30-year fixed-rate mortgage (FRM) averaged 3.82 percent with an average 0.5 point for the week ending August 31, 2017, down from last week when it averaged 3.86 percent. A year ago at this time, the 30-year FRM averaged 3.46 percent.
15-year FRM this week averaged 3.12 percent with an average 0.5 point, down from last week when it averaged 3.16 percent. A year ago at this time, the 15-year FRM averaged 2.77 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. “The 10-year Treasury yield fell to a new 2017-low on Tuesday. In response, the 30-year mortgage rate dropped 4 basis points to 3.82 percent, reaching a new year-to-date low for the second consecutive week. However, recent releases of positive economic data could halt the downward trend of mortgage rates.”
The Armonk Lions Club is proud to invite you to our
2017 Fol-de-Rol and Country Fair
The Armonk Lions Club is pleased to announce the 43rd Annual Fol-de-Rol, taking place June 8, 9, 10 and 11 at Wampus Brook Park, Armonk NY. Please join us and support the charitable work we do in our community and worldwide. June 8 and 9 – Rides only, 6-10 PM; Saturday June 10 11 AM-10 PM and Sunday June 11 Noon-5 PM. See www.armonklions.org for more information.
Armonk Lions support our local fire, police and NC4 first responders; summer camp programs for children with vision impairments and diabetes; community medical and emergency services; and disaster relief around the world through Lions Clubs International Foundation. This year our fund-raising effort will support Puppies Behind Bars (more details at https://usserviceanimals.org/blog/service-dog-for-anxiety), a program which trains inmates at the Bedford Women’s prison to raise and train service dogs, which are then paired with our returning military veterans who need support and companionship.
to visit our Raffle River site and purchase raffle tickets. This site is safe and secure and allows you to pay by credit card. If you would prefer to mail us a check and receive paper raffle tickets, please mail your donation to:
Armonk Lions Club Inc. – Raffle PO Box 211 Armonk NY 10504
and we will send your raffle tickets. The drawing is held on Sunday June 11 at 5 PM, and the prizes are listed on the website.
If you have any questions, or if you would like to volunteer to help us at the Fol-de-Rol, please reply to this email address and we will contact you directly. Thank you very much for your ongoing support of this Armonk tradition!
Sincerely, Armonk Lions Club Doug Martino, President Anthony Baratta, Fol-de-Rol Chairman Michael Rosenman, Treasurer
Where: Wampus Brook Park, Armonk NY
Thursday June 8, Rides 6-10 PM Friday June 9, Rides 6-10 PM Saturday June 10, Vendors 10 AM-10 PM; Rides 11 AM-10 PM Sunday June 11, Vendors 11 AM-5 PM; Rides Noon-5 PM
Activity levels and selling prices for the domestic real estate market last peaked in 2005, two years after the prior peak of the economic cycle (i.e., GDP) in 2003 (at 4.4%). Thus, by preceding the 2008-09 recession, this most recent national housing bust set a precedent as the first in recorded history in which housing helped lead the economy down.
And when economic activity bottomed in early-’09 (March GDP fell 4.9%), domestic housing remained at stubbornly low levels for a few more years.
Sources: US Dept. of Labor (BLS), National Association of Realtors (NAR), US Bureau of Census.
Note: sales of existing homes account for >90% of all homes sold in the US, up from ~85% pre-crisis.
Even today, more than a decade after the start of housing’s precipitous decline, total US sales volumes (including new homes) remain nearly 30% below peak levels, and over 15% below the 2000-’05 average.
It is a different world post-crisis / housing bust, and residential real estate’s demographic hurdles remain high. For example, baby boomers, many of whom live on fixed income payments, are only beginning to downsize or move into managed care facilities.
The more pervasive demographic challenge to home-ownership rates – now below 64%, vs. more than 69% in 2004 – is posed by ‘echo boomers’, in their 20’s and 30’s. Born in the 80’s and 90’s these younger demo’s that nevertheless still account for the bulk of entry-level home purchases, more often favor renting over buying, a contrast to their parents and grandparents.
Thus, Entry-level home-buying now represents only about one-third of housing activity, down solidly from pre-crisis historical levels averaging 40%. First-time buying has, however, slowly improved from cycle lows in the high 20%’s, and in my opinion has plenty of runway ahead.
A couple quick observations. The tight relationship between labor force participation and home-ownership, both of which appear to be bottoming or at least steadying. And, more importantly, the nearly six percentage point drop in home-ownership since 2004, and the comparable decline in entry level home purchases from most past averages.
This paucity of first-time purchases, of relatively inexpensive homes, in fact overstates housing’s recent strength and helps underscore the housing industry’s lack of breadth. Case-Shiller, a commonly used barometer of domestic house prices (only), echoes later price charts, and indicates average selling prices (ASP’s) are still below levels more than 10 years ago.
Source: S&P Corelogic Case-Shiller.
It’s About Jobs (Mainly)
The most important driver for housing demand is job growth. Moreover, it’s the absolute number of jobs created, rather than the unemployment rate, that housing most depends.
The 2017 YTD figure is annualized, and based on latest figures: April’s jobs and March’s home sales.
Indeed, existing home sales have tracked changes in jobs, but in direction – rather than in magnitude. Since housing peaked in late-2005, the US economy has added roughly 11 million new jobs, yet housing activity remains solidly below past levels, as we’ll talk more about. At some point new jobs will more accurately translate into similar increases in home sales.
Confidence Is Key
Consumer confidence is the next most important driver of home sales, after employment. Multiple cycles of empirical data bear this out.
Consumer sentiment based on annual averages of month-end figures
Sources: University of Michigan, US Dept. of Labor (BLS), NAR
Despite steady improvements in consumer confidence since its 2008 trough, the figure, though still steadily upward trending, remains below it base level (100) just as home sales volumes track below their ‘normalized’ levels.
To paraphrase Jamie Dimon, CEO of JP Morgan Chase, the country’s #2 mortgage originator (after Wells Fargo), consumer confidence is the ‘secret sauce’, to housing.
Interest Rates Matter, Though Less Than Is Assumed
Of course rates matter for housing: a single percentage point decline in mortgage rates buys a 15% more house (over 30 years, ceteris paribus). But, contrary to conventional beliefs, empirical evidence suggests interest rates rank behind consumer confidence in terms of importance for the industry.
Although it’s the third leg of the proverbial stool supporting home sales, (mortgage) rates are the factor that most directly benefit from a Federal Reserve Board that has been decidedly ‘dovish’, pursuing relatively easy monetary policy these past 35 years or so.
Yet as investors (and borrowers) handicap a potential increase in short-term rates by the central bank in its next (NYSEARCA:JUNE) meeting, we tend to overstate the impact of mortgage rates on housing.
Favorable borrowing rates had a mitigating effect on the housing ‘bust’. The Fed’s move to zero short-term rates, which lasted a full seven-years (Dec. ’08 – Dec. ’15) has thus far had a similarly benign impact on the subsequent recovery.
Their impact (low rates) has been partly muted by a number of factors, mainly mortgage originators’ basic business decisions (i.e., risk / reward), stricter home-lending regulations, the disappearance of independent mortgage brokers (e.g., Washington Mutual, Countrywide, etc.) and the reduced activity among government sponsored mortgage securitizers (e.g, Fannie Mae).
Yet were it not for mortgage rates following 10-year Treasurys to just over 2% with the launch of quantitative easing (late-2008), financial history might have been much different: One can only speculate on the further damage to home prices, mortgages (especially adjustable), securitizations, etc. that would have occurred had the Federal Reserve not stepped in with zero rates and levered its balance sheet by $4 trillion.
The American housing stock continues to age, especially since residential construction grew at a modest pace after the Great Recession. The median age of owner-occupied housing increased to 37 years in 2015 from 31 years a decade ago. This housing stock aging trend signals a growing market for remodelers, as older structures normally require additional remodeling and renovations. It also implies a rising demand for new construction over the long run.
As of 2015, more than half of the US owner-occupied housing stock was built before 1980, with around 38% built before 1970. Owner-occupied homes constructed after 2000 make up 19% of the owner-occupied housing stock, and homes built after 2010 account for only 3% of the owner-occupied housing stock.
The share of housing stock built 45 year ago or earlier increased significantly from 32% in 2005 to 38% in 2015. However, the share of new construction built within past 5 years declined to 3% in 2015, compared to 9% in 2005.
According to the 2015 ACS, homeowners with higher family incomes tend to live in the newer residential units. In 2015, the average household income for owner-occupied homes built after 2010 was $ 121,577, which was higher than $86,328 average family income for those living in homes built before 1969. Moreover, younger homeowners are more likely to live in newer homes. Homes built after 2010 are headed by homeowners with a median age of 44 years, compared to homes built prior to 1969 and owned by householders with a median age of 58. It implies a growing market for renovations allowing older homeowners to age in place.
A tax-reform proposal by House Republicans that would make the mortgage-interest deduction moot for most Americans is starting to set off alarm bells across the housing, lending and real estate industries.
The right to take a deduction for interest paid on your mortgage has always been a political third rail, and the reforms introduced last June would not directly eliminate the write-off.
Instead, the Better Way tax-reform “Blueprint” of Speaker Paul Ryan and his cohorts would make the deduction irrelevant for about 95 percent of homeowners. By “doubling the standard deduction that taxpayers receive…most people would have no need to take the mortgage interest deduction,” according to National Mortgage News.
The specific language in the Better Way says: “This Blueprint will preserve a mortgage interest deduction for homeowners. …For those taxpayers who continue to itemize deductions, no existing mortgage will be affected by any changes in the tax code. Similarly, no changes will affect re-financings of existing mortgages. But just as importantly, because of the other provisions included in the new tax system, far fewer taxpayers will choose to itemize deductions, with the vast majority of taxpayers finding they are better off by taking advantage of the larger, simpler standard deduction instead.”
Before the election, when it did not look as though Republicans would control both houses of Congress and the White House, the future of the Blueprint seemed far from certain, and even given the GOP sweep in Washington, it is nowhere near a done deal.
But National Mortgage News says the National Association of Homebuilders, the Mortgage Bankers Association and the National Association of Realtors (NAR) have all woken up to what they see as an “indirect threat” to the mortgage-interest deduction.
National Mortgage News quoted Lawrence Yun, chief NAR economist, as a warning against any moves that might derail the housing recovery. “Even a discussion of mortgage interest deduction is counterproductive right now,” he said.
A spokesperson for the NAR said Yun was unavailable to expand on that view given that under the Blueprint, most homeowners would still get the same break on their taxes.
But homebuilders, lenders and realtors may have more to worry about than House Republican attempts to neuter the mortgage-interest deduction.
In a CNBC interview on Nov. 30, Steve Mnuchin, Trump’s nominee for Treasury Secretary said in the context of a discussion on tax reform: “…We’ll cap mortgage interest but allow some deductibility.”
CNBC real estate reporter Diana Olick explained later that “The mortgage interest deduction is already capped at loans up to $1 million if you’re married and filing jointly and at $500,000 if you file separately. That said, the median price of a home in the United States is just more than $200,000, so not a lot of people make it to that cap.”
But, she added, the mortgage-interest deduction is seen as a key selling point for the housing industry and therefore is “a hot potato that lawmakers really don’t want to touch.”
Home builder confidence surged in September to match its highest reading in a decade, an industry group said Monday.
The National Association of Home Builders’ index jumped six points to 65 in September. That was the highest since last October, which was the highest since the height of the housing boom. Economists surveyed by MarketWatch had forecast a 60 reading.
The gauge of current sales conditions soared 6 points to a cycle high of 71 and the index of future sales jumped 5 points, also touching 71. The index that tracks buyer traffic rose four points to 48. It hasn’t topped the neutral 50 mark since mid-2005.
In a release, NAHB noted that builder sentiment is being bolstered by the presence of “more serious buyers.”
U.S. new-home sales surged to the highest in nearly eight years in July as builders picked up the pace while buyer demand remained robust.
Sales of newly constructed homes rose 12.4% to a seasonally adjusted annual rate of 654,000, the Commerce Department said Tuesday. That was 31.3% higher than a year ago, and easily beat forecasts of a 581,000 pace from economists surveyed by MarketWatch.
June’s figure was revised downward slightly, to 582,000.
The median sales price in July was $294,600, 0.5% lower than year-ago levels. As sales soared, supply dwindled to 4.3 months’ worth of homes at the current pace.
On Tuesday, luxury home builder Toll Brothers TOL, +3.27% reported double-digit profit and revenue growth for its second quarter. “The solid economy and employment picture are also benefiting our target customers,” executive chairman Robert Toll told analysts.
Analysts and economists have waited to see stronger activity from home builders as the economic recovery drags on and the job market strengthens. Builders have been wary of ramping up construction to pre-crisis levels, but with demand running so much hotter than inventory, and new construction favoring higher-end customers, the housing market has struggled to find equilibrium.
Freddie Mac (OTCQB: FMCC) today released the results of its Primary Mortgage Market Survey® (PMMS®), showing fixed mortgage rates resuming their decline and aiding home buyer affordability amid a tight supply of for-sale homes in many markets.
30-year fixed-rate mortgage (FRM) averaged 3.62 percent with an average 0.6 point for the week ending February 25, 2016, down from last week when it averaged 3.65 percent. A year ago at this time, the 30-year FRM averaged 3.80 percent.
15-year FRM this week averaged 2.93 percent with an average 0.5 point, down from last week when it averaged 2.95%. A year ago at this time, the 15-year FRM averaged 3.07 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 theDefinitions. Borrowers may still pay closing costs which are not included in the survey.
Quote Attributed to Sean Becketti, chief economist, Freddie Mac.
“Yields on the 10-year Treasury continued their downward trend this week after a small rally the previous two weeks. The 30-year mortgage responded, falling 3 basis points to 3.62 percent. Since the beginning of 2016, 30-year rates have fallen almost 40 basis points helping housing markets sustain their momentum into this year. Earlier this week, the National Association of Realtors announced existing home-sales were up 4 percent month-over-month in January and up 11 percent from last year.”
The Pending Home Sales Index increased for the fifth straight month to the highest level in over nine years. The Pending Home Sales Index (PHSI), a forward-looking indicator based on signed contracts reported by theNational Association of Realtors (NAR), increased 0.9% in May to 112.6, and climbed to 10.4% above the May level a year ago.
Regionally, the May PHSI increased 6.3% in the Northeast and 2.2% in the West. However, the May PHSI declined slightly by 0.6% in the Midwest and 0.8% in the South. Year-over-year, the PHSI was up 13.0% in the West, 10.6% both in the Northeast and South, and 7.8% in the Midwest.
Last month we reported that the contract rate on new home loans dipped below 4 percent in January, based on data released by the Federal Housing Finance Agency (FHFA). In February, the rate continued to decline, from 3.92 to 3.79 percent, as did the average initial fees and charges on the loans, from 1.18 to 1.11. In both cases, the numbers are the lowest they’ve been since mid-2013.
As a result, the average effective interest rate (which amortizes initial fees over the estimated life of the loan) on conventional mortgages used to purchase newly built homes also dropped below 4 percent (going from 4.05 to 3.91) in February—the first time in 20 months the effective rate has been that low.
Meanwhile, both the average size of conventional mortgages used to purchase new homes and the average price of the homes, have been drifting upward (subject to normal monthly volatility) and these trends continued in February. The average loan amount increased from $331,700 to $338,600, while the average new home price increased from $440,300 to $449,400. In each case, the February dollar figure represents a record high.
This information is based on FHFA’s Monthly Interest Rate Survey (MIRS) of loans closed during the last five working days in February. For other caveats and details about the survey, see the technical note at the end of FHFA’s March 26 news release.