Weekly Mortgage and Real Estate Report – Week of March 11, 2019

ECONOMIC COMMENTARY

Fed Looking at the Data

This does not always happen, but Friday’s job report came just in time for the Federal Reserve Board to analyze the data and act on it during their next meeting which starts one-week from today. Before the data was released, most analysts were predicting no action to be taken at this meeting. As a matter of fact, most predictions are ranging from no rate increases this year to perhaps one rate increase towards the end of the year.

Friday’s job report certainly supports this thinking. For the month, the economy created 20,000 jobs, which was much less than expected, even considering the large gain in January and snowy weather in February. We have been subject to significant revisions of the previous months of job data recently and this time there was not much of an adjustment, as the numbers from the last two months were revised upward by only 12,000 jobs. The headline number is the unemployment rate, and this came in at 3.8%, reversing the increase of the previous month. For Fed watchers, the headline number typically is wage growth. Wages grew 3.4% from the previous year — higher than forecasts.

What does this all mean for next week? Certainly, the jobs report will be seen as weak, but as we pointed out the reports have been volatile lately. One thing we can say is that, no matter what the Fed does, spring will still be coming next week, and it will also be Saint Patrick’s Day. For those of us who don’t like winter weather, we will be celebrating regardless of the Fed. Some nice language concerning how they like low interest rates could also be a cause for celebration as the spring real estate market should be heating up as well.  

REAL ESTATE NEWS

 Home price growth is slowing down and that could spell good news for buyers who were previously priced out of the market. According to CoreLogic’s Home Price Index (HPI) and HPI Forecast for December 2018, though home prices increased by 4.7 percent year-over-year, they’re projected to grow at a slightly lower rate of 4.6 percent year-over-year through December 2019. Comparing the annual average HPI and HPI forecast for 2018 and 2019, price growth is forecasted to slow from 5.8 percent to 3.4 percent, the report indicated. Prices are expected to decrease by 1.0 percent on a month-over-month basis between December 2018 and January 2019. These trends are likely to represent good news for potential homeowners. In 2018, CoreLogic together with RTi Research of Norwalk, Connecticut, conducted a survey measuring consumer-housing sentiment, assessing attitudes toward homeownership and the driving force behind the decision to buy or rent a home. According to this survey, when renters were asked how interested they were in owning a home or residence, 36 percent felt homeownership would allow them to fulfill a dream and provide a place to raise a family. On the other hand, 45 percent of those surveyed claimed they could not afford to buy or take on the responsibility of ownership at this time. However, the latest HPI report indicated that as home-price growth cooled and incomes rose, buyer affordability was likely to improve and help “home sales to pick up.” Source: MReport

Seniors who were born after 1931 are less likely to sell their homes than were previous generations —and it’s a significant cause of the housing shortage, according to the “February Insight” report from Freddie Mac. The result is around 1.6 million houses were not for sale through 2018, representing about one year’s supply of new construction, or more than 50 percent of the shortfall of 2.5 million housing units—that the market faces. The scarcity factor serves to increase housing prices and make renting more attractive to younger generations. However, a shortfall of new construction increases house prices and rental rates. “We believe the additional demand for homeownership from seniors aging in place will increase the relative price of owning versus renting,” said Sam Khater, chief economist at Freddie Mac. “This further highlights the importance of addressing barriers to the production of new housing supply to help accommodate long-term housing demand.” Improved health and higher levels of education are causes of the trend. And it’s likely to increase over time as improvements in health care and technology make aging in place easier. For example, the capability to Skype with a doctor. Source: DS News

Are home prices affected by proximity to hospitals and colleges? That’s what a team of computer scientists from University of California – Riverside wanted to discover as they began an analysis of median home price data from 13,105 ZIP codes over 21 years and rent data from 15,918 ZIP codes over seven years to compare a ZIP code’s appreciation, volatility, and vacancies to the size of a university or hospital within that ZIP code. Their results confirmed that colleges and hospitals are ‘opportunity hubs’ with factors including jobs and high wages, but they also found that homes near these institutions see faster rises and falls of prices, creating a risk for investors. Led by Hristidis and UCR computer science doctoral student Ryan Rivas, the group also determined that homes close to a university did have higher average prices and rents and were highest in ZIP codes with a university of 10,000-20,000 students. Larger hospitals nearby meant higher average prices and rents – especially for one-bedroom homes in smaller ZIP codes – while those with smaller hospitals actually saw prices below the average for ZIP codes with no hospital. Source: Mortgage Professional America 

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Weekly Mortgage and Real Estate Report – Week of March 4, 2019

ECONOMIC COMMENTARY

Volatility and Jobs

Within the past year, the markets have all been hit with a heavy dose of volatility. Interest rates moved up significantly in 2018, only to start falling towards the end of the year. Oil prices have been even more volatile with a high of over $75 per barrel in 2018 and a low of just over $45 per barrel. That is quite a swing. Volatility in the stock market towards the end of 2018 was a major topic of discussion. Much of these gyrations were on the downside, but the markets have recovered nicely thus far in 2019.

In general, the job creation machine has been very steady during these market gyrations. But there are signs of volatility within employment data as well. November’s initial reading showed a disappointing growth of 155,000 jobs, but this number was revised up to a solid 196,000. December showed a spectacular gain of over 300,000 jobs, but this number was revised down by a whopping 90,000 jobs. January’s pintail report showed another spectacular gain of over 300,000 jobs. What does all of this violability mean?

When you look at the final numbers, the jobs report may not be as volatile as it seems. For example, the final number of 196,000 jobs in November is close to the still to be revised 222,000 jobs in December — and both are solid numbers. It also tells us that the revisions have become just as important as the initial numbers. Therefore, we will be watching the revisions of December and January just as closely as the numbers for February when the report is released on Friday. The government shutdown still could have had an effect on the report, especially the revisions. 

REAL ESTATE NEWS

 More young adults are still living with their parents and not branching out on their own, and that could have a long-term, negative impact to their finances, according to a new study from the Urban Institute. Researchers found there is no long-term advantage financially for young adults who live with their parents. The share of young adults aged 25 to 34 who live with their parents rose from nearly 12 percent in 2000 to 22 percent in 2017. The trend coincides with a decline in young adults’ marital rates, which during that time has fallen from 55.3 percent to 40 percent. An increase in rents and student debt also is keeping more young adults living at home, the study notes. But “this early life choice could have long-term consequences,” researchers note in the report about the delay of homeownership. “Young adults who stayed with their parents between ages 25 and 34 were less likely to form independent households and became homeowners 10 years later than those who made an earlier departure.” Young adults who stayed in their parents’ home longer did not end up buying more expensive homes or have lower housing debts later on than those young adults who moved out earlier, the study showed. Urban Institute researchers say this suggests that “living with parents does not better position young adults for homeownership, a critical source of future wealth, and may have negative long-term consequences for independent household formation.” Housing is one of the most important tools for building long-term wealth, and researchers noted that those who buy a home before age 25 receive the biggest housing investment returns over time. Source: The Urban Institute

Homeowners should have felt richer in 2018. Equity rich properties comprised 25.6 percent of U.S. properties financed in 2018, according to a newly released report from ATTOM Data Solutions, a real estate research firm. In the fourth quarter, more than 14.5 million U.S. properties were considered equity rich, where the combined estimated amount of loans secured by the property was 50 percent or less of the property’s estimated market value. That represents a new high in ATTOM Data’s records dating back to the fourth quarter of 2013. “With homeowners staying put longer, homeownership equity will most likely continue to strengthen,” says Todd Teta, chief product officer with ATTOM Data Solutions. “Those that are seriously underwater may find themselves coming up for air as they continue to pay off excessive legacy mortgages or sell. This report helps to showcase a story of West Coast markets having the highest share of equity rich homeowners versus the South and Midwest markets, who continue to have stubbornly high rates of seriously underwater homeowners.” Source: ATTOM Data Solutions

Chinese home buyers have been the top foreign buyers of residential housing in the U.S. for six consecutive years, and now they’re expanding their footprint beyond luxury markets to lower-priced tiers as well, the National Association of Realtors® reports. Chinese buyers in the U.S. have long had an appetite for million-dollar properties that they’re willing to pay all cash for. But recently, middle-class buyers from China are looking to snatch up lower-priced homes in the U.S. They’re also more often turning to home loans to finance their purchases. “The Chinese people still see the United States as a safe harbor where they can take their assets and park their money not only for their money but also for the future of their children,” Michi Olson, a real estate professional in San Francisco, told CNBC. “The Chinese are basically politically agnostic,” Olson says. “What I mean by that is even though there is a great tension between the U.S. government and Chinese, the Chinese citizen seems to be able to separate the political turmoil with the sound real estate investment.” Source: CNBC 

Weekly Mortgage and Real Estate Report – Week of February 18, 2019

ECONOMIC COMMENTARY

Good News Scenario?

When we entered 2019, we were dealing with a government shutdown, interest rates that were supposed to rise, a nervous stock market and a slowing economy. There was a lot of pessimism running in the veins of economists and market analysts. The question is–was this pessimism justified? Well, let’s start by reviewing the first six weeks of this not-so-new year.

The stock market? While still very volatile, it has recovered over 5% in the first few weeks of the year. One factor helping the stock market is the fact that interest rates have fallen in response to the Federal Reserve Board taking more of a “wait and see” approach with regard to future rate increases. All those market gurus predicting higher rates in 2019 are starting to back track on their prognostications.

The government shutdown is over and it looks like we will not have a repeat (for now). The first measure of economic growth for the fourth quarter continues to be delayed, but the first jobs report of the year was pretty strong. Low interest rates and a pretty strong economy? Sounds like good news all the way around. That sort of news might make the real estate market a bit stronger than was predicted as well. 

REAL ESTATE NEWS

 Fannie Mae expects home sales to stabilize in 2019 after falling in 2018, according to the Fannie Mae Economic and Strategic Research Group’s 2019 Economic and Housing Outlook. Rates are expected to change little in 2019 from their level late last year of around 4.5 percent, allowing potential homebuyers time to adjust to the rate environment after the volatility experienced in 2018. The Fed’s continued efforts to unwind expansionary monetary policies implemented during the recession have the potential to add to the headwinds facing the economy,” said Fannie Mae Chief Economist Doug Duncan. “However, we believe that contained price pressures should afford the Fed sufficient latitude to slow or pause rate hikes this year. This will allow the economy to continue growing, albeit at a slower pace, and housing to regain its footing.” A slower pace of house price appreciation (4.2 percent in 2019 from 5.5 percent in 2018, according to the Federal Housing Finance Agency purchase-only home price index), and stable rates should make buying a home more affordable and increase buyer confidence. At the same time, Fannie’s forecast for continued job growth implies that the unemployment rate will remain near historic lows–a positive for wage growth and affordability. It expects single-family starts to grow modestly in 2019 as home buying firms. Although labor shortages will likely continue to frustrate builders, lower interest rates should help contain their borrowing costs. However, solid labor market conditions and favorable demographic trends, including household formations by Millennials, are expected to provide support to the multifamily sector in 2019. Total residential investment, which includes new construction and home improvement spending as well as brokerage fees, is projected to rebound this year after contracting last year for the first time in seven years. Source: Fannie Mae

House hunters like to search for homes online during their workday, a new survey shows. The peak times for consumers to search for home listings are between 9 a.m. to 5 p.m. on the weekdays. The most popular time is Friday at 10 a.m., according to a new analysis from real estate brokerage Redfin. Searching for a new home is like a job. Maybe that’s why people most often do it while they work,” Redfin notes in its analysis. Nearly 64 percent more consumers are on Redfin’s website at 10 a.m. on Fridays than any other time, according to the study. Following closely behind, the next most popular window is 11 a.m. on Mondays. On the flip side, researchers found that weekday evenings are unpopular times to search for homes. Weekends also failed to come close to the weekday mid-morning rush of browsers, researchers note. “One possible explanation is the popularity of weekends for hitting the pavement and touring homes in person rather than through a computer or smart phone screen,” Redfin notes. “Another reason could be the rise in real estate technology tools,” such as notifications that are sent when new homes meeting the person’s preferences hit the market or there’s a price change. The temptation to take a peek at the new listings may be too great when a consumer receives a notification while they’re sitting at work in front of their computer or phone at work. Source: Redfin

New homes are increasingly being listed with price cuts according to a recent Zillow analysis that found price cuts for newly constructed housing was more common in the fourth quarter of 2018 than in the first one. More than a quarter of new homes had their list price cut at least once in Q42018, compared with 19.2 percent in the first quarter of the year. And the trend wasn’t restricted to new homes. The analysis found that 16.3 percent of all listings experienced a price cut in November 2018. The analysis put this growing trend down to slowing home value growth, rising rates, and increased inventory especially in major metro areas. It revealed that the nation’s median home was worth almost 1.5 times (49.8 percent) more today than it was at the height of the recession—although “the growth rate of home values has slowed in recent months.” Rates also rose in 2018 after spending five years at historically low levels, the analysis noted. That, along with an increase in for-sale housing supply towards the end of the year, “eventually caused housing demand to fall.” “More newly built homes are seeing their list prices drop, but the size of those price cuts has been remarkably steady, which suggests that the trend we are seeing is being driven more by price discovery than by desperate sellers,” said Aaron Terrazas Senior Economist at Zillow. Source: MReport 

Weekly Mortgage and Real Estate Report – Week of February 4, 2019

ECONOMIC COMMENTARY
The Fed and Jobs Highlight the Week 

The government shutdown dominated the news in January. Many economic reports were delayed, including the preliminary report of economic growth for the fourth quarter. But important events did occur last week, including the Federal Reserve Board announcement after their meeting and the jobs report release for January. Analysts were wondering whether the shutdown would affect the employment data — even if furloughed workers did not count as unemployed.

How did the data turn out? The Fed did not raise rates, but this was expected. More importantly, their announcement indicated that they were flexible with regard to future rate increases. The markets have been counting on this flexibility, as long-term rates have fallen over the last several weeks. The statement was even better than expected, as the Fed removed language regarding “gradual rate increases” in favor of a wait-and-see approach.

The jobs report on Friday showed growth of 304,000 jobs. Coming during the shutdown period and after a very strong report in December (though December’s numbers were revised down by 90,000), this report was seen as stronger than expected. Unemployment ticked up to 4.0%, indicative of more Americans entering the work force — a possible effect of the shutdown. Wages grew 3.2% month-to-month, on par with previous readings. One anomaly, part-time workers looking for full-time work soared, which may have been another effect of the shutdown. All told, it was an interesting week and the markets reacted positively to the news, though rates and oil prices rose after the jobs report was released.

REAL ESTATE NEWS
 After an inspector has finished a home report, buyers may feel overwhelmed by any flaws that might have been found. That’s why it’s important they take the opportunity to learn more so that they can move forward confidently in the transaction. Realtor.com® recommends home buyers ask their inspector clarifying questions like: “I don’t understand this; what does it mean?” or “Is this a major or minor problem?” and “Do I need to call in another expert for a follow-up?” Home inspectors are bound to uncover something in a home; no home is perfect. But the majority of the problems they uncover will likely be minor. “The inspector can’t tell you, ‘Make sure the seller pays for this,’ so be sure you understand what needs to be done,” Frank Lesh, executive director of the American Society of Home Inspectors, told realtor.com®. If the inspector identifies a potentially major problem, consumers will want to follow up whether they should call an additional expert in to investigate further. For example, consumers may need to bring in an electrician to take a closer look at potential electrical issues that were flagged or a roofer if a roofing problem is suspected. Those specialists can then give an idea of the cost to fix it, which the real estate agent can take to the seller to request a concession, if the seller doesn’t want to fix it prior to the sale. Also, Lesh says that the list of items a home inspector identifies are issues the new buyer may need to address as soon as they move in. He says it’s like a “to-do list” for those items that did not get repaired by the seller prior to the sale. Source: realtor.com® In 2018, the total value of the U.S. housing market increased $1.9 trillion, propelling its value to a whopping $33.3 trillion, according to new data from Zillow. Zillow highlights that this 6.2% increase is up $10.9 billion from 2012, when the housing market crashed. In a press release, Zillow Senior Economist Aaron Terrazas said, seen from the rearview mirror, 2018 was a year of unusually strong, stable home value growth across the country, but cracks in the foundation are clearly starting to emerge. “During the second half of the year, appreciation slowed sharply in the priciest corners of the country while it picked up in affordable hotspots,” Terrazas said. “Periods of stability often precede periods of instability, and the outlook for 2019 is certainly both cloudier and blurrier than the outlook a year ago.” “Housing wealth may have touched new highs this year, but home value gains don’t translate into dollars in the bank account unless homeowners opt to sell or borrow against their home and, in contrast to previous housing booms, many Americans have been more reluctant in recent years to spend against their home’s worth,” Terrazas said. Source: HousingWire

The dynamics of the housing market, which had grown over the past few years fueled by high demand, limited inventory, and low interest rates, shifted gears by the end of 2018, according to a study by Trulia that looked at how last year shaped the 2019 outlook of homebuyers, sellers, and renters. The study, which surveyed more than 2,000 adults across the U.S. revealed that while Americans still dream of owning a home, the dream was getting more distant for younger adults who made up the biggest chunk of first-time buyers. Home sellers were also less optimistic as home price appreciation slows. The study showed that 19 percent of those surveyed said they would purchase a home next year, up from 16 percent a year ago, while 60 percent said they planned to wait until after 2020 to buy a home. Among home sellers, 29 percent said they believed 2019 would be a better year to sell than 2018, compared to 21 percent who said next year would be worse than 2018. As to what would be a key factor to hold back homebuyers this year, the study listed money as a key challenge for would-be homeowners. Nearly all (92 percent) of the U.S. renters surveyed said that while they wished to buy, they perceived barriers in homeownership related to personal finances. Source: DS News

Weekly Mortgage and Real Estate Report – Week of January 28, 2019

ECONOMIC COMMENTARY
The Fed Decision and Jobs

 

Tomorrow the Federal Reserve Board releases their decision on rates after their first meeting of 2019. Based upon comments made by members after their increase in December, there is little possibility of another increase in January and only a slightly greater possibility during their next meeting in March. The comments continually talked about concerns that could slow the economy down and we added another concern in the past several weeks — the government shutdown.

On the plus side we had a very strong jobs report for December. Assuming there is no delay because of the shutdown, we have an early release for January on Friday, the first day of February. Because of the shutdown and the fact that job growth topped 300,000 in December, it is not likely we will see a repeat. However, if we do, the probability of another increase in March rises substantially.

Meanwhile, the shutdown went on for longer than anyone expected. This raises the possibility of a weaker economy during the first quarter of 2019. This week we will also see the first reading on economic growth for the fourth quarter of last year. Predictions are for a lower number than the solid growth of 3.4% reported for the third quarter. Hopefully, growth will not decelerate that rapidly going into 2019.

REAL ESTATE NEWS
 Do you believe in love at first sight? Many house hunters do: They describe stepping inside a house and instantly feeling like it’s “home.” But was it the price, the amenities, or the location that attracted them? Home improvement website Porch.com surveyed nearly 1,000 consumers about their first home purchase to find some of the top factors that influenced their buying decisions. Aesthetic appeal, affordability, commute time, and neighborhood character were the top draws, according to the survey. Sixty-seven percent of baby boomers and 61 percent of Gen Xers say affordability was the most important factor when searching for their first home. Millennials also placed a high priority on finding a home within their budget, as well as renovated bathrooms. Whether the home was move-in ready also was a powerful influencer, respondents say. “We know home renovations can get pricey, and one thing that appeals to potential first-time home buyers is finding a home where the kitchen and bathrooms are fresh and up-to-date,” according to Porch.com’s study. “Emotions obviously play an important role in purchasing a first home,” according to the Porch.com survey, which finds that Gen Xers were the most emotionally driven when deciding which home to purchase. Twenty-one percent of Gen Xers—more than both millennials and baby boomers—mentioned the importance of their partner falling for the right house. Source: Porch.comAs part of their 2018 year-end report, RENTCafé and Yardi Matrix took a look at what renters searched for on Google in the last year. And the results provide a window into what renters really care about and want in their next apartment. Given that rents have risen pretty consistently over the last few years, it probably shouldn’t come as a surprise that the phrase renters search for most often is “cheap apartments.” According to the RENTCafé report, “cheap apartments” accounted for more than 25% of the total of rental-related Google searches in 2018. The second most popular search term is “studios,” which accounted for 23.88% of searches. That means renters are clearly focused on the cost of their rent as nearly 50% of all searches focused on cheap apartments and studios. One-, two- and three-bedroom apartments were the next most popular search terms, in that order. And for more evidence about what renters care about, Apartments.com also released a report this week about the features that renters will care about in 2019. Number one on the list of amenities that renters will care about in 2019 is “outdoor community living.” According to the report, “balcony space” and “dog-friendly” are among to the top search terms on Apartments.com. Next up on Apartments.com’s list is “indoor relaxation.” Source: HousingWire

Brokers say that Zestimates can be off base, but that doesn’t stop sellers from obsessing over what the website says their home is worth. The Zestimate is marketed as a tool designed to take the mystery out of real estate for consumers who would otherwise have to rely on brokers and guesswork. But where Zillow sees transparency, some brokers and homeowners see fantasy, arguing that an algorithm, its clever graphics notwithstanding, cannot account for the nuances that determine a home’s worth, like whether your kitchen is brand new or from the disco era. “Most people are kind of obsessed” with the Zestimate, said Stacey Simens, a saleswoman for Coach Realtors in Hewlett, N.Y., on Long Island. Once a potential seller has a number in mind, it can be hard to pull them away from it, regardless of reality. “They’re looking for that magic button that will tell them that their house is worth exactly what they want it to be,” she said. A Nerdwallet survey found that of the 78 percent of homeowners who thought they knew what their home was worth, nearly a quarter got their information from an online calculator. Zillow claims a median error rate of 4.3 percent, meaning the estimate should be within 4.3 percent of the home’s value half of the time. The remaining homes are off by a larger percentage. How large? The site says 87.6 percent of its estimates are within 20 percent of the actual value. It’s anyone’s guess where your house’s estimate lands. Source: The New York Times

Weekly Mortgage and Real Estate Report – Week of January 14th, 2019

ECONOMIC COMMENTARY
Volatility — What Does It Mean?

 

Last year was very interesting. The previous year we had great gains in the stock markets and enjoyed lower interest rates. We began 2018 with even more stock gains, fueled by a significant corporate tax cut. But the boost to the economy at a time when we were already at low employment levels caused interest rates to rise throughout the majority of 2018. There is no doubt that lower interest rates played a big part in the robust stock market rebound we have witnessed in the past decade.

The Dow fell below 7,300 in March of 2009. It topped 26,000 in 2018. That is a spectacular gain. Even if you measure it from the “top” of just over 14,000 before the recession, that is a solid gain. Thus, when you look at the drop of just over 6.0% for 2018, that seems like a drop in the bucket. But what has many concerned is the increased volatility we have witnessed over the last few months.

Stocks did not move back in a straight line. They had quite a roller coaster ride. There were several factors which seemed to cause market jitters in addition to rising interest rates. These included trade skirmishes, some economies slowing down overseas and waning stimulus from the tax cut. But certainly, interest rates were a big part of the concern. Which is why the end of 2018 was very interesting. Oil prices and interest rates pulled back with stocks. So we wonder, if the rise in rates were halted for now, would that give the markets more confidence? It looks like the start to 2019 will be interesting as well.

WEEKLY INTEREST RATE OVERVIEW

The Markets. Rates fell again in the past week, though they started rising a bit towards the end of the survey week. For the week ending January 10, Freddie Mac announced that 30-year fixed rates fell to 4.45% from 4.51% the week before. The average for 15-year loans decreased to 3.89% and the average for five-year adjustables fell to 3.83%. A year ago, 30-year fixed rates averaged 3.99%, less than one-half of one percent lower than today. Attributed to Sam Khater, Chief Economist, Freddie Mac — “Rates on home loans fell to the lowest level in nine months, and in response, applications for residential loans jumped more than 20 percent. Lower rates combined with continued income growth and lower energy prices are all positive indicators for consumers that should lead to a firming of home sales.” 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
January 11, 2019

Daily Value Monthly Value
Jan 10 December
6-month Treasury Security  2.51%  2.54%
1-year Treasury Security  2.59%  2.66%
3-year Treasury Security  2.54%  2.67%
5-year Treasury Security  2.56%  2.68%
10-year Treasury Security  2.74%  2.83%
12-month LIBOR  3.002% (Dec)
12-month MTA  2.332% (Dec)
11th District Cost of Funds  1.060% (Nov)
Prime Rate  5.50% (Dec)
REAL ESTATE NEWS
 Older American homeowners have a greater degree of financial well-being than those who do not own a home, while lower housing costs are also correlated to more positive financial well-being. This is according to a survey titled “Financial Well-being of Older Americans,” released by the Consumer Financial Protection Bureau (CFPB) Office of Financial Protection for Older Americans. According to the federal agency, the survey aims to provide “detailed information on the financial well-being scores by individual characteristics and issues of interest to people who work with older adults.” The survey seeks to qualify financial well-being across a range of topics including employment and retirement, family and specific living arrangements, financial knowledge, debt, health-related experiences and housing. In its section dedicated to the topic of housing, the survey details that older homeowners have a greater degree of financial well-being and autonomy compared with their peers who are not homeowners. However, a unifying factor among both renters and homeowners is that having low monthly housing costs is “positively associated with financial well-being.” Financial well-being is also higher among older adults who express a high level of satisfaction with their housing situation and/or community compared with those who are less satisfied. Source: Reverse Mortgage DailyThe housing stock is well below the requirements of the market in the United States, according to Freddie Mac’s report on U.S. housing supply. The continued shortage in housing supply will result in a sharp rise in home prices and rents, outpacing incomes and drastically affect household formation. The research pointed out that challenges in housing supply will continue to be an issue for years to come. The study that examined the demand side of the housing market, focused particularly on the experiences of young adults. It found that housing costs prevent young adults from forming their own households and buying a house. As a result of rising prices due to the serious mismatch between supply and demand, many young people are doubling up in shared living arrangements or living at home with their parents, the report stated. The cost of land and regulatory costs has averaged about 23 percent of total home building expenses, the report found. The report stated that opposition to new developments near homes and communities by residents also curb housing supply. In 2017, 370,000 fewer units were built in 2017 than needed to satisfy demand. The report revealed the current rate of demand at 1.62 million housing units per year—370,000 units more per year than the current rate of supply. The growth of a younger demographic, wherein 90 million residents are between 15 and 34 years old, has also added to the demand crunch. The age of the median first-time home buyer is 31 years—a group that comprises a large share of first-time home buyer population. The report also indicated the need for vacant homes in a market for sale and rent to cater to a growing population. The estimate is that the U.S. economy is about 2.5 million housing units below what is needed to match long-term demand. Source: DSNews

When it comes to upgrading a residence, the overwhelming majority of homeowners would prefer play Property Brothers rather than House Hunters, according to a recent survey. In a poll of 10,000 adults, 76 percent of respondent said they would rather use a set amount of money to upgrade their existing home rather than use it for a down payment on a new residence. Older homeowners were especially eager to fix up their homes: 87 percent of people who are 55 years or older and 91 percent of retirees cited a preference to renovate instead of moving. Renters and younger Millennials were among the groups who opted for hiring the moving van instead of upgrading their current home. Source: Zillow

Weekly Mortgage and Real Estate Report – Week of January 7, 2019

ECONOMIC COMMENTARY
New Year Jobs Report

 

Actually, the data is from 2018, but it is the most significant data thus far released in 2019. On Friday, the jobs numbers showed the addition of 312,000 jobs last month, more than making up for a miss the previous month. In addition, the previous two months’ numbers were revised upward by well over 50,000 jobs. All in all, 2018 was another good year for jobs growth, with more jobs added than the previous year. This strength is reflected in the unemployment rate which finished the year at 3.9%. This is close to the lowest rate in nearly 50 years, with the uptick from 3.7% last month attributed to more Americans entering the work force.

Also important was the release of wage inflation data. Wages were up 0.4% for the month and 3.2% for 2018, higher than expected. The increase in jobs and in wage growth have contributed to the decision of the Federal Reserve Board to raise rates more rapidly in 2018, compared to the previous few years. And we are seeing just how important interest rates are when it comes to the economy and every-day decisions by consumers. Higher rates certainly have contributed to the increased volatility and downtrend in stocks during the latter part of 2018.

The increase in rates is also being cited as a factor with regard to predictions for slower economic growth this year. What is interesting to see is, as the stock market has declined, long-term rates and oil prices have also dropped as well. Thus, we might be seeing an economy which is self-correcting. If a slowdown occurs because of higher rates, that slow down can cause rates to ease in turn. Does that mean the economy will pick up more than expected in 2019? More jobs might be a sign that additional growth is in the cards. Stay tuned….

REAL ESTATE NEWS
 Higher rates prices have led to high anxiety among many buyers about whether they can afford the home of their dreams. But many house hunters aren’t aware of a plethora of low down-payment loans that can clear their path to homeownership. Lending experts say the combination of loan programs designed to reduce up-front costs and technology that speeds the loan process can save consumers significant cash. “We’re seeing an increasing number of people choose low down-payment loans and take advantage of down-payment assistance programs,” said Michael Fratantoni, chief economist for Mortgage Bankers Association. “Lenders are trying to streamline the process for using gift funds for down payments, too, although they’re still being very careful to document the source of the money.” These days, many buyers can choose from an array of programs offering down payments as low as zero percent (VA and Rural Housing Loans). The “Home Possible” and “Home Ready” programs from Freddie Mae and Fannie Mae allow first-time buyers with an income at or below the median for their area to buy with a down payment of three percent. The down payment funds can be a gift from a relative or an employer, or come through a down-payment assistance program. Both Fannie Mae and Freddie Mac also have guidelines for loan programs with a three percent down payment that are available to all first-time buyers, regardless of their income. Joe Tyrrell, executive vice president of corporate strategy for Ellie Mae, a mortgage software company, said that’s because would-be borrowers are self-selecting themselves out of the housing market. “People still have the misunderstanding that they need a FICO score above 720 and more cash for a down payment, so they don’t apply for loans because they assume they’ll be denied,” Tyrrell said. “The minimum FICO score we require to insure a loan with a three percent down payment is 620. Just a few years ago, we required a minimum score of 680 and wouldn’t insure loans with a down payment of less than five percent.” said Claudia Merkle, President of National Mortgage Insurance Company. Source: The Washington PostRates for home loans have spent the past decade or so doing anything but what’s expected of them. Every year, it seems, the general consensus is that in the coming months, financial conditions will finally get back to “normal,” taking rates with them. And every year something has brought that “normalization” to a screeching halt. In 2015, for example, shock-and-awe bond-buying by the European Central Bank helped push bond yields into negative territory in Europe and behind. In early 2016, markets were rocked so badly by concerns about earnings that there were fears of another recession – and then rocked again by the upset Brexit vote. The year 2017 started off with concerns about surging bond yields under a pro-growth, anti-tax president, but instead saw many months of a slump when tax reform took a while to materialize. Rates on home loans in 2018 may be the closest thing to “normal” we’ve seen in a long time, with the full-year average of approximately 4.54% for 30-year fixed-rates. That will be the highest since 2010. And for 2019? Given all the variables in both financial markets and housing, forecasting rates on home loans is for the “intrepid,” in the words of Mark Zandi, chief economist for Moody’s Analytics, and a long-time housing watcher. With that in mind, here are some thoughts from a few of those “intrepid” souls? The full year average forecasts for 30-year fixed rates range from 4.8% (Doug Duncan, Fannie Mae) to 5.3% (Danelle Hale, Realtor.com) — with economists from Moody’s Analytics, Wells Fargo Economics Group, the MBA and Freddie Mac in-between. Source: Market Watch

If the average renter is feeling a greater sense of claustrophobia coupled by fewer dollars in his or her wallet, that’s because their residential spaces are shrinking while their rents are increasing. According to a data analysis of the top 100 cities with the largest rental stock, the average apartment has seen a 52-square-foot reduction over the last 10 years. Today, an average apartment measures 941 square feet. and renters are getting less bang for their buck: rents in newly-built apartments have increased by 28 percent, but their size is five percent smaller compared to 2008. Source: RENTCafé