attempt to update this consumer comment section regularlyshould
news warrant. But, there are times when we are on vacation or there is other
interference and an update is delayed. If you find that the comment is out
dated, please check back. We will do our best to remain as current as possible
in helping you determine the home loan market information. Thank you!)
IMPACT ON LENDING OPTIONS
The government shutdown is having some impact on our home
For the most part, conventional loans are proceeding
unimpeded but with some potential slowing. For instance, loans require a
response form the IRS regarding confirmation of a borrower’s tax returns.
With the IRS short-handed, acquiring the transcripts has slowed the process.
FHA loans are available but, again, the agency is
short-handed and the acquisition of case numbers and
appraiser assignments have been affected.
VA continues to process loans and we have yet to feel any
results from the shut-down.
USDA is closed. While we can accept loan applications and
partially process them, we are unable to acquire necessary certificates
allowing a loan to close escrow.
There are likely collateral aspects to the shut-down.
Persons have reported that they are now using the savings that they were
accumulating for down payment on a home purchase to maintain their household
budget. Whether such folks will proceed with home buying plans after receiving
back pay (if they receive such pay) is questionable.
Employees who are furloughed cannot document current income
to complete loans in progress or to open new loan applications. Those working but remaining unpaid face a similar situation.
These latter “working without pay” employees are, in some
situations, being deemed unqualified for temporary unemployment by being told
“they have job”. Furloughed individuals seem to be facing similar
the same conundrum in some locations.
We are unable to assess the impact of this protracted
shut-down on future real estate transactions – either the number of loans
projected or the impact on individuals’ capacity to qualify. The most
feared impact is the possible negative affect on credit scores for those both furloughed or working unpaid as they fall behind on
Treasury Yields: Keep
your eye on the 10-year treasury note—expect
home interest rates to follow the note’s trajectory, in spite of the
slight roller-coaster ride (up and down). After rising to over 3% late last
year, the note has become mostly stable again around 2.7% and long-term
interest rates have done the same. Unpredictable economic policies including
the threat of tariff wars, increased deficit spending and immigration rhetoric
are but a few of the impacts that make predicting what might happen a
Interest Rates: Related
to the above, the FED’s recent softening of their
interpretation of the market as stable and inflation within desired parameters
resulted in calming the market. Interest rates declined slightly with the
announcement that the FED MAY NOT increase short term rates as frequently this
year. Remember, the FED affects only short-term rates and not the long-term
home loan rates.
Unusual Market: Generally,
when interest rates increase, home values moderate. We experienced a unique
market wherein both rates and home values increased, mostly due to limited
inventory. The slight rise in interest rates resulted in a pause among some
potential home buyers. The recent increase in home inventory coupled with the
interest rate reduction has stimulated he purchase market again.
has not yet become a major issue even though some would-b home buyers seem to have
exited the market. If home prices rise substantially in the future accompanied
by interest rate increases, affordability could become an issue.
Home Improvement: If senior
home owners stay in their homes, the anticipation is that home improvement
projects will stimulate small construction investment. But there is a lack of
construction workers to perform these sometimes smaller job tasks.
Bank Regulations: With the rollback of the
Consumer Finance Protection Bureau (CFPB) some states have taken to passing
local legislation, some of which mirror that of the CFPB. Lending institutions
that function across state lines are fearful of the loss of national
regulations that could be replaced by numerous sets of individual state rules. A potential nightmare for the big lending institutions.
Maybe it won’t happen?
Growing Older: By 2035 it is projected
that there will be 78 million people 65 years and older compared to only 76.4
million under the age of 18 (according to the US Census Bureau). It will
represent the first time in our history that older folks are projected to
outnumber children. The Bureau projects that the transformative 2030s will see
the population grow at a slower pace, age considerably and become more racially
and ethnically diverse. Current immigration decisions could impact the latter
Housing Changes: As
we age and affordability concerns grow, homes that accommodate shared living
space might become more popular? Might we see a growth in mother-in-law suites
as a part of new home construction to accommodate grandparents or an in-home
Fintech Encroachment: The use of Financial
Technologies is projected to expand as Millennials
embrace home ownership. Reality is that documentation must still be collected,
reviewed, underwritten and a loan funded. Technology is unlikely to help with
fixing qualification defects (i.e; improving credit,
accumulation of additional funds, etc). There may be some limit to how fast a
loan can be acquired—and what is the rush in most instances?
Curiously, would-be home buyers noted recently that they want some speed with
their transactions but definitely want the personal touch in explaining the
documentation and total loan process.
Housing Construction Slow Down: Labor
shortages and now possible higher prices in lumber and building supplies (if
tariffs expand) continue to contribute to extended time frames for new home
construction. This is especially problematic in disaster areas which are trying
to rebuild lost homes. But it has an impact on new home construction also,
especially when home sale inventory is low and we need new home construction.
Retirement Savings: Recent
polls suggest that one-third of the adult population has less than $5000 saved
for retirement. The figures can be deceptive, but the overall prospect is
scary. Many are resigned to working longer before retiring. Expectations are
that seniors will rely more in the future upon the equity they might extract
via the Reverse Mortgage option. Another reason to buy a home
Equity Line Loans: As home values have increased homeowners are
being encouraged to borrow the equity for a plethora of reasons –
vacation, home improvements, college funds or investment reasons. Lenders are
making equity loans increasingly easier to acquire which make such loans very
tempting. Remember prior to the last recession, homeowners were accused of
using their home equity as a form of “piggy bank” resulting in very
negative consequences. This doesn’t mean that one should not use home
equity for legitimate (determined by each homeowner) purposes but one should be
seems foolish to try to predict the future of interest rate and the housing
market but perhaps even more foolish if we don’t at least look at the
“signals” in the economy that MIGHT provide some clues. The attempt
here is to recognize that change is inevitable and determine what can be done
to take advantage of the opportunities that always accompany what many perceive
as negative impacts.
FIRST WHAT IS
Interest rates: Home mortgage rates have remained stable over the past several
months in spite of the FED’s gradual increases
in the short-term rates. The reasons for the moderate changes in long term
interest rates are numerous. Among the most obvious is that wages, while slowly
increasing, are not rebounding as expected after the tax cut legislation. The
business community is uneasy with tariff rhetoric and that is reflected in a
stock market that roller coasters along and often continues
a downward trajectory. While the FED reported that they still intend to stick
to the plan of gradual increases in the short-term rates, pundits are less sure
that this will occur. The next expected rate hike scheduled in April may give
us a sense of the FED’s determination moving
The FED: The economy has reached the
Federal Reserve’s target level of 2% or less inflation. But, the FED
seems poised to continue to review its gradual short-term interest rate
increases with maybe two additional quarter percent raises by the end of 2019. But, there are some economic aspects that
could change the plan (see below):
reaching a price above $70 a barrel prices have tumbled stimulating an
increased interest in the purchase of SUVs. Focus on the development of electric
vehicles suggests a long-term reduction in reliance on oil. We are no longer as
dependent on OPEC production resulting in less of a
roller-coaster affect on oil prices going forward.
Congressional Budget Office released its long-term budget outlook, focusing on
the growing deficits that are expected to impact the nation’s total debt
load over the next 30 years. With the implementation of the tax cuts, the debt
payments are anticipated to exceed the cost of all entitlement spending within
the next decade. With GDP negatively impacted, the idea that we will grow
ourselves productivity wise out of the deficits is unlikely. The Consumer
Confidence Index indicates that its Expectations Index suggests that “consumers don’t anticipate the economy
gaining much momentum in the coming months”. This could be another
reason for some hesitation in the FED’s rate
Housing Inventory: Generally, when interest rates are
trending upward, home values stabilize and sometimes retreat. Not so now, we
have the phenomena of both rates and values increasing. The lack of inventory
has kept housing values artificially high as multiple offers and a bidding
situation escalated home prices. Consensus indicates that we need more new home
construction to ease the lack of available homes for sale. But, the recent
tariffs imposed upon lumber from Canada
has resulted in both a short supply and higher cost for construction. Builders
are opting for units rather than single family homes in order to spread the
higher cost. The housing sector of
the economy tends to lead us into prosperity. If the home purchasing public is
deterred either by higher interest rates or short home supply (or both as is
happening now), there could be pressure on lower interest rates rather than
good news is that there seems to be a bit more inventory available. If this
rend continues, it could stabilize home values, at least in the near term.
HOW DOES ALL
THIS AFFECT YOU?
is a disabling factor for all of us. And when fear is combined with lack of
facts it can cripple a person’s ability to make decisions. Consumers
could easily determine that this is not the time to pursue home ownership
and/or to sell a home. Let us try to dispel such fears. Here are a few things
to consider when considering purchasing a home or other real estate.
Fear of Interest rate increases: While
this has not curbed the appetite for home buyers yet, we don’t know at
what level of rate consumers will begin to balk? We urge would-be home buyers
to identify the actual monthly cost of a small interest rate increase. The
amount is usually manageable and will unlikely impact their ability to qualify
for home financing. In other words, put into perspective what a quarter percent
rate increase means in monthly payment change. Don’t focus on rate but on
the emotion of becoming a home-owner. The fact is that most persons who gamble
on future lower interest rates and/or home values seldom win.
Rate shopping: As rates
increase, buyers can convince themselves that they should shop for the lowest
rate or at least someone who will tell them they have the lowest rate. Facts
are important – all lenders have the same rates as nearly 100% of the
conventional and government home loans are sold to the secondary market. So,
don’t shop rate, shop who one can trust to
perform – educate and fully explain the loan process, solve borrower
concerns, keep promises and close the loan on time. Fact – when only one
source among many is offering a “killer” rate, it is generally too
good to be true!
Fear of a housing bubble: Younger home borrowers
especially are indicating some reluctance to buy because they fear another
housing bubble wherein home values are likely to decline. Absent the negatively
amortized, rate accelerating loans responsible for the last recession, most
persons who retained their homes have seen their value returned along with
increased appreciation. The fact is that while there are no guarantees, long
term home owners seldom lose on investing in a home.
INTEREST RATES—WHAT IS HAPPENING?
assessment of interest rates changes daily. The current unpredictability of the
stock market confused & frightened many. The stock market, however, is not
the best barometer of what may happen in the home interest rate arena but it
does reflect corporations’ future expectations. What we are seeing is an
economic cycle of events. It is too early to determine the outcome but we can
see what is occurring presently.
Federal Reserve (THE FED) has kept interest rates arbitrarily historically low
for several years as the real estate segment of the economy and the economy as
a whole slowly but continually recovered.
New jobs were created and unemployment reached new lows but wages
stubbornly remain static. The slight increase in wages currently accompanied by
last year’s tax legislation has consumers feeling just a bit richer with
anticipated increased paycheck dollars resulting in consumer confidence and
spending. All of this is good news but while we don’t know if wages will
actually increase the possibility can be viewed as inflationary.
FED feels compelled to increase short term interest rates as a way to combat
this rising inflation, whether real or perceived. While short term rates do not
automatically or immediately translate into an increase in the long-term
mortgage rates there is an eventual affect. Rising interest rates mean higher
borrowing costs for everyone, including businesses. Higher deficits translate
into greater national debt payments, sustained low
unemployment creates wage pressures and heightened consumer confidence and
spending combine with the result that the FED raises rates to curb the anticipated
inflation. A continuing cycle is initiated.
panic! We don’t know for sure how many rate changes will actually occur
and those that do are likely to be minimal. The FED’s
recent announcement that there may be only two short term interest increases in
2019 calmed the market fears of rapid interest rate increases. While rates did
increase over the past year, they remain historically low.
Should would-be home buyers put their purchases on hold? We generally
believe that a home provides emotional comfort along with its appreciation and
wealth building capacity and there is Never a Better
Time to Buy Than Now If you are contemplating a home purchase or refinance and
have questions give us a call.
Why You Should
Buy Your Home Soon!
the risk of sounding like just so much real estate hype, there are some good
reasons to consider purchasing a home soon. Home ownership still represents the
typical path for middle class wealth building. While un-even across the state,
2018 did continue the signs of a continuation in real estate appreciation that
many expect to continue into 2019 and beyond.
Home prices: increased, albeit only slightly and not everywhere.
Predictions are that home values will continue to grow slowly.,
thanks to a likely continued shortage in home for sale inventory.
Consumer Confidence Improving: this drives the market and as people seem
to be a bit more confident about the future it is expected that we could see
inflation continue. Buying now allow new home owners to acquire the
appreciation that we expect to accompany home ownership. occur.
Low Interest Rates: home mortgage interest rates, while
edging upward, remain at historic lows. Mortgage rates are going to increase
but the FED seems focused on controlling inflation.
Unemployment Dropping: skepticism over how the numbers are
calculated and the types of jobs being created doesn’t detract from the
fact that more people are working and feeling a bit more optimistic about the
HOME LOANS COMMERCIAL
real estate is local! That statement is true as every area is unique as to its
home values, loan options available and its future growth. Regardless of the
future changes in real estate financing ahead, the need for competent,
knowledgeable loan originators will not change. Humboldt Home Loans’
emphasis remains on education and counseling – the two parts of the home
buying process that most empowers consumers. Every potential buyer requires
good information with which to make good decisions. Our promise remains the
same – our focus is always based on what is best for our client. One may
not always like what we say (sometimes having to tell one that they are not yet
ready to buy) but we guarantee that the information will be accurate and in
one’s best interest. And if you are not ready to buy now, we will provide
a road map to home ownership in the future.
low rates and moderate home price appreciation makes this still a good time to
purchase a home. We urge that you become pre-approved for a loan before
initiating your home buying search. There is a variety of loan options and you
want to identify the one that is best for your circumstances. Call us today to
schedule your FREE qualification meeting.
information regarding all of your real estate financing questions and concerns
you are invited to call us at Humboldt Home Loans:
Fesler 707-269-2318 Jody
the “tip sheet” section of this web site for answers to many of the
most often asked questions – see below.
We follow the market every day, all day. We will attempt to keep you updated
on what we think is happening and what you can expect regarding long term
mortgage rates. We wish we could be clearer with our suggestions of what you
should do in these market times. Remember, real estate is almost always a good
long term investment. Discuss your situation with your Realtor and Mortgage
Broker and then move ahead accordingly.
You may find several tip sheets (found in our "tip sheet" section
of this web site) interesting as you determine if you should proceed with
either a purchase or refinance transaction . . . check out "Never Been a Better Time
to Buy", "Refinancing" and "Locking the Interest Rate"..
Here are a few additional tip sheets of particular interest. You may view
our complete tip sheet table of contents by clicking below.