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If the adage about rising tides lifting all boats is true, then it comes as no surprise that rising incomes have been helping to offset recent increases in mortgage rates, offering a boost to housing affordability in the first quarter of this year, the National Association of Home Builders/Wells Fargo Housing Opportunity Index shows.

 

With an increase of 59.6 percent of homes sold that were affordable to median income earners, the index showed that 61.6 percent of new and existing homes sold between the beginning of January and the end of March were affordable to families earning the U.S. median income of $71,900. That median income mark reflects an increase of 5.7 percent in 2018. According to a news article in Realtor Magazine, the NAHB chief economist Robert Dietz reports that this wage growth has helped to boost housing affordability. He goes on to say that a growing economy, along with tight inventories and increasing household formations, will lift housing production in the year ahead. This prediction is dependent, of course, on the fate of mortgage rates as the year progresses.

 

According to the article, of the 237 metro areas analyzed in the first quarter, the index showed 167 markets experiencing an increase in affordability compared to the fourth quarter of 2017.

 

While we aren’t expecting you to scramble to an area based solely on affordability, if you’re looking for the nation’s most affordable major housing market, look no further than Youngstown-Warren-Boardman, OH-PA metro area, where 90.9 percent of all new and existing homes sold in the first quarter were affordable to families earning the area’s median income of $60,100. Other affordable major housing markets (in order) were Indianapolis-Carmel-Anderson, Ind.; Scranton-Wilkes Barre-Hazleton, PA.; Toledo, OH; and Harrisburg-Carlisle, PA.

 

If you prefer small-town living, the most affordable small market is Cumberland, Md.-W.Va., where 98.5 percent of the homes sold in the first quarter are affordable to families earning the median income of $55,500.

 

The most unaffordable place to live if you fall in the median income slot? It’s still San Francisco, CA, which remains the most costly major housing market, and where only 9.2 percent of homes sold in the first quarter of 2018 were affordable to families earning the area’s median income of $119,600. California continues to dominate the least affordable markets, with Los Angeles-Long Beach-Glendale; Anaheim-Santa Ana-Irvine; San Jose-Sunnyvale-Santa Clara; and San Diego-Carlsbad falling closely behind them.

 

 

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The stock market registered solid gains for the week propelled by solid corporate earnings reports, economic news, and geopolitical events.  In fact, the S&P 500 Index recorded its best weekly advance in two months, closing above its 100-day moving average for the first time since the middle of March.  Meanwhile, the yield on the benchmark 10-year Treasury note briefly touched the psychologically important 3% barrier for the first time since April 26, but ended 1.80 basis points lower for the week at 2.97%.

 

The volume of first quarter corporate earnings reports is winding down, and overall, they have been very favorable for the stock market.  Data and analytics firm FactSet is projecting overall earnings for the S&P 500 have grown by 24.9% for the quarter over the prior year with nearly four out of five companies beating analysts’ earnings and revenue estimates.  Rising oil prices have also pushed energy sector stocks higher during the week.

 

Oil prices jumped on President Trump’s decision to pull the U.S. out of the Iran nuclear agreement while restoring sanctions on Iran.  Military actions between Iran and Israel further supported oil prices when Israel struck Iran’s military installations in Syria in response to an Iranian missile attack on the Israeli-held Golan Heights.  Iran is OPEC’s third-largest oil exporter, and the threat of continuing military conflict within the oil-rich Middle East prompted speculators to bet on a disruption to crude oil supply on the global market.  West Texas Intermediate crude oil reached a new three-and-a-half year high at $71.26 per barrel.

 

On the economic front, investors received some welcome inflation data on Thursday from the April Consumer Price Index (CPI) report.  Total inflation at the consumer level was reported at +0.2% and came in slightly below the consensus estimate of +0.3%.  The Core CPI, which excludes food and energy, increased only 0.1% and was below the consensus forecast of 0.2%.  This data may prompt the Federal Reserve to be less aggressive in raising interest rates this year.

 

There were only a couple housing related reports released this past week.  CoreLogic released their Loan Performance Insights Report for February 2018 showing the number of loans 30 or more days past due declined from 4.9% to 4.8%.  The number of seriously delinquent loans of 90 or more days past due remained stable at 2.1% while those in foreclosure remained stable at 0.6%.

 

Dr. Frank Nothaft, chief economist for CoreLogic, stated “Last year’s hurricanes continue to have an effect on loan performance in affected markets, showing up in statewide data.  Serious delinquency rates in February were 50% higher than in August 2017 in Texas, and nearly double in Florida, even though the wind and flood damage was primarily in coastal markets.  In Puerto Rico, the damage was widespread.  Serious delinquency rates were up five-fold over the August-to-February period, with a significant increase in all metropolitan areas there.”

 

 

From the mortgage industry, the latest data from the Mortgage Bankers Association’s (MBA) weekly mortgage applications survey showed a slight decline in mortgage applications.  The MBA reported their overall seasonally adjusted Market Composite Index (application volume) decreased 0.4% during the week ended May 4, 2018.  The seasonally adjusted Purchase Index fell 0.2% from the week prior while the Refinance Index decreased by 1.0%.

 

Overall, the refinance portion of mortgage activity fell to 36.3% from 36.5% of total applications from the prior week, its lowest level since September 2008.  The adjustable-rate mortgage share of activity decreased to 6.5% 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 4.78% from 4.80% with points decreasing to 0.50 from 0.53.

 

For the week, the FNMA 4.0% coupon bond lost 18.8 basis points to close at $101.656 while the 10-year Treasury yield decreased 1.80 basis points to end at 2.9695%.  The major stock indexes moved higher for the week.

 

The Dow Jones Industrial Average advanced 568.66 points to close at 24,831.17.  The NASDAQ Composite Index gained 193.26 points to close at 7,402.88.  The S&P 500 Index added 64.30 points to close at 2,727.72.  Year to date on a total return basis, the Dow Jones Industrial Average has added 0.45%, the NASDAQ Composite Index has gained 7.24%, and the S&P 500 Index has advanced 2.02%.

 

This past week, the national average 30-year mortgage rate increased to 4.65% from 4.62%; the 15-year mortgage rate rose to 4.05% from 4.00%; the 5/1 ARM mortgage rate increased to 3.84% from 3.78% while the FHA 30-year rate stayed unchanged at 4.45%.  Jumbo 30-year rates were also unchanged at 4.68%.

 

Economic Calendar – for the Week of May 14, 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 ($101.656, -18.8 bp) traded within a slightly wider 53.1 basis point range between a weekly intraday high of 101.922 on Monday and a weekly intraday low of $101.392 on Friday before closing the week at $101.656 on Friday.  The bond looks like it will continue to be range-bound this coming week, trading between the dual bands of support and resistance shown on the chart below.  As a result, mortgage rates should remain relatively stable this week.

 

 

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Never underestimate the power of words. Sellers evidently care about who they sell their homes to. According to an article in the Wall Street Journal, using data provided by Seattle-based brokerage Redfin, one of the most effective ways to win a bidding war is to write the seller a letter.

 

Other factors can up your game as well. Unsurprisingly, all-cash offers can double your chances of winning the bid. And waiving a financing contingency (agreeing to forfeit your deposit if you can’t get a mortgage) can boost a buyer’s odds by 57.9%, according to the data. Escalation clauses (including verbiage that should another offer be higher, you would automatically pay a designated figure over that amount — kind of like eBay). But escalation clauses can also be a turn-off in some markets, so they must be used wisely.

 

Using articulate writing skills came in a close third in the study, however, increasing a buyer’s odds by 52.2%. Numbers vary according to market demographics — the higher the price, the higher the percentages.

 

Redfin’s data are based on about 14,000 offers in 2016 and 2017 that involved competing bids. It’s logical to assume that rational sellers would choose the highest bid. But risk aversion can often trump high offers. To avoid the pain of a deal going dead, sellers often choose the sure thing, such as a quick close or all cash (especially both)—even if it means accepting less money.

 

But back to the letter idea. Evidently, in addition to flattering a seller’s ego—or assuring him or her the home will be cared for—a letter can also signal serious intent on the part of the buyer — something that makes the seller believe that no matter what the hurdles, the buyers will make it work. The confidence gained by putting a face and a story to the transaction is like verifying that your doctor wears a clean white lab coat and has a great bedside manner.

 

Some buyers tell tales of their dilemmas in these letters, such as their years-long quest for a home that is situated in the kind of neighborhood they always wanted for their children or living near family. Others praise the homeowners for keeping the vintage touches of their home intact, pledging to preserve the home’s charm if their bid is accepted.

 

Sometimes knowing the provenance of a home or a neighborhood can push an owner over the edge. The article tells of how the buyer found out that the seller was not only an active local volunteer but also had custom-built the home years earlier. In a letter, the buyer described his desire to part of the community as well as maintain the house, rather than tear it down. In the end, he beat out a higher offer.

 

So next time you speak ill of your high school English teacher who pounded into you the importance of a 5-paragraph essay, know that those skills, including the art of story-telling, can tug at a homeowner’s heartstrings when the going gets tough.

 

Source: TBWS

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The stock market seemed to lack conviction this past week as investors had to wade through a plethora of corporate earnings, including technology giant Apple’s quarterly report, in addition to the latest monetary policy decision from the Fed and the Employment Situation report for April.  As a result, the major stock indexes ended “mixed” for the week with the Dow Jones Industrial Average and S&P 500 Index edging lower while the NASDAQ Composite Index moved slightly higher.  The 10-year Treasury yield slipped slightly lower at 2.95% after approaching 3% on Wednesday.

 

The Fed’s latest monetary policy decision arrived Wednesday afternoon without any real surprises. As expected, Fed officials unanimously decided to leave the federal funds target range unchanged at 1.50% to 1.75%.  However, the Fed’s policy statement led investors to believe there will be a rate hike at their June meeting with the possibility for another one to two rate hikes before the end of the year.  Indeed, the latest probability reading from the Fed Fund Futures market now stands at 100% for a 25 basis point rate hike at the Fed’s June 13 FOMC meeting.

 

The Employment Situation (Jobs) report for April was released Friday morning, showing a lower than forecast 164,000 increase in nonfarm payrolls.  Although this was lower than the consensus estimate of 190,000, upwardly revised readings for the prior two months balanced the shortfall.  Average hourly earnings growth of +0.2% matched expectations while the unemployment rate fell to 3.9%, the lowest it has been in 17.5 years.  The reason the unemployment rate fell below 4% was not due to new job formation, but as a result of 236,000 people dropping out of the labor force during the month.

 

There were several housing related reports released this past week.  The National Association of Realtors® (NAR) reported Pending Home Sales edged higher in March by 0.4%.  This was below the consensus forecast calling for a 1.5% gain, and was constrained by continuing tight inventory levels and appreciating home values that are making it difficult for prospective buyers to find affordable homes to buy.  NAR chief economist, Lawrence Yun, remarked “Healthy economic conditions are creating considerable demand for purchasing a home, but not all buyers are able to sign contracts because of the lack of choices in inventory.  Steady price growth and the swift pace listings are coming off the market are proof that more supply is needed to fully satisfy demand.”

 

The U.S. Census Bureau announced total Construction Spending fell 1.7% in March following an upwardly revised 1.0% increase for February.  Private construction spending fell due to a 3.5% decline in residential spending including a 0.4% drop in single-family construction spending, and a 0.4% decline in nonresidential spending led by a 2.2% decline in commercial spending.  Year-over-year, total construction spending was up 3.6%, with public construction spending 3.0% higher and private construction spending up 3.9%.

CoreLogic® released their latest Home Price Index (HPI™) and HPI Forecast™ for March 2018, showing home prices increased both on a year-over-year and month-over-month basis.  Home prices increased nationally by 7% year-over-year from March 2017 to March 2018, and by 1.4% in March 2018 on a month-over-month basis.  Furthermore, the CoreLogic HPI Forecast shows the national home-price index is projected to continue to increase by 5.2% on a year-over-year basis from March 2018 to March 2019.  Dr. Frank Nothaft, chief economist for CoreLogic, stated “Home prices grew briskly in the first quarter of 2018.  High demand and limited supply have pushed home prices above where they were in early 2006.  New construction still lags historically normal levels, keeping upward pressure on prices.”

 

 

From the mortgage industry, the latest data from the Mortgage Bankers Association’s (MBA) weekly mortgage applications survey showed a decline in mortgage applications.  The MBA reported their overall seasonally adjusted Market Composite Index (application volume) decreased 2.5% during the week ended April 27, 2018.  The seasonally adjusted Purchase Index fell 2.0% from the week prior while the Refinance Index decreased by 4.0%.

 

Overall, the refinance portion of mortgage activity fell to 36.5% from 37.2% of total applications from the prior week, its lowest level since September 2008.  The adjustable-rate mortgage share of activity increased to 6.7% 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 4.80% from 4.73%, its highest level since September 2013.  Points increased to 0.53 from 0.49.

 

For the week, the FNMA 4.0% coupon bond gained 3.1 basis points to close at $101.844 while the 10-year Treasury yield decreased 0.72 of one basis point to end at 2.9515%.  The major stock indexes ended “mixed” for the week.

 

The Dow Jones Industrial Average fell 48.68 points to close at 24,262.51.  The NASDAQ Composite Index gained 89.82 points to close at 7,209.62.  The S&P 500 Index lost 6.49 points to close at 2,663.42.  Year to date on a total return basis, the Dow Jones Industrial Average has fallen 1.85%, the NASDAQ Composite Index has gained 4.44%, and the S&P 500 Index has dropped 0.38%.

 

This past week, the national average 30-year mortgage rate decreased to 4.62% from 4.64%; the 15-year mortgage rate fell to 4.00% from 4.02%; the 5/1 ARM mortgage rate remained unchanged at 3.78% while the FHA 30-year rate stayed unchanged at 4.45%.  Jumbo 30-year rates were also unchanged at 4.68%.

Economic Calendar – for the Week of May 7, 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 ($101.844, +3.1 bp) traded within a narrower 48.4 basis point range between a weekly intraday low of $101.516 on Wednesday and a weekly intraday high of $102.00 on Friday before closing the week at $101.844 on Friday.  The bond looks like it will be range-bound this coming week, trading between dual bands of support and resistance.  This should result in relatively stable mortgage rates this week.

 

 

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Opinions abound about selling your house, and like noses, everyone’s got one. There are myths that have been circulating literally for decades that Realtors still have to debunk, and we aim to name a few of them.

 

Selling your home is taking a dive into the deep unknown for many people. There is no crystal ball to tell them who will buy their place, for how much, and how long it will take. All this makes them vulnerable to well-meaning advice from everyone and everywhere under the sun — even from people who haven’t been involved in a real estate transaction for many years but are convinced they are experts. Even if some of those beliefs and solutions ended up being true for them, however, it doesn’t mean they will be true for you.

 

Real estate advice circulating out there runs the gamut from outdated to region-specific to just plain wrong. So we decided to share some of realtor.com’s list of typical truisms followed by an explanation of how they don’t always pan out. These are mixed, of course, with our own bent on each one. That grain of salt adage about advice? Never was it so true than in real estate.

 

Ever hear it’s always best to list your house in the spring? You typically hear, “People list their homes in March and hope to have it in escrow by the end of spring because that’s close to when their kids get out of school.” Experts now say January is one of the best times to list, when people are back from the holidays and are ready to start looking. Oh, and of course, you are ready to put away the holiday decorations and spiff up the place. If you live in a nasty winter climate, other sellers around you may be waiting to list so they can show off spring flowers. But what’s even more important than green grass is supply and demand. Would you rather list your home when everyone else does and be pitted against more competition? Your call. Truth is, every market is different, and what’s great advice in one area can be terrible advice in another, so consult with your agent on this one.

 

Open houses are like watching a fashion show. Your house puts on its best and struts down the runway, along with others for sale at the same time. But just because you are pivoting at the end of the ramp to a host of people all at once, don’t set your sights on finding that one ideal buyer. If he, she or they come along as a result of an open house, it’s a huge bonus.

 

Besides, with today’s access to virtual tours and dozens of professionally-taken photographs within online listings, the most serious home buyers will usually request a private one-on-one showing anyway. An open house typically attracts curious neighbors as well as others thinking of selling their homes looking at what you’ve done and how they can price and position their own homes when they sell. And there are those who do the “open house shuffle” on weekends as a hobby.

 

While you don’t want to skip the open house entirely (it’s a good way to get the buzz going), it’s time to let go of the idea that an open house is key to finding the ultimate buyer.

 

Real estate agents just want you to sign on the dotted line and then sit back and collect a hefty commission. Really? An agent’s job is much more than that. Think of them as the person who looks at a retail space in a mall and sets it up so that it attracts potential customers inside. This includes pricing, aesthetics (placement of objects) and betting on that store being the most popular one in the mall. They are prudent, savvy negotiators whose reputations depend on their track records with past clients. Realtors are self-supporting business people who make timely recommendations to get your home prepared for sale in order to get it sold for the most money in the shortest amount of time. They supply marketing materials, pay for posters, flyers, broker open houses, and yard signs, use their time calling other agents who have potential buyers, and have negotiation skills as well as a fiduciary responsibility to protect your interests. Their commissions, by the way, are split with a buyer’s agent and can be offered in varying amounts to that agent to get you the best deal as well as the best buyer. It’s also prudent to keep in mind that after they pay for all their own expenses, they also pay legal insurance fees, pay their broker a certain amount, and on and on.

 

Don’t forget that throughout much of the country, bidding wars are common right now. A savvy agent can suggest to you when to hold ‘em and when to fold ‘em for each offer because they make it their business to know how all this works.

 

“Set your price and then hold out for a buyer who’ll pay it” is not the best advice, if that’s what you’ve heard. No Realtor will balk at the idea of getting as high a price as possible for one of their listings, but pricing your home at the top of the market and expecting it to set a precedent in your neighborhood is not a great plan unless you want to sit a while, get frustrated, and keep lowering the price, which makes it now look like you are desperate. Your listing agent will show you comparables — homes that have sold in the past 3-6 months, those which didn’t sell, and those that are actively listed, which are your main competition. Would YOU want to overpay for a house? Funny when you put the shoe on the other foot, isn’t it? A great real estate transaction happens only when both parties win.

 

Experts say it’s vital that you price your home reasonably right from the start—not too high, not too low—and then seriously consider any offers that roll in. They will be the barometer check you’ll need to see where your pricing should be anyway. And don’t forget that even if your home is identical in square footage, bedroom and bath count and even in the same desirable neighborhood, competing homes may have been updated more than yours and show better. That’s why it’s a great exercise to SEE all those listings in person and talk to your agent about them BEFORE listing.

 

 

Source: NAR, TBWS

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How to use your home as a source of cash from CNBC.

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Market action in stocks and bonds was driven by a combination of 1st Quarter earnings reports, economic news, and geopolitical news of a historic meeting between the leaders of North and South Korea, who agreed on Friday to work to remove all nuclear weapons from the Korean Peninsula and, within the year, pursue talks with the United States to declare an official end to the Korean War.

 

This week past week more than a third of S&P 500 companies reported their earnings results and they were mostly better than expected.  However, several companies including Caterpillar provided forward guidance that was worse than anticipated, helping to send stock prices lower for the week while at least temporarily boosting bond prices on Thursday and Friday.  Caterpillar helped to take the Dow lower after saying in its post-earnings conference call that margins in the first quarter will be the “high water mark” for the year.

 

Other than earnings reports, investors closely monitored Treasury yields, which reached new multi-year highs on Wednesday before retreating on Thursday and Friday.  The benchmark 10-year Treasury yield crossed above the psychologically important 3.0% mark for the first time in over four years, reaching 3.03% before closing the week at 2.96%.

In economic news, 1st quarter Gross Domestic Product (GDP) showed the US economy grew by 2.3%, which was higher than expectations of 2.0%, but lower than the fourth quarter’s growth rate of 2.9%.  Weaker consumer spending in the first quarter was largely responsible with only a 1.1% increase following an increase of 4.0% in the fourth quarter.

 

In housing, the National Association of Realtors reported Existing Home Sales increased 1.1% month-over-month in March to a seasonally adjusted annual rate of 5.60 million, slightly above the consensus forecast of 5.57 million.  The median existing home price for all housing types increased 5.8% to $250,400, while the median existing single-family home price increased 5.9% from a year ago to $252,100.  Home inventory for sale at the end of March increased 5.7% to 1.67 million, but this is 7.2% lower than the same period a year ago.  Unsold inventory is at a 3.6-month supply at the current rate of sales.  The low inventory of existing homes for sale coupled with high prices and rising mortgage rates continues to hinder overall sales.

 

Further, the Census Bureau and the Department of Housing and Urban Development reported New Home Sales in March at a seasonally adjusted annual rate of 694,000 versus expectations for 631,000.  This was a 4.0% month-over-month increase above an upwardly revised February rate of 667,000.  The median sales price of new houses sold in March was $337,200, a year-over-year increase of 4.8%.  The average sales price dipped 3.8% to $369,900.  Based on the current rate of sales, the inventory of new homes for sale fell to a 5.2-months’ supply, versus 5.4 months in February and 5.0 months in the year-ago period.

 

From the mortgage industry, the latest data from the Mortgage Bankers Association’s (MBA) weekly mortgage applications survey showed a drop in mortgage applications.  The MBA reported their overall seasonally adjusted Market Composite Index (application volume) decreased 0.2% during the week ended April 20, 2018.  The seasonally adjusted Purchase Index was unchanged from the week prior while the Refinance Index decreased by 0.3%.

 

Overall, the refinance portion of mortgage activity fell to 37.2% from 37.6% of total applications from the prior week, its lowest level since September 2008.  The adjustable-rate mortgage share of activity increased to 6.5% from 6.6% 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 4.73% from 4.66%, its highest level since September 2013.  Points increased to 0.49 from 0.46.

 

For the week, the FNMA 4.0% coupon bond gained 12.5 basis points to close at $101.813 while the 10-year Treasury yield decreased 0.15 of one basis point to end at 2.9587%.  The major stock indexes moved modestly lower during the week.

 

The Dow Jones Industrial Average dropped 151.75 points to close at 24,311.19.  The NASDAQ Composite Index fell 26.33 points to close at 7,119.80.  The S&P 500 Index lost 0.23 points to close at 2,669.91.  Year to date on a total return basis, the Dow Jones Industrial Average has fallen 1.65%, the NASDAQ Composite Index has gained 3.13%, and the S&P 500 Index has lost 0.14%.

 

This past week, the national average 30-year mortgage rate increased to 4.61% from 4.58%; the 15-year mortgage rate rose to 3.99% from 3.95%; the 5/1 ARM mortgage rate remained unchanged at 3.77% while the FHA 30-year rate moved from 4.37% to 4.43%.  Jumbo 30-year rates rose to 4.65% from 4.59%.

 

Economic Calendar – for the Week of April 30, 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 ($101.813, +12.5 bp) traded within a wider 64.1 basis point range between a weekly intraday low of $101.172 on Wednesday and a weekly intraday high of $101.813 on Friday before closing the week at $101.813 on Friday.

 

As anticipated in last week’s newsletter, mortgage bond prices first fell for a test technical support before managing to bounce higher during the latter half of the week.  The rebound on Thursday resulted in a positive stochastic crossover buy signal from a deeply oversold position.  There was also positive follow through on Friday with the bond closing at its high for the day.

 

From a purely technical basis, the bond should move higher for a test of resistance, and this would result in a slight improvement in rates.  However, there is a potential market-moving personal consumption expenditures (PCE) report looming on Monday.  This report is one of the Federal Reserve’s favorite measures of inflation, and if the data shows hotter than expected inflation we could see bond prices retreat back toward support resulting in slightly worse rates.

 

Furthermore, a Preliminary 1st Quarter Unit Labor Cost report on Thursday could show a rise in wage inflation that would be negative for bond prices.  The week’s economic reports will also be highlighted by the April Jobs Report that could also be a market mover impacting mortgage rates.  While the technical picture currently looks favorable, significant economic news often “trumps” technical signals.

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f you’re already a homeowner, do you wonder why you keep getting unsolicited snail mail asking if you have any interest in selling your home? Wonder no more. The gains in home prices are getting bigger as the supply of homes for sale gets leaner, and buyers and their agents are hoping-hoping-hoping you’ll consider selling now instead of later.

 

According to real estate broker Redfin, the median price of a home sold in March surged 8.9 percent compared with March 2017 —the biggest annual increase in four years. Redfin tracks prices in 174 local markets and calculated the median home price at $297,000.

 

Like sports cars built in limited supply, low-low home inventories are pushing prices higher. Housing supply was down 11.9 percent in March compared with a year ago. As a result, sales fell 3.7 percent. The number of new listings in March dropped 5.6 percent annually.

 

Redfin credits this to sellers being slow to list and new construction failing even to come close to closing the gap. If this does not change, inventory will be a persistent drag on sales for the remainder of the year.

 

Single-family home construction fell 3.7 percent in March, and building permits, an indicator of future construction, declined 5.5 percent, barely 2 percent higher compared with a year ago. Multifamily construction is one of the few bright spots in all this having increased considerably. Builders are banking on continued, strong demand for rental apartments as homebuyers struggle to find affordable homes.

 

Despite higher prices, buyer demand is still strong. Sellers, however, are slow to sell because of concerns about finding anything else they like or can afford as well as losing their low fixed mortgage interest rates. With multiple offers being the rule and not the exception to it throughout most larger urban areas, the average home went under contract in 43 days in March, more than a week faster compared with a year ago and a March record. Nearly a quarter of the homes sold for more than their list prices.

 

Large metropolitan markets in California, Seattle, and Denver continue to see big price gains, but some unexpected markets are seeing inflation as well. Markets like Allentown, PA (21.8 percent), Detroit, MI (20.6 percent) and Las Vegas, NV (16.5 percent) are not far behind.

 

The supply situation is most acute in Washington, D.C., where inventory fell 22 percent in March annually, according to expert sourced. It would take just 1.8 months at the current sales pace to exhaust the supply. A balanced market supply is considered to be about six months.

 

With the Feds expected to raise mortgage rates several more times in 2018, current homeowners will have even less incentive to sell. Sales have been dropping as a result of the tight supply, and prices usually lag sales by a few months. That does not appear to be the case, however, in this cycle, as demand is outweighing everything else.

 

 

Source: CNBC. TBWS

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Is cash still king? While it may feel powerful to have that all-cash ace up your sleeve as you look for the perfect property, thinking home sellers swoon over all-cash offers (which they do), it’s wise to go into a purchase of this kind with your eyes wide open. Why? Unlike other home buyers out there, you’ve got the luxury of options.

 

Think it’s only millionaires that have enough money lying around to make an all-cash offer? Think again, because these deals are surprisingly common. According to a recent report from ATTOM Data Solutions, all-cash offers made up 29% of single-family home and condo sales in 2017, and most of them are not on behalf of the filthy rich. When we learn that billionaires like Mark Zuckerberg buy homes with mortgages when they clearly don’t need to, however, it should give us pause to think.

 

At first glance, an all-cash offer looks like a no-brainer because of its lack of risk to the seller and even to you, as long as you are not using every penny you have on a house. Even those buyers with a loan pre-approval in hand still run the risk of having a last minute smudge surface on their credit, one of those pesky little storm clouds appear on a title search, a job loss or change happening mid-stream no one could foresee, or anything else that can affect the final approval. Loan procurement is also contingent upon a home appraisal meeting the negotiated selling price so that the lender feels secure in its investment. All these what-ifs are eliminated with an all-cash offer unless a buyer’s verified funds suddenly disappear before the close of escrow.

 

So the question remains: is it always the wisest decision to make an all-cash offer if you can? Here are a few pros and cons of an all-cash offer.

 

Tough seller’s markets create bidding wars. All cash, then, can help you eliminate the competition and catapult your offer to the top of the list. It can also speed up escrow periods by eliminating a number of contingencies.

 

All-cash offers can strengthen your negotiation stance and persuade sellers to accept less than their full asking price because of the sure-deal aspect of it. However, in today’s low-inventory seller’s market, don’t expect to get a crazy-good deal just because you’re paying cash.

 

Laying out the green means less paperwork and no delays. It can also offer sellers the option of a quicker close, since there is basically little-to-nothing to hold up the deal.

 

Without a mortgage, you save money on fees such as closing costs, title insurance, etc. The most obvious advantage is, of course, that the home is yours and not the bank’s from day one. No worries about a foreclosure, either.

 

On the minus side, you’ll be tying up a lot of money in one asset instead of diversifying your financial portfolio — something you learned a long time ago was not always the best course. Unless you are one of the lucky ones who have tons of money to spare, that means limiting your your liquidity. It also means you’ll miss out on good-sized tax deductions. This is especially true if your home’s value is under $750K under today’s new tax laws. Those are the biggies, and they are nothing to sneeze at. It may be wise to think about how even taking out a mortgage and keeping up payments for ten years or so gives you options. If emergency situations arise in your life, you have more ready cash. You also have the option of paying off the loan at any time, which can offer you and your family a lovely sense of security.

 

All-cash buyers can pool their purchase money from variety of sources, including personal savings, cash gifts, and inheritance, but experts advise having your home-buying funds in one account to make it easier for you to keep track of the money you’re going to need. And don’t forget bank transfers can get delayed. You won’t want to be moving money around shortly before closing.

 

Prove you’ve got it. You can’t expect to beat out other offers on a home saying you’ll be paying cash unless you provide the home seller with a copy of your bank statement as proof of funds when you submit your offer.

 

Sweat the small stuff. There are other home-buying expenses in play here. You’ll still have to budget for the costs that come with any home purchase, including the property taxes, homeowner’s insurance, condo or association fees, if applicable, and a professional home inspection.

 

Make sure you build an emergency fund that will cover living expenses for at least six months, including one for future property taxes, because they are something that will never go away. Financial advisors agree that if you have extra cash after that, you’d be smart to funnel it into a retirement account, since a home alone should not constitute your entire nest egg.

 

 

Source: TBWS

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