Summer is Here

A View from the Beach

ECONOMIC COMMENTARY
May 30, 2017 –

 

It is hard to believe that we have already celebrated Memorial Day in 2017. Doesn’t it seem that this year is going particularly fast? On Memorial Day, we remembered those who died in service to our country, a tradition that goes back as far as the Civil War and was originally known as Decoration Day. While there are ceremonies and parades going on across our country, the average American is also participating in Memorial Day picnics because good weather has finally arrived throughout the country.

Yes, the timing of Memorial Day is also the unofficial start of the summer. The kids are heading into their last weeks of school, vacations are starting and many people are moving because of the homes they have purchased during the spring homebuying season. This means that Americans are also meeting their new neighbors and becoming part of different communities — a very joyous occasion.

While we all enjoy the picnics and new homes, we should not forget the meaning of Memorial Day and its roots which came from a time when our Nation was literally torn apart. We mention this because today again our country is divided, and while differences of opinions are part of what makes our Democracy great, we hope that our divides heal over time because the more energy we expend focused upon conflicts, the less we can focus upon progress. Speaking of progress, we may take off for Memorial Day weekend, but the economy does not. We have another reading on our employment situation coming up this week — always an interesting time for the markets.

WEEKLY INTEREST RATE OVERVIEW

The Markets. Rates were down last week to their lowest level of the year. For the week ending May 25, Freddie Mac announced that 30-year fixed rates fell to 3.95% from 4.02% the week before. The average for 15-year loans decreased to 3.19%, and the average for five-year adjustables moved down to 3.07%. A year ago, 30-year fixed rates averaged 3.64%. Attributed to Sean Becketti, chief economist, Freddie Mac — “As we predicted, the rate on 30-year fixed loans fell 7 basis points this week in a delayed reaction to last week’s sharp drop in Treasury yields. The survey rate stands at 3.95 percent today, a new low for the year.” 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 May 26, 2017

Daily Value Monthly Value
May 25 April
6-month Treasury Security  1.08%  0.95%
1-year Treasury Security  1.16%  1.04%
3-year Treasury Security  1.46%  1.44%
5-year Treasury Security  1.78%  1.82%
10-year Treasury Security  2.25%  2.30%
12-month LIBOR  1.780% (Apr)
12-month MTA  0.732% (Apr)
11th District Cost of Funds  0.583% (Mar)
Prime Rate  4.00% (Apr)

REAL ESTATE NEWS
  The U.S. homeownership rate is finally poised to rise significantly as household formations by owners grew faster in the first quarter than those by renters — the first time that’s happened in more than a decade. While the share of Americans who owned their homes was up only slightly from a year earlier, at 63.6 percent, the number of new owners jumped by more than 850,000, compared with an increase in renter households of 365,000. The 1.1 percent year-over-year gain in owners was also the biggest since 2006, according to an analysis by Trulia of Census Bureau data released. The homeownership rate, which sunk last year to the lowest level in data going back to 1965, had been losing ground because young people leaving home tended to rent rather than buy. That diluted the number of owner-occupant households. Now, with consumer confidence on the upswing and wages increasing, first-time buyers are being drawn into the market after years of saving for down payments. “It’s a significant reversal of what we’ve seen,” Ralph McLaughlin, chief economist for Trulia, said in a phone interview. “These are signs that we may have hit bottom.” The homeownership rate reached a peak of 69.2 percent in June 2004. A few years later, the housing crash caused credit to tighten and resulted in millions of Americans losing their properties to foreclosure. Source: Bloomberg

Homeowners who sold their property in the first quarter realized an average price gain of $44,000 since purchase, representing an average 24 percent return on the purchase price—the highest average price gain for home sellers in terms of both dollars and percent returns since the third quarter of 2007. According to new statistics from ATTOM Data Solutions, homeowners who sold in the first quarter had their property for an average of 7.97 years, down slightly from a record-high average homeownership tenure of eight years in the fourth quarter of 2016, but still up from 7.68 years in the first quarter of 2016. “The first quarter of 2017 was the most profitable time to be a home seller in nearly a decade, and yet homeowners are continuing to stay put in their homes longer before selling,” said Daren Blomquist, senior vice president with ATTOM Data Solutions. “This counterintuitive combination is in part the result of the low inventory of move-up homes available for current homeowners, while also perpetuating the scarcity of starter homes available for first-time homebuyers. There are some early signs this inventory logjam may be loosening up in some markets, with the average homeownership tenure down from a year ago in nine of the 66 markets we analyze.” Source: National Mortgage Professional 

When it comes to their homes, Americans want bigger–except when they want smaller. “Americans are a lot like Goldilocks,” according to a new survey. “They’re looking for a place that feels ‘just right’ and in most cases want a home that’s a different size than the one they’re living in now.” The survey, conducted for Trulia by Harris Poll, asked Americans about the space they live in and their ideal home size. The results–even as U.S. home sizes continue to get bigger–was a lot of dissatisfaction. Most Americans aren’t satisfied with their current home size. Less than one-third (32 percent) would choose a home the same size as the one they’re currently living in if they decided to move in a year. Bigger homes are not always the key to satisfaction. Of those currently living in homes larger than 2,000 square feet, more would choose a smaller home than the one they’re living in than a larger one if they decide to move this year (60.6 percent vs. 39.4 percent). Even after controlling for size of current home, age matters. Many more boomers (ages 55+) want to downsize than upsize (36 percent vs. 23 percent); most Millennials, ages 18-34, want to go big (46 percent). Source: Trulia

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