Taxes, Jobs and Rates
We promised a busy December and certainly we have not been disappointed in this regard. We entered December with the tax legislation flying through the Senate faster than anyone would have predicted. This is not to say that the work is finished, as there are many differences between the House and Senate versions — differences that must be reconciled in conference before the final package is put to a vote. While it seems like there are a few weeks left in the year, the holidays make it a very short month to get this accomplished. Though you can see that the stock market seems to be very optimistic that it will get done.
Then we had the jobs report released. The economic numbers leading up to the report had been strong, and this had resulted in some optimistic expectations. In reality, the number of jobs created was even higher than expected. The unemployment rate of 4.1% keeps us near full employment and wage inflation continued to be tame. In addition, the average work week increased to 34.5 hours from 34.4 hours and 18,300 temporary workers were added.
Taking the data into account — along with the specter of a tax package passing — there is little doubt left that the Federal Reserve will not be raising short-term rates this week. The announcement will be coming Wednesday afternoon and the Fed should be comfortable that the economy can withstand another increase as it returns rates closer to what it considers “normalcy.” The stimulus of a tax cut will also place the Fed on high alert with regard to the threat of future of inflationary pressures.
As was the case recently for conventional conforming loan amounts, loan limits on forward and reverse mortgages insured by the Federal Housing Administration have been boosted for next year. FHA floor loan limits are determined based on 65 percent of conforming limits on residential loans that are acquired by Fannie Mae and Freddie Mac. Late last month, the regulator and conservator of Fannie and Freddie, the Federal Housing Finance Agency, reported that the 2018 conforming limit has been set at $453,100. On Thursday, the Department of Housing and Urban Development issued a letter indicating that the FHA floor limit on forward mortgages for next year on one-unit properties will increase to $294,515 from $275,665 in 2017. This floor applies to those areas where 115 percent of the median home price is less than the floor limit,” the letter stated. “Any areas where the loan limit exceeds this ‘floor’ is considered a high-cost area, and HERA requires FHA to set its maximum loan limit ‘ceiling’ for high-cost areas at 150 percent of the national conforming limit.” In high-cost areas, the one-unit ceiling limit is increasing to $679,650 in 2018 from $636,150 last year. Thanks to rising home prices, FHA loan limits are increasing in 3,011 counties, while no change will occur in 223 counties. HUD also issued a letter indicating that the maximum loan limit for FHA-insured home-equity conversion (reverse) mortgages will be $679,650 next year. Source: Mortgage DailyZillow has dusted off its crystal ball for 2018 housing market predictions, and the forecast is laced with both new and ongoing trends. Looking into the new year, Zillow predicted that the ongoing inventory shortage will persist, with more existing homeowners opting to remodel and stay in place rather than try to elbow their way through tight markets with limited and expensive selections. Home prices will grow 4.1 percent next year, which will be particularly painful for first-time homebuyers in the nation’s more expensive markets. Zillow also predicted that builders will finally respond to the inventory crisis by creating more new construction for entry-level homes. However, much of this construction will be in suburban markets, thus creating a new wave of suburban sprawl. The rise in new suburban construction will be due primarily to higher costs and limited land options in urban centers. “In most markets around the country, housing has become a game of musical chairs, and nobody wants to be the last one without a seat,” said Zillow Chief Economist Svenja Gudell. “Homeowners who are looking for a change will turn to remodeling and redecorating instead of selling their home and facing the challenges of being a buyer in a sellers’ market. New homes will be designed to be particularly appealing to the Millennial and Boomer generations. Wide hallways can make it easier to move in, as well as make it easier to navigate a stroller or wheelchair through the halls. Large drawers will replace cabinets, making it easier to access everyday items that previously were hard to reach.” Source: National Mortgage Professional America
Single women are making up a bigger share of sales. Single females comprised 18 percent of sales this year, which matches the highest share since 2011, according to the National Association of Realtors®’ 2017 Profile of Home Buyers and Sellers. Single women were the second most common household buyer type, behind married couples at 65 percent. Single women tend to purchase slightly pricier homes than single men, despite earning less, according to the report. “Solid job prospects, higher incomes, and improving credit conditions translated to continued momentum in the growing share of single female buyers,” according to NAR’s report. Single men, on the other hand, aren’t as likely to buy alone. For the second consecutive year, the overall share of single male buyers was 7 percent, which is below unmarried couples at 8 percent. Source: NAR