Economic Commentary Consumer & Realtor Corner: This news is designed to assist you by providing information that will be helpful to your existing and previous clients as well as other industry related contacts. Feel free to forward this to your database, post on blogs, websites and more. The Party Begins – America is Refinancing! American homeowners are quickly fulfilling their New Years Resolution to refinance their home loans. Residential finance applications rose nearly 50% in one week in January, the strongest weekly gain since November 2008, according to the Mortgage Bankers Association, which tracks housing market data. Its a closely watched metric because applications are a key indicator of not just the real estate market, but the overall U.S. economy, says Diane Swonk, chief economist at Mesirow Financial. Were looking for housing to come back this year, Swonk says. Theres no other single change in the economy other than home buying that has such a large effect on spending. Rates are at their lowest levels since May 2013. Many homeowners rushed to refinance at these rates. People refinancing their home loans made up over two-thirds of the application surge, the MBA reported. In addition, the President announced that the Federal Housing Administration is lowering their mortgage insurance fees. The low rates are also creating more jobs. Home-building employment increased 7% in December from a year ago. Looking ahead, Swonk sees 2015 as the year that many Millennials, long stuck with poor job prospects, will become home buyers. We are at a tipping point where were finally going to see some of those Millennials leave their parents homes, grow some wings and leave the nest, Swonk says. Theyll either rent or buy, but the arbitrage is really to buy. Source: CNN/Money What a great time to purchase or refinance a home. Contact us to get the process started. Wild January In the past two weeks we have gone over a review of 2014 and also presented some predictions from economists for 2015. However, no one could have predicted the wild ride the markets would have in January. In early January, after just a few days, we looked like we were headed into the long-awaited stock market correction. It took only a few more days of strong rallies to ease those thoughts for a few days, and then the markets reversed course again. Oil prices are down substantially. And while that may hurt some foreign countries, some stocks and certainly the oil industry, it helps the average consumer. If you consider the peak of oil in 2014, the cost to fill up your car has been almost cut in half. That is a lot of savings. Long-term interest rates are also down which translates into more savings for the consumer. For example, by mid-January rates on home loans were the lowest in more than 18 months. More and more consumers are refinancing home loans and garnering major savings. Lower oil prices and lower rates? The economy must be really hurting. Yet, the December jobs gains tell us that the opposite is true. We just finished a year in which the economy added almost three million jobs, the best year since 1999. On the face of it, rates should be increasing when economic growth picks up. There are many factors holding rates down and most of them are international. The economies in Europe, Russia and in many other countries are not strong. One must remember that we are now in a world economy. Even our growth is uneven with certain states faring better than others and the world is the same way. For our citizens in general, it is a win-win situation. The Markets • Fixed rates on home loans continued dropping in the past week and remained at lows not seen for almost two years. • Freddie Mac announced that for the week ending January 15, 30-year fixed rates fell to 3.66% from 3.73% the week before. • The average for 15-year loans decreased to 2.98%. • Adjustables were lower as well, with the average for one-year adjustables decreasing to 2.37% and five-year adjustables easing to 2.90%. • A year ago, 30-year fixed rates were at 4.41%, which is 0.75% higher than todays levels. • Attributed to Frank Nothaft, vice president and chief economist, Freddie Mac -- Rates on home loans fell for the third consecutive week as oil prices plummeted and long term treasury yields continued to drop despite a strong employment report. The economy exceeded expectations by adding 252,000 jobs in December which followed an upward revision of 50,000 jobs to the prior two months. The unemployment rate fell to 5.6 percent which was the lowest since June 2008. Rates indicated do not include fees and points and are provided for evidence of trends only. They should not be used for comparison purposes. Real Estate News Breaking News. Applications for residential loans surged 49% from one week earlier, the largest single weekly gain since 2008, as key interest rates fell back below 4 percent to their lowest levels since May 2013, the Mortgage Bankers Association reported January 14 in its Weekly Mortgage Applications Survey for the week ending January 9. Source: The Mortgage Bankers Association A hike in down payments for certain areas is now effective for the U.S. Department of Veterans Affairs (VA) loan program borrowers because of the omnibus spending bill Congress passed. Congress did not include a renewal of higher loan limits that were set in 2008 when it passed the spending bill. The loan-limit rollback will affect 84 counties across 14 states. The loan limits are not a borrowing cap, but a cap on how much a VA borrower can get without putting up a down payment. If the loan exceeds a limit in a given area, VA borrowers must pay 25 percent of the difference between the loan amount and the loan limit. The rollbacks bring VA loan limits in line with those set by the Federal Housing Finance Agency (FHFA) for the government-sponsored enterprises (GSEs), Fannie Mae and Freddie Mac, which in most parts of the U.S. is $417,000. The most drastic loan-limit decreases will occur in counties that had the highest VA loan limits in the entire continental U.S. as those limits have fallen to $625,500. A Congressional staff member who works closely on the House Committee on Veterans’ Affairs indicated that a fix for the limits might be coming. “The House Committee on Veterans’ Affairs is working on finding a legislative remedy that will increase the limits and be budget neutral,” the staff member said, adding that members of the House and Senate appropriations committees made the decision to let the limits lapse. Because FHFA increased loan limits for some countries in 2015, VA loan limits will actually increase in 36 counties. Source: The Scotsman Guide RealtyTrac has released an analysis of fair market rents and median home prices in more than 500 U.S. counties, which shows that buying is still more affordable than renting in the majority of U.S. housing markets, while the opposite is true in markets with the biggest increase in the millennial share of the population over the last six years. RealtyTrac analyzed 2015 fair market rental data recently released by the U.S. Department for Housing & Urban Development (HUD) for three-bedroom properties in 543 counties nationwide with a population of at least 100,000. In the 473 counties with sufficient rental and home price data, the fair market rent for a three-bedroom property in 2015 will require an average of 27 percent of median household income, while buying a median-priced home requires an average of 25 percent of median household income based on the median sales price in November. Buying a median-priced home was more affordable than renting a three-bedroom property in 68 percent of the counties analyzed, representing 57 percent of the total population in those counties. Source: National Mortgage Professional While the government has earned more than $16 billion from its investments in banks during the financial crisis, housing programs have so far cost it nearly $14 billion. Under the Emergency Economic Stabilization Act of 2008, $700 billion was made available through the Troubled Asset Relief Program. The funds were intended to restore confidence in the financial system by providing assistance to financial institutions and markets, businesses, homeowners and consumers. As the crisis subsided, the amount authorized was cut by Congress to $475 billion through the Dodd-Frank Wall Street Reform and Consumer Protection Act. The activity was discussed in a report from the Government Accountability Office, TROUBLED ASSET RELIEF PROGRAM: Treasury Continues to Wind Down Most Programs, but Housing Programs Remain Active. The Capital Purchase Program, which extended $205 billion to 707 financial institutions, has earned $16 billion in income for the government as of Sept. 30, 2014. Automobile companies received $80 billion in TARP funds through the Automotive Industry Financing Program, and lifetime income stands at a $12 billion loss. On the $68 billion in TARP funds used for the American International Group Inc. Investment Program, losses exceed $15 billion. Another $40 billion used for the Targeted Investment Program has yielded $4 billion in lifetime income, while $19 billion used for the Public-Private Investment Program has generated nearly $3 billion in income. In all, the Department of the Treasury has exited four of the nine non-housing TARP programs including the AIG program and the Targeted Investment Program. Of the $38.5 billion in TARP funds designated for housing programs, nearly $14 billion has been disbursed -- including more than $9 billion for Making Home Affordable programs, almost $5 billion for the Hardest Hit Fund and less than $1 billion for the FHA Short Refinance program. TARP-funded housing programs are ongoing. They focus on preventing avoidable foreclosures. But the report indicated that following an increase in permanent modifications completed through Home Affordable Modification Program in early 2013, the number fell last year to the lowest level since the inception of the program. In all, 1.4 million first liens had been permanently modified as of Sept. 30. Source: Mortgage Daily
Posted on: Fri, 23 Jan 2015 20:55:49 +0000
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