Freddie Mac (OTCQB: FMCC) today released the results of its Primary Mortgage Market Survey® (PMMS®), showing average fixed mortgage rates moving higher with the average 30-year fixed-rate mortgage topping 4 percent for the first time since 2015.
30-year fixed-rate mortgage (FRM) averaged 4.03 percent with an average 0.5 point for the week ending November 23, 2016, up from last week when it averaged 3.94 percent. A year ago at this time, the 30-year FRM averaged 3.95 percent.
15-year FRM this week averaged 3.25 percent with an average 0.5 point, up from last week when it averaged 3.14 percent. A year ago at this time, the 15-year FRM averaged 3.18 percent.
Average commitment rates should be reported along with average fees and points to reflect the total upfront cost of obtaining the mortgage. Visit the following link for the Definitions. Borrowers may still pay closing costs which are not included in the survey.
Quote Attributed to Sean Becketti, chief economist, Freddie Mac.
“In a short week leading up to the Thanksgiving holiday, the 10-year Treasury yield rose 8 basis points. The 30-year mortgage rate followed suit, rising 9 basis points to 4.03 percent. This increase marks the first week since 2015 that mortgage rates have risen above 4 percent.”
Sales of previously owned houses in the United States rose 2 percent to a seasonally adjusted annual rate of 5600 thousand in October of 2016. It is the highest figure since February of 2007, beating market expectations of a 0.5 percent fall or 5430 thousand. Sales of single family homes went up 2.3 percent to 4990 thousand while those of condos were flat at 610 thousand. The average price fell 1 percent and the months’ worth of supply went down to 4.3 from 4.4. Existing Home Sales in the United States averaged 3881.83 Thousand from 1968 until 2016, reaching an all time high of 7250 Thousand in September of 2005 and a record low of 1370 Thousand in March of 1970. Existing Home Sales in the United States is reported by the National Association of Realtors.
Rising mortgage rates, overheating home prices, nothing for sale, pre-election jitters — the list of reasons to lose confidence in the housing market is growing.
In fact, the share of consumers who think now is a good time to buy a home fell 5 percentage points in September in a monthly housing sentiment survey (known as HPSI) by Fannie Mae. The only drop that was bigger was the share of consumers who think mortgage rates will fall.
“The decline in the HPSI over the past two months from the survey-high in July … adds a note of caution to our moderately positive housing outlook,” said Doug Duncan, senior vice president and chief economist at Fannie Mae. “The starter home tight supply and rising home prices as well as the unsettled political environment are likely giving many consumers a reason to pause or question their home purchase sentiment.”
The September employment report was mixed for housing. Wage growth is strengthening, but not as much as home price growth. Construction jobs increased, suggesting more housing supply in the future, but housing starts for single-family homes are not exactly robust. Construction spending fell in August and July’s numbers were revised down.
“A blah September jobs report gives no impetus for anything on the economy’s to do list: There’s no sign of an overheating economy that would justify a rate hike; no groundswell of construction hiring that would finally hint at a return to a normal pace of housing starts; no big wage gains that would give hope for renewed productivity gains. Just a stubbornly average report at a time when the economy is looking for a jolt of the spectacular,” wrote Redfin’s chief economist, Nela Richardson.
“Housing seems to have hit a soft patch, with residential investment likely posting a second consecutive quarterly decline last quarter despite positive labor market and mortgage rate trends”-Doug Duncan, chief economist, Fannie Mae
Pending home sales, which represent signed contracts to buy existing homes, have fallen for three straight months, according to the National Association of Realtors. Housing demand is strong, but supply is historically weak and getting weaker, as fewer homes come on the market in the fall and winter.
Hong Kong/Shanghai: Earlier this year, Mr. and Mrs. Cai, a couple from Shanghai, decided to end their marriage. The rationale wasn’t irreconcilable differences; rather, it was a property market bubble. The pair, who operate a clothing shop, wanted to buy an apartment for 3.6 million yuan ($532,583), adding to three places they already own. But the local government had begun, among other bubble-fighting measures, to limit purchases by existing property holders. So in February, the couple divorced.
“Why would we worry about divorce? We’ve been married for so long,” said Cai, the husband, who requested that the couple’s full names not be used to avoid potential legal trouble. “If we don’t buy this apartment, we’ll miss the chance to get rich.”
China’s rising property prices this year have been inspiring such desperate measures, as frenzied buyers are seeking to act before further regulatory curbs are imposed. While the latest figures out Friday show easing in some of the hottest cities such as Beijing and Shanghai, the cost of new homes surged by the most in seven years in September.
On the whole, the real estate market “apparently cooled” in October following targeted measures rolled out in first-tier and some second-tier cities, China’s National Bureau of Statistics said in a statement. Local governments in at least 21 cities have been introducing property curbs, such as requiring larger down-payments and limiting purchases of multiple dwellings in a bid to cool prices.
The impact of the curbs may be short-lived as regulators have shown no signs of tightening on the monetary front, according to analysts from UBS Group AG and Bank of Communications Co.
“The curbs will show their effect in the initial two-to-three months, but in the longer term idle capital will still likely flow to property in the largest hubs as ‘safe-heaven’ assets,” said Xia Dan, a Shanghai-based analyst at Bank of Communications. The impact of the curbs will gradually abate as “liquidity is so abundant in a credit binge,” she said.
In the first three quarters of 2016, according to data compiled by Bloomberg, average prices for new homes rose 30% in tier-one cities such as Shanghai, and 13% in smaller, tier-two cities.
The boom traces to 2014, when the People’s Bank of China began easing lending requirements and cutting interest rates. The China Securities Regulatory Commission also lifted restrictions on bond and stock sales by developers, helping them raise money for new projects.
Soon, properties were selling for ever-larger sums in government land auctions. By June 2016, China’s 196 listed developers had incurred 3 trillion yuan in debt, up from 1.3 trillion three years before. In many cities, the price per square meter for undeveloped land has risen higher than for existing apartments on a comparable plot next door, a situation the Chinese describe as “flour more expensive than bread.”
Officials have been trying to end the exuberance without harming the economy, a task made more difficult by the property fever’s uneven spread. Many smaller municipalities rely on property sales to plug holes in their budgets, giving them an incentive to increase the supply of developable land. So while premier cities have seen tight supply and high prices, smaller ones have too many apartments and not enough buyers.
“Usually the market moves in tandem,” said Patrick Wong, an analyst with Bloomberg Intelligence in Hong Kong. “It’s quite dramatic to see tier-one cities need tightening and lower-tier cities need relaxation.”
The central government is also promising to crack down on rogue players: In early October, the ministry of housing and urban-rural development said it was investigating 45 developers and agents for allegedly engaging in false advertising and other unlawful activities promoting speculation.
There’s some risk that such measures will succeed too well. In a 28 September report by Deutsche Bank AG, economists Zhiwei Zhang and Li Zeng estimated that a 10% decline in housing prices nationwide would lead to 243 billion yuan in losses for developers. Consumer spending could fall, too, since people have taken on more debt to buy property. Mortgages accounted for 23% of new loans in 2014, compared with 35% in the first half of 2016 and 71% in July and August.
“The potential macro risk is alarming,” Zhang and Zeng wrote.
The red-hot growth in home prices across the U.S. West is starting to slow in some cities as sticker shock and low inventory put off weary buyers.
Denver, Los Angeles and Austin, Texas, have seen gains in real estate values moderate after years of double-digit increases, according to Zillow. A slowdown in the tech epicenter of San Francisco is becoming even more pronounced, with the median home value in August rising less than 1 percent from a year earlier.
The five-year surge in real estate demand across the West is starting to take its toll in some areas as buyers become more reluctant to purchase a home that would eat up a large chunk of their monthly earnings. With job growth still robust, house hunters are pushing outward from core cities to get more for their money.
“Homebuyers are starting to see a bit of price fatigue and are starting to step back and think twice about making that purchase,” said Svenja Gudell, chief economist at Seattle-based Zillow. “Prices have grown so much over the last few years as part of the recovery that many markets are well beyond their initial 2006 or 2007 peak, so homes are now more expensive than they’ve ever been.”
Western cities have led the nation’s recovery from last decade’s recession with record-setting economic growth and a boom in jobs, particularly in the technology industry, leading to a surge in housing demand. In the past five years, home values have soared 71 percent in Denver, 66 percent in San Francisco and 54 percent in Austin, Zillow data show. Nationwide, the gain was 22 percent.
The prices have gotten too heated for many buyers in Denver, which has seen a slowdown since the beginning of the year, said Wade Perry, a managing broker at Coldwell Banker Devonshire in the area.
“Buyers are starting to push back and say, ‘I’m not going to pay that much for that house,’” Perry said.
The median home value in Denver rose 10 percent in August from a year earlier to $353,300, according to Zillow. While that’s still one of the top increases in the country, it’s down from an almost 16 percent surge in the same period of 2015.
In Austin, which, like Denver, has benefited in part from a spreading tech industry and an influx of well-paid workers, the median climbed 8.1 percent, compared with 12 percent growth a year earlier. Los Angeles’s growth slowed to 6.9 percent from 7.5 percent, while in San Diego it decelerated to 4 percent from 6.3 percent.
For San Francisco, where the median home value has soared to $1.1 million, the increase was just 0.6 percent after a 15 percent jump in August 2015. The city’s price gains have made it the most overvalued housing market in the U.S., UBS Group AG said in a report this week.
Still, there’s no let-up in some other Western tech-heavy markets, such as Portland, Oregon, where home values soared 20 percent in August, compared with 13 percent a year earlier. In Seattle, the 15 percent gain outpaced the roughly 14 percent increase the year before.
Nationwide, the median home value climbed 5.1 percent in August — up from 4.6 percent a year earlier.
A slowdown in home-price appreciation would be a healthy change, said Patrick Carlisle, chief marketing analyst at Paragon Real Estate Group in San Francisco.
“The cooling of a desperately overheated housing market to something closer to normal is not bad news,” he said. “The huge increases in housing prices have created enormous social stresses in the area, as well as leading some of our local high-tech companies and would-be startups to look at locating elsewhere.”
The overheated markets are pushing some buyers to shift their house hunt to the suburbs, fueling faster appreciation in outlying areas than in the neighboring boom cities, Zillow data show. In the Denver suburb of Arvada, for instance, the median home value in August soared 13 percent from a year earlier. It jumped almost 14 percent in Englewood, a short light-rail ride from downtown.
Ben and Nicole Irwin began looking for homes in the area last year and soon discovered the Denver properties they liked cost $500,000 to $600,000. The couple ended up paying $390,000 for a three-bedroom house in Arvada, where they were attracted to good public schools, a charming old town and the city’s proximity to the Red Rocks Amphitheatre, a popular outdoor concert venue.
“To get the size house we wanted, it would have been out of our price range,” said Ben Irwin, a 37-year-old communications manager for the city of Boulder. “We found that we could get those kinds of houses for $150,000 to $200,000 less” outside of Denver.
In Austin, where home prices are higher but sales are down, surrounding towns “have seen incredible appreciation” as buyers seek out affordability in the city’s outskirts, said Dave Murray, a broker at DMTX Realty.
Home prices are continuing to rise; now mere basis points below the all-time highs for prices, set in 2006.
According to the latest data released Tuesday by S&P Dow Jones Indices and CoreLogic, the S&P CoreLogic Case-Shiller U.S. National Home Price NSA Index, which covers all nine U.S. census divisions, reported a 5.3% annual gain in August, up from 5% in July.
Per the report, the S&P CoreLogic Case-Shiller U.S. National Home Price NSA Index is currently at 184.42, which is within 0.1% of its record high of 184.62, set in July 2006.
The increase in August represents the 52nd consecutive month of positive gains.
According to the Case-Shiller report, the 10-City Composite posted a 4.3% annual increase, up from 4.1% in July, while the 20-City Composite posted a 5.1% annual increase, up from 5.0% in July.
The report states that Portland, Seattle and Denver turned in the highest year-over-year gains among the 20 cities for the seventh consecutive month, with year-over-year increases of 11.7%, 11.4% and 8.8%, respectively.
“Supported by continued moderate economic growth, home prices extended recent gains,” said David Blitzer, managing director and chairman of the Index Committee at S&P Dow Jones Indices.
“All 20 cities saw prices higher than a year earlier with 10 enjoying larger annual gains than last month,” Blitzer continued. “The seasonally adjusted month-over-month data showed that home prices in 14 cities were higher in August than in July.”
Blitzer also noted that other housing data including sales of existing single-family homes, measures of housing affordability, and permits for new construction also point to a “reasonably healthy housing market.”
Additionally, the Case-Shiller report showed that before seasonal adjustment, the National Index posted a month-over-month gain of 0.5% in August.
The report also showed that both the 10-City Composite and the 20-City Composite posted a 0.4% increase in August.
After seasonal adjustment, the National Index recorded a 0.6% month-over-month increase, and both the 10-City Composite and the 20-City Composite reported 0.2% month-over-month increases.
The National Association of Home Builders’ (NAHB) Multifamily Production Index (MPI) dropped three points to 50 in the second quarter of 2016 (Exhibit 1). This is the 18th consecutive reading of 50 or above, which means that more builders and developers report that current conditions in the apartment and condominium market are improving than report conditions are getting worse.
Exhibit 1: NAHB Multifamily Production Index (MPI) and Multifamily Starts (in thousands)
The MPI is comprised of three key sub-components: construction of low-rent units, market-rate rental units and “for-sale” units, or condominiums. Low-rent units decreased two points to 52 in the second quarter, while market-rate rental units dropped five points to a level of 53, and for-sale units fell three points to 45.
The NAHB Multifamily Vacancy Index (MVI), which measures respondent perceptions of vacancies in the multifamily housing market, increased three points to 42, with higher numbers indicating more vacancies (Exhibit 2). However, the MVI is still below the breakeven point of 50, which means that more respondents perceived a reduction in vacancy rates than perceived an increase.
Exhibit 2: NAHB Multifamily Vacancy Index (MVI) and 5+ Rental Vacancy Rate
After peaking at 70 in the second quarter of 2009, the MVI improved consistently through 2010 and has been fairly stable since 2011. Historically, the MVI has shown to be a leading indicator of Census multifamily vacancy rates, which is displayed in Exhibit 2 as well.
Imagine you are considering working with a potential client who seems apprehensive and possibly needy. Imagine you get the project. What might you wish you had considered and/or asked the potential client or yourself before deciding to work with them?
Here are some suggestions:
Why are these folks good clients for your company?
Over time, all companies have at least a gut level feel for what is a good fit regarding clients. Use that filter all the time. Ignoring it can put you, your people, and the company through thankless grief.
Why do these folks think we are the right contractor to work with?
Ask this question early on. The worst case is they expect something from your company that you simply can’t deliver. Better to find that out as soon as possible.
Have they been through a remodeling project in the past? If so, how did it go?
If they have never experienced the challenges involved in being a remodeling client, you are likely to be viewed negatively if you work for them. There are simply so many things that can go wrong during all phases of the planning and the actual remodeling.
If they have been through a remodeling project and it did not go well, question them thoroughly about why they think that happened. If all they do is blame the contractor then get clear about what they think the contractor did wrong. If you think the potential client was the real problem, not the contractor, then don’t work for them!
What are the client’s expectations about the process, in general? Do those expectations align with your company’s idea of what reasonable expectations are?
If so, great. But if not, what are the specific gaps? Are the gaps large or small? It’s better find out sooner than later. There is the distinct likelihood that they don’t align with yours. Talk it through. If there is not a meeting of the minds, refer another remodeler who might be a better fit.
Can the client listen to what your company says? Will they allow your company to be in control?
If they won’t listen now, they likely won’t listen when it all hits the fan. If you can’t be in control you will rue the day you decided to work with them.
Housing Starts in the United States is expected to be 1150.00 Thousand by the end of this quarter, according to Trading Economics global macro models and analysts expectations. Looking forward, we estimate Housing Starts in the United States to stand at 1230.00 in 12 months time. In the long-term, the United States Housing Starts is projected to trend around 1280.00 Thousand in 2020, according to our econometric models.
United States Housing Starts Forecasts are projected using an autoregressive integrated moving average (ARIMA) model calibrated using our analysts expectations. We model the past behaviour of United States Housing Starts using vast amounts of historical data and we adjust the coefficients of the econometric model by taking into account our analysts assessments and future expectations. The forecast for – United States Housing Starts – was last predicted on Tuesday, July 19, 2016.
And while these changes are mostly focused on the technology aspect of buying a home, the mortgage product side is changing just as much.
In a recent interview with HousingWire, Mat Ishbia, CEO of United Wholesale Mortgage,explained why 3% down mortgages are going to be the new normal.
What’s more, in order to help educate new borrowers on mortgages today, David Gunn, mortgage sales effectiveness director for Fifth Third Mortgage, shared five of the biggest mistakes consumers make when buying homes, along with tips to avoid them:
1.Passing up help.
There are more than 200 federal, state and local programs to assist consumers to make their down payments or pay their mortgage closing costs. Some programs are only for first-time homebuyers, others could be for veterans.
Tip:Make sure to research programs in your region. “It’s hard to research and navigate programs alone,” Gunn said. “They vary from city to city, and might only be available during certain times of the year.”
2. Believing you make too much money to qualify.
Some buyers think assistance programs are only for low-income households. Some programs assist first-time homebuyers no matter their income levels depending on where they purchase a home.
Tip:Look at programs options. For example, Gunn notes that they have a program that helps pay closing costs on homes purchased in designated low-income areas with loans financed through Fifth Third Mortgage, no matter the consumer’s income.
3. Thinking you don’t have enough money for a down payment.
The Freddie Mac Home Possible Advantage Mortgage allows homebuyers to put down 3%. This will allow the majority of borrowers to enter this program with no cash out of pocket for the down payment.
Tip: Work with your mortgage loan originator to see which programs can help you qualify. “People tell us they can’t afford a house because of the down payment,” Gunn said. “It’s the most common barrier to buying a home. But we find that a buyer needs less money than she thinks to get into a home with a monthly payment that meets her budget.”
4. Clinging to outdated ideas on closing timelines.
Closing times are lengthening. And that can be a good thing. The Know Before You Owe rule enacted by the Consumer Financial Protection Bureau went into effect, and has extended the timeline on most home closings. The rule created documents that detail how much a buyer will pay for closing costs, how much each monthly payment will be, and how payments or rates could potentially adjust. Any change to these terms must be given to borrowers with 3 days to review, which is different from the past when changes could be made to the loan before and during closing without a wait.
Tip:“Be patient,” Gunn said. “And know that all of the changes are made to help you better understand the mortgage terms and help you find the best loan for you.”
5. Relying on a one-size- fits-all loan.
Many homebuyers likely had a 30-year-loan on their last house. But it’s not the default loan anymore. For each purchase, loan originators look at the buyer’s financial situation and goals, and might suggest a loan with a shorter term.
Tip:Work through the financials on several options with your loan originator to see what puts you in the best financial position to meet your family’s goals. “It might be better to get a lower term loan now to build equity, and then move into something bigger in a few years,” Gunn said. “We want what is right for you.”