Home Loan Rates Post First Decline of 2018

Following nine consecutive weeks of increases, borrowers finally got some relief this week with mortgage rates. The 30-year fixed-rate mortgage posted its first week-over-week decrease of 2018.

“Tuesday’s Consumer Price Index report indicated inflation may be cooling down; headline consumer price inflation was 2.2 percent year over year in February,” says Len Kiefer, Freddie Mac’s deputy chief economist. “Following this news, the 10-year Treasury fell slightly. Mortgage rates followed.”

Freddie Mac reported the following national averages for the week ending March 15:

  • 30-year fixed-rate mortgages: averaged 4.44 percent, with an average 0.5 point, dropping from last week’s 4.46 percent average. Last year at this time, 30-year rates averaged 4.30 percent.
  • 15-year fixed-rate mortgages: averaged 3.90 percent, with an average 0.5 point, dropping from last week’s 3.94 percent average. A year ago, 15-year rates averaged 3.50 percent.

Source: Freddie Mac

Household Net Worth Reaches Record High

Americans are feeling richer. Household net worth neared $100 trillion in the final quarter of last year, falling into record territory, according to new data released by the Federal Reserve on Thursday. Rising stock markets and property prices were attributed to the jolt in the fourth quarter. (Household net worth is the value of all of a consumer’s assets, like stocks and real estate, minus any liabilities like mortgage and credit card debt.)

Household net worth increased more than $2 trillion last quarter to a record $98.7 trillion in the final three months of last year, according to the report. Households in the U.S. saw their net worth increase to nearly seven times their disposable personal income in 2017.

More at source: “U.S. Household Net Worth Pushes Further Into Record Territory,” The Wall Street Journal (March 8, 2018) [Log-in required.] and “Stock Market Lifts U.S. Household Wealth to $98.7 Trillion,” The Associated Press/USA Today (March 8, 2018)

Survey: Home Owners Worried, Buyers Excited

Consumer sentiment is following an unusual trend for a seller’s market: Home buyers are upbeat, but homeowners are less so, according to ValueInsured’s latest quarterly survey of about 1,600 consumers. Why the divergence between buyers and owners? Some homeowners may feel stuck, while buyers are anxious to jump into real estate before home prices and mortgage rates rise further.

Fifty-eight percent of homeowners surveyed say they want to sell but are holding off because they don’t want to purchase again at today’s higher prices. Fifty-nine percent of owners say they believe buyers in their area are overpaying for a home, according to the survey.

Buyers still have plenty of concerns, such as saving for a down payment and eroding housing affordability, particularly in the nation’s hottest housing markets. Some say they are ready to make some sacrifices to afford their first home.

We suggest you view charts and data at: ValueInsured Modern Homebuyer Survey

Hispanics: ‘Helping Home Ownership Rates’

For the third consecutive year, the Hispanic population is driving growth in homeownership, according to the latest State of Hispanic Homeownership Report. Hispanics’ rising populations and household formation, as well as their increased workforce participation, is behind the uptick, according to the report by the Hispanic Wealth Project and National Association of Hispanic Real Estate Professionals.

The Hispanic population in the United States increased by 1 million last year and accounted for 51 percent of U.S. population growth. Hispanics increased their homeownership rate slightly from 46 percent to 46.2 percent, or a net increase of 167,000 new-owner households in 2017. Hispanics boasted the highest workforce participation rate among any other ethnic or racial demographic at 66.1 percent, according to the report.

The three biggest obstacles facing Hispanic homeownership: Lack of inventory, recent natural disasters, and the nation’s immigration policy, according to the report.

Source: National Association of Hispanic Real Estate Professionals

Mortgage Applications Finally Edge Up Again

A brief pause in the rise of interest rates helped buoy mortgage application volume last week, following several weeks of declines. Total mortgage applications for home purchases and refinancings rose 2.7 percent compared to the previous week, the Mortgage Bankers Association reported Wednesday. Applications, however, are 2.4 percent lower than a year ago.

The bulk of last week’s increase was driven by home buyers. Mortgage applications to purchase a home rose 6 percent during the week, and are 3 percent higher than a year ago, the MBA reports.

Meanwhile, refinance applications dropped 1 percent for the week and are down nearly 10 percent from a year ago. Interest rates were lower a year ago, and refinance applications tend to be more rate-sensitive.

Source: “Mortgage Applications Rise 2.7 Percent as Rates Take a Brief Breather From Surge,” CNBC (Feb. 28, 2018)

Mortgage Rates Still Climbing, Not Fading!

The 30-year fixed-rate mortgage shows little signs of stopping its gradual move upwards week to week. This marks the seventh consecutive week for higher mortgage rates, the highest since April of 2014, and rates continue to be at a four-year high.

“Mortgage rates have followed U.S. Treasury’s higher in anticipation of higher rates of inflation and further monetary tightening by the Federal Reserve. Following the close of our survey, the release of the [Federal Open Market Committee] minutes for February 21, 2018, sent the 10-year Treasury above 2.9 percent. If those increases stick, we will likely see mortgage rates continue to trend higher.” says Len Kiefer, Freddie Mac’s chief economist.

Freddie Mac reports the following national averages for the week ending Feb. 22:

  • 30-year fixed-rate mortgages: averaged 4.40 percent, with an average 0.5 point, rising from last week’s 4.38 percent average. Last year at this time, 30-year rates averaged 4.16 percent.
  • 15-year fixed-rate mortgages: averaged 3.85 percent, with an average 0.5 point, increasing from last week’s 3.84 percent average. A year ago, 15-year rates averaged 3.37 percent.

Source: Freddie Mac

Home Equity Loans allow Interest Deduction?

Taxpayers can continue to deduct the interest they pay on home equity loans when the funds are used for home improvements, the IRS confirmed in a statement on Wednesday. The status of home equity deductions has been in question following the limits on the mortgage interest deduction included in recent tax reform legislation passed in December.

In its statement, the IRS said despite the restrictions on mortgages, taxpayers can, in most cases, still deduct interest on home equity loans, a home equity line of credit, or a second mortgage.

The tax law,  the interest on a home equity loan used for building an addition to an existing home would generally be deductible. But interest on the same loan used to pay personal living expenses, like credit card debt, would not be.

The IRS offered scenario’s and details in describing how the new tax law works in these reference sources: IRS; “IRS Says Interest on Home Equity Loans Can Still Be Deducted,” Accounting Today (Feb. 21, 2018); National Association of Home Builders

‘Tiny Homes’ May Have a Wider Buyer Pool

A new survey confirms that consumers are definitely intrigued by smaller homes, often described as less than 600 square feet. More than half of adults recently surveyed–or 53 percent—said “yes” or “maybe” when asked if they would ever consider the possibility of buying such a small home, according to a recent study by the National Association of Home Builders. That means a majority of adults would consider moving into a tiny home at some point in the future, the NAHB notes.

Younger generations tend to find tiny homes more appealing than older age groups. More than half of millennials and Generation X members said they were open to the idea of a tiny home. However, only 45 percent of baby boomers and 29 percent of seniors said they’d be willing to entertain the idea.

But local zoning laws may curtail the prevalence of just how big the tiny-home movement gets. However, there has been a recent momentum among some local jurisdictions to relax some of those restrictions.

Source: “Tiny Homes Have Potential Buyers,” National Association of Home Builders’ Eye on Housing blog (Feb. 7, 2018)

Is Market Volatility Giving Buyers Cold Feet?

It seems a 1,000-plus point drop in the stock market last week mixed with rising interest rates may have been enough to give homeowners and buyers the jitters. Overall mortgage applications last week dipped 4.1 percent week over week on a seasonally adjusted basis, the Mortgage Bankers Association reported Wednesday.

Broken out, mortgage applications for home purchases plunged 6 percent last week. However, that number is still 4 percent higher than last year. Home buyers complain of weakened affordability and lengthier home searches in research released this week by the National Association of Home Builders. Refinance applications dipped 2 percent last week, but they remain 2.8 percent higher than the same week a year ago.

Mortgage rates continue to move upwards. Last week the 30-year fixed-rate mortgage rose to its highest rate since January 2014, averaging 4.57 percent, the MBA reported.

Source: “Stock Jitters and Higher Interest Rates Drive Weekly Mortgage Applications Down 4.1%,” CNBC (Feb. 14, 2018)

Don’t Panic Over Stock Market Mayhem

The housing market likely won’t be deeply affected by the sharp decline in stocks over the last two days because underlying economic fundamentals remain strong, says Lawrence Yun, chief economist for the National Association of REALTORS®. Jobs are being created, workers are seeing wage gains, and there’s no recession on the horizon.

The Standard & Poor’s 500 stock index fell by more than 4 percent Monday, and the Dow Jones Industrial Average declined nearly 5 percent. As of late Tuesday, the S&P was down by almost 1.2 percent since the first of the year, although that comes after a year of double-digit gains.

One metric to watch is long-term bond rates, which historically have gone up as stocks go down. That link, however, hasn’t been as strong in the past few years. Investors tend to increase demand in bonds as an alternative to stocks, driving up yields, which can lead to higher mortgage rates. Since the start of the year, the average rate on a 30-year mortgage has risen, from 3.95 percent to 4.22 percent, according to Freddie Mac. That’s still low by historical standards.

—REALTOR® Magazine