Shelter Six:  Jobs Way Up in February

March 12, 2018 by · Leave a Comment 

1. The economy gained an enormous 313K jobs in February, much higher than expected and the largest gain since July 2016.

2. Construction firms added 61K of the jobs, the highest monthly increase in 11 years!

3. As job growth continues to surge, wages continue to remain flat as average hourly earnings did not increase last month near as much as expected.

4. The Unemployment Rate remains remarkably steady though and is still at 4.1% for the fifth straight month.

5. A quick reminder that the 2018 maximum single-family loan limit is $453,100 for Conforming and $359,950 for FHA for the 29 county Metro Atlanta area.

6. In serving Metro Atlanta, Shelter continues to use only the very best local appraisers who know the areas they work and are always willing to go the extra mile.

Rate Update

Mortgage rates continued to move higher last week as a wide range of events, including important labor market data, a European Central Bank meeting, and government policy changes, all affected the markets in different ways.

This Week

The Consumer Price Index is due out on Tuesday, Retail Sales on Wednesday, and Housing Starts on Friday.

Shelter Six:  New Fed Chairman Paints Rosy Picture for Economy

March 5, 2018 by · Leave a Comment 

1. New Federal Reserve Chairman, Jerome Powell, gave his first testimony to Congress last week and painted a rosier picture for the economy than expected.

2. Powell’s forecasts for higher inflation and wage growth as well as comments that the economy had “strengthened since December” caused mortgage rates to rise.

3. Investors now expect another .25% bump to short-term rates at the next Fed meeting on March 21.

4. Evidence of a strengthening economy, the ISM National Manufacturing Index climbed to the highest level since 2004 and Weekly Jobless Claims fell to the lowest level since 1969.

5. According to NAR, in the 4th Quarter of 2017 single-family home prices reached an all-time high in 114 of 177 (64%) U.S. metropolitan statistical areas.

6. The national median price was up to $247,800, up 5.3% from one year ago. Since 2011, home prices have risen 48% but, interestingly, incomes only 15%.

Rate Update

Mortgage rates remained flat last week as strong economic data and comments from the new Fed Chair were offset by concerns over new global tariffs on steel and aluminum.

This Week

ISM National Services Index will be released on Monday, Factory Orders on Tuesday, and Employment figures on Friday.

Shelter Six:  Inventory and Home Sales Both Down

February 26, 2018 by · Leave a Comment 

1. Existing Home Sales were down 3% in January from December and 5% from last year.

2. The main reason for slower sales is a lack of inventory, which is down 10% from a year ago and now sits at a 3.4 months supply (6 months is considered healthy).

3. Fannie Mae now gives a discounted rate on a Conforming cash-out refinance if the cash is being used to consolidate student loans.

4. In the aftermath of the Great Recession, Congress voted to make Private Mortgage Insurance (PMI) tax deductible for the first time.

5. Over the last decade, Congress has continued to vote at the end of each year to make PMI tax deductible for the subsequent year.

6. Tax deductible PMI was not initially reinstated for 2017 taxes but Congress finally approved this deduction on February 9.

Rate Update

For the first time in 2018, mortgage rates did not increase last week but rather stayed flat after the economic data of the week came in as expected.

This Week

Investors will be focused on Jerome Powell’s first speech as Fed Chair on Wednesday.  Also, Durable Orders will be released on Tuesday, Core PCE Price Index on Thursday, and ISM National Manufacturing Index on Friday.

Shelter Six:  Expect Short-Term Rates to Increase by .25% in March

February 19, 2018 by · Leave a Comment 

1. Federal Funds futures contracts imply an 83% chance of a rate-hike at the Fed’s March meeting.  The general consensus is that there will be three rate hikes this year.

2. Interest on second mortgages is still tax deductible if the proceeds from the loan go toward “substantial home improvements” and the combined 1st and 2nd mortgage balances do not exceed $750,000.

3. Good News:  Housing Starts were up 4% in January and are 8% higher than a year ago.

4. Not So Good News:  January Retail Sales figures were lower than expected while the Consumer Price Index was higher than expected.

5. Great News:  According to a released internal memo, the CFPB will pull back its enforcement actions and act with “humility and moderation” moving forward.

6. The memo also said that the CFPB will work toward “free, innovative, competitive, and transparent consumer finance markets where the rights of all parties are protected.

Rate Update

For the first time this year, it was a relatively quiet week for mortgage rates.  The major economic data was mixed and mortgage rates ended the week with little change.

This Week

It is a very light week for economic data.  On Wednesday, Existing Home Sales will be released as will the minutes from the January 31 Fed meeting.

Shelter Six:  Government Shutdown Averted

February 12, 2018 by · Leave a Comment 

1. Last week another government shutdown was averted as the Senate passed a two-year budget deal.

2. Economic data is the number one reason mortgage interest rates move daily.  Rates move in relation to the deviation from expectations.

3. Last week, the ISM National Services Index came in much higher than expected with one of best readings in over a decade.

4. The ongoing strong economic data is continued proof that the economy is healthy, but also the reasons rates keep pushing up a little each week.

5. Fannie Mae’s Home Purchase Sentiment Index (HPSI) rose in January to an all-time high.  This 100 question survey of 1000 consumers measures expectations of job security, if it is a good time to buy or sell, and if home prices will increase in 2018.

6. Mortgage delinquencies were up slightly in the 4th Qtr of 2017.  The increase in the National Delinquency Survey conducted by the Mortgage Bankers Association was attributed primarily to last year’s hurricanes.

Rate Update

Massive swings in the stock market caused tremendous rate volatility last week.  Mortgage rates pushed up for the fifth straight week mostly due to inflation concerns stemming from the budget deal as well as optimistic comments from European central bankers.

This Week

Retail Sales and the Consumer Price Index (CPI) are both due out on Wednesday, Industrial Production on Thursday, and Housing Starts on Friday.

Shelter Six:  Mortgage Rates Continue to Surge Higher

February 5, 2018 by · Leave a Comment 

1. Mortgage rates continue to surge in 2018 out of concerns over inflation pushing above targeted levels due to a growing economy fueled by recent tax cuts.

2. Another reason rates are trending higher is simply less potential demand for bonds if the U.S. budget deficit grows and both China and Europe buy less.

3. Friday’s Employment Report came in mostly as expected but annual wage growth was well above the consensus forecast, adding to the recent inflationary concerns.

4. Home Sales finished 2017 at the highest level since 2006 despite inventory being at only a 3.2 month supply, the lowest since tracking began in 1999.

5. The Fed, meeting for the last time last week under the leadership of Janet Yellen, left rates unchanged setting the stage for an increase in March under her successor Jerome Powell.

6. Powell is being officially sworn in this week as speculation grows that the Fed may pick up the pace of future rate hikes, which have been bumped up five times since late 2015.

Rate Update

News that the European Central Bank may end its bond repurchase program along with strong wage growth data led to a jump in rates to the highest level in four years.

This Week

The ISM National Services Index is due out on Monday with the JOLT Survey due out on Tuesday. Investors will also be watching to see if an agreement is reached to fund the government past Feb 8.

Shelter Six:  Consolidation Refinance Can Keep Interest Deductible

January 29, 2018 by · Leave a Comment 

1. Interest on 2nd Mortgages is no longer tax deductible, however, when consolidating 1st and 2nd mortgages together through a refinance, the interest would be deductible up to $750K.

2. MGIC will now insure loans with debt-to-income ratios over 45% only with a credit score of 700+.  Expect other mortgage insurance companies to tighten guidelines in the same way.

3. Housing had an amazing run in 2017 fueled by low mortgage rates, a growing economy, and increased sales.

4. Freddie Mac is forecasting more of the same in 2018 with home sales, new construction, and home values all expected to be slightly higher.

5. Economic growth is projected at 2.5%, down slightly from 2.6% last year.

6. The biggest red flag in Freddie’s outlook is income growth, which is unlikely to keep pace with housing prices and could continue to weaken affordability.

Rate Update

Last week was quite busy with lots of economic news and Congress reaching a deal to fund the government.  Despite volatility, mortgage rates ended the week with little change.

This Week

The Federal Reserve meets on Wednesday (no change in policy is expected).  The Core PCE Price Index is due out on Monday, the ISM National Manufacturing Index on Thursday, and the Employment Report on Friday.

Shelter Six:  Government Shutdown Could Delay Closings

January 22, 2018 by · Leave a Comment 

1. Fortunately, the government shutdown is not going to impact the mortgage business too severely, but expect potential delays getting loans funded if it drags out.

2. Fannie Mae, Freddie Mac, FHA, and VA will all have continued normal operations.  USDA will honor existing conditional commitments but will not be able to issue new ones.

3. The biggest concern is the IRS not being able to generate tax return transcripts, which are needed on virtually every loan.  Lenders will try to relax standards and circumvent the transcripts by obtaining additional documentation from borrowers.

4. Another big concern is lenders being unable to verify borrower social security numbers through the Social Security Administration.

5. The National Flood Insurance Program (NFIP) will also not be able to issue new flood insurance policies.

6. Another potential delay is simply buyers who work for the government not being able to close until their jobs resume.  Past shutdowns have lasted anywhere from 1-21 days.  Hopefully, this one gets resolved quickly!

Rate Update

There was more upward pressure on mortgage rates last week as investors continued to favor stocks over bonds.

This Week

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

Shelter Six:  Stock Market Surge Pushes Mortgage Rates Higher

January 15, 2018 by · Leave a Comment 

1. A key inflation report was a little higher than expected on Friday.  Hopefully, this is not a trend as higher inflation always leads to higher mortgage rates.

2. The U.S. population is up to 327M, an increase of 2.3M (.71%) over where we started last year.

3. NAR reports single women account for 17% of homebuyers (vs. 7% for single men), buy homes at a later age (34 vs. 31), and at a lower average price ($147k vs. $191k).

4. Bloomberg reports that Baby Boomers aren’t selling as 53% of owner-occupied homes are now owned by people 55 and older (43% a decade ago).

5. This dynamic is crowding out younger Americans trying to own their first property.  The share of U.S. homes sold to first-timers declined in 2017 to the lowest level in 30 years.

6. Census Bureau data, however, shows new homeowners 132% higher than new renters over 1st Qtr of last year, which could be a trend of greater ownership for younger families.

Rate Update

Investors have started the year very optimistic about the prospects of U.S. economic growth.  The stock market continues to surge to new highs but at the sake of the bond market.  Higher bond yields have led to higher mortgage rates.

This Week

Industrial Production and the NAHB Housing Index are due out on Wednesday, Housing Starts on Thursday, and Consumer Sentiment on Friday.

Shelter Six:  Housing Market Remains Very Strong

January 8, 2018 by · Leave a Comment 

1. Housing remains strong as November home sales were up 6% from October to the highest level since 2006.

2. Single-family housing starts and building permits also reached the best levels in over a decade, which will eventually help with inventory issues.

3. First-time home buyer demand surged to its highest level in 17 years during the 3rd Quarter, according to Genworth Mortgage Insurance.

4. The U.S. ended a fabulous year for job growth by adding 148K jobs in December, down a little from the consensus estimate, but still a strong finish to an amazing year!

5. Unemployment rate remains 4.1%, the lowest level since 2000.

6. Tame inflation is one reason that mortgage rates are starting 2018 even lower than last year.  The Core PCE Price Index was just 1.5% higher than a year ago (Fed’s target is 2%).

Rate Update

Weaker than expected labor market data was offset by a rally in the stock market with the net effect being little change with mortgage rates last week.

This Week

The Job Openings & Labor Market Turnover Rates Report (JOLTS) is due out on Tuesday with both Retail Sales and the Consumer Price Index (CPI) due out on Friday.

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