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Monthly Archives: September 2015

Market Preview 9.29

LENDING RATES REACT TO A CHRONIC CASE OF INERTIA

Sept. 17 came and went as expected, with nothing happening.

Fed officials will meet two more times in 2015: on Oct. 28 and Dec. 16. As it now stands, traders in fed funds future contracts are betting on a 12% chance the fed funds rate will be increased at the October meeting, and a 32% chance they will be raised in the December meeting.

Lower rates are clearly spurring additional lending activity. For the week ending Sept. 18, the Mortgage Bankers Association reports that application activity was up 13.9%. The seasonally adjusted purchase index was up a strong 9%, and is up 27% year over year.

Overall, the outlook is good for both housing and mortgage lending. Expect the outlook to remain good as we head into 2016.

Mortgage applications leap as Fed sticks with low interest rates

Mortgage application numbers shot skyward last week, after the Federal Reserve decided not to raise interest rates. The number of total applications jumped 13.9 percent in the week ending on September 18 compared to the previous week. 

The boom was driven by increased applications for both refinance and purchase loans. After a nine percent rise, purchase loans hit their highest level since June 2013, standing 27 percent higher than this time last year. More rate-sensitive, refinance applications saw an even greater swell, increasing 18 percent over the previous week. 

"We saw significant rate volatility last week surrounding the FOMC (Federal Open Market Committee) meeting, and rate declines toward the end of the week likely drove applications from both prospective homebuyers and borrowers looking to refinance," said Mike Fratantoni, chief economist for the Mortgage Bankers Association, which collected and reported the data.

3 things to plan for in your home improvement budget

When you're budgeting for a major home improvement project, it's important to leave some room in the budget for dealing with certain common unforeseen circumstances. Renovations can often end up involving more steps than you might have anticipated, and they can also turn up problems in your home that need to be repaired. 

Remember to leave some room in your budget for problems like these:

  • The project becomes more structurally detailed than you anticipated. If your project involves tearing down walls to open up spaces, you might be up for a bigger project than you expected if any of the walls you want to remove are load-bearing. To make sure the changes you want to make won't cause structural problems, you may have to hire an architect or a structural engineer, which can run up the cost of the project significantly.

Market Preview 9.22

The Decision is Out: No Rate Hike, for Now

As we’ve been saying, the Fed avoided a rate hike this past Thursday. However, we consider this to be more of a tactical retreat than a permanent decision, since the Fed delayed the hike on concerns with the international economy. As of Friday 9/18, 13 of 17 Fed policymakers were still forecasting a rate hike during 2015. There will be new policy meetings in October and December.

The Fed has stated that it wants to see “some further improvement in the labor market” before raising rates. With that said, policymakers are predicting unemployment to sink below 5% and stay there for the next 3 years. They are also predicting the economy to grow 2.1% this year, a tad above expectations. Barring extraordinary circumstances, we’re not budging from our belief that a rate hike is still coming.

Millions of homeowners could save by refinancing

According to the latest Mortgage Monitor Report from Black Knight Financial Services, millions of American homeowners could save a significant amount per month by refinancing their mortgages. Many current homeowners first acquired their mortgages in less favorable economic circumstances and could benefit from revising the terms of their loans in the current climate.

The report found that more than six million mortgage borrowers would benefit from refinancing. Of these six million, 550,000 could save more than $500 per month, and more than three million would be able to save more than $200 per month. 

Market Preview 9.15

The Federal Reserve will decide whether or not to raise interest rates on Thursday, September 17. Will they do it?

To find the answer, we have stay away from black and white analyses of the economy. For example, a strong jobs report would likely bring about a rate hike. Last month, a disappointing 173,000 jobs were created (200,000 is typically the goal). Even though unemployment sunk again to 5.1%, the employment participation rate is only 62.6%, a multi-decade low.

Homeowners gaining equity across the country

Homeowners are gaining equity at the fastest rate since 2013, according to the National Association of Realtors (NAR). These equity gains are powering real estate markets in metro areas across the country and making it possible for homeowners to invest back into their homes or borrow money for other purposes, like education.

Federal Reserve records show that homeowner equity hit a high in 2005, when the total market value of all homes minus homeowners' debt was $13.1 trillion. After the crisis, total national equity plunged as low as $6.4 trillion. However, now the market is well on the way to recovery, with homeowners owning $11.3 trillion in equity in 2014, a 4.9 trillion increase since 2011. 

According to NAR, these gains are equivalent to about $63,000 per home. This means that homeowners who bought after the recession are significantly wealthier now than when they first bought their homes, making them less vulnerable to foreclosure. Real estate database RealtyTrac reports that foreclosure starts in May 2015 were below the levels seen in 2005 and 2006, before the crisis was even on the horizon.

Market Preview 9.9

Everyone's Focused on Growth: Ours and Theirs

We’re all part of one big, interconnected world, for better or for worse. China’s manufacturing index has fallen to its lowest point since 2012. A survey by Markit, a data provider focused on smaller private firms, shows China's manufacturing is at its weakest level in six-and-a-half years.

On our end of the Pacific, GDP came in at the lower range of expectations for the second quarter, at 2.3% annualized growth.  Economists were particularly disheartened by nonresidential fixed investment, which fell 0.6% for the quarter.  With stocks gyrating wildly, investors are losing faith in a weakening bull market.

This means that housing continues to serve as the rock of the economy. Because of housings innate advantages (notably price stability), we see a strong housing market for the rest of 2015 and beyond. Regardless of the state of the current economy, people always need a place to store money. Housing remains as good a place as any. 

 

Mortgage rates fall amid international turmoil

In bad news for the international economy but good news for those who are hoping to get into the housing market this summer, mortgage rates dropped recently due to economic crises in Greece and China. According to government mortgage finance company Freddie Mac's weekly mortgage report, the average rate for a 30-year fixed-rate mortgage has slipped to 4.04 percent from 4.08 percent. Meanwhile, the average rate for 15-year fixed-rate mortgages also fell slightly, from 3.24 percent to 3.2 percent.

Investors around the globe have been reacting to the debt crisis in Greece and troubles in the Chinese stock market by buying up U.S. Treasury bonds, which has pushed down yields, allowing lenders to charge lower interest rates.

4 tips for gardening with limited space

If you're trying to sell a small house in an urban area, you're probably looking into ways to improve its curb appeal to draw prospective buyers in and close the deal faster. One of the best ways to make a home stand out in the city is to add a nice garden. However, many small homes in the city don't have enough space to set up a traditional garden.

Here are some ways you can make a garden work in a small space:

  • Set up window gardens. The classic gardening option for small urban areas, window gardens are relatively easy to set up and maintain and add pops of color that contribute to curb appeal. Pieces of old gutters can be used as window boxes to reuse materials.