Production and Housing Starts out on Wednesday.

Shelter Six:  Unemployment Drops to 3.9%

May 7, 2018 by · Leave a Comment 

1. The economy added 164K jobs in April.  Although 190K were expected, upward revisions added 30K jobs to results for prior months bringing net gains very close to expected levels.

2. The unemployment rate declined from 4.1% to 3.9%, the lowest level since December 2000.

3. The decline in Unemployment was mostly due to workers leaving the labor force rather than job gains, so it was not necessarily viewed as a sign of strength.

4. As widely expected, the Fed made no change to the Federal Funds rate on Wednesday and the meeting caused little change in investor expectations for the pace of future rate hikes.

5. The Census Bureau reports that the Homeownership Rate held steady at 64.2% in the 1st Qtr of 2018, unchanged from the prior quarter and still at the highest level since 2014.

6. The Homeownership Rate is up from 63.6% in the 1st Qtr or 2017 and is now higher than last year for the fifth consecutive quarter.

Rate Update

Despite a wide range of major economic news, it was a very quiet week for mortgage rates, which ended the week nearly unchanged.

This Week

The JOLTS report, which measures job openings and labor turnover rates, will come out on Wednesday while the Consumer Price Index (CPI) will come out on Thursday.

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