March 14, 207 –
The data is in. The jobs report has been released and the Federal Reserve Board’s Open Market Committee is meeting as we release this publication. Keep in mind that the employment numbers are a major factor in affecting the Fed’s decision — but they are not the only factor. The stock market rally, which indicates confidence, as well as inflationary indicators, are also watched closely. As a matter of fact, the numbers on wage growth might be almost as important as the jobs numbers themselves. Last month, wage growth came in 2.8% on an annual basis and this is seen as good news for workers but bad news on the inflation front.
Add a strong stock market and rising wage growth to the fact that the economy added 235,000 jobs last month and the unemployment rate ticked down to 4.7%, and you can see why the markets are predicting a rate increase. You might ask why a rising stock market would affect the Fed’s thinking. We have already spoken about the stock market’s indirect influence upon the economy. Certainly, the growth of equity will make those who own stocks more confident in making large purchases, and this has the potential to boast the economy.
However, there is a more direct link between the Fed and the rise in the stock market. The last thing the Fed wants to do is raise rates and stifle the economy. With the stock market so strong right now, the Fed is much more likely to conclude that the economy can withstand the news of higher rates. If consumers are uncertain, piling on a rate increase just makes things worse. If consumers are hopeful, they are much less likely to envision higher rates as a roadblock to success. Of course, this is all speculation, and by the time you read this commentary, you are likely to know what the Fed was really thinking.
The Markets. Rates moved to their highest level of 2017 last week, as the jobs report approached. For the week ending March 9, Freddie Mac announced that 30-year fixed rates rose to 4.21% from 4.10% the week before. The average for 15-year loans increased to 3.42%, and the average for five-year adjustables moved up to 3.23%. A year ago, 30-year fixed rates averaged 3.68%. Attributed to Sean Becketti, chief economist, Freddie Mac — “The 10-year Treasury yield rose about 10 basis points this week. For the first time in weeks, the rate on 30-year fixed home loans moved with Treasury yields and jumped 11 basis points to 4.21 percent. The strength of Friday’s employment report and the outcome of next week’s FOMC meeting are likely to set the direction of next week’s survey rate.” 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 10, 2017
|Daily Value||Monthly Value|
|6-month Treasury Security||0.88%||0.65%|
|1-year Treasury Security||1.04%||0.82%|
|3-year Treasury Security||1.67%||1.47%|
|5-year Treasury Security||2.13%||1.90%|
|10-year Treasury Security||2.60%||2.42%|
|12-month LIBOR||1.713% (Feb)|
|12-month MTA||0.663% (Feb)|
|11th District Cost of Funds||0.616% (Jan)|
|Prime Rate||3.750% (Dec)|
One in four U.S. adults say they are considering buying a home this year, which extrapolates to a whopping 59 million people, according to a recent survey by Bankrate.com. Minorities are expected to be big buyers this year. More than two in five black survey respondents said they were considering buying a home. That is more than double the percentage of potential white buyers. “Black homeowners were harmed in greater numbers by the housing crash and the foreclosure crisis,” says Holden Lewis, a Bankrate.com mortgage analyst. “Now that the economy has improved and time has passed, maybe they’re ready to jump back in and own a home again.” Also, older millennials and Generation X – which encompasses the ages of 27 to 52 – are showing more willingness to either become homeowners or trade up to a new home, the survey showed. Lewis notes, however, what many people say is not always what they’ll be able to do. Rising rates and an uptick in home prices could prevent some would-be homebuyers from saving enough for a down payment and limited inventories could delay their efforts in finding a suitable home to buy. About 6 million new and existing homes were sold last year, according to the National Association of Realtors® and U.S. Census data. Source: Realtor® Magazine Online
The news and research about women and money can be dreary. Women earn less than their male counterparts, pay harsher workplace penalties for pursuing parenthood, struggle more with debt, and save less for retirement. But there’s one area of personal finance where single women are outpacing men in the U.S., and it’s a significant one: home ownership. Nearly a century since the publication of A Room of One’s Own—Virginia Woolf’s essay on women’s urgent need for a private physical space in which to flourish—and a legacy of laws that restricted women in owning property or considered them to be property, single women account for 17 percent of homebuyers in the U.S., compared with 7 percent of single men. The data, from last year, are from the National Association of Realtors®. Although women have been ahead of men in NAR’s data since 1981, the gap has widened even further in recent years, said Jessica Lautz, NAR’s managing director of survey research and communications. Single women are also likelier than single men to be parenting on their own, Lautz noted, and therefore likelier to seek stable housing for raising children. There were 8.6 million single-mother households in 2011, more than three times the 2.6 million single-father households, according to the Pew Research Center. With that comes an increase in financial sacrifices women are willing to make to own a home, Lautz said, such as taking a second job or working their budgets to save for a down payment. “They really value home ownership, and they’re willing to give up a lot to have a home of their own.” Source: Bloomberg
Pets are having more of an influence in home buying and selling as well as renovation, a new study by the National Association of Realtors® shows. Eighty-one percent of Americans say that animal-related considerations play a role when deciding on their next living situation, according to the 2017 Animal House: Remodeling Impact report. “In 2016, 61 percent of U.S. households either have a pet or plan to get one in the future, so it is important to understand the unique needs and wants of animal owners when it comes to homeownership,” says NAR President William E. Brown. “Realtors® understand that when someone buys a home, they are buying it with the needs of their whole family in mind; ask pet owners, and they will enthusiastically agree that their animals are part of their family.” Indeed, a whopping 99 percent of pet owners say they consider the animal part of the family. Eighty-nine percent of respondents say they would not give up their animal because of housing restrictions or limitations. Home owners are willing to move for their pets too. Twelve percent of pet owners have moved to accommodate their animal; 19 percent would consider moving to accommodate their animal in the future. Pets are serving as guides to renovations too. Fifty-two percent of respondents say they had completed a home renovation project specifically to accommodate their pet. Source: NAR