Dec 21, 2015 | Market Outlook
Last week’s scheduled economic reports included the NAHB Housing Market Index, Housing Starts, FOMC statement and Fed Chair Janet Yellen’s press conference. In addition to weekly reports on jobless claims and mortgage rates, inflation reports were also released.
Builder Confidence Slips, Housing Starts Increase
According to the NAHB / Wells Fargo Housing Market Index for December, home builder confidence slipped by one point to a reading of 61 as compared to an expected reading of 63 and November’s reading of 62. December’s reading was three points higher year-over-year. Readings over 50 indicate that more builders than fewer are confident about housing market conditions. December’s confidence reading remained higher than 2015’s average reading of 59.
Components used in comprising the NAHB HMI also slipped in December. Builder confidence in current market conditions fell one point to a reading of 66; the six months sales outlook fell two points to 67 and the reading for buyer foot traffic in new developments also decreased by two points to a reading of 46. The reading for buyer foot traffic has consistently remained below the neutral benchmark of 50 since the housing bubble ended.
While builder confidence eased, housing starts rose in November with 1.17 million starts reported. Analysts expected a reading of 1.14 million starts based on October’s reading of 1.06 million housing starts. During much of 2015, demand for homes accelerated due to slim inventories of available homes; new construction is seen as essential to easing demand.
Fed Raises Interest Rates, Mortgage Rates Higher
The Federal Open Market Committee of the Federal Reserve raised its target federal funds rate from a range of 0.00 to 0.25 percent to a range of 0.25 percent to 0.50 percent. While the Fed’s increase is expected to affect consumer lending rates for auto loans and credit cards more than mortgages, Freddie Mac reported that rates for fixed rate home loans rose last week. The average rate for a 30-year fixed rate mortgage rose by two basis points to 3.95 percent and the average rate for a 15-year fixed rate mortgage increased by three basis points to 3.22 percent. The average rate for a 5/1 adjustable rate mortgage was unchanged at 3.03 percent. Discount points were unchanged for fixed rate mortgages at 0.60 percent and 0.50 percent respectively while average points for a 5//1 adjustable rate mortgage dropped to an average of 0.40 percent.
Weekly jobless claims fell to 271,000 new claims against expectations of 275,000 new claims and the prior week’s reading of 282,000 new claims.
What’s Ahead
Next week’s economic reports include reports on new and existing home sales, consumer spending and consumer sentiment. Weekly jobless claims and Freddie Mac’s mortgage rates report will also be released as scheduled. No reports will be released on Friday due to the Christmas holiday.
Dec 18, 2015 | Mortgage Guidelines
What Do Lenders Have To Tell You About Your Real Estate Loan?
Federal “disclosure” forms define the information that creditor businesses MUST provide to consumers applying for real estate loans.
As of Oct 1, 2015 lenders must provide TWO New “TRID” disclosure forms. for the most common kinds of real estate loans First, the Loan Estimate, which covers the key features, costs and risks of a mortgage loan.
For an approved loan this must be returned to the consumer within 3 business days of loan application. If the loan goes forward, the Closing Disclosure form, covering key transaction costs, must be delivered at least 3 business days before loan consummation.
Dec 17, 2015 | Market Outlook
After prolonged speculation by economic analysts and news media, the Federal Open Market Committee of the Federal Reserve raised short-term interest rates for the first time in seven years. Committee members voted to raise the target federal funds rate to a range of 0.25 to 0.50 percent from a range of 0.00 to 0.25 percent to be effective December 17. The good news about the Fed’s decision is that the Central Bank had enough confidence in improving economic conditions to warrant its decision. But how will the Fed’s decision affect mortgage rates?
December’s FOMC statement cited improving job markets, increased consumer spending and declining unemployment as conditions supporting the Committee’s decision to raise the target federal funds rate. While inflation has not yet reached the Fed’s goal of two percent, FOMC members were confident that the economy would continue to expand at a moderate pace in spite of future rate increases. The FOMC said that the Central Bank’s monetary policy remained “accommodative.”
Little Impact Expected on Mortgage Rates after Fed Decision
The Fed’s decision to raise short-term rates likely won’t affect mortgage rates in a big way. The Washington Post quoted Doug Douglas, chief economist at Fannie Mae: “This one change, will in the larger scheme of things, will be unlikely to make a dramatic impact on what consumers will feel.”
Mortgage rates, which are connected to 10-year Treasury bonds, may not rise and could potentially fall. While the interest rate increase could increase yields on these bonds, analysts say that multiple factors impact 10-year Treasury bonds, so a rate increase is not set in stone for mortgage rates.
Rising Mortgage Rates Would Impact Affordability and Cost of Buying Homes
Higher mortgage rates could sideline some first-time and moderate income home buyers and would also increase the long-term cost of buying a home. Interest rates on vehicle loans and credit cards are more closely tied to the Fed rate and may rise according to current and future Fed rate hikes. Rising consumer interest rates indirectly impact housing markets as prospective home buyers face higher debt-to-income ratios caused by higher interest rates on car loans and credit card balances.
During a press conference following the Fed’s announcement, Fed Chair Janet Yellen emphasized that future rate increases would be “gradual.” Chair Yellen said that the Fed’s decision reflects the agency’s confidence in an economy that is on a path of “sustainable improvement.” When questioned about inflation rates, Chair Yellen said that the Fed will closely monitor both expected and actual changes in the inflation rate.
Dec 16, 2015 | Home Mortgage Tips
Mortgage closing costs have been coming down in recent years, which is good news for buyers. But if you’re buying a home in the near future, you’ll want to ensure you’re prepared to take full advantage of these lower fees – after all, keeping more money in your pocket is always good. When you close on your mortgage, take these three steps and you’ll find that you’ll pay far less in closing fees than most buyers would.
Ask The Seller To Pay Some Of The Closing Costs
In most situations, the buyer is responsible for paying all closing costs – that’s the industry standard agreement. But just because that’s what generally happens most of the time, that doesn’t mean you need to pay all the closing costs on your new home.
Negotiate with the sellers to see if they’d be willing to cover some of the closing costs. If you want to make a deal like this, though, you’ll want to add an extra incentive for the sellers to agree to it. Tell the sellers that they can choose any closing date they wish, or offer to accept the home “as-is” rather than requesting repairs.
Use The Money You Save For An Extra Annual Payment
With lower closing costs come savings that you can either pocket or spend. One great way to leverage lower closing costs is to use the amount of money you saved with reduced closing fees as an extra mortgage payment.
Most lenders will allow you to make one extra lump sum payment per year, without penalty – and by making this extra payment every year, you’ll save on interest payments. So use the money you saved in closing costs as part of an extra payment to reduce your debt load.
Reducing your closing costs and taking advantage of the lower fees is easy if you know what you’re doing. A mortgage advisor can help you to understand what closing fees are negoitable and how you can budget for success. If you feel like now is the time to look at purchasing a new home, contact your trusted real estate advisor for details on how to get started.
Dec 15, 2015 | Home Seller Tips
With the busyness of the holiday season, selling your home during the winter months can often be more difficult than it is in other seasons. If you’re intent on selling before the year is out and you’re looking for some staging pointers, here are a few ways to convince potential buyers that your home will be the perfect place to spend Christmas!
Compliment Your Home’s Colors
If the green, red and gold tones of the holiday season contrast with your home décor, it might be a good idea to bring out some less flashy pieces that will still lend to the joyous season. Instead of huge garlands all over the house or old decorations that have been passed down through the years, go for items that will complement the décor and coloring of your home to maximum effect.
Adorn It With A Wreath
A holiday wreath is often the perfect finishing touch when it comes to home decorating, but since your door will be one of the first things that potential buyers will see, it’s a staging tip you might not want to go without. Since a wreath will make buyers think of the exciting season ahead, it may be much easier for them to picture themselves sipping eggnog around the fire and putting presents under the tree of their potential new home.
Bake A Holiday Batch
There are few things more enticing about the holiday season than its treats, and since it’s proven that scent can go a long way in selling a home, you might want to dive into the holiday baking early. Whether you go with shortbread or gingerbread, this sweet holiday scent will likely enrapture potential buyers and may make them feel like they’re already home.
Keep The Tree Simple
It goes without saying that you’ll want to put out a tree for the holidays, but with all of the personal trimmings that can go into a tree, it’s a good idea to keep it relatively simple. Instead of overdoing it and distracting from the rest of your home, go for an understated tree with a few bulbs and simple decorations. This will showcase your love of the season without obscuring the attention that’s meant for your house.
Selling a home in the winter months can be more difficult than it is in spring or fall, but staging it for the holiday season may have a positive impact on potential buyers. If you’re curious about other staging tips for the holidays and selling in the winter, you may want to contact your trusted real estate professional for more information.
