The Market Moving Forward

As recently discussed on our blog, the market currently lies in favor of sellers as opposed to buyers, an analysis which is likely to change as buyers may have the opportunity to step forward later this year. News of mortgage rates and home prices increasing by mid 2019 gives potential homebuyers the chance to reconsider in 2018.

Data from CoreLogic and the U.S. Census Bureau and Department of Housing and Urban Development predict that median home prices are expected to increase by 3.9% in mid 2019. Mortgage trends and experts have similarly suspected that mortgage payments on a median-priced home could possibly increase by 10% in 2019. While no prediction can ever be taken as fact, it is something to consider. This increase in home prices and mortgage rates can be intimidating for potential homebuyers, but there is a silver lining.

The demand for homes in 2018 has given sellers the upperhand, while the latter half of the year may be the time when buyers take reign of the market. Considering these factors, it is encouraged by data that potential buyers reconsider a home as the market may shift in their favor due to increased availability of homes and a predicted slowing down of demand. With that being said, step over sellers, and make room!

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Ideas for Brightening Your Summer Space!

 

What better time to brighten up your outdoor space than during the summer? Here are some simple and exciting tips to not only brighten up your backyard, but your Monday too!

Often times, homeowners may think that making a space feel new can only be achieved through costly renovations. We challenge this today beginning with your outdoor space. Whatever that may look like for your home.

Some of the best ways to change the feel of an area can be done through small changes. We’re highlighting some of those small changes to help you update your yard just in time for more late summer nights. If your patio or front porch constitutes your outdoor space, consider purchasing a bright new rug or vibrant pillows to add a pop. There are many options for weather proof decor, so always consider this for its durability. Additionally, something that works in any outdoor area is adopting colorful new plants. These bring new life to an area while feeling appropriate for the summer. Something that works great for backyards are colorful lanterns. These can be filled with electric candles if necessary, or even citronella to ward off those pesky mosquito’s.

Hopefully these tips help you to renew and enjoy your outdoor area this summer!

Rates Increase Due to Growth Expectations from Tax Cuts

Mortgage interest rates increased slightly this past week on expectations that tax cuts will increase wages and consumer spending potentially leading to higher inflation.  The December Consumer Price Index (CPI) was up 0.1%, as expected, and up 2.1% year over year.  December Core CPI, excluding the food and energy components, was up 0.3% and year over year it was up 1.8%.  The December Producer Price Index (PPI), a measure of wholesale prices, was down 0.1% but up 2.6% year over year.  December Core PPI was also down 0.1% but up 2.3% year over year.  December Import Prices were up 3.0% year over year and Export prices were up 2.6% year over year.  November Consumer Credit was also up substantially.  The general belief is that GDP will increase by 3.0% in 2018.  With the recent increase in rates, the 10 Year Treasury Note auction this past week was the strongest since June of 2016 and the 30 Year Treasury Bond auction was the strongest since December of 2014.

 

The Dow Jones Industrial Average is currently at 25,771, up almost 500 points on the week.  The crude oil spot price is currently at $63.54 per barrel, up over $2 per barrel on the week.  The Dollar weakened versus the Euro and Yen on the week.

 

Next week look toward Tuesday’s Empire State Manufacturing Survey, Wednesday’s Industrial Production and Housing Market Index, Thursday’s Housing Starts, Jobless Claims, and Philadelphia Fed Business Outlook Survey, and Friday’s Consumer Sentiment Index as potential market moving events.  U.S. markets are closed on Monday for Martin Luther King Jr. Day.

Mortgage Credit News

BY LOUIS S. BARNES – June 23, 2017

Financial markets are in a most peculiar place: standstill. This last week extended the June freeze: the 10-year T-note this week traded between 2.19% and 2.14%, mortgages not moving at all, very close to 4.00%; and the S&P500 stayed between 2435 and 2447.

The period of exceptionally low volatility goes all the way back to March. Are markets stalled because there is no news, or is there no news because markets are stalled?

Financial markets change prices to reflect changed facts and expectations, usually economic ones but also local politics and geopolitics — and of course the old, mindless force of rebalancing more buyers than sellers or vice-versa. That’s a lot of nuthin’ happenin’.

We must look back eight months to find at the last big action, the huge jump in long-term interest rates which coincided with the election, the 10-year T-note in just six weeks from 1.78% to 2.60%, mortgages from 3.75% to 4.375%. That move peaked again in March and has slowly fizzled since. Stocks have had no fizzle, just a seemingly endless succession of new-record highs until the recent flats.

Long quiet periods are almost always an illusion that nothing is happening. Tension always builds during quiet markets, whether we can see it or not. Fabled market advisor Bob Farrell articulated ten rules of trading, one of the few sets of wisdom quoted too often. Farrell’s Rule #4: “Rapidly rising or falling markets usually go further than you think, but they do not correct by going sideways.”

If we don’t know why we have gone flat, it’s a reach to guess at the next move, up or down — but it will be one of the two, and the longer we stay flat, the more violent.

Instead of predicting, or embracing boom or doom and then finding supporting evidence, ask “What has changed?” In what ways did the world or nation change to create flatness, and see if shedding that light provides hints for what’s coming.

Start big. As a global economic matter, nothing substantial has happened since last fall with the possible exception of soft prices for oil, which in itself has little net effect, hurting some, benefiting others. Since US frackers are the swing producers, oil can’t crash below the frackers’ minimum price, which is close to $40/bbl and where we are. Nothing is underway to hurt oil demand.

Global politics break into direct economic impact, and “geopolitics,” the all-time euphemism for risk of war. Seven-and-a-half billion people are busy with all sorts of things, but in the last year only two big changes: the potential for Brexit chaos, and the sudden weakness in Britain’s government. These twin uncertainties are enough to freeze anything. 

Nothing much has changed in Asia. Japan festers on, China tries to rationalize its economy via top-down control but nothing new.

Geo-political risks are rising in the Middle East as the US reduces its hyper-exposure. The muscle-flexing by an economically deteriorating Saudi Arabia is unsettling, but all actors in the area still suppress big conflicts in favor of noise. Smart, too. Russia’s ambitions are limited by economic distress, and the embarrassing exposure of its mischief-making.

So far, so good. Dull markets reflect a dull outside world.

The action is here in the US. In utmost political delicacy, trying not to offend: US government has moved from nearly 20 years of gridlock to something like decapitation. It may last, and it may not. Lasting: each political party is split, radical wings preventing bi-partisan action, and the Republican majority too thin to act while the party is so divided. The wild card is of course the president, ineffective in the first six months but capable of dramatic action at any time. Possible: the government moves on without the president, in limited ways but enough to keep the trains running on time.

The agenda is in the hands of the White House and the Republican leaders in Congress. They have been stalled, entangled in in trivia like the travel ban and off-point upsets in the Oval Office, and the agenda itself is prone to stall because it has only minority national public support. Congress may become un-stuck at any moment. The most immediate marker: health care. If Congress cannot deliver a substitute for Obamacare, it will have even more trouble with the other big items, tax reform, tax cuts, infrastructure, and regulatory relief.

Decapitation causes no particular economic harm, but an open-ended stall would tend to unwind the post-election market moves, especially belief in economic stimulus. Much as I believe in basic US economic health, and the Fed’s intention to raise interest rates (modestly), if health care fails in Congress next week the market reaction will be down, more likely mortgages and long-term interest rates than stocks. 

If Congress and the White House suddenly begin to find traction, that will support both rates and stocks.

———- ———- 

The 10-year T-note in the last year. Hardly moving at all, but the movement is down:

The 2-year T-note has stopped its rise, halting expectations of the next Fed hike:

 

What Millennials Don’t Know about Qualifying & Why It’s Keeping Them from Buying

 

Many customers, especially in the 18-34 year range, aren’t clear on what is needed to qualify for a mortgage and the many different loan programs available. 

According to a 2015 Fannie Mae survey, 57% of respondents in this younger demographic perceived it to be difficult to obtain a mortgage, significantly higher than any other age group. Additionally, 73% of Millennials were unaware of 3-5% down loan programs; and almost half didn’t know or gave incorrect answers to the minimum credit score required. You can find the entire study here.

If you have Clients that are wanting to become homeowners, but aren’t sure if they can qualify, have them contact me today. We have a multitude of loan options that offer low down payments or can accommodate less than ideal credit scores.