|There is no doubt that the world has seen more than its share of conflicts this year. We have seen major conflicts in the Ukraine, Iraq, Gaza, Syria, Libya and more. With the amount of turmoil we have seen, the world markets have been pretty solid with our stock market being no exception. By mid-July, the Dow and the S&P were in record territory. In this column we even called it the “Teflon Market” because major news seemed to be shrugged off regularly.
Could this time be different? The Ukrainian crisis has occupied the headlines pretty much all year. Yet, the downing of a civilian airliner has brought the conflict to center stage as many countries, including the U.S., have invoked economic sanctions against Russia because of it’s actions in Ukraine. Russia has retaliated with sanctions of their own and now we have an economic cold war in the making. And the markets have reacted negatively to these escalating developments.
Many times analysts have indicated that the stock market is due for a correction as it has been almost three years since the last real correction of at least 10%. Each time we have had a pullback in the past three years the markets have rebounded quickly and this past week we saw at least a moderate rebound. If the Russian crisis escalates, could we be in for a real correction? Only time will tell. However, there is some positive news which has arisen from the stock market’s recent international malaise. Long-term rates and oil prices have both headed lower. At a time in which we are receiving positive news with regard to the economic recovery, lower rates and lower oil prices may serve to hasten economic growth. If economic growth accelerates, that is good news for stocks — but possibly only if rates stay low.
The Markets. Fixed rates fell slightly in the past week with rates staying within the same range they have been for almost the past three months. Freddie Mac announced that for the week ending August 14, 30-year fixed rates fell slightly to 4.12% from 4.14% the week before. The average for 15-year loans ticked down to 3.24%. Adjustables were also stable in the past week, with the average for one-year adjustables up slightly to 2.36% and five-year adjustables decreasing marginally to 2.97%. A year ago 30-year fixed rates were at 4.40%. Attributed to Frank Nothaft, vice president and chief economist, Freddie Mac — “Rates on home loans were down slightly amid a week of light economic reports. Of the few releases, retail sales were virtually unchanged in July after a 0.2% increase in June, ending five months of increases. Excluding motor vehicles and parts, retail sales were up 0.1% last month.” 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 August 15, 2014
|6-month Treasury Security
|1-year Treasury Security
|3-year Treasury Security
|5-year Treasury Security
|10-year Treasury Security
|| 0.556% (July)
|| 0.118% (July)
|11th District Cost of Funds
|| 0.668% (June)
The creator of one of the most widely used and influential credit scores, FICO, said that the latest version of its score would no longer weigh medical debts — which account for about half of all unpaid collections on consumers’ credit reports — as heavily as it did in previous iterations. The newer FICO scores, available this fall, will also ignore any overdue payments that have already been made. Previously, the scores factored paid and unpaid collections equally, though it ignored amounts under $100. FICO credit scores, which have become consumers’ financial passport to just about everything from rental apartments to most loans such as mortgages, are based on the information in an individual’s credit reports, which are generated by the three major credit bureaus: Equifax, Experian and TransUnion. The scores are based on a 300- to 850-point scale. Because of the new scoring model, individuals with a median score of 711 — and an otherwise clean credit history, except for unpaid medical debts — may see their FICO score rise by 25 points. As a result, many consumers may qualify for more attractive interest rates on various loans, potentially resulting in thousands of dollars in savings. “It probably doesn’t mean the difference between an approval and a denial, but it can mean the difference in a more advantageous rate,” said John Ulzheimer, a credit expert at Credit Sesame, a consumer credit website, and a former FICO employee. But consumers whose credit files are tarnished only by unpaid medical debts that went to collection agencies — but were ultimately settled or paid — are likely to see a much greater increase in their scores. “That is when you could expect to see your score go through the roof,” said Mr. Ulzheimer. Source: NY Times — Not sure where your score puts you with regard to being eligible for a home purchase or refinance? A quick and simple analysis may let you know how to get in position to take advantage of these upcoming changes. Just contact me and I will help you get started.
When it comes to smart homes, consumers are more interested in their security features than the gadgets that control the homes’ appliances. New research by Icontrol Networks, a home technology company, shows that 90 percent of 932 respondents recently surveyed say that security is one of the most important reasons for using a smart-home system. In fact, 67 percent rank it the No.1 reason, and the majority of consumers say security is a must-have in any home automation, according to Icontrol’s 2014 State of the Smart Home Report. Fire and carbon monoxide alarms, as well as gas leak alarms, were listed as top security features, according to the survey. “For now, safety and security are driving initial mass market adoption,” says Jim Johnson, executive vice president of Icontrol Networks. “But the convenience associated with a connected home will likely play a greater role as consumers realize how much easier automation makes their lives.” Seventy-eight percent of respondents also ranked energy management as one of the top features that matter most to them in a smart home. HVAC heating and cooling management was cited as the most important feature in helping to reduce utility bills. Nearly 43 percent of respondents say they’d be interested in replacing their thermostat with a “smart thermostat,” one that automatically adjusts when the home is occupied. Source: Builder
International buyers continue to flock to the U.S. to purchase and invest in properties. Favorable exchange rates, affordable home prices, and rising affluence abroad is driving interest, according to the 2014 Profile of International Home Buying Activity conducted by the National Association of Realtors®. From April 2013 through March 2014, total international sales are estimated at $92.2 billion, a rise from $68.2 billion from the previous period, NAR reports. Twenty-eight percent of Realtors® reported working with international clients this year. “We live in an international marketplace; so while all real estate is local, that does not mean that all property buyers are,” says Steve Brown, NAR’s president. “Foreign buyers are being enticed to U.S. real estate because of what they recognize as attractive prices, economic stability, and an incredible opportunity for investment in their future.” International buyers are coming to the United States from all over the world, but the highest interest in U.S. property is being driven by Canada, China, Mexico, India, and the United Kingdom, which accounted for about 54 percent of all reported international transactions. Canadian residents continue to have the largest share of U.S. purchases, but dropped their share from 23 percent in 2013 to 19 percent in 2014. Buyers from China hold the lead in dollar volume, purchasing an estimated $22 billion with an average sale cost of $590,826, according to the NAR study. China was also the fastest-growing source of transactions, now accounting for 16 percent of all purchases, up 4 percent from last year. In 2014, nearly 60 percent of reported international transactions were all cash, compared to only one-third of domestic purchases. The survey also revealed that 42% of foreign buyers use their U.S. home as a primary residence. Source: NAR