Mortgage rates keep rising


An increase of six basis points is normal within week over week reporting.  However, it is the trend which has many borrowers showing signs of concern.  The benchmark thirty-year mortgage crept to the highest point of 2018 and now sit as 4.610%.  The news was reported yesterday as Freddie Mac released its primary market survey which tracks mortgage rate movement.

 

A seller’s market

 

Adding consternation to those in the market to purchase a home is the fact the current market is defined as a “seller’s market.”  That translates into fewer properties on the market, thus buyers have been forced to make competitive offers and the result is higher sales prices.

 

Those in the market to purchase a new home or refinance their existing mortgage usually take a very cautious position when contemplating a transaction.  The economy has been on a nine-year recovery and each month there has been improvement.  Unemployment is at record lows.  Some have received bonuses or extra money in their paychecks.  All of this may sound good on a political front, however the increase in rates represents higher cost and puts first time buyers in jeopardy as there is added pressure on them to qualify for a loan.

 

Rates have increased approximately fifty basis points from a year over year comparison

 

Here is a snapshot of rates for popular programs:

May 17, 2018

30-Yr FRM 15-Yr FRM 5/1-Yr ARM
Average Rates 4.61 % 4.08 % 3.82 %
Fees & Points 0.4 0.4 0.3
Margin N/A N/A 2.77

 

** each week Freddie Mac publishes the rate survey.  It is retrieved from a sampling from its lenders who sell mortgages to them.  The report is an industry standard and used to gauge consumer mortgage rate movement.

Racism: White Flight: Gentrification – A discussion about View Park and surrounding communities


[Exposition Park – Los Angeles, CA] This past Thursday the California African-American Museum (CAAM) hosted L.A. Commons and Mrs. Karen Mack in a community symposium titled the “Evolution of View Park.”  This was the second of a three-part series focusing on “Making Sense of Gentrification,” highlighting the community of View Park (Los Angeles), CA.

Mrs. Karen Mack welcoming attendees. photo courtesy of fredyt123

A standing room crowd came out to hear and discuss what is one of the hottest topics in the past twenty years.   Gentrification is not an easy topic to discuss.  The word evokes emotion and for many has a negative meaning.  Although from my lens those in attendance were predominately African-American, homeowners and female, for the most part there was a good degree of diversity from other ethnic groups.  What also made for a good discussion was the span of age groups.  In addition to the focus on View Park, some who have called the community home represented multi-generational families.  You also had representation from neighboring communities such as Baldwin Hills, Leimert Park, West Adams and Venice, just to name a few.  Additionally, there was representation from cities such as District of Columbia, Baltimore and other cities on the east coast.  Sprinkled in the audience were a few millenniums who were courageous to share their perspectives.

Mrs. Mack brought quite a team to inform those in attendance but to also motivate dialogue which is essential in fostering honesty about the subject matter.  She was joined by economist Dr. Devin Bunten who has researched the effects of gentrification throughout communities in the United States.  The data he was able to cull together to add to his presentation was unapologetic as it was supported by solid documentation.  This helped the audience frame a better understanding in answering the What and the Why, as well as the How of Gentrification.

View Park and neighboring Windsor Hills are just two enclaves where today African-Americans maintain over 70% occupancy.  They are treasured communities due to property type and proximity.

To view some of his presentation click here Gentrification and View Park


Also, joining Mrs. Mack was local community historian Mr. Robert Lee Johnson.  The grassroots work he has done was well received because he was able to dig back to the evolution of various communities and discuss how they have come to define themselves in 2018.

Lee pointed out how African-Americans migrated from the south.  For housing they were relegated to Central Avenue or the “eastside.”  Legal segregation was a reality.  However, as legal victories were achieved in the 60’s and racial property covenants were ruled unenforceable, African-Americans were afforded housing opportunities that those before them could not enjoy.  Many find it hard to believe that Compton, CA was once all white!

Those who were stacked in the Central Avenue corridor took advantage of the legal victories and moved in all directions.  Some went west to West Adams, Leimert Park as well as View Park and Baldwin Hills.

 


The motivation

Gentrification primarily occurs in the urban core and surrounding communities.  Communities such as View Park are desirable for a variety of reasons.   As beautiful are these areas are, for those looking to move closer to the urban core they must contemplate life in a more multi-cultural environment versus an area they may have grown up in, such as the Westside or other bedroom communities in the suburbs.

By selecting to relocate patient buyers are rewarded with savings in the hundreds of thousands of dollars. The biggest issue they face in coming to the new community is the realty of instead of being in the majority, they find themselves in the minority.  Also, part of their acceptance in relocating is understanding services they have come to accept, might be lacking in the new neighborhood, however they can be transformed.  Blending those needs into their new community is one of the biggest challenges of gentrification.  That is, making sure the new services are appreciated by the current residents so they don’t feel like outsiders.


After the presentations those in attendance came prepared to ask questions and provide their anecdotal realities.  The discussion was very candid and became quite emotional.  Some felt the current gentrifi’ers are more like invaders.

 

“THEY WALK THE NEIGHBORHOODS WITH THEIR DOGS AND TARGET PROPERTIES WHICH ARE VUNERABLE, PARTICULARLY WHERE SENIORS MAY BE LIVING ALONE”

 

“THEY COME TO THE COMMUNITY WITH A HAPPY FACE AND BRING COOKIES AS A RUSE TO DEVELOP FRIENDSHIPS BUT THE REAL MOTIVATION IS TO GET THE HOMEOWNER TO FEEL COMFORTABLE IN DISCUSSING PURCHASING THEIR HOME.”

 

“THEY WORK WITH LOCAL CODE ENFORCEMENT AGENCIES WHO SCOUR COMMUNITIES LOOKING FOR VARIOUS VIOLATIONS WHICH RESULT IN THE CURRENT OWNERS FEEL THEY ARE HARRASSED.  OR THEY RECEIVE FINANCIAL PENALTIES WHICH JEOPARDIZE THE CURRENT OCCUPANTS ABILITY TO PAY.”

 

“WHILE EVERYONE WANTS A POSITIVE COMMUNITY, THOSE WHO ARE ABLE TO MOVE IN HAVE THE FINANCIAL RESOURCES AND POLITICAL VOICE TO MAKE IMPROVEMENTS THAT CURRENT OCCUPANTS MAY HAVE LACKED.  CONSEQUENTLY, AS COMMUNITIES ARE ENHANCED AND DEVELOPED THE RESULT IS HIGHER TAXES WHICH THREATENED CURRENT OCCUPANTS BASED ON THEIR INABILITY TO HAVE THE INCREASE IN INCOME NEEDED TO REMAIN IN THEIR PROPERTIES.” 

 

“THERE IS GREAT CONCERN CURRENT FAMILY’S WILL NOT BE ABLE TO SUSTAIN A LEGACY FOR THEIR CHILDREN AS BASED ON THEIR FINANCIAL PLIGHT, BATTLING RACISM AND OTHER SYSTEMIC ISSUES MAKES IT VERY HARD FOR THEM TO BE ABLE TO AFFORD THE WAY THEIR PARENTS DID.”

 


 

The majority of issues raised by the audience was well received as you could see many heads nodding in approval.  At the same time, some issues were like self-inflicted wounds as some claimed to be unfairly targeted or harassed.  Based on what they were representing their behavior is the type that falls prey to being targeted.  Illegal add-ons or other enhancements which might have made the property more livable, in fact are out of code.  The result may lead to financial penalties or decrease in value based on what they represent their properties to be.  The key, and most homeowners understand this, is to make sure their property is within code or not a target from any scrutiny, let alone a gentrifier who may feel their property is a potential purchase.

 

The bottom line is Mrs. Mack provided an opportunity for folk to gain information, network and become more empowered.  Gentrification may have a negative connotation but understanding how it works is essential so that one has a workable answer why and how groups are reclaiming parts of the city.   In the meantime, while people continue to move or relocate for a variety of reasons, much of it justified, those who remain are encouraged to take a page from the 1960’s which saw one of the early migrations of folk leaving the city for what they perceived as “greener pastures.”   Don’t Move!  Improve!!!


 

A Historical Perspective:

Racism, White Flight, Gentrification

 

As mentioned Racism, White Flight and Gentrification are words many have a difficult time discussing.

Racism is not a new clothing line!  White Flight is not a new dance step!  Gentrification is not a new gelato flavor!

Racism is a by-product of white supremacy.   Gentrification is the reverse of White Flight but still a by-product

Racism was most attributed to those who identify as “white” and whose ancestry is primarily European.  A construct or a system was created where their race was used to dominate other races and otherwise maintain superiority over others through oppressive tactics, hence the birth of white supremacy.

 

“IF YOU’RE WHITE, IT’S ALRIGHT……IF YOU’RE BROWN STICK AROUND….IF YOU’RE BLACK GET BACK!!”

the original jim crow character. It became the symbol of institutionalized racism in the united states

 

Racism became a world phenomenon as whites used their domination to conquer many ethnic groups.  The result was colonization.  Over the years some may have thought racism was eliminated by groups reclaiming their cultures, however EVEN in 2018 it still festers in our overall society and is quite prevalent.

Many voting age African-Americans had accepting the notion in their lifetime a fellow African-American would never ascend to the office of President.  That is why in 2008 they were happily stunned when Barack Obama was elected the 45th president.  Likewise, as long as racism has been around many feel it will not be eliminated in their lifetime.

 

“When we discuss the word integration, what we are stating is the sharing of: Resources, Power & Responsibility”  Rev. Dr., Martin Luther King, Jr.

 

Racism is often confused with prejudice and other biases.  Disliking something or someone for whatever reason is much different from using race to oppress other groups.  Most people have prejudices but not everyone is a racist.  Therefore, many whites are not racist, per se.  However, the legacy they inherited shows up in many forms of behavior as other groups attempt to migrate into the larger society.

 

In the 1940’s, 1950’s, the 1960’s and beyond another phenomenon was created which has it roots in racism.  White Flight was the result of primarily African-Americans and other groups moving into areas once primarily occupied by whites.  While there are many reasons why whites fled communities and neighborhoods they once proudly called home, the common denominator was their dislike or being uncomfortable sharing space with those such as African-Americans or those who were not like them.  In other words, on the periphery they may have had friendly relationships with them, but living next could not be tolerated, thus they fled and established new communities, commonly known as suburbs.

 

A vital element of White Flight is acknowledging Whites or no group wants to be confined to neighborhoods were property values are decimated, or where there are inferior stores, shops or business opportunities, or where their children suffer the blow of an inadequate educational system.  Most important feeling fearful because of the lack of basic services.

A critical element of disparity

 

Racism has a specific pecking order or domination over others.  From economics, employment, housing, education and other factors necessary to fulfill the ideal of living, whites receive higher pay, better employment opportunities, more access to lending as well as better educational opportunities than non-whites.  That pattern still exists today as while many groups appear to enjoy a positive lifestyle, typically the person who is white is in a much better economic position, much of it the result of racism or white supremacy.  However, one must be careful to not assume whites do not make sacrifices in achieving a better lifestyle.  They too work very hard and are dealt some of the same blows as anyone else.  In our society they just do not have the burden of being considered “less-than” or other pitfalls which systematically stymies their growth.

“All things being equal if one could insure steady employment, thus steady compensation they too would be in a position to pay their debts in a timely manner resulting in stellar credit”

 

Gentrification

 

White Flight does not mean every white person left their community as soon as a non-white showed up.  However, as the dominant group shifted, communities across the United States, particularly those in major cities or those known as large urban Cities started a slow process of deterioration.  As whites left, they rightfully took their resources, especially in the form of a thriving tax base.

 

Compounded with the reality of a disparate economic condition, non-whites simply had an inferior economic standard based on the pecking order of racism and discrimination, so living standards were directly compromised.

 

Those urban areas once occupied by whites were always technically called ghettos.  However, the connotation drastically changed once non-whites claimed the space.   As resources necessary to maintain those areas took on a slow stream of deprivation, the result was the creation of blight and other negative consequences as well as social forces such as crime and a variety of factors which rendered those areas unattractive.

 

Gentrification is a subtle, yet specific process.  Communities which were defined as deplorable are stimulated with resources as they are redefined.  People who are part of the reclamation are for the most part white, and interestingly the off-spring of the very families who fled during White Flight.  Through the systemic reality of racism, they are in a better economic and educational position than those who will greet them as neighbors.   Thus, rebuilding the communities becomes strategic and transformational.  So instead of day-to-day survival, due to their economic standing they are able to execute a more sustainable lifestyle.

 

The core reality of gentrification is many who remain in those areas which are being reclaimed or who have paltry resources eventually are dealt the blow of being dislocated.  This is created from the basic notion of being priced out due to higher taxes or not fully comprehending the windfall they might receive for their property is never enough, thus communities are broken up; literally one house, one block at a time until it is transformed into an oasis for the current occupants.

 

Video courtesy of Victor Allen’s Local Zone


Additional resources:

Dr. Frances Crest-Wesling:  Definition of racism and white supremacy

Mrs. Karen Mack, LA Commons

Dr. Devin Bunten, Professor M.I.T University

Mr. Robert Lee Johnson, History Council – CAAM


Fred Thomas, III and his wife Judith have been residents in the West Adams community of Los Angeles for the past forty-two years.

Mortgage rates jump to highest level of 2018


The news is not enough to create panic but mortgage rates reached their highest level of 2018 and now sit at 4.470%.  That is the rate reported by Freddie Mac from their weekly primary market rate survey, which is the industry standard for gauging consumer mortgages.  It represents the benchmark thirty-year mortgage.  The survey is compiled from a sampling of lenders who sell mortgages to them.

The increase represents a five-basis point increase from week over week reporting.  Among other things the rate increase is attributed to the uncertainty over the impact of tariffs which the Trump administration recently announced.

 

Most consumers understand mortgage rates are cyclical and even the five-point increase would be considered normal movement.  On the other hand, those in the market for a mortgage pay attention to trends as positioning is a big factor in determining when to apply for a loan.  Purchase transactions are driven by the close of escrow and refinance transactions take approximately sixty days to close.  So, if the assumption is that rates will further increase it is more prudent to lock in the rate at time of application.  Of course, if your analysis conclude rates might drop, then your strategy might be to submit your application but “float” the rate or lock in at a later time.


Tax Cuts

 

The financial projection for 2018 was that rates would increase from their 2017 level.   There was much fanfare about the historic tax bill which was passed in December 2017.  Hopefully you were lucky enough to receive bonuses touted by the majority political party as well as Donald Trump?

“Still, the vast majority of adults don’t seem to have sensed the effects of the tax cut on their personal finances.” Politico

Although the public still hasn’t been told of how the government plans to pay for the tax cuts which by 2020 will push the tax deficit pass the TRILLION-dollar mark, many have taken the position to support anything which puts a little money in their pocket, even on a temporary basis.

Donald Trump proclaims tax cuts will revolutionize economy. Some are still waiting on promised bonuses or larger paychecks.

Expect Mark Short to be taken to the woodshed

Perhaps he misspoke but later this week do not be surprised if Trump and his strong allies do not take one of their own directly to the woodshed.  Why?  There was so much hype in attempting the justify the tax cuts and/or more money in worker’s paychecks, one would surely assume the numbers would be more than five percent!!!!

However, contrary to what the Trump administration has been boasting their own Director of Legislative Affairs and Assistant to the President for U.S. President Donald J. Trump, Mark Short belted out on “Meet the Press” that there is good news as five million people have financially benefited from the tax bill passed in December.  The problem with Short’s assessment is while five million represents lots of folk, it represents less than five percent of the total workforce which is nearly 125 million, as reported by the Bureau of Labor Statistics.  Wasn’t it presented that nearly every worker would see an immediate gain?  Maybe you were one of the lucky five million?

Hear Short’s specific comment at the 40 second mark.


Cost of good increase

 

Everyone appreciates a good economy.  The result is consumer confidence has increased and that is a positive sign which doesn’t get much debate..  The impact for most consumers is even though they have more money in their pocket, the increased cost of goods has eaten away at those gains.

People take part in a protest against the Republican tax bill in Los Angeles, California on December 4, 2017. Democrats and many economists warn that the GOP tax plan gives large tax cuts to corporations and the wealthy and will hurt middle class families. (Photo by Ronen Tivony/NurPhoto)

On the mortgage front today’s rate represents a fifty-basis point increase from year over year reporting.  The result is the average consumer ($244,000) is paying an additional $102 per month over a tad over $1,200 for the year.  Based on those numbers you will need more than a tax cut or bonus to break even.

Current rates for popular programs**

April 19, 2018

30-Yr FRM 15-Yr FRM 5/1-Yr ARM
Average Rates 4.47 % 3.94 % 3.67 %
Fees & Points 0.5 0.4 0.3
Margin N/A N/A 2.76

** source – Freddie Mac rate survey

Donald Trump’s amazing economic record since taking over as President


You’ve seen the character who professes everything he touches turns to gold?  Or, they profess being truly self-made while convincing themselves and those who fall prey to their hustle they possess the magic to make lives  better?

In the example of Donald Trump, he has convinced those who believe him that anything and everything President Barack Obama accomplished, in fact had a negative impact to their lives.  Worse, he has convinced them any success they currently have or that they project to have is the direct result of him taking over as the 45th president of the United States.

 

Hundreds of thousands have already started the pilgrimage to Memphis, TN.  Millions more are expected to join those for local activities or tune in to participate on Wednesday, April 4th in the commemoration of the 50th anniversary of the assassination of Rev., Dr. Martin Luther King, Jr.

Dr. King was an influential leader who had developed exceptional oratorical skills.  As Donald Trump continues to boast his prowess, including his followers or base supporters who feel he is the core reason for the success of the economy, they are unfortunately missing a basic reality!  No doubt there is positive movement in the economy but what gets lost with partisanship or trained pundits who have taken a blood-oath to never make any comments which might be perceived as minimizing Trump’s achievements are the facts of what he inherited in what most agree were positive signs targeted for future growth.

 

 

One of Dr. King’s famous quotes in trying to help leaders understand the plight of negroes (African-Americans) and the negative legacy of slavery, Jim Crow and institutional racism which resulted in insuring that population would always remain deficient, was the bootstrap example.

 

“It’s all right to tell a man to lift himself by his own bootstraps, but it is cruel jest to say to a bootless man that he ought to lift himself by his own bootstraps.”  Dr. Martin Luther King, Jr. April 1, 1968

Barack Obama made sure Trump had boots

Dr. King’s words have an interesting parallel with what Barack Obama received when he assumed the presidency versus what he left for Donald Trump.

Many have forgotten or have wiped out of their minds what was going on in 2007 and 2008.  Economically, things were as bad as one could imagine and president Obama could have been defined as that “bootless man.”

Eight years later or when he handed over the reins to Donald Trump the economy had already made a recovery.  There were unprecedented measures of success that even the most ardent Obama critic would have to admit.  The result is yes, the economy continues to rack up impressive numbers but the notion that Donald Trump has achieved it all by himself or didn’t inherit anything positive from the Obama administration would leave a reasonable person scratching their head.  Dr. King would caution Trump to be a bit humbler and remind him it is more honorable to give credit where credit is due versus proclaiming to never receiving a helping hand, especially from the lad he convinced millions that he was not a legitimate citizen.  The boots president Obama left for Trump have helped improve his step.

Federal Reserve pulls the plug – rates move higher


Jerome Powell holding press conference following FOMC meeting. Generated by IJG JPEG Library. Getty Images

After approximately two months since taking over the helm as the chairman of the Federal Reserve, Jerome Powell announced a rate increase.  The move was expected as while rates are cyclical they are based on a variety of economic factors.  Powell and the rest of the board agreed recent unemployment numbers, household confidence and the positive direction of the economy provided justification of moving the rates one-quarter of a percent or to the highest level of the year at 1.750%.

 

The formal announcement via a press conference followed the Federal Open Market Committee (FOMC) meeting held earlier today.  The vote was unanimous as all members of the FOMC voted to increase the rate.

 

“The Committee expects that economic conditions will evolve in a manner that will warrant further gradual increases in the federal funds rate; the federal funds rate is likely to remain, for some time, below levels that are expected to prevail in the longer run. However, the actual path of the federal funds rate will depend on the economic outlook as informed by incoming data.”  Federal Reserve.

 

The Federal Reserve is responsible for U. S. monetary policy and when there are positive economic signs, rate increases are a necessary buffer to control inflation or other negative impacts.  During the press conference, Powell mentioned at least two more rate increases are scheduled for 2018.

The fed rate is related to what banks are charged to obtain funds.  

Trump finally thanks Obama – Jobs report beats expectations!


President Obama sharing with Trump not to worry because he will be leaving a positive economy and much less drama than we he took office

It may be daylight savings time but it surely isn’t April Fools!  So, the thought that Donald Trump finally thanked Barack Obama for anything is wishful thinking.  Trump has convinced himself and his supporters that any and everything of a positive nature which has occurred since he assumed office on January 20, 2017 is the result of his personal brilliance and superb business acumen.  As painful as it may seem for him to be humbler and demonstrate basic respect or acknowledgment of what he inherited, unfortunately in doing so it might go against the basic premise of his bombastic personality of giving others credit.  Particularly if he considered that person a political opponent!

Economic factors looking good!

On Friday the Bureau of Labor Statistics released their monthly jobs report.  The data reflects activity for February 2018.  The numbers were better than expected as over 313,000 jobs were created.  No doubt those numbers are impressive and highlight the positive direction the overall U.S. economy is headed.  The core issue for Trump and to the chagrin of his supporters is that when you evaluate historic data you can’t pick what you like or dismiss what you don’t like.  Specifically, no doubt the economy has produced some impressive numbers since the Trump administration took over the reins.  What gets lost in his enthusiasm is acknowledging or admitting what he inherited?  As previously stated, some feel in doing so their anti-Obama argument get muddled because they have accepted the notion he is a Muslim, didn’t achieve anything or a person of absolute failure who did nothing to help the American people during his eight years as President.

“The recent tax cuts are a good sign but they don’t get much credit for this report because the synchronized global recovery has been strong since the middle of 2016” said Jonathan Golub, chief United States equity strategist at Credit Suisse.

The jobs report was a welcome change as it reversed the tough week the Trump administration was dealing with.

 

Nine years later some have forgotten or marginalized the condition of our economy when Obama took the oath of office?   It was in a tailspin most had never experienced.  Jobs were being lost to the tune of nearly 800,000 each month.  Yet with some fundamental economic discipline and solid leadership the economy regained it stability and charted month over month  improvement.  Remarkably, many criticized Obama for not achieving a higher level of success!  While those early years in the Obama administration required exceptional focus one thing is certain; positive numbers, even limited are much better than any negative numbers.  The result is as Obama was departing and Trump was coming into office there is little argument things were headed in the right direction.  Therefore, in fairness Trump has earned credit for keeping the economy on track and continue to move in the right direction.  Perhaps the day will come when he communicates gratitude that what he inherited was much better than what Obama inherited.

 

 

Mortgage rates keep climbing


This has been a tough week for the stock market.  One that many say is a long-overdue correction.  On the mortgage front rates continue to climb as this week they jumped 10 more basis points and now sit at 4.32%

  Generated by IJG JPEG Library

Most consumers understand rates are cyclical and are not stagnant so it is not uncommon for them to move up and down.  What is alarming may be ever since the tax cut was announced as well as the subsequent news major employers would be granting bonuses, they have climbed nearly ½ point.  The number may appear insignificant but with all of the hoopla of the benefits of the tax break to “regular” people it is worth noting the increase in rates have translated into higher cost or more payments.  Specifically, with mortgages, the impact is approximately $44 more each month.  The soundbite that you will see more money in your paycheck starting around February may be true but the reality is if you are in the market for a mortgage, you will need it!

 

While the increase in rates was projected, it shows why you need to be laser focused on the details especially if you are in the market to obtain a new mortgage or refinance your existing one.  If that is you, positioning continues to be the name of the game as the slightest hesitation can be costly.  Perhaps that explains why mortgage applications are also rising because with normal closing times projected from 45 to 60 days, you don’t wait for rates to rise through the roof before you finally decide to start the application process.

 

While the drop in the market has some concerned, the bigger issue is whether the Feds will increase the discount rate to tamp down on inflationary concerns?

 

Here is a recap of this week rate survey

30-Yr FRM 15-Yr FRM 5/1-Yr ARM
Average Rates 4.32% 3.77% 3.57%
Fees & Points 0.6 0.5 0.4
Margin N/A N/A 2.75

 

 

Freddie Mac produces the weekly rate survey.  Data is comprised from a pool of its lenders and the information is used to gauge movement and provide a target of interest rate movement.

Yellen gives up gavel, mortgage rates continue to climb


Yesterday Dr. Janet Yellen chaired her last fed meeting of the Federal Open Market Committee.  The committee is part of the Federal Reserve leadership and they chose to keep rates unchanged.  Dr. Yellen passed the gavel to Trump nominee and incoming chair, Mr. Jerome Powell.  Yellen is an Obama appointee and since 2014 has served as chair.  The move was expected and even though the discount rate did not change there is speculation for increases as we move into the year.  The economy continues to move in a positive direction and it is the Fed’s mandate to manage monetary policy.

Mortgage

On the mortgage side of consumer finances, the benchmark 30-year fixed rate mortgage continued to rise.  In week over week reporting from the Freddie Mac primary market rate survey rates moved up seven basis points to 4.22%.  The increase in rates was expected based on economic conditions.  While consumer confidence also continues to improve the jump in rates affects affordability, especially for those on the margins where qualifying for a mortgage could be trickier.

 

Seven basis points represents almost 1/8th of a percent and while the movement is up there is no need for alarm as movement is based on a normal cyclical flow.  As a comparison in year over year reporting, this year’s rate of 4.22% is just three basis points from last year which was 4.19%


Snapshot of popular programs

February 1, 2018

30-Yr FRM 15-Yr FRM 5/1-Yr ARM
Average Rates 4.22% 3.68% 3.53%
Fees & Points 0.5 0.5 0.4
Margin N/A N/A 2.75

Both mortgage rates and applications jump


This morning the benchmark 30-year mortgage jumped eleven basis points and came in at 4.15%.  Likewise, mortgage applications also increased almost five percent from week over week reporting.  As the economy continues to pick up steam consumers can expect to see rates increase accordingly as they are cyclical in nature and move based on a variety of economic factors.

Also, it is noted consumer confidence has improved.  Combined with the heralded tax cut and the recent announcement of companies providing bonuses to employees, the result is more household cash to work with.  Some analyst caution the giddiness being reported about the bonuses and cuts.  Just this morning Home Depot joined the list of companies who will provide bonuses to eligible staff to the tune of up to $1,000.  For most, the additional cash might seem like a great windfall but in the larger picture higher interest rates or higher cost of goods will reduce perceived savings.

Short term gain, long-term loss

Could the tax cuts touted by Donald Trump be another one of his “slight of hand” hustles?   Throwing a bone to average people, while he and his elite group escape with the real riches?

Let, take a look.  As an example, assuming a mortgage of $200,000, prior to the tax cuts rates where around 3.90%.  Compared with today’s mortgage survey release of 4.15%, the difference is 25 basis points here is the bottom-line.

 

3.90% principal and interest  = $943

4.15% principal and interest = $972

The difference is a motley $29 per month which seems nominal.  However annually it is $348 and factoring seven years (which is the average time consumers keep their mortgage) the result is $2,436.  So, while the bonuses are great in today’s dollars, it is more than wiped out based on higher cost.

 

Short term gain, long-term loss

There is a long-standing political debate on what effect the tax cut has for the “average” family that typically lives paycheck?  No doubt in the capital society which we live in it is great to receive extra money such as bonuses or tax cuts, however the issue for many is sustainability or how long it will last?

 


The jump is interest rates is one sign attributed to the increase in mortgage applications.  On one hand consumers may have extra money but on the other hand those who are in the market for a refinance or new mortgage realize any delay in making an application or locking in a rate may subject themselves to higher movement or additional cost to their budget.


The mortgage rates which are reflected are from the Freddie Mac weekly rate survey.  The mortgage application data is from the Mortgage Bankers Association from the “Mortgage Application Weekly Survey.”


Rate recap

January 25, 2018

30-Yr FRM 15-Yr FRM 5/1-Yr ARM
Average Rates 4.15% 3.62% 3.52%
Fees & Points 0.5 0.5 0.4
Margin N/A N/A 2.75

Trump administration comes up short on first jobs report of 2018


The Trump administration woke up this morning knowing many eyes and ears would be focused on Michael Wolff’s scathing new book “Fire and Fury.”  In the past several days regardless of how they have attempted to dismiss it as full of crap, fake news or otherwise unreliable, their strategy has backfired as even with the bitter cold in the east coast, the public is snatching up the book in record numbers.

Customer at book store in D.C. Photo credit ANDREW CABALLERO-REYNOLDS/AFP/Getty Images)

 

Many supporters of Donald Trump and his administration cry foul that the media refuses to focus on all of the great things they are accomplishing.  The problem with that narrative is perhaps more focus would be given on accomplishments and positive news if Trump and his administration didn’t have so many self-inflicted issues which become newsworthy, thus journalist and reporters have an ethical obligation to report that, as well of other issues of the presidency!

 

The book Fire and Fury is just one example that is blocking great news such as the soaring stock market.  The other may be the January jobs report which was released this morning by the Department of Labor, Bureau of Labor Statistics (BLS).   Unfortunately, the 148,000 jobs reported in December fell 42,000 short of projections.  While the news is not alarming or worthy of concern, it does present an awkward sign for a person such as Trump who likes to boast of his success

 

The reduction in numbers have been attributed to the decline of jobs in the retail sector.

 

“A little bit of a disappointment when you only get 2,000 jobs out of the government and get retail at the absolute busiest time of the year losing 20,000 jobs. It just goes to show the true struggle that traditional brick and mortar is having now,” said JJ Kinahan, chief market strategist at TD Ameritrade.

 

Just today while discussing President Trump, nationally acclaimed journalist David Gregory reported on CNN, “He is his own worst enemy.”

One more critical point and indicative of Donald Trump’s communication style is this afternoon on his way to Camp David but taking time to have an impromptu chat with the media belted out, “the jobs report released this morning is good.”  A perflexing comment when you compare January 2016 data while President Obama was in office as the numbers were 151,000 but better than the 148,000!

“Never apologize, never back down, never admit you were wrong, use every means possible toward achieving your ends,” Donald Trump as private citizen

Read the full BLS report HERE