Forget the Snow & Fed — Spring Has Sprung For Housing Market
It looks like winter across much of the east after one of the biggest snow storms of the year but for the residential real estate market, spring has sprung and new home buyers are sprouting everywhere.
Job creation so far this year is 30% stronger than in the same period last year. Unemployment is close to a low of more than nine years. Wages and income are also starting to pick up to growth levels we haven’t seen since 2009.
And with more money in their bank accounts, consumers are feeling a boost in confidence that leads to big purchases … like homes!
But, here come the higher mortgage rates with the Fed this afternoon expected to raise rates by a quarter-point. The expectation is for three increases by Janet Yellen and company this year. If economic data continue to show growth in inflation and wages, those three increases could actually become four.
This means that rates will continue to rise—we’re more likely to see movement of 10-25 basis points in one- to two-week spurts, as new data and new comments from the Fed indicate rate policy changes are imminent. Those spurts will likely be followed by weeks with little change in rates.
The Collingwood Group Chairman Tim Rood says, “As we saw with the market’s reaction to the ‘Taper Tantrum’ in 2013, a sudden increase in rates has a tendency to impact home price appreciation rates but doesn’t substantially impact home sales rates. Furthermore, Ben Carson, President Trump’s new HUD Secretary, is committed to settling the nerves of FHA lenders who have been fearful to use the program for the very purpose that it exists – giving low to moderate income Americans and minority borrowers a chance to buy their first home at market rates.Increased access to credit for previously underserved families will buoy the home sales market this Spring if the inventory is there to meet demand.” (Collingwood Group Chmn Tim Rood joins FBN’s Cavuto this Friday 3/17 at 12 PM ET)
The upside of higher rates is that it is getting easier to get a mortgage. The most widely followed measure of mortgage credit access from the Mortgage Bankers Association indicates that access has expanded 6.5% since September.
Arguably the biggest challenge to buyers this spring will be simply finding a home to buy and getting it successfully under contract. That’s because the supply of homes for sale is at an all-time low, and yet demand is strong and getting stronger.
Realtor.com reports we started the year with the lowest inventory of homes available for sale that we’ve ever seen on realtor.com. While we did see inventory grow 2% in February, total inventory was down 11% over last year.
Low inventory and strong supply is leading to inventory moving faster and faster as measured by median days on market. The median number of days on market in February was 90 days, six days less than last year. We also saw 27% of all listings selling in less than 30 days. Last year, we saw that happen in mid- to late March, so this year’s timetable is about three weeks ahead.
The early birds who decided to buy in the winter faced less competition and enjoyed lower rates than we are seeing now. It gets more expensive and more competitive going forward, but the early(ish) buyer, at this point, is still likely to come out on top, when you consider that prices and rates are likely to be much higher later in the year.
Mortgages Approach 3 Year High Ahead of Today’s Fed Meeting
Mortgage rates rose for the 10th time in the past 11 days today, bringing them very close to highest levels in 3 years. You’d have to go back to April 30th, 2014 to see the average lender offering higher rates. The most common conventional 30yr fixed quote is easily up to 4.375% on top tier scenarios with a growing number of lenders moving up to 4.5%.
Despite that gloomy assessment, there were no new major developments causing bond markets to weaken (weaker bond markets imply lower bond prices and higher rates). Rather, this has simply been the trend since late February when several Fed speakers made comments intended to “convince” financial markets that the Fed was intent on hiking the Fed Funds Rate this week.
The Fed Funds Rate is an “overnight” rate–the shortest possible term used by banks to borrower and lend on an overnight basis to meet the shortest-term obligations. Mortgage loans are dictated by rates on longer-term bonds (specifically, “mortgage-backed-securities” or “MBS”). These bonds are moving up and down every day whereas the Fed Funds Rate has only changed 2 times in nearly 9 years. Longer-term bonds can also behave differently than shorter-term bonds.
Because of these factors mortgage rates won’t necessarily move in the same direction as the Fed Funds rate this Wednesday. Rather, mortgage rates are more likely to follow the market’s EXPECTATIONS for the Fed Funds Rate. The more likely and more frequent the market sees Fed rate hikes, the more mortgage rates (and other longer-term rates) will move up. That’s exactly what’s been happening so far in March, and today’s weakness is just another expression of anxiety ahead of today’s Fed meeting.
read more http://www.mortgagenewsdaily.com/consumer_rates/716933.aspx
What Baby Boomers Need to Know About Rising Interest Rates
The Federal Reserve raised interest rates in December for just the second time since the 2008 financial crisis. But Fed officials at the December meeting indicated three rate hikes in 2017 were likely — with the first one widely expected to come today.
And according to some personal finance experts, that should be welcome news to Baby Boomers preparing for retirement.
“Most Baby Boomers, who are likely to be retired or preparing to retire, will benefit as interest rates rise. Older Baby Boomers have had a terrible time to try to build wealth with safe assets,” said Bob Johnson, CEO of the American College of Financial Services and author of Invest with the Fed. “Rising interest rates are going to increase returns on safe investments that are popular with retirees, [including CDs and money market accounts].”
AARP’s March Bulletin “Adapting to Rising Interest Rates” took a deep dive into what rising rates can mean for seniors. Eileen Ambrose, senior money editor at AARP, broke down for FOX Business some of the key points.
Higher interest rates are welcome news for older savers who don’t want to take too much risk with their money. These conservative investors have barely earned any money on their savings for years. If the Fed continues to raise rates as indicated, these conservative investors should start seeing an increase in what they earn on savings accounts and certificates of deposit toward year end. And many will be happy with that. Savers, though, should stick with CDs that will mature in a year or less. That way, if rates do continue to rise, they will be able to reinvest later at a higher rate.
read more: http://www.foxbusiness.com/markets/2017/03/14/what-baby-boomers-need-to-know-about-rising-interest-rates.html
Kushners Set to Get $400 Million From Chinese Firm on Tower
A company owned by the family of Jared Kushner, President Donald Trump’s son-in-law and senior adviser, stands to receive more than $400 million from a prominent Chinese company that is investing in the Kushners’ marquee Manhattan office tower at 666 Fifth Ave.
The planned $4-billion transaction includes terms that some real estate experts consider unusually favorable for the Kushners. It provides them with both a sizable cash payout from Anbang Insurance Group for a property that has struggled financially and an equity stake in a new partnership.
The details of the agreement, which is being circulated to attract additional investors, were shared with Bloomberg. It would make business partners of Kushner Cos. and Anbang, whose murky links to the Chinese power structure have raised national security concerns over its U.S. investments. In the process, an existing mortgage owed by the Kushners will be slashed to about a fifth of its current amount.
The document offers a rare look at a major deal by a close Trump associate and family member. It’s unclear whether the deal could prompt federal review, as occurred when Anbang bought other properties, like the Waldorf Astoria Hotel in Manhattan. Anbang could also face review by the Chinese government, which has been clamping down on overseas investments and which has a range of pending issues with the Trump administration.
read more: https://www.bloomberg.com/news/articles/2017-03-13/kushners-set-to-get-400-million-from-chinese-on-marquee-tower
Airbnb CEO Signals IPO in 2018
Brian Chesky has finally set a clock on going public.
The 35-year-old chief executive of Airbnb hinted that the home-sharing site could launch an initial public offering next year.
“We are halfway through the two-year process of getting ready to go public,” Chesky said at a luncheon hosted by the Economic Club of New York at the New York Stock Exchange.
Now valued at about $31 billion, the San Francisco-based home sharing service has raised more than $3 billion since it launched in 2008 — with $1 billion of that total raised in a single funding round last week.
Unlike many Silicon Valley startups raising cash, Chesky boasted that Airbnb “doesn’t need money. The only reason to go public is to give investors immediate liquidity.”
But Chesky may also need it to expand the company’s mission beyond apartment and home rentals.
read more: http://nypost.com/2017/03/13/airbnb-ceo-signals-company-is-planning-ipo-in-2018/?utm_source=newsletter&utm_medium=email&utm_campaign=newsletter_axiosam
New York City’s housing authority chair warns of threat from federal funding cuts, The cash-strapped New York City Housing Authority, already grappling with a $17 billion backlog in capital repairs, is facing another dire threat – a federal funding cut of at least $81 million this year, the agency chairwoman said Monday. That figure almost certainly means diminished services to the city’s 400,000 public housing residents, chairwoman Shola Olatoye warned during a City Council budget hearing. “A cut today means real service reductions, an impact to residents that will be felt immediately and mostly in maintenance and repairs,” Olatoye said. … Councilman Ritchie Torres, who chaired the hearing, said he’s concerned the authority will lay off staff and urged Olatoye to come up with a better plan than simply monetizing its land for a mix of affordable and market-rate housing.
read more: https://www.politicopro.com/states/new-york/city-hall/story/2017/03/citys-housing-authority-chairwoman-warns-of-impact-from-federal-funding-cuts-110338
Lux in Flux
Manhattan’s mercurial luxury market has a banner weak. The latest Olshan Realty report found 37 contracts at $4 million or more last week-the highest total of the year so far. The contracts yielded a total of $339 million, which marks the biggest volume of the Olshan reported. And 11 of them were at asking prices north of $10 million. The luxury market has been in flux since its 2015 peak.
read more: http://www.olshan.com/marketreport.php
You Need This! — Google/Levi’s Jacket (Oh Yea $350 Price Tag!)
The jacket, which Levi’s brought to the South By Southwest Festival this week in Austin, is made in partnership with Google’s Project Jacquard, a division within the company’s Advanced Technology and Projects, or ATAP, group. The Jacquard division pioneered conductive fibers that are woven directly into clothing, so that motions you make on the left cuff of the jacket’s sleeve register as touch inputs, as if it were a screen. Those are then sent to your smartphone via a Bluetooth attachment that clips on as a cufflink. The conductive fibers are flexible and can be washed — though the actual electronics are handled by the cufflink, which you have to remove before you wash the jacket.
A jacket is there to keep you warm and make an aesthetic statement about your personal style. The fact that this particular jacket does some neat smartphone-related stuff is a perk — not the core focus. That Google and Levi’s accept and embrace that turns a $350 jacket into a wearable device that seems well worth the price.
read more: http://www.theverge.com/2017/3/12/14899468/google-levis-project-jacquard-jacket-hands-on-sxsw-2017