Rate update: What Fed’s Powell says is important

 Interest Rates, Residential Mortgage  Comments Off on Rate update: What Fed’s Powell says is important
Jul 302019
 

For more information, please contact me at (512) 261-1542 or steve@LoneStarLending.com.

By G. Steven Bray

This is a big week for interest rates. Not only do we have a lot of important economic reports, but the Federal Reserve is expected to announce it’s reducing short term interest rates by a quarter point. The Fed has been telegraphing the rate cut for weeks, so that really shouldn’t garner much attention. Instead, markets are going to be watching what Fed head Powell says in the post-meeting press conference.

Markets WANT the Fed to continue cutting rates at subsequent meetings this year, and the Fed’s forward guidance has indicated a willingness to do so – if economic conditions warrant it. So, I’m sure Powell will get peppered with questions trying to pin him down on that question. If he pulls back on future rate cuts, mortgage rates are likely to jump. Personally, I think he’ll thread the needle, showing a willingness to cut further, but saying the timing depends on economic data.

If that happens, markets will turn their attention to Friday’s jobs report. Last month’s report rebounded strongly from relatively weak May numbers. July’s economic data has been somewhat mixed, but generally positive. Consumer spending has buoyed the economy, making up for a slowdown in the manufacturing sector.

The problem is that the latter is more likely to be affected by slowing economies overseas. Thus, another strong jobs report still might not sway markets (or the Fed) from anticipating lower rates in the months to come, which probably would leave rates in their current range. On the other hand, if job growth shows a weakening trend, I suspect interest rates will follow that trend lower.

Help your appraisal district save trees

 Regulations  Comments Off on Help your appraisal district save trees
Jul 292019
 

For more information, please contact me at (512) 261-1542 or steve@LoneStarLending.com.

By G. Steven Bray

As part of property tax reform, the State Legislature this year authorized appraisal districts to email your Notice of Appraised Value instead of mailing out a paper copy.

Don’t worry if you don’t like email, or you prefer paper records. It’s on “opt-in” system. What that means is you have to choose email delivery. It won’t happen automatically.

In order for you to receive emailed notices, you must make a written request to the Chief Appraiser of your appraisal district. The appraisal office will confirm your email address by sending an email to the address you identified.

As a fail-safe, when the Chief Appraiser sends you the Notice of Appraised Value, you have 30-day to acknowledge receipt. If you don’t respond, the appraisal office will mail the notice on the 30th day.

If you want to return to mailed notices, you simply send a written request to the Chief Appraiser to revoke email delivery.

Housing survey shows strength and caution

 Real Estate Market  Comments Off on Housing survey shows strength and caution
Jul 252019
 

For more information, please contact me at (512) 261-1542 or steve@LoneStarLending.com.

By G. Steven Bray

Homebuyers remain cautious about the housing market according to the most recent Fannie Mae National Housing Survey. The overall index dipped slightly last month after peaking at a near survey high in May.

The index was buoyed by a rise in one component: the net percentage of respondents who thinks mortgage rates will fall. The remaining components were flat or fell slightly. Interestingly, even though more folks said they think rates will fall, they’re still outnumbered by those who think they’ll rise 4 to 1.

The good-time-to-buy component fell four points last month. However, positive sentiment outweighs negative more than 2 to 1, and a majority still thinks it’s a good time to buy a home.

The good-time-to-sell component was flat, and it remains strongly positive, most likely reflecting the strong price appreciation in most markets over the past few years.

Two measures that aren’t part of the overall index concern rental prices. Respondents still think rents will rise almost twice as fast as home prices, and a majority still believes rents will rise in the coming year. Only 2% think they’ll fall. So, renters still have a strong incentive to become homebuyers.

Click here for the full report.

Rate update: Will the Fed surprise us?

 Interest Rates, Residential Mortgage  Comments Off on Rate update: Will the Fed surprise us?
Jul 232019
 

For more information, please contact me at (512) 261-1542 or steve@LoneStarLending.com.

By G. Steven Bray

Interest rates have settled back into a narrow range while markets await the Federal Reserve meeting next week. The Fed has strongly telegraphed its intention to cut short term rates, and recent positive economic data has convinced markets it will only be a quarter point cut. So, with that decided, what possible motivation could rates have to move?

Well, I’ll give you a couple, but I think they’re outliers. The first is headlines from the Middle East. So far, the US and its allies seem content mostly to ignore Iran’s provocations, allowing the punishing economic sanctions to continue to work. Should Iran get more desperate and start a shooting war, interest rates will tumble quickly.

The second is the Chinese trade tiff. I’m calling it a tiff because despite the doomsday prognostications from the experts, the damage to the US economy seems to have been quite limited. The Chinese economy, on the other hand, seems to be suffering. Should the Chinese finally decide the pain is too great and strike a deal, it will relieve some of the uncertainty that’s been keeping rates low.

Absent those events, I think it’s a balancing act between weakening foreign economies and the still-strong US economy. And as long as we remain in balance, rates really don’t have any motivation to move.

Two changes to FHA mortgage insurance

 Regulations, Residential Mortgage  Comments Off on Two changes to FHA mortgage insurance
Jul 202019
 

For more information, please contact me at (512) 261-1542 or steve@LoneStarLending.com.

By G. Steven Bray

The House Financial Services Committee recently passed two bills out of committee that could make FHA loans more attractive.

The first, The FHA Loan Affordability Act, would repeal the requirement that FHA borrowers pay mortgage insurance for the life of their loans. Mortgage insurance on conventional loans automatically ends when the loan balance is 78% of the original home value.

Mortgage insurance can considerably increase a homebuyer’s mortgage payment. On a $250k 30-year loan, mortgage insurance adds $180 to the monthly payment.

Despite the pain of never-ending mortgage insurance, this FHA requirement really has been more of an annoyance than an impediment for homebuyers who want to use an FHA loan. Home price appreciation often allows FHA borrowers to refinance into a conventional loan with no mortgage insurance within a few years of purchase, and perpetually low mortgage rates have made that an attractive option.

Interestingly, the wording of the bill appears to disallow appreciation as a means of achieving the requisite home equity to cancel mortgage insurance. Thus, homebuyers with strong credit still may favor conventional loans.

The second bill, The Housing Financial Literacy Act, would provide a 14% discount on the the upfront mortgage insurance for FHA borrowers who complete a homebuyer course prior to closing. On that $250k 30-year loan, the discount would save a homebuyer $625.

Both bills now go to the full House for consideration.

Rate update: Choppy waters ahead

 Interest Rates, Residential Mortgage  Comments Off on Rate update: Choppy waters ahead
Jul 162019
 

For more information, please contact me at (512) 261-1542 or steve@LoneStarLending.com.

By G. Steven Bray

Following the surprisingly strong jobs report at the beginning of the month, mortgage rates have started edging up again – but without conviction. Rates are being affected by several factors right now, and those factors seem fairly balanced.

On the one hand, we have deteriorating economic conditions in Europe and China worrying investors of a global economic slowdown, which would push rates down. The Federal Reserve has acknowledged this ‘fear factor,’ which made markets very happy a couple weeks ago and supported lower rates.

On the other hand, US economic conditions remain healthy, as evidenced by the strong Jun jobs report earlier this month and today’s very strong retail sales report. On top of that, the inflation report last week came in a tad higher than expected, and inflation is the big enemy of low interest rates.

I expect rates to remain choppy and noncommittal until the end of the month when the Fed meets again. Based on Fed head Powell’s Congressional testimony last week, markets fully expect the Fed to cut short term rates by 25 bp at that meeting, so that action probably won’t move the needle. However, if the Fed fails to cut rates or cuts more than expected, watch out. And we’ll talk about those possibilities in the upcoming weeks.

Rate update: Markets expect Fed rate cut

 Interest Rates, Residential Mortgage  Comments Off on Rate update: Markets expect Fed rate cut
Jul 032019
 

For more information, please contact me at (512) 261-1542 or steve@LoneStarLending.com.

By G. Steven Bray

The interest rate rally has hit the pause button again, and all eyes appear to be on this Friday’s jobs report.

Rates really started rallying lower after the last jobs report missed expectations so badly. Investors immediately started predicting rate cuts by the Federal Reserve and questioning when the next recession would begin. The Fed acknowledged a potential slowdown at its Jun meeting and didn’t really dissuade the rate cut talk.

The market currently is pricing in a nearly 100% chance of the Fed cutting rates at its end-of-July meeting.

So, what happens if Friday’s jobs report isn’t awful – and what is awful? Well, markets are predicting about 160,000 jobs were created last month, so awful is probably a number below 100,000. Other recent economic data has shown slower growth, but still growth, so it’s quite possible that the Jun number was an outlier – or that it gets revised higher.

I think the Fed has a tricky job this time around. Other economies, in particular the European Union and China, appear to be in the early stages of contraction, and the trade war with China seems to have taken a bite out of the US economy. I suspect the Fed doesn’t want to be seen as caving to the markets, which really want to see a rate cut. However, if other economies slip into recession, and the Fed hasn’t done something to boost confidence, investors may pull back sharply and drag the US into recession, as well.

Should you lock or float? If you’re closing in Jul, and you’re risk averse, today is a good day to lock your rate. Rates are as low as they’ve been in a long time. They could get lower, but probably not much lower until after the Fed meeting. If you like to roll the dice, I think it would take a strong jobs report to send rates much higher. I think the more likely scenario is moderate job growth that leaves rates about where they’ve been for the last month.