Employment Report Analysis

A View from the Beach

A View from the Beach

March 8, 2016 –

The numbers are in and it looks like the world financial situation is not affecting our economy’s job creation. This gives the Federal Reserve Board food for thought going into their meeting next week. As we indicated earlier, many analysts originally thought this would be the month the Fed raised rates again, but market volatility and international concerns tempered these thoughts.

The economic news leading up to the jobs report was pretty solid as well. There was an upward adjustment in the measure of the fourth quarter’s economic growth and solid growth in orders for durable goods, existing home sales, personal income and consumer spending. Not all the news was positive, as new home sales faltered, but new home sales were coming off a month in which we saw a very large increase in sales.

All in all, the increase in jobs of 240,000 shows that the economy is continuing to move forward, which means that we are moving towards another rate increase by the Fed. Looking at the big picture, the stock market’s recent rally and the rebound in oil prices are all giving us the same indication. However, that does not mean that the Fed will definitely be increasing rates when they meet next week, especially considering the fact that the increase in wage growth was tame. But certainly, it puts such an increase back on the table.

The Markets. Rates on home loans inched higher in the past week. Freddie Mac announced that, for the week ending March 3, 30-year fixed rates rose slightly to 3.64% from 3.62% the week before. The average for 15-year loans was also slightly higher at 2.94%. The average for five-year adjustables increased to 2.84%. A year ago, 30-year fixed rates were at 3.75%, just above today’s levels. Attributed to Sean Becketti, chief economist, Freddie Mac — “The market turbulence that kicked off the year subsided at the end of February, providing at least a temporary break in the flight to quality. Treasury yields approached their highest level in a month, boosting the 30-year mortgage 2 basis points this week to 3.64 percent. Despite this welcome breather, Fed officials have been highlighting the downside risks to the economic outlook, and the market expects the Fed to refrain from any further short-term rate increases for now.” 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
Updated March 4, 2016
Daily Value Monthly Value
March 3 January
6-month Treasury Security  0.46%  0.43%
1-year Treasury Security  0.65%  0.54%
3-year Treasury Security  0.99%  1.14%
5-year Treasury Security  1.33%  1.52%
10-year Treasury Security  1.83%  2.09%
12-month LIBOR  1.153% (Jan)
12-month MTA  0.350% (Jan)
11th District Cost of Funds  0.664% (Jan)
Prime Rate  3.50% (Dec)
REAL ESTATE NEWS

Twenty-year mortgages are making a comeback. As the economic recovery has progressed, more consumers are looking at ways to improvetheir long-term financial situation. The real estate boom of a decade ago was all about putting as little money down as possible and staying highly leveraged. Today, Americans recognize the benefits of a home loan being a forced savings plan that builds up equity each month. That is why home loans with a 15-year schedule have been so popular in the past five years. However, many cannot afford the higher payment of a 15-year loan. The 20-year mortgage provides a great alternative for those who can’t qualify or afford a 15-year payment schedule. The 20-year pays off the loan 10 years early, which is only five years less than a 15-year, but does not have as high a payment. Plus, some 20-year loans are priced less than 30-year alternatives and mortgage insurance costs may be reduced as well. It is no wonder this option is becoming more popular. Want a free article which compares these three options for home loans, including a comparison of costs and benefits? Contact us.

Walkable mixed-use neighborhoods across the country are growing in popularity, with buyers valuing close access to entertainment areas, public transit, and job centers, all without having to rely on a car. A home’s walkability is not only increasingly important to buyers; it’s shown to be a factor in raising home values. “One of the best sources of evidence of the value of walkability is home values,” MarketWatch reports, “and some new evidence confirms that walkability adds to home values, and also shows that walkable homes have held and increased their value more even in turbulent real estate markets.” A neighborhood’s walkability is a big draw for potential buyers. In NAR’s Community Preference Survey, 60 percent of respondents said they preferred to live in a neighborhood with a mix of houses and businesses that are within walking distance. “While different places appeal to different people, there’s a growing awareness that walkable neighborhoods with a wide mix of uses provide communities a trump card as they strive to compete in a 21st century economy,” says Brad Broberg in the latest issue of On Common Ground. “Neighborhoods where people can live close to work, get their groceries and grab a beer — all without needing a car — are the magnets that attract many of today’s young professionals. Where they go, jobs follow.” Sources: MarketWatch and NAR

Whether a home owner has a court record violation – like a traffic or criminal violation – may help determine their risk level on their home owners insurance, a new study by TransUnion finds. “The homeowners insurance industry is expanding its use of underwriting variables and rating techniques and is more closely evaluating those that are traditionally used in the personal automobile insurance underwriting process,” said Mark McElroy, executive vice president of TransUnion’s insurance business unit. “The findings clearly show that the use of alternative data assets such as court record violations can help property insurance carriers better assess a homeowner’s risk. As insurance carriers incorporate driving records to properly price riskier policies, consumers with clean driving records can benefit.” The TransUnion study finds the loss ratio for a home owner insurance company is about two times greater with home owners who have severe court violations than those who have none. The study revealed that 25 percent of policies have at least one criminal or traffic violation against the primary name insured. However, when researchers accounted for the court record data of additional household members, the violation rate surged from 25 percent to 34 percent. Source: TransUnion

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