Mortgage Rates Flat Again, Despite Modest Market Weakness

Mortgage Rates Flat Again, Despite Modest Market Weakness

Bajak and Associates

Mortgage rates were flat again today, further prolonging a trend that's been in place for weeks.  During that time, we've seen modest ups and downs, but no significant changes.  To put the narrowness of the range in context, the "ups and downs" are only seen in the upfront costs associated with any given mortgage rate.  Rates themselves haven't changed for the average loan scenario.

Today's absence of change belies market movement to some extent.  The bonds that underlie mortgage rates weakened enough through the course of the day that mortgage lenders were nearly justified in a mid-day rate sheet adjustment (for the worse).  When this happens (i.e. when bonds weaken, but not quite by enough to prompt mid-day changes), the implication is that tomorrow starts out at a slight disadvantage.  In other words, if bond markets simply hold steady overnight, borrowing costs could edge higher.

Ongoing Lock/Float Considerations

Rates moved higher in a serious way due to several big-picture headwinds, including: the Fed's rate hike outlook (and general policy tightening), the increased amount of Treasury issuance to pay for the tax bill (higher bond issuance = higher rates), and the possibility that fiscal stimulus results in higher growth/inflation.

Despite those headwinds, the upward momentum in rates has cooled off heading into the summer months.  This could merely be the eye of the storm, or it could end up being the moment where markets began to doubt that prevailing trends would continue.

It makes sense to remain defensive (i.e. generally more lock-biased) because the headwinds mentioned above won't die down quickly.  Temporary corrections can be explained away, but it will take a big change in economic fundamentals or geopolitical risk for the big picture to change.  While that doesn't necessarily mean rates have to skyrocket, there's a good chance it means rates will struggle to move much lower than early 2018 lows until more convincing motivation shows up.

If you plan to or are actively searching for a new home, this would be a perfect time to get pre-qualified.

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Source: Matthew Graham, Mortgage News Daily, July 18, 2018

Buying A Home During The Holidays

Buying A Home During The Holidays

LenderVolt

Moving during the holidays can be a headache with all the seasonal activities and obligations – not to mention unpleasant weather in many locations. However, there are plenty of positives to buying a home during the holidays that may make the headaches of moving worth the effort, including the six listed below.

1. Home Prices Are on an Up-Trend – Existing-home sales increased in October to their strongest pace since earlier this summer, but continual supply shortages led to fewer closings on an annual basis for the second straight month, according to the National Association of Realtors®.

The median existing home sales price in October was $247,000 up 5.5 percent from October 2016 ($234,100). October's price increase marks the 68th straight month of year-over-year gains. 

Though the recent lack of existing home inventory is likely a factor for the spike in October's home prices, as the housing market continues to rebound, so will home prices.

On the other hand, if you're thinking of selling your home, the increase in prices are resulting in more equity for current homeowners, and those homeowners are using that equity for down payments on their next home purchase. The prospect of higher mortgage rates and home prices, are encouraging households to buy now, according to NAR Chief Economist Lawrence Yun.

2. Less Buyer Competition – The same issues that make holiday moving a hassle tend to keep people from shopping for homes at that time. While there may be fewer homes available, there are also fewer home buyers – and that should equal less competition for any home that fits your needs.

3. More Motivated Sellers – Home sellers don't enjoy moving over the holidays any more than home buyers do. It's likely that people who are selling their homes over the holidays are highly motivated to do so. Perhaps they must relocate for a new job, or their home has been on the market for a long time and they need the money from a sale before the year is out. Combine motivated sellers with decreased competition and you have great leverage to get a better deal.

4. Lower Prices – Home prices have been rising rapidly, in part because of an overall shortage of homes. However, December historically has lower home prices than any other month, due in part to the reasons listed above. There's no guarantee that this year will continue the trend, but it's worth checking the prices within your local market.

5. Faster Closings – As a general rule, everyone involved in a holiday real estate transaction wants to complete the transaction before the year ends. Buyers want to settle in their new homes (and if sellers are relocating, they want to settle in before the holidays as well). Lenders want to include the loan on the current year's books. Real estate agents and brokers want to include their commission on the current year's income. Motivated parties should make the closing process go as smoothly as possible – but do your part by having all the required paperwork in order.

6. Better Interest Rates – Currently, mortgage rates are still near record lows but if you've been paying attention to any news regarding the Federal Reserve's plans to increase the short-term federal funds rate you know that mortgage rates will be negatively impacted.

Beyond the 6 reasons already disucussed, there are other reasons to buy your home during the Holidays:

7. Potential Tax Benefits

While this shouldn't be the sole reason for buying a home at the end of the year, some tax advantages certainly do sweeten the deal. If you itemize on your taxes, you may be able to deduct any points (also known as origination fees) you paid at closing, property taxes and mortgage interest.

Whether it's better to purchase before the end of 2017 or in 2018 for tax purposes is dependent on how much you plan to deduct this year or next. It is always a good idea to consult with a tax professional when it comes to determining homeownership deductions.

8. Rent Prices Are Still Rising

Rising rents are eating up an increasingly large share of tenants’ incomes, costing the typical U.S. renter almost $2,000 more per year than they would if renters were devoting the same-sized chunk of their paychecks to their landlord as they used to.

In some markets, the difference is far greater: Renters in San Jose, Calif., spend 38.4 percent of their incomes on rent, compared to 26 percent historically, which meant paying a total of $13,525 more in rent this year. That’s enough to buy a decent recent-model used car every year – or take a six-month world cruise every few years. It could also put a dent in student debt or help build retirement savings.


If you're wanting to get out of the rental circuit in 2018, this would be a great opportunity to become a first-time home buyer. However, before hunting for your new home, it is wise to get prequalified! Find out what your options are at LenderVolt.com and see what works best for you!

Sources: NAR.Realtor.com; AFN; Mortgage 101