So you’ve found the house of your dreams, made an offer, and finally, both you and the seller have agreed on a price. This is when your agent has you sign the sales contract, and you pop the bubbly, right? Perhaps you shouldn’t pop that cork so fast. You may have more negotiating to do.

 

Unless you are buying a new construction home where most buyers opt out of doing an inspection, you are only at the beginning of the negotiating process, because negotiations still occur during the escrow period — mostly notably over what is revealed during a home inspection. Zillow’s Brendon DeSimone offers these tips for this step along your home purchase journey:

 

Don’t expect the seller to get the work done for you, even if they agree to pay for it. Instead, ask for a credit for the work to be done. Why? Because the seller’s focus is on moving out. “If the property is moving toward closing, they’re likely packing and dreaming of their life post-sale. The last thing they want to do is repair work on their old home. They may not approach the work with the same conscientiousness that you, as the new owner, would. They may not even treat the work as a high priority,” says DeSimone.

 

Even if you got a quote from a contractor or tow for the repairs, taking a cash-back credit at close of escrow means you can even use the money to complete the project yourself (if it’s simple enough) and pocket the difference.

 

If you got inspired watching a slew of HGTV shows and are already planning to remodel a bathroom the minute escrow closes, then it’s unlikely that you would care about a bit of floor damage, a leaky faucet, or that the tiles need caulking because they’ll get taken care of during your renovation. But the repairs are still up for negotiation and asking the seller for a credit to fix these issues will help offset some of your closing costs.

 

Don’t share your plans with the seller or the seller’s agent. “Revealing your comfort level with the home or your intentions, in the presence of the listing agent, could come back to haunt you in further discussions or negotiations,” says DeSmone. “If they sense you are uneasy with the inspection, they’ll be more willing to relay that to the seller. Conversely, if you spend two hours measuring the spaces and picking paint colors, you lose negotiation power.”

 

This is especially important if you mention gutting the kitchen, according to DeSimone. “If you mention you’re planning a gut renovation of the kitchen, the sellers will certainly hear about it. And they’re going to be less likely to offer you a credit back to repair some of the kitchen cabinets.” It’s wise to resist the urge to share your giddiness regarding plans for the house.

 

He warns buyers about completing the original contract assuming with the expectation that they can and will negotiate the price down more after the inspection, as it may backfire on you — particularly in a competitive seller’s market where sellers tend to call all the shots.

 

DeSimone ends his cautionary advice with, “A real estate transaction is never a done deal until the money changes hands and the deed is transferred. Stay on your toes. Otherwise, you may risk losing out on further viable negotiation opportunities, which could lead to buyer’s remorse.”

 

 

Source: TBWS

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Mortgage bond prices slipped lower and the 10-year Treasury yield moved modestly higher this past week while the major stock market indices put in a mixed performance.  While the Dow Jones Industrial Average and the S&P 500 saw some decent gains, the technology-heavy NASDAQ Composite Index took it on the chin following social media giant Facebook’s 19% plunge on Thursday.  Facebook’s dive marked the largest-ever one-day drop in market value for a U.S.-listed company to the tune of -$119.1 billion.

 

In economic news, the preliminary reading for 2nd Quarter GDP showed an annualized increase of 4.1%.  This matched most analyst forecasts although there were those hoping for a more robust number closer to 5%.  This was the best GDP reading since the third quarter of 2014, driven mostly by consumer spending which increased 4.0% and contributed 2.69 percentage points to the GDP total.

 

In political news, President Trump scored a promising trade deal with European Commission President Jean-Claude Juncker on Wednesday.  President Trump procured trade concessions from the European Union (EU) whereby the EU would import more soybeans and natural gas from the U.S. and improve market access for U.S. medical devices.  Future negotiations will be taking place on auto tariffs.

 

In housing, the National Association of Realtors reported sales of Existing Homes edged 0.6% lower in June to a seasonally adjusted annual rate of 5.38 million.  This was slightly below the consensus forecast of 5.45 million and also below a downwardly revised 5.41 million in May.  Compared with a year earlier, sales in June fell 2.2% and have now fallen year-over-year for four straight months.

 

The median existing home price for all housing types increased 5.2% to an all-time high of $276,900 – the 76th straight month of year-over-year gains.  The median existing single-family home price was 5.2% higher from a year ago reaching $279,300.  The inventory of existing homes for sale at the end of June increased 4.3% to 1.95 million while unsold inventory is at a 4.3-month supply at the current sales rate.  Overall, low housing supply continues to act as a burden on overall sales in addition to high prices on available inventory hindering affordability, especially for first-time buyers seeing home prices rise faster than income.

 

 

Last Wednesday, the Commerce Department reported sales of New Homes declined 5.3% from May through June to a seasonally adjusted annual rate of 631,000, the weakest rate in eight months possibly indicating the housing market is cooling off.  This was the slowest pace for new-home sales since October.  Plus, the three-month average for new home sales was 646,000 for the three months ending in June, the lowest average since the period that ended in February.

 

The median sales price decreased 4.2% year-over-year to $302,100 while the average sales price decreased 2.0% to $363,300.  With the current sales rate, the inventory of new homes for sale increased to a 5.7-months’ supply compared to 5.3 months in May and 5.3 months in the year-ago period.  One thing to worry about is the June swoon took place despite a decline in median and average selling prices.

 

The latest data from the Mortgage Bankers Association’s (MBA) weekly mortgage applications survey released on Wednesday showed a decrease in mortgage applications.  The MBA reported their overall seasonally adjusted Market Composite Index (application volume) fell 0.2% during the week ended July 20, 2018.  The seasonally adjusted Purchase Index decreased 1.0% from the week prior while the Refinance Index increased by 1.0% from a week earlier.

 

Overall, the refinance portion of mortgage activity increased to 36.8% from 36.5% of total applications from the prior week.  The adjustable-rate mortgage share of activity increased to 6.3% from 6.1% of total applications.  According to the MBA, the average contract interest rate for 30-year fixed-rate mortgages with a conforming loan balance was unchanged at 4.77% with points decreasing to 0.45 from 0.46.

 

For the week, the FNMA 4.0% coupon bond lost 25.0 basis points to close at $101.563 while the 10-year Treasury yield increased 6.49 basis points to end at 2.9580%.  The Dow Jones Industrial Average gained 392.94 points to close at 25,451.06.  The NASDAQ Composite Index fell 82.78 points to close at 7,737.42.  The S&P 500 Index advanced 16.99 points to close at 2,818.82.  Year to date on a total return basis, the Dow Jones Industrial Average has gained 2.96%, the NASDAQ Composite Index has advanced 12.08%, and the S&P 500 Index has added 5.43%.

 

This past week, the national average 30-year mortgage rate climbed to 4.72% from 4.63%; the 15-year mortgage rate rose to 4.19% from 4.13%; the 5/1 ARM mortgage rate increased to 4.00% from 3.96% while the FHA 30-year rate rose to 4.42% from 4.37%.  Jumbo 30-year rates remained unchanged at 4.50%.

 

Economic Calendar – for the Week of July 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 ($101.563, -25.0 bp) traded within a narrow 37.5 basis point range between a weekly intraday high of 101.84 on Monday and a weekly intraday low of $101.47 on Friday before closing the week at $101.563 on Friday.  After taking a step lower below technical support last Monday, mortgage bonds continued to trade mostly in a sideways direction.  They are now deeply “oversold” and could take a turn higher this coming week on either disappointing economic news or a faltering stock market.  If mortgage bonds do turn higher they will face a stiff, multiple layer of overhead resistance as shown on the chart below.  The chart suggests there will be stable to slightly improved mortgage rates this coming week

 

 

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Those of us who live in places where we believe flooding, hurricanes, fires or tornadoes seem unlikely to occur, watch our TV screens, horrified over the devastation elsewhere in the country. We can’t imagine experiencing something like that first hand, seeing our homes destroyed or living in temporary shelters.

 

This inability to fathom the horrors of natural disasters can often make us more complacent regarding our homeowner’s insurance coverage, perhaps blissfully ignoring what is included in its many clauses and paragraphs. After something happens, however, is not the time to address what’s there. Taking inventory of the coverage you already have is something to put on your to-do list now. Forbes financial writer Mark Dennis offers some common errors many homeowners make regarding their policies.

 

The first is confusing replacement cost with cash value. If you still owe a considerable amount on your mortgage, chances are your lender already requires you to carry a homeowner’s policy that includes replacement cost coverage. This is defined as the amount needed to cover demolition, construction, and other related rebuilding costs needed to replace your home if it were destroyed. A less expensive form of coverage is cash value coverage. Your insurance agent should make it a point to explain, however, that cash value coverage may not include the added rebuilding costs that could find you unable to stay in your home after disaster strikes.

 

And what about those coverage limits? If you’ve lived in your home a long time, confident that the value of your home has significantly increased, isn’t it wise to invite your insurance agent over for coffee to discuss making your policy coverage limits sufficiently high to account for replacement costs that covers its value today rather than when you bought the place? If your policy does not include guaranteed or extended replacement cost coverage to protect against unexpected cost increases, it’s time to regroup. Read the policy and know what you own.

 

How sizable a check would you have to write to a construction contractor to cover your insurance deductible repairs? When you took out the insurance, you may have opted for a high deductible to offset a higher monthly insurance payment. According to Dennis, who experienced hurricane damage to his own home, he experienced what the world of behavioral finance refers to as loss aversion. “Under this behavioral bias, we tend to experience losses (e.g., paying a large deductible for an insurance claim) much more deeply and painfully than we appreciate the joy of gains (such as saving money by paying less in monthly insurance premiums because we agreed to pay a larger deductible if we file a claim). Becoming more aware of our built-in psychological biases is one way to help ourselves make better financial decisions.”

 

If you are cash-strapped, however, and can’t seem to set aside emergency funds for a larger deductible, it may be more comfortable to go for a smaller insurance deductible with a higher premium for a while. If this is the case, ask yourself what you could trim in order to steer more money toward emergency savings. “Better yet, take the money you save in reduced premiums and redirect it to your emergency fund savings account as well. You were paying that “extra” money to the insurance company anyway. Why not pay it back to yourself now and have a larger emergency fund in the future?” says Dennis.

 

What about your own safety? Homeowners policies include a provision for personal liability coverage for instances where the owner is sued for injuries or damage caused on or by his property, but many homeowners carry only the minimum amount of personal liability coverage. This exposes their assets to potential forfeiture if they are ever served with a lawsuit. A separate umbrella policy or rider might be needed to provide the maximum amount of liability coverage.

 

It rains everywhere, but many of us are in denial, pretending we live on higher ground where flooding would never reach us. “A standard homeowner’s insurance policy protects against many catastrophes – fire, theft, wind damage – but not rising water,” says Dennis, who said many homeowners where he lives did not carry flood insurance. Whether it’s heavy rains, melting snow, or hurricanes, flood insurance is the only thing that can cover these damages. The National Flood Insurance Program (NFIP) provides consumer information regarding flood insurance, along with details of what flood insurance will and will not cover.

 

It’s important to remember that insurance is there to cover the “what ifs” in life. Even the most unlikely things continue to happen to someone, somewhere. It’s much more likely to be hit by a devastating tornado than to win the lottery, even many of us still feed dollar bills into those machines, grab, our tickets, and hope for a miracle.

 

 

Source: Forbes, TBWS

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As in any industry, the real estate industry has its fair share of stereotypes and myths, but a new report from the National Association of Realtors just debunked some of those myths.

Read full article from Housingwire.

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A recent 2018 Bank of the West study dealing with the buying habits of millennials indicates the equity-shy demographic is now turning to real estate as the cornerstone of their investment portfolio. Homeownership is emerging as the most popular ingredient of their American Dream (56%), followed by debt pay-off, and the goal of a comfortable, early retirement (49%) as the second and third most critical components.

 

The study shows how millennials’ desire to own a home is pushing some to risk their other goals by taking on mortgages, with one in four say that they are willing to withdraw or borrow against retirement funds to finance down payments for a home.

 

Builder Magazine quoted Ryan Bailey, who heads up Bank of the West’s Retail Banking Group. “Millennials are so eager to become homeowners that some may be inadvertently cutting off their nose to spite their face. The fact that nearly one in three millennials who already own their homes have dipped into their retirement nest eggs to finance their down payment is alarming.”

 

The study suggests millennial homeowners may be rushing into a home buying decision without asking all the right questions, citing 68% having reported buyer’s remorse regarding ill-prepared going into the purchase and 44% have issues with space itself. Many feel that soon after they closed escrow, they felt stuck in one place with a house that either had unnoticed damage or didn’t work for their family. A full 41% cited financial regrets, saying they felt stretched too thin financially, either dealing with home maintenance expenses or not having waited long enough to save up for a larger down payment.

 

“A white picket fence can certainly be a smart investment. To help avoid buyer’s remorse, millennials should consider covering their bases and kick the proverbial tires—reflecting on their physical and financial wishes for their home before they sign on the dotted line,” said Bailey.

 

According to the Builder article, timing has worked against millennials when it comes to home-buying. Most weren’t ready to close on a home when housing prices were at their lowest, and interest rates hovered just above zero. For those who may feel ready to buy now, the new Tax Cuts and Jobs Act eliminates some of the homeownership tax breaks (deducting state and local property taxes from federal tax bills) their parents enjoyed.

 

Despite these setbacks, 4 in 10 millennials in the study are already homeowners, while the rest remains interested in someday owning a home (92%). Despite the housing crisis when homes values fell like rocks, 59 percent still believe it is a good investment or say it makes more financial sense to own than rent.

 

According to the article, 69% of millennials in the study believe debt-free status is the ultimate dream. 58% say they pay off their credit card balances in full each month, while they try to avoid credit cards in general and are most likely to use cash, checks, or debit cards (59%).

 

Bailey goes on to say that debt doesn’t have to be a dirty word. “By responsibly borrowing the amount that is just right for their financial situation, millennials can fund their homeownership dreams, while freeing up capital to invest in the markets today when they still have a long time-horizon on their side.”

 

 

Source: Builderonline.com, TBWS

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This past week was the second week of earnings season resulting in a roughly flat finish for the stock market with bonds edging modestly lower.  So far, approximately 20% of corporations have reported their second quarter earnings and they have mostly exceeded expectations as the economy continues to build strength.  Evidence of the economy humming right along included the latest release of the Federal Reserve’s Beige Book reporting “Economic activity continued to expand across the United States, with 10 of the 12 Federal Reserve Districts reporting moderate or modest growth.”  Plus, the Philadelphia Fed Manufacturing Index rose to 25.7 from 19.9 and that was 4.2 points better than expected.

 

Furthermore, the June Case Freight Index reported “The Cass Freight Shipments and Expenditures Indices are clearly signaling that the U.S. economy, at least for now, is ignoring all of the angst coming out of Washington D.C. about the trade war.  Demand is exceeding capacity in most modes of transportation by a significant margin.  In turn, pricing power has erupted in those modes to levels that continue to spark overall inflationary concerns in the broader economy.”  This hasn’t gone unnoticed by the Fed.  Fed Chair Jerome Powell gave Congress his semiannual update on the economy and monetary policy, speaking before both the Senate Banking and the House Financial Services Committees.  Mr. Powell’s testimony strengthened the view that improving economic conditions should allow the Fed to continue to gradually raise short-term interest rates.  Rate hike odds are now showing about a 60% chance for two more hikes this year with the next likely one coming in September.

 

In housing, the Commerce Department reported homebuilding fell to a nine month low during June with housing starts dropping 12.3% to a seasonally adjusted annual rate of 1.173 million units.  Economists had been expecting 1.318 million starts.  Single-family homebuilding, accounting for the largest share of the housing market, fell 9.1% to a rate of 858,000 units.  Meanwhile, building permits fell for the third consecutive month to a rate of 1.273 million units – a 2.2% decline to their lowest level since September 2017.  The consensus forecast called for 1.301 million permits.  Permits for single-family units increased a modest 0.8% to 850,000.  The data from this report is somewhat surprising as it shows weakness at a time when there should be strength.  This weakness reveals the difficulties builders are having finding adequate labor in addition to the challenges they are facing from higher labor, land, and materials costs.

 

The latest data from the Mortgage Bankers Association’s (MBA) weekly mortgage applications survey released on Wednesday showed a decrease in mortgage applications.  The MBA reported their overall seasonally adjusted Market Composite Index (application volume) fell 2.5% during the week ended July 13, 2018.  The seasonally adjusted Purchase Index decreased 5.0% from the week prior while the Refinance Index increased by 2.0% from a week earlier.

 

Overall, the refinance portion of mortgage activity increased to 36.5% from 34.8% of total applications from the prior week.  The adjustable-rate mortgage share of activity decreased to 6.1% from 6.3% 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 4.77% from 4.76% with points increasing to 0.46 from 0.43.

 

For the week, the FNMA 4.0% coupon bond lost 17.1 basis points to close at $101.813 while the 10-year Treasury yield increased 6.23 basis points to end at 2.8931%.  The Dow Jones Industrial Average gained 38.71 points to close at 25,058.12.  The NASDAQ Composite Index fell 5.78 points to close at 7,820.20.  The S&P 500 Index added 0.52 of one point to close at 2,801.83.  Year to date on a total return basis, the Dow Jones Industrial Average has gained 1.37%, the NASDAQ Composite Index has advanced 13.28%, and the S&P 500 Index has added 4.80%.

 

This past week, the national average 30-year mortgage rate was unchanged at 4.63%; the 15-year mortgage rate rose to 4.13% from 4.12%; the 5/1 ARM mortgage rate increased to 3.96% from 3.95% while the FHA 30-year rate rose to 4.37% from 4.35%.  Jumbo 30-year rates decreased to 4.50% from 4.54%.

 

Economic Calendar – for the Week of July 23, 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, -17.1 bp) traded within a narrow 28.2 basis point range between a weekly intraday high of 102.063 on Thursday and a weekly intraday low of $101.781 on Monday and Friday before closing the week at $101.813 on Friday.  Mortgage bonds continued to trade within a narrow range between resistance and support levels ending the week between the 25-day and 50-day moving averages which serve as short-term support levels.  Trading has been in a consolidating, “sideways” direction for several consecutive weeks now and it appears this “sideways” pattern could continue this coming week.  Unless an unforeseen market-moving “catalyst” such as a major geopolitical or economic event comes along to shake up the financial markets this coming week, bond prices are likely to continue trading in a tight trading range resulting in relatively stable mortgage rates

 

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Despite a lack of housing inventory and fierce competition in the real estate industry, there are a lot of people who still want to be Realtors. According to the U.S. Bureau of Labor Statistics, jobs in real estate are expected to continuously grow by 6% through 2026. That means seasoned Realtors and hard working rookies will compete for your business. So how can you find just the right agent for your specific real estate needs?

 

Recently thirteen members of the Forbes Real Estate Council shared some tips home buyers or sellers may want to heed to ensure the agent they choose is the right one for them.

 

Don’t just read an agent’s bio and choose someone from a search engine or website. Bios, while helpful, do not tell you everything you need to know about a real estate professional. While looking for a Realtor online is not uncommon, forgoing a one-on-one interview is not the best course. Would you hire someone based on merely receiving their resume and cover letter? Just as important is the firm they represent. Don’t hesitate to ask probing questions such as what that firm required of them before hiring them and what compelled them to go in real estate in the first place. While it’s understandable you may prefer a seasoned professional, don’t discount the enthusiasm and commitment a savvy newbie (with nothing but time on their hands to serve you) might offer as well. Often they have top-producing mentors there to help them every step of the way, offering you an entire team of people at your disposal.

 

Your agent does not need to be your best friend, but he or she does need to address realities while supporting your buying or selling goals. If you are a first-time buyer or seller, find out just how much hand-holding a potential agent might offer you. No question should be considered too dumb. Your agent is there not only to represent you but educate you as well.

 

These days home buyers or sellers can spend even more time with their agents aided by Skype, FaceTime or text messaging even when personal meetings are not feasible. Your agent or his or her executive assistant should have time for you when you have pressing questions or direct you to someone who can help. Questioning them over how often you should expect them to be in touch, how quickly they respond to texts and voicemails, etc., is never out of line. While agents are only human and most will inform you of any unavoidable absences that might occur on their part, they are in an industry that has no real set hours or days off.

 

Local agents serving your target area are the most privy to market data that matters to you, since many know facts about neighborhoods and homes you may never see in print. They can explain the provenance and potential of a particular area — not just a momentary glimpse.

 

And how about their negotiating skills? How does an agent handle a bidding war, which is now more the rule than the exception to it? If you are a seller, how involved would they be if you were readying your property for sale?

 

The best Realtors are those whose best interests are your interests — not the amount of commission they will receive or even how much they’ve spent of their own money to either market your home or tour you around. And if you must decide between spending more or less, a good agent will not try to influence your decisions. Instead, he or she should lay all the facts on the table, Ben Franklin style, and permit you to make decisions base on your own priorities, offering as many useful disclosures as possible in the meantime.

 

Let’s face it. If you were hiring someone to do work for you, you’d want to see what others say about them, so don’t settle for a few published testimonials on their website. An agent should never take offense you ask for names and numbers of past clients and call one or two. Google an agent and look for any challenges against their licenses through the local Department of Real Estate website.

 

Most of all, go with your gut after you’ve done all the vetting recommended here. If an agent seems to talk too much about their abilities and past successes instead of focusing on your needs, don’t let him or her suede-shoe you or make you feel as if your concerns are trivial. They will become YOUR employee, and you deserve the kind of communication and professionalism you would expect from anyone else who would go to work for you. Active listeners address your wishlist of important items (yes, you should compile one). If you find that list being ignored in subsequent experiences and conversations, keep looking.

 

Source: Forbes, TBWS

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Trade tensions and inflation data dominated investor sentiment creating increased volatility in the stock market.  Stocks got off to a good start last Monday primarily due to a lack of any bad news over the prior weekend.  Stocks then fell on Wednesday when trade tensions surfaced on news the U.S. would continue its plan to enact an additional $200 billion worth of tariffs on a variety of Chinese goods to begin a few months from now.  However, this threat was not met with an immediate response from China and investors viewed this as a positive sign helping the stock market to recover on Thursday.  In fact, the technology laden NASDAQ Composite Index set a new all-time high on Thursday and Friday.

 

Inflation data came in a little hotter than expected with the Producer Price Index rising 0.3% in June following a 0.5% increase in May.  On an annualized basis, Producer Prices have increased 3.4%, their fastest increase in almost seven years.  Increased costs for steel and aluminum were noticeable suggesting the tariffs recently put in place by the Trump administration for these metals are beginning to drive input costs higher for manufacturers.

 

Also, inflation at the consumer level edged higher but was within the consensus forecast.  The headline Consumer Price Index (CPI) in June increased 0.1% with the Core CPI rising 0.2%.  However, consumer prices have risen 2.9% over the past year for its highest rate in six years.  This year-over-year rate more than offsets the 2.7% increase in average annual wages over the same time period leading to growing inflation concerns.   These concerns have shown up in the latest Consumer Sentiment report from the University of Michigan where it was noted “The primary concerns expressed by consumers were a decline in the future pace of economic growth and an uptick in inflation.”

 

In housing, the latest data from the Mortgage Bankers Association’s (MBA) weekly mortgage applications survey released on Wednesday showed an increase in mortgage applications.  The MBA reported their overall seasonally adjusted Market Composite Index (application volume) rose 2.5% during the week ended July 6, 2018.  The seasonally adjusted Purchase Index increased 7.0% from the week prior while the Refinance Index decreased by 4.0% from a week earlier to its lowest level since December 2000.

 

Overall, the refinance portion of mortgage activity decreased to 34.8% from 37.2% of total applications from the prior week.  The adjustable-rate mortgage share of activity decreased to 6.3% 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 4.76% from 4.79% with points increasing to 0.43 from 0.41.

 

For the week, the FNMA 4.0% coupon bond lost 7.9 basis points to close at $101.984 while the 10-year Treasury yield increased 0.068 of one basis point to end at 2.8308%.  The Dow Jones Industrial Average gained 562.93 points to close at 25,019.41.  The NASDAQ Composite Index advanced 137.59 points to close at 7,825.98.  The S&P 500 Index added 41.49 points to close at 2,801.31.  Year to date on a total return basis, the Dow Jones Industrial Average has gained 1.21%, the NASDAQ Composite Index has advanced 13.36%, and the S&P 500 Index has added 4.78%.

 

This past week, the national average 30-year mortgage rate decreased to 4.63% from 4.65%; the 15-year mortgage rate fell to 4.12% from 4.13%; the 5/1 ARM mortgage rate decreased to 3.95% from 3.99% while the FHA 30-year rate fell to 4.35% from 4.37%.  Jumbo 30-year rates decreased to 4.54% from 4.59%.

 

Economic Calendar – for the Week of July 16, 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 ($101.984, -7.9 bp) traded within a narrower 26.6 basis point range between a weekly intra-day high of 102.016 on Friday and a weekly intraday low of $101.750 on Wednesday and Thursday before closing the week at $101.984 on Friday.  Mortgage bonds traded within a narrow range between resistance and support levels ending the week close to resistance located at $101.988 on Friday.  A weak sell signal on Tuesday was followed by a weak buy signal on Friday suggesting the bond could continue to consolidate and trade sideways like it did last week.  This should result in stable mortgage rates this coming week

 

 

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This past holiday-shortened week was good for both the broad stock market indexes and mortgage bonds as both asset classes finished the week moderately higher.  Trading volumes were lower than usual due to the 4th of July holiday, although active investors had to wade through ongoing news of a “trade war” between the U.S. and China; the release of Fed minutes from their latest policy meeting; and data from the June Employment Report.

 

Thursday, the Fed released the minutes from its June 12-13 policy meeting revealing officials are aware of the possibility that growing trade tensions could have a negative impact on future business sentiment and investment spending.  Friday brought a “not too hot, not too cold” “Goldilocks” employment report featuring solid nonfarm payrolls growth of +213,000 jobs coupled with a restrained 2.7% year-over-year gain in average hourly earnings that kept inflation and aggressive rate-hike worries at arms’ length.  Nevertheless, neither the Fed minutes nor the key jobs data had much of an impact on long-term interest rates, with the yield on the benchmark 10-year Treasury note decreasing slightly for the week.

 

In housing news, CoreLogic reported Tuesday their Home Price Index (HPI) showed home prices increased by 1.1% in May and by 7.1% on a year-over-year basis.  May’s one-year appreciation of 7.1% was stronger than April’s reading of 6.9% and was the strongest number in four years.  Moving forward, CoreLogic is forecasting homes will appreciate 5.1% in the coming year which is slightly below their forecast of 5.3% last month.

 

The highest price gains in metro areas were seen in Denver, Las Vegas, and San Francisco.  CoreLogic Chief Economist Frank Nothaft remarked “The lean supply of homes for sale is leading to higher sales prices and fewer days on market, and the supply shortage is more acute for entry-level homes.

 

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 0.5% during the week ended June 29, 2018.  The seasonally adjusted Purchase Index increased 1.0% from the week prior while the Refinance Index decreased by 2.0% from a week earlier.

 

Overall, the refinance portion of mortgage activity decreased to 37.2% from 37.6% of total applications from the prior week.  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 decreased to 4.79% from 4.84% with points decreasing to 0.41 from 0.42.

 

For the week, the FNMA 4.0% coupon bond gained 14.1 basis points to close at $102.063 while the 10-year Treasury yield decreased 3.60 basis points to end at 2.824%.  The Dow Jones Industrial Average gained 185.07 points to close at 24,456.48.  The NASDAQ Composite Index advanced 178.09 points to close at 7,688.39.  The S&P 500 Index added 41.45 points to close at 2,759.82.  Year to date on a total return basis, the Dow Jones Industrial Average has lost 1.06%, the NASDAQ Composite Index has gained 11.37%, and the S&P 500 Index has advanced 3.22%.

 

This past week, the national average 30-year mortgage rate decreased to 4.65% from 4.66%; the 15-year mortgage rate rose to 4.13% from 4.11%; the 5/1 ARM mortgage rate decreased to 3.99% from 4.00% while the FHA 30-year rate fell to 4.37% from 4.38%.  Jumbo 30-year rates decreased to 4.59% from 4.69%.

 

Economic Calendar – for the Week of July 9, 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 ($102.063, +14.1 bp) traded within a slightly wider 34.4 basis point range between a weekly intraday high of 102.094 on Friday and a weekly intraday low of $101.750 on Tuesday before closing the week at $102.063 on Friday.  Mortgage bonds traded mostly between resistance and support levels during a holiday-shortened week, but did manage to close just above nearest resistance located at $101.988 on Friday.  However, the bond is currently extremely “overbought” and will be susceptible to a slight pull-back or sideways trading this coming week.  With the stock market seemingly “shrugging off” the latest trade news with China on Friday, we could see bond prices consolidate leading to stable or very slightly higher mortgage rates this coming week.

 

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Semantics are alive and well with real estate. You either buy, or you invest. Right? Well, let’s admit there is a slight nuance here. You plan to live in what you “buy,” but the idea of investing carries the connotation of renovating and making a quick buck. Today’s consumers are much more interested than ever to try their hand at flipping. The problem is, many of them have not done their homework, making the path ahead fraught with potentially costly roadblocks.

 

These days of frantic buying have caused many a consumer to muster up a quick education about real estate, but it may not always be a complete one. In a galaxy not that far away, raising capital for a simple distressed single-family house fix-and-flip used to be met with negative reactions. As a result, the world of real estate investing was at a standstill, and golden opportunities were missed.

 

HGTV and its reality shows about flips put new steam into the idea of buying the worst property on the best street. Suddenly everyone had a dangerous knowledge about buying distressed real estate, distilled into 50 minutes of airtime. Even Wall Street has recognized the residential rehab craze, sustaining the longest bull market ever, since real estate is a great hedge against a Wall Street correction.

 

What we are left with is a market full of people doing flips, driving property values up, and fueling the demand for inventory. But someone is bound to get burned. So, how do you start playing the real estate investment game and NOT be the guy who got there too late for those $100 bills being handed out on that proverbial corner somewhere?

 

Forbes New York Business Council’s Melissa Shea, a 15-year RE investor, and educator, offers some tips, the first of which is to take to heart in the saying that goes, “If you think the price of education is expensive, try ignorance.”

 

A quality education is key here, but we’re not talking about buying a course from some TV real estate guru standing in front of his yacht while leaning on his Bentley. What he’ll tell you won’t come close to the true reality of a fix-and-flip. Shea’s advice is to “take the money you would pay a guru, buy a house, and flip it by yourself. You’ll lose less money and learn more. The best place to start is local real estate investment clubs and associations. You need local knowledge, not national programs.” She recommends finding local investment clubs and associations by going to CRE Online or to the National Real Estate Investors Association. Don’t let your education stop there, however, she recommends. There is a podcast, among others, called Bigger Pockets that offers real content, excellent education and follows the trends, according to Shea.

 

And then there is the emotional component. Shea warns you not to get attached to properties, causing you to overlook costly potential errors. “People rationalize, ‘It’s only $3,000 more,’ but you said that three times ago, so now it’s $9,000 more, and you aren’t going to make much of a profit. Don’t lie to yourself. Stick to the numbers; they don’t lie,” she says. She warns against allowing yourself to increase your purchase price and not deluding yourself that the rehab is going to cost less than the quote your contractors gave you. “It’s always more,” she says. “Don’t fool yourself into thinking the property will sell for a higher price than the last house in the area because yours will be ‘so much nicer.’ That’s a recipe for financial disaster.”

 

Shea also advises you not to be alone on that investment island. “Going it alone is one of the worst mistakes you can make. Personally, I love joint ventures.” Time was when you could be a complete rookie, purchase a property, wait a few months and, without touching the property except for mowing the lawn and emptying the house, make a tidy sum. Even then, it was more likely that you would have lost money or broken even. The real estate market crash, however, served as an expert professor, teaching investors to use reputable attorneys, seasoned Realtors, long-established title companies and reliable lenders, and to network with other investors, she says.

 

Real estate investing is still not an exact science, according to Shea. “There are plenty of dangers, but if you’re educated, keep a level head, don’t get emotionally involved, and work with an award-winning team, you can enjoy the pleasures real estate investing can bring.”

 

Source: TBWS

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