Fed Meets Today
Let us assume that the prognosticators are correct, and the Federal Reserve Board will hike short-term rates by one-quarter of one percent when they finish their two-day meeting tomorrow. What questions does that leave us with? For one, will the Fed’s announcement also give us a hint about whether there will be a fourth rate increase next year? Secondly, what kind of surprise could the Fed have in store?
Surprises could consist of the Fed not hiking rates or moving rates by one-half of one percent instead. There is no way to predict how the markets would react to either surprise and these hypotheticals are not likely if you believe most market analysts. How would the markets react to the expected increase? Typically, we see long-term rates moving up several days or a few weeks before the meeting. That has already happened. Then rates move down a bit as the meeting approaches or right after the announcement. Markets often move in anticipation of an event.
Where do we go from here? The Fed’s announcement may or may not give us a clue. Thus far we have had no indication that the Fed feels that we are close to neutral range with regard to short-term rates. The economic news from now and November or December will give the Fed enough clues as to whether to act again or hold off. Next week we have another jobs report and that data will be an important factor the Fed considers. Other than the real estate market, most areas of the economy continue to be moderately strong.
It’s been a decade since the onslaught of the Great Recession, and the housing market has healed and changed drastically since then. Home prices in many markets have hit record highs—beating their prerecession levels—and foreclosure rates are historically low, according to the National Association of Realtors®. Stronger lending and regulatory reforms in recent years also have prevented the formation of another housing bubble, says NAR Chief Economist Lawrence Yun. “Over the past 10 years, prudent policy reforms and consumer protections have strengthened lending standards and eliminated loose credit, as evidenced by the higher-than-normal credit scores of those who are able to obtain a mortgage and near record-low defaults and foreclosures, which contributed to the last recession,” Yun says. “Today, even as interest rates begin to increase and home sales decline in some markets, the most significant challenges facing the housing market stem from insufficient inventory and accompanying unsustainable home price increases.” Though inventory shortages continue to plague many housing markets, Yun believes some of the nation’s most overheated will see sales slow down. Many of these markets are experiencing rising prices because of insufficient supply, not due to weak buyer demand, he says. New construction rose 7.2 percent year over year in July, but Yun says that even more is needed to fill national shortages. Yun forecasts that existing-home sales will increase 2 percent in 2019, and home prices will rise by 3.5 percent. Source: National Association of Realtors®Home buyers want the home loan process to be less onerous and faster. But they also want more personal interaction as they navigate a transaction and very big decision in their life, according to Fannie Mae’s National Housing Survey, a survey of about 3,000 recent home buyers. “As the Amazons and Ubers of the world continue to raise the bar for ‘consumer-grade’ experiences, home buyers have made it clear that it’s also time for the home purchasing and mortgage processes to change,” writes Henry Carson, senior vice president of digital products, at Fannie Mae’s Perspectives blog. Overall, borrowers say they want less paperwork. They said gathering the necessary financial information to apply and get approved for a loan is the most difficult part of the mortgage process, which was particularly true for those over the age of 45 or those who’ve purchased more than one home in their lifetime. Respondents were asked whether they would prefer a fully digital process, where every step could be completed online. The majority said they would be “somewhat” or “very” interested. They do like the idea of a digitizing the application if it would speed up the process. The majority of home buyers surveyed said they’d like to see the process—from application to closing—completed in one month. That is five days less than the current median process takes, which averages about 35 days, Carson notes. But home buyers still want personal interaction in the process too. They noted they want personal interaction in the review of final loan documents and understanding terms and options. Source: Fannie Mae
Snooping online proves to be an easier way of finding out what a homeowner paid for a property. A recent poll of more than 500 homeowners found that 52 percent of respondents admit they have spied online to track how much friends and family paid for their houses, according to a poll by Branded Research. Homeowners say they are simply curious what someone else paid for a property, how much it’s worth currently, and how much is paid in taxes. Many real estate sites offer a place where you can plug in an address to see a home’s worth and often even more information. Certain age groups are more likely to snoop than others. Seventy-six percent of survey respondents between the ages of 35 to 44 admitted to checking out their friends’ real estate deals online. Seventy-two percent of respondents ages 25 to 34 admitted to snooping. The least likely to snoop are homeowners aged 65 and up. Just a quarter of that age group said they checked out what their friends paid online. Source: Realtor.com®