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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The three major stock market indexes plus mortgage bonds ended the week modestly lower after strong economic data elevated fears of higher interest rates.  The week’s solid economic data sent the yield on the benchmark 10-year Treasury note up to 3.12% on Thursday, its highest level in seven years.

 

In economic news, the Commerce Department reported retail sales increased by 0.3% in April.  Although this figure matched the consensus forecast, the government revised the sales data from February and March significantly higher.  With current labor market trends driving up wage income at an annualized rate of about 4.5%, retail spending growth should continue to trend higher over the coming months.  Furthermore, the New York Empire State and Philadelphia Fed Manufacturing Indexes for May both showed significantly more manufacturing growth than expected.

 

There were several housing related reports released this past week.  Tuesday, the National Association of Home Builders (NAHB) Housing Market Index (HMI), a gauge of builder opinion on the relative level of current and future single-family home sales, came in with a reading of 70 for May, slightly higher than the consensus forecast of 69 and April’s downwardly revised reading of 68.  NAHB Chairman Randy Noel remarked “The solid May report shows that builders are buoyed by growing consumer demand for single-family homes.  However, the record-high cost of lumber is hurting builders’ bottom lines and making it more difficult to produce competitively priced houses for newcomers to the market.”

 

Wednesday, the U.S. Census Bureau and the Department of Housing and Urban Development reported new Housing Starts in April reached a seasonally adjusted annual rate of 1.287 million.  This was a decline of 3.7% from the upwardly revised March pace of 1.336 million but was an increase of 10.5% compared with the April 2017 rate of 1.165 million.  The consensus forecast called for a rate of around 1.325 million for April.  Meanwhile, the seasonally adjusted rate of new Building Permits fell to 1.352 million, down 1.8% from the upwardly revised February rate of 1.377 million, but 7.7% higher than the April 2017 rate.

 

In the single-family home category, housing permits rose month over month in April from a revised annual rate of 851,000 in March to a seasonally adjusted annual rate of 859,000.  The rate rose 7.9% year over year.  Danielle Hale, chief economist for Realtor.com, had this to say about the report:  “We saw 894,000 single-family housing starts in April, a slight step up from an upwardly revised March figure.  We remain significantly behind a normal level of 1.2 million starts.  In fact, if single-family starts continue at the strong yearly growth rate we saw in April, it will be fall 2019 before annual single-family starts break the 1 million mark consistently — which is still 17 percent lower than normal.”

 

 

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 2.7% during the week ended May 11, 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 August 2008.

 

Overall, the refinance portion of mortgage activity fell to 35.9% from 36.3% of total applications from the prior week, its lowest level since September 2008.  The adjustable-rate mortgage share of activity was unchanged at 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 decreased to 4.77% from 4.78% with points decreasing to 0.35 from 0.36.

 

For the week, the FNMA 4.0% coupon bond lost 39.0 basis points to close at $101.266 while the 10-year Treasury yield increased 9.05 basis points to end at 3.06%.  The three major stock indexes ended lower for the week.

 

The Dow Jones Industrial Average fell 116.08 points to close at 24,715.09.  The NASDAQ Composite Index dropped 48.54 points to close at 7,354.34.  The S&P 500 Index lost 14.75 points to close at 2,712.97.  Year to date on a total return basis, the Dow Jones Industrial Average has dropped 0.02%, the NASDAQ Composite Index has gained 6.53%, and the S&P 500 Index has advanced 1.47%.

 

This past week, the national average 30-year mortgage rate increased to 4.78% from 4.65%; the 15-year mortgage rate rose to 4.21% from 4.05%; the 5/1 ARM mortgage rate increased to 4.00% from 3.84% while the FHA 30-year rate rose to 4.50% from 4.45%.  Jumbo 30-year rates increased to 4.80% from 4.68%.

 

Economic Calendar – for the Week of May 21, 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 ($101.266, -39.0 bp) traded within a wider 98.1 basis point range between a weekly intraday high of 101.641 on Monday and a weekly intraday low of $100.66 on Thursday before closing the week at $101.266 on Friday.  The bond had a positive bounce off of support on Thursday and Friday from a deeply oversold position resulting in a positive stochastic crossover buy signal.  From a technical perspective, the bond should trade up for a test of overhead resistance in the coming week, and should this happen; mortgage rates should undergo a slight improvement.

 

 

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Thursday is the best day to list a home, find out what time from CNBC.

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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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