When Bad News is Good and…

April 14, 2015
ECONOMIC COMMENTARY
There is no doubt that the expression, “I have good news and bad news,” should be changed a bit for our present day economic situation. For years we have been hoping for good economic news as we worked our way up from a deep recession and tepid recovery. But now we seem to be hoping for bad economic news. Why?

With the markets feeling that the Federal Reserve Board is on the cusp of raising short-term interest rates, any bad economic news we receive holds the Fed off a bit. That is why the stock markets right now seem to react better to bad economic news as opposed to good economic news. When we received bad news during the past several years, there was always this thought in the backs of the minds of economists that we might slip back into a recession. Not that another recession is not possible, but at this point, the risk of a “double dip” recession is definitely marginalized.

Statements from Federal Reserve Board members more recently have tempered enthusiasm regarding the economy overheating. The most recent jobs report has us wondering if, through these statements, the Fed was doing more than trying to allay fears of fast and severe rate hikes. Perhaps the economy is indeed slowing down. It will take another month or two of jobs data to give us a clearer picture. Right now it is at least clear that the economy is not close to teetering on recession. So we say at this point — let the bad times roll because they help keep the Fed at bay.

WEEKLY INTEREST RATE OVERVIEW

The Markets. Rates on home loans fell in the past week in response to the employment report for March. Freddie Mac announced that for the week ending April 9, 30-year fixed rates decreased to 3.66% from 3.70% the week before. The average for 15-year loans also fell to 2.93%. Adjustables were mixed, with the average for one-year adjustables remaining at 2.46% and five-year adjustables falling to 2.83%. A year ago, 30-year fixed rates were at 4.34%, which continues to be more than 0.50% higher than today’s levels. Attributed to Len Kiefer, deputy chief economist, Freddie Mac — “Rates on home loans fell across the board following last week’s disappointing employment report. The US economy added 126,000 new jobs in March, well below market expectations of 247,000 jobs. We did see some uptick in wages, as average hourly earnings increased 7 cents for the month, and are up 2.1 percent over the year. Meanwhile, jobless claims fell sharply to 268,000 this week, much lower than market expectations of 285,000.” 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 April 10, 2015
Daily Value Monthly Value
April 9 March
6-month Treasury Security  0.10%  0.11%
1-year Treasury Security  0.22%  0.25%
3-year Treasury Security  0.89%  1.02%
5-year Treasury Security  1.40%  1.52%
10-year Treasury Security  1.97%  2.04%
12-month LIBOR  0.700% (Mar)
12-month MTA  0.146% (Mar)
11th District Cost of Funds  0.700% (Feb)
Prime Rate  3.25%
REAL ESTATE NEWS

Positive statements by the Federal Reserve Board regarding the pace of future hikes in interest rates and the release of weak employment data have served to bring rates down moving into the spring selling season. This unexpected move in rates give Americans a unique opportunity to save money through refinancing or making their new dream home more affordable. From mid-September of last year to early-April of this year, Freddie Mac has reported that average rates on a 30-year fixed loan have moved down slightly more than one-half of one percent. This amounts to a savings of more than $1,500 annually for a $300,000 mortgage and $45,000 over the life of the mortgage. Recently, Black Knight Financial Services found that, in light of recent interest rate decreases on home loans, 7.1 million Americans would currently benefit by refinancing. In addition, Zillow has reported that 5.2 million renters are planning to purchase a home in the next year. Sources: Freddie Mac, Zillow & HousingWire

Fifty-four percent of for-sale listings of existing homes are within reach for a median-income household in the U.S., according to a new analysis by realtor.com®. Their analysts used the national median income of $51,801 to determine how many of the site’s 1.6 million listings would be affordable to an average family, while also assuming a 20 percent down payment and 30-year fixed-rate mortgage. The monthly payment couldn’t exceed 28 percent of the family’s income. “So far this year we are hearing from home shoppers that finding a home that meets their needs or budget is the biggest impediment to buying,” says Jonathan Smoke, realtor.com®’s chief economist. “The good news from this data is that more than half of the listings nationwide are by definition affordable.” Realtor.com® analysts also found that existing homes tended to be much more affordable than new homes. In February, realtor.com® had more than 7,700 actively selling new-home communities listed, with an inventory of nearly 57,000 homes available for sale. Only 21 percent of those new homes, however, were deemed affordable. Source: realtor.com®

As Millennials begin to enter the homebuying market in larger numbers, homes will get a little smaller, laundry rooms will be essential, and home technology will become increasingly prevalent, said panelists during an International Builders’ Show press conference on home trends and Millennials’ home preferences. NAHB Assistant Vice President of Research Rose Quint predicted that the growing numbers of first-time homebuyers will drive down home size in 2015. Three million new jobs were created in 2014, 700,000 more than the previous year “and the most since 1999,” Quint said. At the same time, regulators have reduced downpayment requirements for first-time homebuyers from five percent to three percent and home prices have seen only moderate growth. “All these events lead me to believe that more people will come into the market, and as younger, first-time buyers, they will demand smaller, more affordable homes,” Quint said. “Builders will build whatever demand calls out for.” Of the Top 10 features mentioned by home builders, four have to do with energy efficiency: Low-E windows, Energy Star-rated appliances and windows and programmable thermostats. The top features: a master bedroom walk-in closet and a separate laundry room. Source: National Mortgage Professional

 

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