Weekly Mortgage and Real Estate Report – Week of June 6, 2016

Jobs and YellenThe Chairperson of the Federal Reserve Board spoke at an event at Harvard University on the last Friday of May. The probability for a June or July rate hike increased because of her statement that a rate hike is “probably” appropriate in the near term, given an improvement in economic data. “As I have said in the past, it’s appropriate I think for the Fed to gradually and cautiously increase our overnight interest rate over time and probably, in the coming months, such a move would be appropriate,” she said.

A very important slate of this data was released this week, headlined by the May jobs numbers released one week after Yellen’s talk. The job numbers were very weak with only 38,000 jobs added, while the unemployment rate fell from 4.9% to 4.7%. These numbers could be seen as contradictory, but the fact that more people dropped out of the job force, lowering the labor force participation rate, shed doubt about the lower unemployment rate. All in all, it will be seen by the Fed as a sign that the economy is not improving as much as we would like.

Other numbers released recently have been mixed, with positive numbers from the real estate sector and consumer outlays, but lower construction spending and slightly lower readings for consumer confidence. What does this mean? The jobs numbers are the most important, and this means that the chances for an immediate rate hike by the Fed have decreased significantly. We won’t have to wait long to find out about a rate hike in June as the Fed’s Open Market Committee meets next week.


The Markets. Rates rose slightly in the past week, but these numbers were released before the weak jobs report was unveiled. Freddie Mac announced that, for the week ending June 2, 30-year fixed rates rose to 3.66% from 3.64% the week before. The average for 15-year loans increased to 2.92%. The average for five-year adjustables also increased to 2.88%. A year ago, 30-year fixed rates were at 3.87%, approximately one-quarter of one percent higher than today’s levels. Attributed to Sean Becketti, chief economist, Freddie Mac — “Since jumping 11 basis points on May 18th, the 10-year Treasury yield has leveled-off around 1.85 percent. Rates on home loans continue to adjust to this new level with the 30-year fixed rate inching up another 2 basis points this week to 3.66 percent. Recent statements by the Fed appear to have persuaded the market that a rate hike may come sooner than later. However, the market is fickle, and Friday’s employment report has the potential to swing opinion 180 degrees in the other direction.” Note: Rates indicated do not include fees and points and are provided for evidence of trends only. They should not be used for comparison purposes.
Current Indices For Adjustable Rate Mortgages
Updated June 3, 2016
Daily Value Monthly Value
June 2 April
6-month Treasury Security  0.48%  0.37%
1-year Treasury Security  0.68%  0.56%
3-year Treasury Security  1.03%  0.92%
5-year Treasury Security  1.36%  1.26%
10-year Treasury Security  1.81%  1.81%
12-month LIBOR  1.230% (Apr)
12-month MTA  0.438% (Apr)
11th District Cost of Funds  0.690% (Apr)
Prime Rate  3.50% (Dec)
 New U.S. single-family home sales surged to a more than eight-year high in April and prices hit a record high, offering further evidence of a pick-up in economic growth early in the second quarter. The Commerce Department said that new home sales jumped 16.6 percent to a seasonally adjusted annual rate of 619,000 units, the highest level since January 2008. The percent increase was the largest since January 1992. March’s sales pace was revised up to 531,000 units from the previously reported 511,000 units. Economists polled by Reuters had forecast new home sales, which account for about 10.2 percent of the housing market, rising to only a 523,000 unit-rate last month. New home sales are volatile month-to-month and April’s increase probably exaggerates the housing market strength. Still, last month’s gain pushed new home sales well above their first-quarter average of 531,667 units. The report came in the wake of fairly upbeat data on home resales and residential construction. It also added to retail sales and industrial production reports in suggesting that the economy was gathering speed after growth almost stalled in the first quarter. Source: CNBCThere was no such animal as a credit score until about 1995. Well, it’s back to the future. Good going Fannie Mae. On June 25, Fannie Mae will be rolling out the automation of a manual process for residential loan applicants without credit scores, according to Mindy Armstrong, senior product manager at Fannie Mae. Here’s how it will work: A loan officer takes your application and runs your credit, but the credit bureaus Equifax, Transunion and Experian have no credit scores for you. This usually happens because you don’t have any or don’t have enough traditional credit (credit cards or auto financing, for example). In the past, that meant that loan officers were unable to qualify you for a loan backed by Fannie Mae. But soon, you will qualify — opening up a vast new array of borrowing options. You are eligible for a purchase or a no cash-out refinance loan, if the lender can gather at least two pieces of credit information that covers the last 12 months. One must be a verification of rent. The other can be anything from a utility bill to on-time payments to your local gym. You must put a minimum of 10 percent down (or have 10 percent equity when refinancing), all of which can be a gift. It has to be a single unit primary residence and loan amounts cannot exceed $417,000. Source: The Orange County Register

For the majority of home buyers, they want a home with about 9 percent more space than they currently have. A new study translates that to a median of 2,020 square feet. But the amount of desired square footage can vary quite a bit among the different age groups, according to findings from the National Association of Home Builders’ “Housing Preferences of the Boomer Generation: How They Compare to Other Home Buyers.” For example, millennial and Gen X buyers desire the most space, at more than 2,300 square feet. Baby boomers and seniors, on the other hand, mostly would be happy with homes that are under 1,900 square feet. NAHB’s study also found that more than half of all home buyers across all age groups would like to have a home with three bedrooms. Thirty percent of respondents say they’d prefer four bedrooms or more. Millennials and Gen X’ers are most likely to want a home with at least four bedrooms. Source: NAHB


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