In addition to some generally positive economic news, there were three major events affecting the financial markets this past week.  There was an historic initial summit between the U.S. and North Korea over denuclearizing the Korean peninsula; a 25 basis point rate hike by the Fed; and further threats of a trade war between China and the U.S.  The three major stock indexes ended “mixed” for the week after the Dow Jones Industrials slid lower on Friday erasing its weekly gains.  The Nasdaq Composite Index managed to set a new record high during the week before falling back on Friday while the S&P 500 ended minimally higher.

 

The stock and bond markets reacted somewhat negatively to the Federal Reserve’s monetary policy meeting on Wednesday.  Fed officials decided to raise the federal funds rate by another 0.25% as widely expected, but the markets retreated after policymakers provided a more hawkish view for future rate hikes with greater expectations for a total of four rate hikes in 2018, rather than three.

 

Tuesday, the Labor Department reported consumer inflation in May rose 0.2% and had reached 2.8% on a year-over-year basis, its highest level since 2011.  However, most of the increase in inflation is attributed to the rise in oil prices, and core inflation (excluding food and energy costs) remained close to the Fed’s target of 2%.  Thursday, Retail Sales provided an upside surprise with retail sales excluding automobiles increasing 0.9% in May versus expectations for a 0.5% gain.  Friday, the Trump administration declared it would follow through with an earlier warning to implement tariffs on imports of $50 billion worth of goods from China in response to intellectual property theft and forced technology transfers.  China quickly responded with proposed tariffs on

$50 billion worth of U.S. goods including beef, cars, poultry, and tobacco.  Hopefully, these tariff announcements are nothing more than strategizing for a negotiated solution that will avoid a full-blown trade war that would end with negative consequences for the world’s two largest economies.

 

There were two mortgage-related reports released this past week.  Tuesday, CoreLogic released its monthly Loan Performance Insights Report for March 2018.  The report showed the number of mortgage loans 30 days or more past due declined from 4.8% to 4.3%.  The serious delinquency rate, defined as those loans 90 days or more past due, dropped to 1.9% in March, the lowest delinquency rate for the month of March since 2007 when it was 1.5%.  The serious delinquency rate a year ago for March was 2.1%.

 

The foreclosure inventory rate, a measure of the share of mortgages in some stage of the foreclosure process, was 0.6% for March – a level that has been holding since August 2017 and the lowest level since June 2007.  Dr. Frank Nothaft, chief economist for CoreLogic, remarked

“Unemployment and lack of home equity are two factors that can lead to borrowers defaulting on their mortgages.  Unemployment is at the lowest level in 18 years, and for the first quarter, the CoreLogic Equity Report revealed record levels of home equity growth with equity per owner up $16,300 on average for the year ending March 2018.”  This is certainly good news for the housing industry.

 

 

Wednesday, the latest data from the Mortgage Bankers Association’s (MBA) weekly mortgage applications survey showed a decrease in mortgage applications.  The MBA reported their overall seasonally adjusted Market Composite Index (application volume) fell 1.5% during the week ended June 8, 2018.  The seasonally adjusted Purchase Index declined 2.0% from the week prior while the Refinance Index also decreased by 2.0% from a week earlier.

 

Overall, the refinance portion of mortgage activity remained unchanged at 35.6% of total applications from the prior week.  The adjustable-rate mortgage share of activity decreased to 6.8% from 7.1% of total applications.  According to the MBA, the average contract interest rate for 30-year fixed-rate mortgages with a conforming loan balance increased to 4.83% from 4.75% with points increasing to 0.53 from 0.46.

 

For the week, the FNMA 4.0% coupon bond gained 4.7 basis points to close at $101.641 while the 10-year Treasury yield decreased 2.6 basis points to end at 2.924%.  The Dow Jones Industrial Average lost 226.05 points to close at 25,090.48.  The NASDAQ Composite Index gained 100.87 points to close at 7,746.38.  The S&P 500 Index added 0.63 of one point to close at 2,779.66.  Year to date on a total return basis, the Dow Jones Industrial Average has gained 1.50%, the NASDAQ Composite Index has added 12.21%, and the S&P 500 Index has advanced 3.96%.

 

This past week, the national average 30-year mortgage rate decreased to 4.65% from 4.68%; the 15-year mortgage rate was unchanged at 4.11%; the 5/1 ARM mortgage rate increased to 3.95% from 3.94% while the FHA 30-year rate fell to 4.38% from 4.42%.  Jumbo 30-year rates decreased to 4.68% from 4.70%.

 

Economic Calendar – for the Week of June 18, 2018

 

Economic reports having the greatest potential impact on the financial markets are highlighted in bold.

 

 

Mortgage Rate Forecast with Chart – FNMA 30-Year 4.0% Coupon Bond

 

The FNMA 30-year 4.0% coupon bond ($101.641, +4.7 bp) traded within a wider 53.1 basis point range between a weekly intraday high of 101.797 on Friday and a weekly intraday low of $101.266 on Wednesday before closing the week at $101.641 on Friday.

 

The bond fell to its secondary support level at $101.234 during the first half of the week before bouncing and moving higher just above primary short-term support at $101.586 by the end of the week.  There was a new buy signal on Thursday from a slow stochastic crossover plus the bond is neither overbought nor oversold so we should see prices rise into overhead resistance levels this coming week.  If the bond is able to break above overhead resistance, it should lead to stable to slightly lower mortgage rates in the coming week.

 

 

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It’s terrifying but it’s true. One minute you think you own a property and the next, it has been recorded in someone else’s name. Fraud in real estate is alive and well, with authorities all over the country saying homes are illegally taken without owners’ consent.

 

Because of the ever-growing rise of technology, it is now easier than ever to create fraudulent documents that can be easily recorded in public records making your house appear that it was sold and now belongs to someone else.

 

In a Texas case, a deed turned out to be a forgery perpetrated by a daring group of rogue businessmen who claimed ownership of more than 70 vacant houses and lots across Houston. These con artists allegedly made millions by reselling them to unwitting buyers, according to a Houston Chronicle analysis of pending civil and criminal lawsuits.

The players in this massive swindle simply strolled into the Harris County Civil Courthouse with fake deeds bearing the freshly minted signatures of long-dead men, faked notaries’ seals and other blatantly false claims to seize and sell others’ property, according to the Chronicle. The consequences of this fraud — carried out between 2002 and 2008 — continue to affect hundreds of people in some of the city’s humblest neighborhoods and much of the mess remains unresolved.

 

Your best defenses against fraud of this kind are awareness and diligence, not permitting yourself to go on autopilot. The most straightforward way to make sure you are not a victim of this sort of fraud is to check public records regularly, looking for changes. Every city has a place where the public can go to search for information on a property. Property records are maintained at either the county courthouse, county recorder, city hall or another city or county department. Many public offices are staffed by knowledgeable personnel ready to help you find property deeds and encumbrances.

 

Telltale signs something is amiss would be things like getting mail addressed to a different name at your address or seeing that mail you normally might receive regarding your home is no longer arriving in your mailbox. Any new deed recorded in the public records triggers a slew of mail advertisements, so they are a great warning sign that something is up.

 

Another sign is sudden unsolicited interest from prospective real estate agents or home service-related companies. If anything sends up a red flag, go online and check for changes. Then check it again a few weeks later to confirm.

Vacation homeowners will need to be extra-vigilant, since these sorts of properties are especially vulnerable to fraud. Find a neighbor, or hire a reputable property manager, to regularly check and report on your property. Also, make sure to have mail related to that property forwarded to you, and be concerned if the flow stops unexpectedly.

 

Most times there will be nothing amiss regarding the ownership of your home. But it’s much easier to take steps to avoid a problem of this proportion than to spend a lot of time and money fixing it.

 

Source: Sun Sentinel, Houstong Chronicle, TBWS

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There are few more interesting real estate investments than home flipping — seeing an older or run-down piece of property find a fairy godmother to make it beautiful again and then being sold in several months’ time. According to a report in Realtor.com, home flipping activity is increasing across the country, as more investors look to capitalize on the run-up in home prices.

 

There’s limited opportunity to flip houses now: Sidney Torres from CNBC.

 

On par with the highest home-flipping rate since the first quarter of 2012, nearly 50,000 single-family homes and condos were flipped in the first quarter of this year, comprising 6.9 percent of all home sales, according to ATTOM Data Solutions’ Q1 2018 U.S. Home Flipping Report.

 

Even profits were up. with flips in the first quarter of this year selling at an average gross profit of $69,500, up from $66,287 a year ago, the highest average gross profit for flips since ATTOM began tracking such data in 2000. A flip is defined as a property that has been sold more than once in a 12-month period.

 

The data company’s senior VP Daren Blomquist is cited in the report saying, “The 2018 housing market is a double-edged sword for home flippers. Rapidly rising home prices boosted by low inventory of homes for sale or for rent are padding profits at the back end when flippers sell. But those same market realities are eroding flipping returns at the front end by forcing flippers to pay more to acquire homes to flip.”

 

Memphis, TN won the prize for the highest flip rate of the 136 metros with 15.1 percent, followed by Albany, Ore. (11.7 percent); East Stroudsburg, Pa. (11.4 percent); York, Pa. (10.4 percent); and Merced, Calif. (10.3 percent).

 

 

Source: NAR, TBWS

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The major stock market indexes made a solid advance during the week amid strong jobs and economic data resulting in lower bond prices and rising yields.  Tuesday, the ISM Non-manufacturing Index showed a greater than forecast expansion in the services sector with a reading of 58.6 in May from 56.8 in April.  This increase matched the rise in the ISM Manufacturing Index for May, suggesting second quarter GDP growth will show a noticeable increase over GDP growth in the first quarter.

 

Also on Tuesday, the monthly Job Openings and Labor Turnover Survey (JOLTS) showed there were 6.698 million job openings available in April with only 6.4 million available workers to fill them.  This is the second month in a row where there were more job vacancies than available hires, a phenomenon the American economy has never experienced before until March and April of this year.  Although this situation should create a demand for higher wages, average hourly earnings only increased 2.7% annualized in May, up one-tenth of a point from April.  However, you can bet the Fed will be keeping a close eye on wage growth going forward, and there is no doubt that they will raise interest rates for the second time this year when they announce their rate-hike decision this Wednesday.

 

There was one housing related report released this past week.  Tuesday, CoreLogic reported their latest Home Price Index (HPI) and Forecast for April 2018 showing home prices increased by 1.2% month-over-month in April and by 6.9% year-over-year from April 2017.

 

CoreLogic is forecasting their national HPI will continue to increase 5.3% on a year-over-year basis from April 2018 to April 2019 and will rise another 0.2% for May 2018.  Frank Nothaft, CoreLogic Chief Economist, remarked “The best antidote for rising home prices is additional supply.  New construction has failed to keep up with and meet new housing growth or replace existing inventory.  More construction of for-sale and rental housing will alleviate housing cost pressures.”

 

Analyzing home values in the country’s 100 largest metropolitan areas based on housing inventory indicated 40% of metropolitan areas had an overvalued housing market, 28% were undervalued, and 32% were considered at value as of April 2018.  When evaluating only the top 50 markets, 52% were overvalued, 14% were undervalued and 34% were at-value.

 

 

From the mortgage industry, the latest data from the Mortgage Bankers Association’s (MBA) weekly mortgage applications survey showed an increase in mortgage applications.  The MBA reported their overall seasonally adjusted Market Composite Index (application volume) increased 4.1% during the week ended June 1, 2018.  The seasonally adjusted Purchase Index rose 4.0% from the week prior while the Refinance Index also increased by 4.0% from a week earlier.

 

Overall, the refinance portion of mortgage activity increased to 35.6% from 35.3% of total applications from the prior week.  The adjustable-rate mortgage share of activity increased to 7.1% from 6.7% of total applications.  According to the MBA, the average contract interest rate for 30-year fixed-rate mortgages with a conforming loan balance decreased to 4.75% from 4.84% with points decreasing to 0.46 from 0.47.

 

For the week, the FNMA 4.0% coupon bond lost 34.4 basis points to close at $101.594 while the 10-year Treasury yield increased 4.8 basis points to end at 2.950%.  The three major stock indexes advanced during the week.

 

The Dow Jones Industrial Average gained 681.32 points to close at 25,316.53.  The NASDAQ Composite Index added 91.18 points to close at 7,645.51.  The S&P 500 Index added 44.41 points to close at 2,779.03.  Year to date on a total return basis, the Dow Jones Industrial Average has gained 2.42%, the NASDAQ Composite Index has added 10.75%, and the S&P 500 Index has advanced 3.94%.

 

This past week, the national average 30-year mortgage rate increased to 4.68% from 4.60%; the 15-year mortgage rate rose to 4.11% from 4.04%; the 5/1 ARM mortgage rate increased to 3.94% from 3.93% while the FHA 30-year rate climbed to 4.42% from 4.38%.  Jumbo 30-year rates increased to 4.70% from 4.66%.

 

Economic Calendar – for the Week of June 11, 2018

 

Economic reports having the greatest potential impact on the financial markets are highlighted in bold.

 

Mortgage Rate Forecast with Chart – FNMA 30-Year 4.0% Coupon Bond

 

The FNMA 30-year 4.0% coupon bond ($101.594, -34.4 bp) traded within a narrower 42.2 basis point range between a weekly intraday high of 101.938 on Monday and a weekly intraday low of $101.516 on Thursday before closing the week at $101.594 on Friday.

 

The bond fell from its position sitting on the 50-day moving average (MA) and continued to slide lower during the week to end just below the 25-day MA.  Technically, the last sell signal from May 31 is still in effect and since the bond is still not “oversold,” there is some continuing risk for further mortgage bond price erosion this week.  A continuing price move toward the next support level will result in a slight increase in mortgage rates in the coming week.

 

 

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The major stock market indexes were “mixed” for the week with the Dow Jones Industrial Average modestly lower while the Nasdaq Composite and S&P 500 Indexes posted moderate gains.  Early in the holiday-shortened week, investors had to navigate political unrest in Italy and Spain as well as news of U.S. imposed tariffs on steel and aluminum from Canada, the European Union, and Mexico that sent stock prices lower and bond prices higher.  On Tuesday, the turmoil in Italy triggered such a demand for safe-haven securities that a rally in U.S. Treasuries sent the 10-year Treasury note’s yield to its largest one-day decline since June 2016 when Great Britain voted to leave the European Union.

 

However, the stock market bounced back on Friday following news that the summit with North Korea is back on as originally scheduled for June 12, and on a strong Employment Situation report for May.  The Employment Report showed a better than forecast increase in nonfarm payrolls (+223,000) and a lower than expected unemployment rate of 3.8%, an 18-year low.  Average hourly earnings matched expectations showing only moderate wage inflation with a month-over-month increase of 0.3%.

 

There were a couple of housing related reports released this past week.  Thursday, the National Association of Realtors released their Pending Home Sales Index data for April.  This forward-looking indicator based on contract signings showed an unexpected 1.3% decline to 106.4 in April from an upwardly revised 107.8 in March.  The Index was lower on an annualized basis (by 2.1%) for the fourth straight month.

 

Lawrence Yun, NAR chief economist, had this to say about the report: “Pending sales slipped in April and continued to stay within the same narrow range with little signs of breaking out… the underlying sales data, reveals that the demand for buying a home is very robust.  Listings are typically going under contract in under a month, and instances of multiple offers are increasingly common and pushing prices higher…For now, the economy is very healthy, job growth is holding steady and wages are slowly rising.  However, it all comes down to overall supply.  If more new and existing homes are listed for sale, it would allow home prices to moderate enough to stave off inflationary pressures and higher rates.”

 

From the mortgage industry, the latest data from the Mortgage Bankers Association’s (MBA) weekly mortgage applications survey continued to show a drop in mortgage applications.  The MBA reported their overall seasonally adjusted Market Composite Index (application volume) decreased 2.9% during the week ended May 25, 2018.  The seasonally adjusted Purchase Index fell 2.0% from the week prior while the Refinance Index decreased by 5.0% to its lowest level since December 2000.

 

Overall, the refinance portion of mortgage activity fell to 35.3% from 35.7% of total applications from the prior week.  The adjustable-rate mortgage share of activity decreased to 6.7% from 6.8% of total applications.  According to the MBA, the average contract interest rate for 30-year fixed-rate mortgages with a conforming loan balance decreased to 4.84% from 4.86% with points decreasing to 0.47 from 0.52.

 

For the week, the FNMA 4.0% coupon bond gained 7.9 basis points to close at $101.938 while the 10-year Treasury yield decreased 2.9 basis points to end at 2.902%.  The Dow Jones Industrial Average lost 117.88 points to close at 24,635.21.  The NASDAQ Composite Index added 120.48 points to close at 7,554.33.  The S&P 500 Index gained 13.29 points to close at 2,734.62.  Year to date on a total return basis, the Dow Jones Industrial Average has lost 0.34%, the NASDAQ Composite Index has added 9.43%, and the S&P 500 Index has advanced 2.28%.

 

This past week, the national average 30-year mortgage rate decreased to 4.60% from 4.61%; the 15-year mortgage rate was unchanged at 4.04%; the 5/1 ARM mortgage rate decreased to 3.93% from 3.95% while the FHA 30-year rate fell to 4.38% from 4.40%.  Jumbo 30-year rates increased to 4.66% from 4.65%.

 

Economic Calendar – for the Week of June 4, 2018

 

Economic reports having the greatest potential impact on the financial markets are highlighted in bold.

Mortgage Rate Forecast with Chart – FNMA 30-Year 4.0% Coupon Bond

 

The FNMA 30-year 4.0% coupon bond ($101.938, +7.9 bp) traded within a narrower 75.0 basis point range between a weekly intraday high of 102.578 on Tuesday and a weekly intraday low of $101.828 on Friday before closing the week at $101.938 on Friday.  After moving above resistance at the 50-day moving average (MA) and running into the 100-day MA on Tuesday, the bond traded back to the 50-day MA by Friday’s close.  This action resulted in a new sell signal from a negative stochastic crossover from an “overbought” position.  As a result, we could see a move down toward the 25-day MA resulting in lower bond prices and slightly higher mortgage rates.

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The dictionary’s definition of the word incentive reads “a thing that motivates or encourages one to do something.” It’s also a word used by new home builders to encourage buyers to use their preferred lender by tying a certain amount of “play money” to the equation. These are funds can be applied toward the buyer’s design center choices for upgrades (higher-end appliances, hardwood floors, etc.) or toward financing, such as closing costs or a loan rate buy-down. While builder incentives are nothing new, it has always been a touchy subject for buyers, who often walk in to a builder’s subdivision pre-approved by their own lender.

 

The first thing new home buyers should understand is that they are always free to use whichever lender they choose —be it their credit union, their bank, or even their cousin who happens to be a mortgage guy. That’s the law. If they do decide not to use the builder’s lender, however, the builder is not bound to offer incentive monies.

 

Exceptions do exist. If the builder’s lender cannot provide the same product as the outside lender, OR if the builder can’t broker the deal through the buyer’s desired lender, the incentive may still apply.

 

It’s wise to look at both sides of this equation. Why do builders sometimes ‘sweeten the pot,’ so to speak, for buyers to use their own preferred lender? For one, builders take a lot of risk in building a home and then tying it up until close of escrow, which may take up to 6 months after their buyers sign on the dotted line. Pre-approvals do fall through, and it’s a double whammy if this happens at the last minute to a house customized to their buyers’ tastes. Multiply this risk for a subdivision of potentially hundreds of homes, and you might get the picture.

 

An in-house lender (one owned by the same entity that owns the builder), whose only priority is to its builder accounts, must not only get buyers pre-approved in a timely fashion for the house construction to proceed. It must also educate the builder on whether it is prudent for them to take a particular home or home site off the market for what may be an extended period of time. This is the “well-oiled machine” of sales, construction, lender, and design center personnel, all of whom meet regularly to track progress on every facet of the home buying and home building process. Their goal is a seamless build as well as a seamless closing, handing buyers the keys once their names are on record without having to “carry” the house a day longer than necessary —hopefully just in time for the moving van to arrive. But an outside lender will be just as concerned about accountability, as their credibility is on the line as well and a seamless close can mean future business for them, possibly even referrals. And unlike the in-house lender, they are capable of refinancing the loan down the road if warranted. Outside lenders can often be more competitive with pricing, potentially saving borrowers thousands of dollars over the life of the loan, freeing them up to buy their own upgrades after close of escrow.

 

There is no doubt about it. Tying thousands of dollars in incentives to using an in-house lender gives buyers little reason to shop around. However, it’s prudent to take note of the builder’s lender’s rates and loan programs and check to see if they are competitive. Do an apples-to-apples comparison on their loan with outside lenders.

 

Builder incentives can get you that surround sound system you’ve always dreamed of without having to put out any long-term money up front, but in the end anything you spend over and above the incentive monies will be added to the loan principal unless, of course, you don’t pay for it outright. This usually works out well for cash-strapped buyers who have holes in their pockets for a while after the move-in.

 

What can buyers do to feel reassured that they are getting the best deal? They can “shop” their loan and make a decision based upon their own bottom line. If they are already pre-approved by their own lender when they walk into a builder’s sales office and are happy with that loan program, they can either forgo the builder’s incentives altogether or they can try to make the builder’s lender to match the program and rate they already have. Your mortgage payment is something you’ll be living with for a good, long time. So whichever lender you choose, we think they will agree that it’s always best to be aware of all your options.

 

 

Source: TBWS


 All infor

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Okay. It may sound bureaucratic and boring. But there are a number of precautionary contractual conditions for any purchase agreement recommended by the Realtor community that protects homebuyers from liability as well as poor decision-making. And no matter how competitive the bidding for a home, they’ll advise you to include them. One of them is a home inspection.

 

Even though your Realtor will urge you NOT to waive that contingency and even make you sign a form disclosing they made that recommendation, however, many buyers will still plow ahead and waive the inspection in an effort to make their offers the strongest of the bunch. We do understand: if you’re buying a home in a competitive market, and your offers keep getting pushed to the bottom of the pile, it’s hard not to resort to desperate measures — offering more than the asking price, pledging to close on the home in lightning quick speed, or even waiving the financing contingency and risking your entire earnest money deposit.

 

But waiving a physical inspection of a house is never a good idea unless the house is close to brand spanking new, which, of course, ups the odds that nothing costly or bothersome might be revealed during the inspection. The problem is, even in newer homes, what you see is not necessarily what you get. It’s what’s beyond the surface, or items that you can’t identify as problematic, that cause the biggest issues, as anyone who watched rehab/remodel programs on HGTV will tell you.

 

The typical buyer would have a tough time spotting asbestos, knob and tube wiring, lead paint, evidence of termite infestation, a leak inside the HVAC system, how the house is being propped up on jacks, or be aware of how a single toilet flush could change your morning shower from warm and toasty to arctic and shocking. Imagine moving in and trying to turn on the heat, nothing happens, and the fix is $10,000. Picture standing there buck naked in your bathroom, and the power goes off all over the house when you turn on your hairdryer. Traipsing down a flight of stairs to that electrical panel outside the back door semi-dripping wet in 25-degree weather is not something we would wish on our worst family members.

 

We realize bidding wars can cause buyers to spend an inordinate amount of time finding the right home, making them crazy-desperate, asking themselves “how bad can it be?” when considering waiving the home inspection. But when do you ever hear any GOOD stories about people who took that leap? And waiving an inspection can cost you a fortune. But there are a few things you can do to hedge your inspection bets while remaining competitive.

 

If you love the home and the buyer will permit it, inspect it before you make an offer or sign a contract. At best, it passes muster and when you offer you can waive the contingency. At worst, you’ve spent a few hundred dollars on a house you don’t end up buying.

 

If the seller already had their own inspection performed (which is a wise thing to do in order to make a home as marketable as possible), you have the luxury of scrutinizing that report without spending a dime. Even then, however, many buyers will get an inspection of their own because, like an attorney representing a client, the inspector is liable only to the person who paid for and ordered the inspection. And if that person missed something in their report, you would not have any recourse.

 

Because Realtors understand that time is vital for good outcomes, they will encourage you to get your offer in quickly and advise you to pre-schedule an inspection even before the ink is dry on your offer. Seasoned agents have relationships with inspectors at the ready to ring the seller’s doorbell within a day or two of acceptance. And writing in a short inspection contingency timeframe into your offer assures the seller that momentum is alive and well.

 

Bidding wars are rife with emotion as well as fear-of-loss, but it’s wise to keep the bigger picture in mind when purchasing what may well be your life’s biggest asset. Your goal is to wake up in that house morning after morning knowing you did all you could to ensure a mostly problem-free investment in yours and your family’s future. Because money pits are no fun.

 

Source: Zillow/TBWS

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The major stock market indexes managed to grind out some marginal gains as investors reflected on a torrent of uncertain geopolitical news centered on U.S.-China trade negotiations and the U.S.-North Korea summit “canceled” last Thursday by President Trump.  Still, White House press secretary Sarah Sanders stated a “pre-advance team for Singapore will leave as scheduled in order to prepare should the summit take place.”  This uncertainty coupled with a “dovish” set of Federal Reserve minutes from the May FOMC meeting increased demand for “safe-haven” assets such as Treasuries and mortgage bonds to drive bond yields noticeably lower for the week.

 

The FOMC minutes suggested there will be a rate hike at the June Fed meeting, as widely expected, but also implied the Fed may not be as aggressive with its pace of future rate hikes as previously thought.  The minutes indicated Fed officials would be willing to let inflation run temporarily above their stated 2.0% target and this took some pressure off of the bond market.  A sharp sell-off in crude oil prices was also a contributing factor as reports surfaced that Russia and Saudi Arabia would soon boost oil production in response to significantly lower production in Venezuela, a country with the highest known oil reserves in the world, but whose economy is in shambles.

 

There were several housing related reports released this past week.  The Commerce Department reported last Wednesday that purchases of newly built single-family homes fell 1.5% to a seasonally adjusted annual rate of 662,000 in April.  However, economists had forecast a larger 2.2% drop.  Housing market inventory remains extremely tight, helping to drive up home prices. The average new home sales price climbed to $407,300 in April, the highest price since records have been kept beginning in 1963.  At the current sales pace, there was a 5.4-month supply of new homes on the market by the end of March.

Thursday, the National Association of Realtors reported Existing Home Sales fell 2.5% month-over-month in April to a seasonally adjusted annual rate of 5.46 million.  This was below the consensus forecast of 5.57 million and lower than the 5.60 million in March.  Median prices of existing homes for sale for all housing types increased 5.3% to $257,900 while those for existing single-family homes increased 5.5% from a year ago to $259,900.  While the inventory of homes for sale at the end of April increased 9.8% to 1.80 million, this is still 6.3% lower than the same period a year ago. At the current sales pace, unsold existing home inventory is only at a 4.0-month supply compared to the more normal 6.0-month supply characteristic of a more balanced market.

 

From the mortgage industry, the latest data from the Mortgage Bankers Association’s (MBA) weekly mortgage applications survey continued to show a decline in mortgage applications.  The MBA reported their overall seasonally adjusted Market Composite Index (application volume) decreased 2.6% during the week ended May 18, 2018.  The seasonally adjusted Purchase Index fell 2.0% from the week prior while the Refinance Index decreased by 4.0% to its lowest level since December 2000.

 

Overall, the refinance portion of mortgage activity fell to 35.7% from 35.9% of total applications from the prior week.  The adjustable-rate mortgage share of activity increased to 6.8% from 6.5% of total applications.  According to the MBA, the average contract interest rate for 30-year fixed-rate mortgages with a conforming loan balance increased to 4.86%, its highest level since April 2011, from 4.77% with points increasing to 0.52.

 

For the week, the FNMA 4.0% coupon bond gained 59.3 basis points to close at $101.859 while the 10-year Treasury yield decreased 12.9 basis points to end at 2.931%.  The three major stock indexes ended modestly higher for the week.

 

The Dow Jones Industrial Average gained 38.00 points to close at 24,753.09.  The NASDAQ Composite Index added 79.51 points to close at 7,433.85.  The S&P 500 Index rose 8.36 points to close at 2,721.33.  Year to date on a total return basis, the Dow Jones Industrial Average has gained 0.14%, the NASDAQ Composite Index has added 7.68%, and the S&P 500 Index has advanced 1.78%.

 

This past week, the national average 30-year mortgage rate decreased to 4.61% from 4.78%; the 15-year mortgage rate fell to 4.04% from 4.21%; the 5/1 ARM mortgage rate decreased to 3.95% from 4.00% while the FHA 30-year rate dropped to 4.40% from 4.50%.  Jumbo 30-year rates decreased to 4.65% from 4.80%.

 

Economic Calendar – for the Week of May 28, 2018

Economic reports having the greatest potential impact on the financial markets are highlighted in bold.

 

Mortgage Rate Forecast with Chart – FNMA 30-Year 4.0% Coupon Bond

 

The FNMA 30-year 4.0% coupon bond ($101.859, +59.3 bp) traded within a narrower 76.6 basis point range between a weekly intraday high of 101.891 on Friday and a weekly intraday low of $101.125 on Monday and Tuesday before closing the week at $101.859 on Friday.  As predicted in last week’s newsletter, the bond did manage to trade higher during the week to set up a test of overhead resistance now located at the 50-day moving average and the 76.4% Fibonacci retracement level.

 

Now approaching “Overbought” levels, it will be difficult from a technical perspective for the bond to pass this test and break above this formidable layer of resistance, and we could see bond prices turned away from the 50-day moving average resulting in slightly worse mortgage rates.  However, there is a plethora of potential market-moving economic news headed our way this week headlined by the May employment report.  Should the week’s economic data disappoint stock investors, we could see bond prices improve and break above resistance resulting in an improvement in rates.

 

 

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Appraisers Not Needed

May 27, 2018

For decades, now, we have been dealing with humans being replaced by streamlined processes or machines that end up making them dispensable. But what about eliminating the friendly face at the front door there to appraise your home? It appears appraisers may no longer be required to get formal property appraisals—a change that could save consumers hundreds of dollars and speed up the closing process as well.

 

As if slipped under the radar last year, a change in requirements took place in the Fannie Mae/Freddie Mac arena that has made waivers for traditional, in-person appraisals available. Instead of live appraisals, the two government-sponsored enterprises have started to use proprietary analytics and property data to value homes. That means no physical inspections of the home and no study of recent sales data in the area to come up with the valuation.

 

The usual in-person appraisal carries a price tag of about $500, according to Fannie. That cost is footed by the loan seeker, whether it’s a buyer getting a mortgage or a homeowner trying to refinance. Despite this new opportunity, however, not everyone is eligible for these appraisal-free loans, which typically require a down payment of at least 20%. And it’s not as if borrowers can request these faster-track valuations. Fannie and Freddie identify properties that they deem appropriate, favoring those that have had other recent appraisals.

 

Experts in the field agree that if the two government lending entities have a good basic inventory of information about the house, its value, and what it sold for, it is more likely to be identified for a property inspection waiver. However, if your house or the house you want to buy hasn’t been appraised in quite a while, your chances of getting that waiver plummets.

 

Reports tell us only about 5% of Fannie loans were no-appraisal mortgages in 2017. Freddie hadn’t tallied its number of no-appraisal mortgages, but estimates they will eventually account for between 10% to 15% of its new loans.

 

It’s altogether feasible that some buyers and sellers would rather skip the option of an appraiser-free transaction, however, even if it’s available to them. With many, it represents much more than saving a few bucks. How? In a recent realtor.com article, NAR chief economist Danielle Hale admits that it has the potential to lead to buyers into overpaying. By the same token, if the appraisal comes in lower than the agreed-to price, buyers could have some room to negotiate. In the current market, however many buyers are unable to negotiate anyway, even if the appraisal came in too low.

 

The article reveals the in March, 42% of buyers had contingencies in their purchase contracts allowing them to back out if the appraisal came back too low.

 

Refinances, however, are different animals. When refinancing solely to get a lower rate and nothing else has really changed about the property itself, it just makes sense to go appraiser-less whenever possible.

 

So what about the human factor in appraising properties. How much weight should it be given? The article cites a Sacramento-based appraiser that Fannie and Freddie’s computer programs “cannot smell 20 cats living at the property” or judge the pride of ownership in the immediate neighborhood.

 

Despite this new change, appraisals are still considered the gold standard for real estate evaluation, so even if you are offered the option of saving that $500, you may opt to pass on it.

 

 

Source: Realtor.com,TBWS

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It’s not that kitchen island that offers more entertainment space for those weekend gatherings. And it’s not the relaxing master bathroom with two (count ‘em, TWO sinks) that drive millennials into taking the mortgage plunge. It’s their dogs.

 

A 2017 Harris Poll conducted by Sun Trust Mortgage revealed that a full one-third of millennial home buyers’ decisions to buy homes is driven chiefly by their desire to have a dog or have space for a dog that didn’t require them to head down a set of apartment stairs at 6 am every day. In fact, dogs outranked weddings and kids as one a prime incentive for buying a house.

 

It isn’t just the inconvenience of having to walk a dog several times a day that is at the heart of this, however. Much of it is tied to guilt — guilt over owning a dog that is forced to stay cooped up each day. With dog rescues becoming a lasting trend, millennials’ desire to give one’s dog the best life possible is one that real estate brokers see more frequently than one would imagine.

 

Ask any Realtor who specializes in the millennial demographic, and they’ll describe how their buyers will go into the house, through the kitchen, and then walk directly into backyard, assessing it for their dog(s).

 

This phenomenon is also a reason homebuilders and remodelers are seeing a surge in amenities like dog-washing stations, retractable kitchen drawers for dog bowls, and under-stairs retreats designed just for canines. A nearby dog park is a huge neighborhood feature as well. Think about it. How many romantic comedies involve two people meeting over a dog romp? It seems having this trait in common with others that live nearby forms bonds between people that eclipses the neighborhood barbecue or yard sale day.

 

Another feature millennials look for in their to-be neighborhoods are dog-friendly restaurants. Eating establishments are rising to the occasion, with entry areas that offer fresh running water, patios that offer seating for pet owners with their pets in tow, and even a standard free menu treat. Starbucks now offers a free “puppacino” — a frothy concoction in a cup that will have your dog sporting one of those “Got milk?” smiles all day long.

 

Millennials also take note of the number of walking trails nearby and if they don’t exist, will bolster efforts to add pet waste stations to keep things looking good. Sound a little extreme? It’s obvious millennials regard their pets as family members — arguably more so than any previous generation. In an NBC News article on the topic, Laura Schenone, author of The Dogs of Avalon: The Race to Save Animals in Peril, says, “Millennials have grown up in a different world than boomers and Gen-Xers, and it has impacted the way they see dogs. For one thing, this generation is more educated than any before: 27 percent of millennial women have a bachelor’s degree, compared with 14 percent of boomers and 20 percent of Gen-Xers. There is research to show that the college educated are more aware of the environment and the natural world, which includes animals.”

 

Compare this to the childhood many baby boomers experienced with larger dogs or those that shed relegated to the backyard, when responsible dog ownership included rolled up newspapers and choke collars, and routinely putting pets to sleep instead of spending the thousands of dollars dog owners now spend to keep Fido around for even six more months.

 

Part of this dog-centered penchant on the part of millennials may also be due to how they wait to have kids or decide not to have them at all. “Some millennials say they are having dogs [instead] of children,” says Schenone in the article. “That’s a leap, but not hard to believe; after all, they are less well off than boomers and Gen-Xers were at their age, and more burdened by student loans and debt. Everybody needs love and a family: dogs are cheaper, easier, and provide love.”

 

Source: CBS News, TBWS

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