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FIRST TEAM’S WEEKLY MORTGAGE WATCH (MARCH 25TH, 2018) THIS WEEK HIGHLIGHTS THE FOLLOWING UPDATES:
- Mortgage rates may be moving back into neutral after last week’s meeting of the Federal Reserve.
- As expected, the Fed raised its interest rates which had little impact on mortgage rates.
- The bigger news from the gathering was that the Fed Governors’ predictions continue to show a split on how many rate increases to expect this year. Markets are now betting on only two more rate increases this year.
- While the economy started 2018 with a bang, it appears to have significantly decelerated, potentially to under 2%. This makes the probability of inflationary flare-ups less likely and could help keep rates flat for a while.
- However, even if the economy does shift into a lower gear, the potential of a trade war, with China scaling back US Treasury purchases, could push interest rates upward.
- Final GDP numbers for the last quarter of 2017 are due this week. With the reduced concerns around accelerating growth, a reading of less than 2.2% could help push mortgage rates downward.
- However, political news could push rates either way, especially if we see more threats of a trade war.
ADULTING IS INHIBITING HOUSING FOR YOUNGER FOLKS
According to the latest from Freddie Mac, the housing market is being held back to some degree by the financial challenges facing younger generations. Since 2000, young adults’ average annual expenditure has climbed by 36%, with both housing and healthcare more than doubling. Add in skyrocketing education costs and debt, coupled with lower labor market participation rates, and young people are having a more challenging time accessing the housing market.
FIRST TEAM’S WEEKLY MORTGAGE WATCH (MARCH 4TH, 2018) THIS WEEK HIGHLIGHTS THE FOLLOWING UPDATES:
- While rates stepped higher again last week, they spent part of the week looking as if they might drive even further upward.
- In his first testimony to Congress, the new Fed Chair, Jay Powell, expressed that he is increasingly optimistic that the US economy will continue to experience strong growth, and that he is confident that inflation will hit the Fed’s target level relatively soon.
- Coupling this with a strong reading from the ISM Manufacturing Index, and Consumer Confidence returning to levels not seen since 2000, rates could have moved even higher.
- However, comments from the President about the potential of starting a trade war dampened market enthusiasm in both stocks and bonds.
- This week could end up focused on the potential for a trade war. The likely result of one could be higher prices.
- As markets are already concerned about inflation, the more aggressive stance that the US takes against imports, the more likely that rates may rise. However, if the details are less aggressive than feared, rates might retreat. Of course, a strong employment report could change that.
HOME PRICES PASS HISTORIC PEAK LEVELS
In the third quarter of last year, average home prices passed their peak level from 2006. The Great Recession saw home prices across the nation fall by an average 33%. However, the rebound is not evenly distributed. Illinois, Nevada, Florida, and Arizona still remain below their historic highs, and almost 2.5 million homes are still underwater. Other states faired better, like North Dakota which only dropped 2% during the recession and is now up 48% since 2006. > Historic Peak Levels
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FIRST TEAM’S WEEKLY MORTGAGE WATCH (JANUARY 28TH, 2018) THIS WEEK HIGHLIGHTS THE FOLLOWING UPDATES:
- Market momentum and positive economic news continue to press interest rates higher, with little relief on the horizon.
- While the first GDP estimate for the final quarter of 2017 did come in at 2.6%, which was lower than expected, markets shrugged it off.
- We still have two more estimates before the final reading, and other economic data point to upward revisions in the offing.
- Inflation data in the GDP report also point to firming pressures that may push the Fed to more rate increases this year.
- This week is jam-packed with economic news and data.
- Changes in language are expected in the Fed’s policy statement that would push odds of a March rate hike to near 100%.
- While chances of an increase this month are low, an unexpected hike by the Fed would certainly drive all interest rates even higher.
- The ISM Manufacturing Index is expected to slip, but as long as the slip is less than 1.0 point, the impact will be muted.
- Friday’s Employment report could easily send rates even higher if November’s new jobs number is adjusted upward and December’s comes in over 180,000.
ARE OLD BUILDINGS WORTH PROTECTING?
The January 10th demolition in Whitefish, MT of a building designed by architecture legend, Frank Lloyd Wright, highlights the tension between owners and preservationists. The tension often balances between the rights of owners, perceived historical value, potential market value of the land upon which the building sits, and the cost of maintaining or renovating. Unbeknownst to many, even a building on the National Register of Historic Places can be demolished.