Monday, May 30, 2016

Fed Chair Janet Yellen: ‘Probably’ ready to raise interest rates in coming months

Federal Reserve Chairman Janet Yellen said Friday that the central bank would “probably” raise interest rates in the coming months, a move that would indicate that America's economy had successfully weathered the global financial turmoil earlier in the year.
Yellen said the recovery appears to be picking up steam after losing momentum in the first quarter of the year. Fears of a slowdown in China and emerging markets, falling oil prices and a rising dollar had sent financial markets into a tailspin. But the U.S. economy continued to expand and add a healthy number of jobs. On Friday, the government increased its estimate of growth in the first quarter to 0.8 percent. That number is forecast to jump to 2.9 percent in the second quarter, according to the Federal Reserve Bank of Atlanta.
“The economy is continuing to improve,” Yellen said during a discussion at the Radcliffe Institute for Advanced Study at Harvard University. She emphasized that the Fed would move “gradually and cautiously” in raising its influential interest rate and that “probably in the coming months such a move would be appropriate.”
The timing of a rate hike has been the focus of intense debate among economists and on Wall Street. In December, the Fed increased the target for its benchmark federal funds rate — which banks pay to borrow from each other overnight — the first increase since the country plunged into recession nine years ago. The central bank slashed the rate all the way to zero in an aggressive and unprecedented bid to avert another Great Depression.
The effort was led by Yellen’s predecessor, Ben Bernanke, and she praised his stewardship of the American economy as “nothing short of magnificent” in her remarks on Friday. But Yellen also faces perhaps an equally daunting task of unwinding the massive stimulus programs he put in place — and it starts with raising interest rates.
Yellen and many of her colleagues in the top ranks of the Fed had expected to increase rates four times this year as the nation’s economic recovery continued to strengthen. But the volatility during the winter stayed their hand, and investors increasingly bet that the Fed would only hike once this year, if at all.
Recently, however, central bank officials have emphasized the underlying strength of the U.S. recovery and the relative calm in the global economy. Wall Street has regained the ground it lost earlier in the year. The price of a barrel of U.S. oil reached more than $50 on Thursday, the highest point of the year, and the dollar is off its recent highs.
The Fed is slated to meet in Washington next month to decide whether to raise interest rates again. In a speech Thursday at the Peterson Institute for International Economics, Fed Gov. Jerome Powell said he believed “another rate increase may be appropriate fairly soon” if the economic data remains firm. Other top Fed officials have said they now anticipate two, or perhaps even three, rate hikes this year.

But it is Yellen’s position that matters most of all. And her comments Friday are the clearest signal yet that the Fed’s rate hikes have been merely delayed, not derailed.
U.S. stock markets seemed to take her remarks largely in stride on a light trading day ahead of the Memorial Day weekend. The major indexes fell slightly in early afternoon trading but remained in the green, then recouped much of the dip. Yields on 10-year Treasury notes rose following Yellen’s comments, a sign that traders may be finally getting the Fed’s message.
Investors have upped the chances that the central bank will hike rates in June to roughly 34 percent from just 13 percent a month ago, according to the CME Group’s FedWatch tool. However, the Fed will have to make that decision just one week before Britain’s historic vote over whether to remain within the European Union, and the outcome of the referendum has the potential to rattle financial markets. Yellen’s comments left open the possibility that the Fed could choose to raise rates at its meeting in July to avoid additional volatility. On Friday, the likelihood of a rate hike in July jumped to more than 60 percent.
Yellen’s comments confirmed that the [Fed] is close to a rate hike, assuming the data hold up, but that no decisions have been made about the precise timing,” said Laura Rosner, senior economist at BNP Paribas. “It will be a collective decision.”
Yellen was at Harvard to receive the Radcliffe Medal, awarded to those who have had a “transformative impact on society.” Bernanke delivered her introduction, calling her a role model for future generations. Yellen is the first woman to lead the Fed in its 101-year history.
When Yellen spoke during central bank meetings, “everyone would go very silent because everyone would want to hear the entire argument.” Bernanke said. “She was a terrific colleague and an invaluable ally.”

Sunday, May 22, 2016

5 reasons not to forget Housing '07

5 reasons not to forget Housing '07

In 2007, 53 percent of the mortgages used to buy Orange County homes were riskier adjustable-rate deals. In April, the variable-rate loans had just a 16 percent share. TONY AVELAR , BLOOMBERG NEWS

Orange County real estate hit a milestone last month, reaching a pricing pinnacle for homes that was last seen nearly nine years ago.
CoreLogic reported Orange County’s median selling price for April was $645,000, same as the old high set in June 2007. As much as we’d like to forget the real estate turmoil in between these two dates, I figure it was worth a look deeper inside the data to see what history might teach us.
Remember, the old price high was set after an era of aggressive lending that gave previously unbankable house hunters access to the mortgage market. The rapid rise of those “subprime” mortgages, and their equally quick retreat, whipsawed Orange County housing – and the broader economy – in numerous ways.
In some ways, data from Orange County’s last boom time should be viewed as cooked numbers with little historical relevance. In other more important ways, housing’s fabulous heat-up and flame-out has plenty to teach us.
Here are five lessons learned from reviewing CoreLogic data from the two peaks:
1. House gambling was once chic. Unfortunately, we have no data on the quality of Orange County’s borrowers approved for purchase loans. But two snippets of CoreLogic’s mortgage data speak volumes about the different mindsets of buyers in 2007 and today.
In 2007, Orange County’s financed home purchases had an average 22 percent down vs. 20 percent in April. That’s no small difference.
The larger down payments from 2007 reflect the many buyers who used paper profits of previous deals to help close the next purchase. Today, with a limited move-up market, down-payment rates are slightly lower.
Also in 2007, 53 percent of the mortgages used to buy Orange County homes were riskier adjustable-rate deals. In April, the variable-rate loans had just a 16 percent share. Now, the 2007 adjustable loans proved to be good bets, payment-wise, as rates fell considerably the last eight-plus years. But that heavy use of adjustable loans shows risk-taking nature of that era’s buyers.
2. A median is a just benchmark. Orange County’s widely watched price index may be back to its old top, but that doesn’t mean most local homeowners experienced similar results.
I reviewed ZIP code pricing since June 2007, noting these local benchmarks are notoriously volatile. So I won’t make too much of the extremes: The largest percentage-point price gain since 2007 through April was 212 percent in Newport Beach 92662, while the biggest loss was 42 percent in Seal Beach 90740.
Using a wider prism, consider that 40 out of the county’s 83 ZIP codes – communities with 40 percent of April’s sales activity – had June 2007-to-April price moves of 10 percent or more – up or down.
That tells me that plenty of local home values are not at or near the old peak – some may be well above it!
3. Cheaper homes recovered slower. Of the 10 Orange County ZIPs with the largest price losses since June 2007, only one had a median price above the countywide $645,000.
That’s a perfect summation of one key way the bubble hit Orange County’s market a decade ago. Easy-qualifying loans were a boon to the typically cash-strapped house hunter who often targets more affordable communities. Those mortgages, huge mistakes in hindsight, helped balloon prices of lower-end homes.
Thus, after the crash, pricing in these communities were hit harder and have had a largest mountain to climb to get back to old peaks.
4. Biggest recoveries were in pricier neighborhoods. Eight of the 10 largest ZIP-level gains since June 2007 – and 10 of the top 12 – were Orange County communities with pricing above the countywide $645,000 median in April.
A decade ago, house hunters in pricier neighborhoods did not get as much relative help from overly generous lenders since they were usually highly qualified buyers to start with. As a result, easy-to-get mortgage money was not as critical to these markets and pricing in these neighborhoods typically did not tumble as far after real estate’s bubble burst.
In addition, once more normal lending returned – you know, the highly skeptical banker – buyers for these higher-priced homes did not miss the few-questions-asked mortgages as much. So the price rebound in these markets started sooner and has been more robust.
5. High-end suffered, too. Luxury housing often dances to its own beat, so it’s usually hard to decipher what pricing and sales volume trends really mean in Orange County housing’s stratosphere.
In June 2007, there were 11 ZIP codes with medians above $1 million representing 10 percent of that month’s sales volume. In April, there were just eight million-dollar ZIPs with only 5 percent of the closings.
My best guess is there is nothing really wrong with today’s high-end housing. This statistical gem is more about overzealous buying in 2007. It wasn’t just a problem in Orange County’s cheaper neighborhoods as homebuyers’ “irrational exuberance” went above seven-figures, too!

Sunday, May 15, 2016

Mortgage rates dip to lowest in three years: good news for homebuyers?

A record decline in the US for the average rate for a 30-year mortgage comes amid declining homeownership and a middle class that is increasingly migrating to either upper or lower income groups.

Rates for longterm mortgages in the US continued dropping this week, likely an encouraging sign for people considering buying a home.
The average 30-year fixed-rate mortgage dipped to 3.57 percent from 3.61 percent last week, reaching a three-year low, the mortgage buyer Freddie Mac said Thursday. For 15-year mortgages, the average dropped to 2.81 percent from last week's 2.86 percent.
But the numbers come as the number of middle class Americans – for whom owning a home was long a symbol of success – has been steadily declining for more than a decade in urban areas, while home ownership rates have dipped significantly since the 2008 financial crisis.
Meanwhile, the share of income many Americans pay in housing costs has also increased, dramatically in some cases, in the past 15 years.
The percentage of Americans living in a middle-income household fell from 55 percent in 2000 to 51 percent in 2014, according to a study released Thursday by the Pew Research Center.
The low mortgage rates are also impacted by a mixed jobs picture. "Disappointing April employment data once again kept a lid on Treasury yields, which have struggled to stay above 1.8 percent since late March," said Sean Becketti, chief economist of Freddie Mac, in a statement. "Prospective homebuyers will continue to take advantage of a falling rate environment that has seen mortgage rates drop in 14 of the previous 19 weeks."
Increasingly, Americans are migrating across class lines, into either upper-income or lower-income brackets, Pew found, a trend that's impacted by decreasing wages and growing levels of wage inequality between the wealthiest Americans and the 99 percent.
"Because of the economic downturn, employment took a huge hit, and there is still a fair amount of slack in the labor market, [which is] going to keep income on the lower side," Rakesh Kocchar, Pew's associate director of research, told The Christian Science Monitor.
Despite the changing economic circumstances, particularly for younger Americans, aspirations to own a home haven't diminished, writes The Daily Beast's Joel Kotkin:
"Millennials may be staying in the city longer than previous generations, but their long-term aspirations remain fixed on buying a single-family house," he writes. "This trend will accelerate in the next few years, suggests economist Jed Kolko, as the peak of the millennial population turns 30."
But these low rates have sparked only a slight increase in mortgage applications, according to the latest data from the Mortgage Banker's Association.
Sky-rocketing rents, which have forced many middle-class and low-income families out of urban areas, would seem to make buying a house a more attractive option.
Low-income renters spent nearly 50 percent of their income on rent in 2014, a Pew analysis of government data found, while low-income families who owned their homes spent nearly 20 percent. A year earlier, by contrast, those renters spent just over 30 percent of their income on housing.
For middle-income families, who spent 25 percent of their income on housing regardless of whether they owned or rented a house in 2014, the distinction wasn't as dramatic, though middle-income owners spent less of their incomes than renters.
Some mortgage companies have particularly tried to seize on this trend, with Quicken Loans airing an ad during this year's Superbowl with the slogan "Push Button, Get Mortgage" that some argued was reminiscent of pre-2008 home-lending practices.
Executives from Quicken dismissed those concerns. "I don't see any harm in those who qualify getting a mortgage more easily," Quicken Loans President Jay Farner told CNET in January. "We think the American dream is an important thing. And our research tells us it's an important thing. All we're trying to say is, that's good."
But the advantages could be outweighed by other factors, notes The Guardian's Suzanne McGee in the US money blog:
More than any other single factor, what anyone wrestling with the buy v rent decision needs to ponder is the extent to which they are stable… That’s because while a house purchase can make sense – even tenuously – when you run the math, it may still not be wise when you examine life circumstances.

Robert Bobby Darvish of Platinum Lending Soultions

Sunday, May 8, 2016

Mortgage Rates Inch Lower; Slowdown in Some Hot Markets

Mortgage Rates Inch Lower; Slowdown in Some Hot Markets

You can trust that we maintain strict editorial integrity in our writing and assessments; however, we receive compensation when you click on links to products from our partners and get approved. Here's how we make money.
Reversing gains made last week, mortgage rates dropped slightly this week while mortgage applications, particularly refinance loans, also fell. Meanwhile, if you’re in one of the busier housing markets in the country and have been struggling to find a home, some relief in home prices and inventory might be headed your way, according to a new report.
Freddie Mac’s just-released weekly survey of lenders shows the following average rates for the most popular home loan terms:
  • 30-year fixed-rate mortgages averaged 3.61% with an average 0.6 point for the week ending May 5, 2016. A year ago, the rate averaged 3.8%.
  • 15-year fixed rates averaged 2.86% with an average 0.5 point. The same term priced at 3.02% a year ago.
  • 5-year adjustable-rate mortgages priced at 2.80% with an average 0.5 point. Last year at this time, the same ARM averaged 2.9%.
Freddie Mac Mortgag
“The Fed’s decision to stand pat followed by a week of assorted unsettling news drove Treasury yields lower,” Sean Becketti, chief economist for Freddie Mac, said in a release. “As a consequence, the 30-year mortgage rate drifted down to 3.61%, just three basis points above the low for the year. Since the start of February, mortgage rates have varied within a narrow range, providing an extended period for house hunters to take advantage of historically low rates.”
Meanwhile, new home loans are flat as mortgage applications fell 3.4% for the week ending April 29, 2016, according to the Mortgage Bankers Association.
Purchase applications increased infinitesimally by 0.1%, as refi applications dropped 6% from the previous week. Overall, home purchase applications remain 13% higher than the same week one year ago.

Trulia: Hot markets slowing, Bargain Belt rebounding

It’s no secret that some of the nation’s hottest markets have created a conundrum for homebuyers faced with fewer affordable options and shrinking inventory. But there are some promising signs that some of the fastest-paced markets on the East Coast and West Coast may be slowing down while sluggish post-downturn markets are (finally) picking up speed, according to the latest Trulia Fastest Moving Markets Report.
The report, released Wednesday, analyzes how fast homes are selling and how those particular markets have fared in the past year. Overall, if you look at the national picture, homes are moving off the market faster today than this time last year.
Nearly 67% of homes are still on the market after 30 days, which is a dip from 67.8% in 2015, Trulia found. Although San Francisco saw a 41.3% slowdown in year-over-year time on market, it’s worth noting it also has a median asking price of $1.05 million — one of the highest in the country.
But in some areas, homes are moving off the market slower today than a year ago. Below is Trulia’s breakdown of the top 10 U.S. metros, followed by the percentage change of homes on the market after a month from April 2015 to April 2016:
  1. Houston, TX — 66.3%
  2. San Francisco, CA — 41.3%
  3. North Port-Sarasota-Bradenton, FL — 72.4%
  4. Madison, WI — 75.2%
  5. Miami, FL — 75.1%
  6. Phoenix, AZ — 65.6%
  7. Cape Coral-Fort Myers, FL — 72.0%
  8. Oakland, CA — 39.8%
  9. Sacramento, CA — 58.7%
  10. Fort Lauderdale, FL — 69.6%
Trulia also lists the fastest- and slowest-moving housing markets. It’s no surprise that the greater San Francisco Bay Area is king when it comes to fast-paced regions, even with the slowdown in San Francisco proper, and it has plenty of company on that list, including other Western cities like Seattle, Denver, Salt Lake City, and Portland, Oregon.
The biggest pickups are being seen in the South. The top 10 markets where houses are selling faster than a year ago include Charlotte and Raleigh, North Carolina; Louisville, Kentucky; and Atlanta. These markets also have median prices at or well below $220,000, making them more affordable markets for first-time buyers who might be outpriced in costlier metro areas.
Deborah Kearns is a staff writer at NerdWallet, a personal finance website. Email: Twitter: @debbie_kearns.