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.

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

Mortgage rates show no sign of let-up – Keep rising


Employee Rhonda Lawson works in the customer call center area at Freddie Mac headquarters in McLean, Virginia, U.S., Photographer: Andrew Harrer/Bloomberg via Getty Images

[McLean, VA]  For the eighth consecutive week mortgage rates have continued their climb.  Now at 4.40% which is just two basis points in week- over-week reporting, it represents the highest mark of 2018.  The increase did not catch anybody off guard as the 10-year Treasury climbed over 2.90%.   The 10-year Treasury is known as the long-term index which affects mortgage rates.

 

Going forward, rates are projected to keep climbing.   Also, based on economic movement experts have suggested the Fed is positioned for three and perhaps four discount rate hikes for 2018.  This is designed to counter inflationary worries and keep the economy in check.

 

Consumers haven’t pushed the panic button as when evaluating year over year data, mortgage rates have only increased fourteen basis points.  That difference is well within the range of mortgage rate movement as they are very cyclical.

Rate recap for the week:

February 22, 2018

30-Yr FRM 15-Yr FRM 5/1-Yr ARM
Average Rates 4.40% 3.85% 3.65%
Fees & Points 0.5 0.5 0.4
Margin N/A N/A 2.75

Freddie Mac known technically as Federal National Home Loan Corporation purchases mortgages from it approved mortgage originators.  The primary market rate survey is the industry standard published weekly and is used by consumers and industry experts to gauge rate movement.

 

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

Mortgage rates climb above 4%


For the first time in eight months mortgage rates have climbed above the 4% threshold.  The news was expected as financial markets continue to post positive numbers including improved business and consumer confidence.

Lenders who fund mortgage applications typically offer rates in a range based on various factors.  Today’s report is from Freddie Mac’s primary market rate survey.  It is the industry standard used to gauge rates and the data is compiled from a sample of lenders who sell their closed mortgage loans on the secondary market.  This week’s rate is 4.04% and is based on the benchmark thirty-year mortgage.

 

While mortgage rates inched higher they stil make home ownership affordable.  At the same time consumers realize timing is everything and as overall economic conditions improve, increases may be the result.

 

Current snapshot of rates

January 18, 2018

30-Yr FRM 15-Yr FRM 5/1-Yr ARM
Average Rates 4.04% 3.49% 3.46%
Fees & Points 0.6 0.5 0.3
Margin N/A N/A 2.74

source:  Freddie Mac Rate Survey

Mortgage rates jump on speculation of a tax deal


It was in the middle of July when mortgage rates were at 4%.  Based on yesterday’s mortgage rate survey the benchmark 30 years mortgage jumped six basis points in week over week reporting and came in at 3.960%.  Most know rate movement is cyclical so the increase must be viewed  based on trends not as an isolated incident.

Industry experts attributed the jump to the increase of the yields on the 10-year Treasury bond, which jumped nearly 10 basis points.  The 10-year bond is the primary indices which affect movement on the 30-year mortgage.

 

The markets reacted based on anticipation that a tax deal may be accomplished?  Also, yesterday the Senate passed procedural regulations  known as a budget resolution making it a bit easier for a deal to be reached.   If things work out as projected, it would mark a key win for the Trump administration which has been bogged down since taking office by not being able to tout any legislative victories.

 

In the meantime, homeowners who are purchasing a property or attempting to refinance their existing mortgage are gauging rates to make sure their budgets are not negatively impacted.

Here is a snapshot of this week’s rates:

October 26, 2017

30-Yr FRM 15-Yr FRM 5/1-Yr ARM
Average Rates 3.94% 3.25% 3.21%
Fees & Points 0.5 0.5 0.4
Margin N/A N/A 2.74

The Freddie Mac rate survey is published every Thursday.  It is an industry standard and used to gauge mortgage movement.

CITY RISING:  A 2017 look at Gentrification


Special Review

 

[Los Angeles, CA] On September 13th KCET in partnership with The California Endowment hosted the premiere screening of CITY RISING.  The theme of the documentary is gentrification.  An overflow crowd of nearly 700 was on hand to see the “Director’s Cut” which was 90 minutes.  Coincidently, on the same evening KCET showed the regular 60-minute screening on their channel.

If you’re black, get back!

If you’re brown, stick around!

If you’re white, it’s all right!

from an anonymous social scientist

 

Gentrification, a working understanding

Not every white person is rich and not every black person or those of color is poor!  One legacy of the history of the United States is the construct of racism or using race as a controlling factor.  On basic quality of life issues; from economic or the ability to earn money, to health, to housing and other areas whites were granted privilege over other groups.   Even today many attempt to dismiss this very basic fact of not understanding or accepting the issue in a historical context.

 

“He who gets behind in a race must forever stay behind or run faster than the man ahead of him, that is our dilemma” – Dr. Martin Luther King, Jr. January 1961 

 

That privilege buffered by legal discrimination, including specific land covenants of who could buy land or live in certain communities which set in motion the premise of defining the American Dream as being able to afford a home.  Unfortunately, the dream dismissed the reality of certain groups being blocked based on race.

 

In addition to basic shelter, the more important benefit of home ownership is wealth accumulation or a legitimate asset which has generational benefits.  The lack of it, is one reason for the marginalization.

 

Inner cities, the target of gentrification

 

Following the great depression and leading up to the industrial revolution, cities throughout the U.S. witnessed an economic boon.  Labor was the fuel that fed the boon and many ethnic groups relocated and the result was financial uplift.  As the majority group or whites were enjoying the lions-share of the boon, they created the strategy in developing suburbs which allowed them to flee the urban core.  They were able to transfer their properties (through sale or renting) to the minority groups who remained.  Thus, the term “white flight” was coined.  More important and critical to the gentrification discussion is the reality that as whites moved out of the urban core, critical resources were stripped and went with them.   Employment stability left.  Stores left.  Services left.  Resources which are necessary for a community to thrive slowly disappeared.  The result was communities were disseminated and succumbed to blight and other negative forces.  As bad as that may appear the groups who remained didn’t die off.  Instead they created their own identity based on their culture to create a vibrancy which allowed them to thrive and redefine the space they occupied.

 

Reclamation

 

City Rising focuses on several communities in California.  They are Santa Ana, Long Beach, Sacramento, Oakland, Boyle Heights and South-Central Los Angeles.

 

One poignant part of the documentary is discussing the issue of racial covenants which made it illegal to sell property to certain groups.  Many people are ignorant to this reality and dismiss it as being made up or something which happened lifetimes ago.  The sad reality; it is current history regarding real estate ownership.  Assemblyman Hector De La Torre lives in South Gate, CA.  The discussion centered around him showing the covenant as part of the land title documentation which years earlier would have prevented him from purchasing the very home where he was being interviewed.    Even though the practice was outlawed through fair housing legislation, it remained as permanent language within the documentation.  Using his activism as a political leader he created a law which would have required title companies to remove the language from the report.  Unfortunately, even though the law passed, then Governor Arnold Schwarzenegger vetoed it and the language remained as a reminder of the discrimination meted out against certain groups.

 

The documentary does a good job in highlighting the effects of gentrification.  Even though race plays a huge role in its impact, the subtle reality is the class divide or the “haves versus the have nots.”

 

Cities that were once thought of as “dead” have sprung to life through various forms of reinvestment.  Interestingly many of the families who fled the urban core, see their offspring take on a renewed pioneering spirit to reclaim areas.  With their economic status, they are able to pick up properties, many on the cheap and with modest investment, transform what was unthinkable into havens of a new lifestyle.  Through this process and focus on redevelopment they are able to attract stores and services which provide a great opportunity, assuming one has the money to operate.

 

People can only buy your property if you agree to sell

 

Who doesn’t want to live in a “nice” neighborhood?  The problem with gentrification and this is where CITY RISING shines is as new people reclaim or move back into neighborhoods,  the issue is what happens to the current occupants?  Do they just disappear?  Do they escape in the middle of the night?  For many it’s pure economic, especially the vast majority who are renters.  Those who reclaim properties and invest in the restoration are not motivated by some benevolent gesture, but from an economic perspective so it boils down to return on investment.  The result is the rise of home prices as well as the rise of rents.  Many occupants simply become priced out and that is the ire of those who oppose gentrification.  The community they thought they knew……no longer exist, so they must rebuild their lives or try to coexist with their “new neighbors.”    Some do it very successfully, most don’t because they do not have the leverage of home ownership.

 

There is much more to this topic.  The causes and effects are worthy of examination.  This documentary does an excellent job in creating a foundation for you to move forward.

 

See the documentary HERE.

The one bank indicted from the mortgage crisis of 2008


The mortgage or housing crisis erupted across the nation in 2008 and crippled the U.S. economy.  Institutions, companies, cities, communities and individuals were not spared its devastation.  Even though recovery was a painful process and total restoration is a fleeting hope for many, it was felt those responsible, especially the well-known companies and their corporate leadership would eventually be held responsible for their involvement.

 

Shockingly, of all those who may have been involved in the nuances of mortgage lending and whose decisions resulted in historic loses, only one bank was indicted by the federal government.  Abacus Federal Savings and Loan headquartered in New York was dealt the wrath of selling fraudulent loans to the Federal National Mortgage Association (FANNIE MAE).

 

Too Big to Fail

You remember the panic, the desperation and the commentary from our political leadership? Most had never heard the phrase, “too big to fail!”  They would quickly learn it was akin to one of the great Chick Hearn phrases in announcing a basketball game, “no harm, no foul.” That basically meant that even though a foul may have been committed by the opposing player, it was not deemed worthy of declaring a foul or infraction.

2008 photo Ben Bernake, President George Bush & Hank Paulson

Instead, countless banks and mortgage originators were fined billions by various regulators, however there was no criminal prosecution as was the case with Abacus.  Even today there are many raw nerves, emotions and opinions when the topic of the mortgage crisis is discussed.  The how and why of Abacus being targeted raises more questions than it answers.  In 2016 a film about the plight of Abacus and impending trial was released.  Frontline, which specializes in showing documentaries on the public broadcasting network platform released the television version on September 12, 2017.

This spread the danger of risky mortgage loans, systematizing the housing market’s risks throughout the global financial system.23 These developments occurred in an environment characterized by minimal government oversight and regulation and depended on a perpetually low-interest rate environment where housing prices continued to rise and refinancing remained a viable option to continue borrowing.  When the housing market stalled and interest rates began to rise in the mid-2000s, the wheels came off, leading to the 2008 financial crisis.

Low hanging fruit

Abacus was eventually vindicated as the government was not able to prove their case.   Whatever your thoughts are about the crisis or your familiarity of the case, you ponder and ask what was so unique about Abacus that the government thought them to be “the poster of criminal intent and deemed a responsible party?”  There were so many well-known companies that were involved in the crisis.  As a matter of fact, each day lenders were imploding right before our eyes.  No doubt, they represented low hanging fruit that even a rookie prosecutor could attempt to give the public some sense of relief through indictments..  Yet, absent those who managed to survive and keep the doors open, their core penalty as mentioned was having regulatory fines levied against them.    From their perspective, dealing with a fine was much better than going out of business or worse, having to spend time in jail or prison.

 

Abacus goes down in history by being the only bank or mortgage lender to suffer the fate of being indicated and having to go through a full trial.

 

 

You can access the full film by clicking HERE