While we keep saying that the economy has not fully recovered from the recession of almost ten years ago, there are certainly some aspects of the economy that have recovered while others have not. For example, the unemployment rate averaged around 5% for the ten years before the recession and that is where we are now. On the other hand, inflation adjusted wages have not recovered and the labor force participation rate is much lower than before the recession. It should be added that labor force participation rates are affected by the aging of the population and subsequent retirements.
This plus and minus picture is true of real estate as well. If you look at the average price of homes, in many areas of the country we are now at the level we reached at the peak of the real estate boom. On the other hand, demand for housing should be higher based upon how much our population has grown during the past decade. Part of the problem is that we have a shortage of listings available for sale. There are many factors causing this and two of these include baby boomers not giving up their single family homes and retiring as quickly as previous generations, and new homes are not being built at the same pace as before the boom.
Builders are actually reporting shortages of skilled laborers, which brings us back to the evidence of a jobs recovery. This week the Federal Reserve Board decided to keep rates steady. This is all well and good that they feel the economy has not recovered enough to continue raising rates for right now. However, they could help matters greatly by figuring out a way to increase the listing supply. We are not suggesting that the Fed go into the building business, but surely there is a way for the government to somehow address the pressing issue that America will need a greater supply of homes to house our growing population in the future.
The Markets. Rates on home loans inched higher again in the past week. Freddie Mac announced that, for the week ending March 17, 30-year fixed rates rose to 3.73% from 3.68% the week before. The average for 15-year loans was also moderately higher at 2.99%. The average for five-year adjustables increased slightly to 2.93%. A year ago, 30-year fixed rates were at 3.78%, very close to today’s levels. Attributed to Sean Becketti, chief economist, Freddie Mac — “Treasury yields increased heading into this week’s FOMC meeting, partially in response to modestly higher inflation readings. 30-year fixed rates kept pace, rising 5 basis points to 3.73 percent. Nonetheless, at the meeting the Fed confirmed what the market had already concluded and made no change to the Federal funds target. The Fed went further and acknowledged that economic signals have been mixed and that the pace of monetary tightening may be slower than had been assumed at the end of 2015.” 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.
Updated March 18, 2016
|Daily Value||Monthly Value|
|6-month Treasury Security||0.47%||0.45%|
|1-year Treasury Security||0.64%||0.53%|
|3-year Treasury Security||1.04%||0.90%|
|5-year Treasury Security||1.39%||1.22%|
|10-year Treasury Security||1.91%||1.78%|
|12-month LIBOR||1.179% (Feb)|
|12-month MTA||0.377% (Feb)|
|11th District Cost of Funds||0.664% (Jan)|
|Prime Rate||3.50% (Dec)|
Fannie Mae has indicated that it is moving to consider trended data in its credit decisioning. The question is–how will that affect the consumer? “Prior to trended data, there was no way to distinguish between a transactor and a revolver,” according to Atlanta-based credit expert John Ulzheimer, who has written several books on consumer issues. “It is very valuable and powerful information.” For example, transactors who pay their credit card bill in full each month are considered three to five times less risky than revolvers who are current but do not pay in full. Ulzheimer expects transactors will get better pricing on their home loans. Trended data can also show if a balance is growing and whether monthly payments are increasing or decreasing. If consumers are choosing to pay less while balances are growing, it may signal an applicant is becoming riskier and could become delinquent before their credit score changes. “It provides insight into each borrower’s use of credit and provides a more complete picture of their eligibility for home loans as well as the risks inherent in their creditworthiness,” said Timothy Mayopoulos, Fannie’s president and chief executive, in a recent interview. Source: Source Media
The National Association of Home Builders has published the results of a major study into what home buyers want from their properties. It found that single-family detached homes are still the preferred option of most buyers (65 per cent) with the baby boomer generation driving this desire. Millennials are the generation keenest to have a basement (77 per cent) while boomers (75 per cent) and seniors (88 per cent) are most likely to want a single-story home, although 64 per cent of all buyers prefer this. Around two-thirds of buyers want a suburban location with just 8 per cent of respondents preferring a central city location. A formal living room could become less common with 37 per cent of all buyers saying they would buy a home without the space; this rises to 43 per cent among millennials. While the environment may be a hot topic, it doesn’t trump price for home buyers it seems, with only 13 per cent willing to pay more for a home purely on environmental grounds. Source: NAHB
Moms may have a big place in real estate decisions. The average American lives only 18 miles away from their mother, according to the 2008 Health and Retirement Study. What’s more, the trend is likely to continue as baby boomers age and require more care from their adult children and two-income families require more help with child care, suggests a new report by New York Times staffers, Quoctrung Bui and Claire Cain Miller. “Over the last few decades, Americans have become less mobile, and most adults – especially those with less education or lower incomes – do not venture far from their hometowns,” according to The New York Times article. America is filled with close-knit families, the data shows. Only 20 percent of Americans live more than a couple of hours from their parents. Source: The New York Times