Weekly Rate & Market Update 8-5-16
Question of the week: We are thinking about selling our current home and buying a new one, is this a good time?
Answer: We’ve been this question a lot lately as we run numbers for clients to determine whether a refinance of their existing mortgage makes. “We don’t know if we want to stay here much longer….” or some variation is the lead to the question, is now a good time for us to sell our home and buy a new one?
Families who have outgrown their first home, couples near retirement looking to down size for retirement or young couple looking to move out of their condo into a house, asking “should we refinance or buy a new home?” After discussing options, what-ifs and objectives some are deciding to move up their future purchasing time line and finding what they need on the market. Is this something you should do?
Last week we addressed if the sharp rise in home prices the last few years portends another housing bubble. So if you are considering moving in the future, later this year, next year, the year after….should you move sooner, i.e. today, rather than later?
Here is a chart that shows the median home price in June for 2014, 2015 and 2016 and the interest rate for 30 year fixed rate loan (20% down, 740 FICO score, 1.25 points—what is quoted each week in the Weekly Rate & Market Update). What if you asked the should we buy now question in 2014?
Looking at the interest rate and monthly payment of the 2016 median price it appears that if you waited from 2014 or 2015 to purchase a home you made a good decision because you were able to purchase a higher priced home for a lower rate and affordable payment. But that is too casual of a comparison. Keep in mind this is the median home, so pretty much the same home you could have purchased in 2014 or 2015 for a less cash out of pocket and a smaller loan to pay off over the 30 year mortgage. As well, those who purchased in 2014 or 2015 have probably refinanced their mortgage, lowering their payment significantly.
Those who purchased the median home in 2014 have built equity and purchased for less cash out of their pocket than if they had waited a year or two to purchase.
Looking forward, rates are at all-time lows and home prices are rising as a steady pace. If you are considering buying a new home in the new few years consider the long term cost of higher price for the same home you could purchase today requiring higher down payment, and probably a higher interest rate on what will be a higher loan amount.
Yes, it is currently a seller’s market, but if you are a homeowner you will be the seller in the seller’s market before you become the buyer.
If purchasing a new home in the future is something you are considering give me a call and we can discuss your options, risks, benefits, etc so you have more information before making such an important decision.
Remember, with Dennis it’s not just a mortgage, it’s your complete financial picture.
Some very important economic data this week. First was the release of Personal Income and Consumer Spending for July. Personal income rose for the second month in a row, up 0.2% from July, weaker than expected but positive nonetheless. Consumer spending increased 0.4% for the month, dipping into savings as the consumer spending rate dropped. Year over year prices are well below the Fed’s inflation target rate, up 0.9% for all prices and only 1.6% if food and energy are taken out of the data. The news is mixed for mortgage rates, the positive consumer spending gives a bit of a push higher to rates, however the tepid income and inflation numbers give support to low rates.
July’s job report was released this morning. The data shows a strengthening job market with 255,000 jobs added to the economy last month. Also in the report was an uptick in the labor participation rate and an increase in the average work week for the first time since January. Overall the report is positive for the economy and as such puts pressure on mortgage rates to move higher. On the strength of this report the chances of the Fed to increase its discount rate at its next meeting in September are pretty high, especially if August employment figures are as strong as July’s.
Rates for Friday August 5, 2016: Rates hold on this Friday despite the positive jobs report news. I keep waiting for a technical breakout and profit taking but so far investors are content to let their money ride in the bond markets.
FIXED RATE MORTGAGES AT COST OF 1.25 POINTS
30 year conforming 3.25% Flat
30 year high-balance conforming 3.50% Flat
30 year FHA 3.00% *** Flat
30 year FHA high-balance 3.25% *** Flat
Please note that these are base rates and adjustments may be added for condominiums, refinances, credit scores, loan to value, no impound account and period rate is locked. Rates are based on 20% down (3.5% for FHA) with 740 FICO score for purchase mortgages. ***FHA rates have may have no points and credit towards closing costs, changes daily.
How times have changed department. Our internet, phone, television crashed this morning at home. My standard Friday is to put out the Weekly Rate & Market Update from the home office and no internet could be a problem—or it would have been a few years ago before our phones were able to become mobile hot spots through which we can connect other devices to the world wide web machines. Dating myself, when I started in this business we hand wrote applications, had to mail in requests for credit reports and wait a week or more to get the reports. Everything was sent to lenders using special couriers. Now we get upset if our internet connection takes fifteen seconds to connect to the MLB.com website to see if the Phillies scored in the top of the 9th.
Enough of the “back in my day…” remember today is someone’s back-in-my-day several decades hence.
Have a great week,
Dennis
