September 2019 Buyer’s Blog

Mortgage rates have fallen by over a full percentage point since Q4 of 2018, settling at near-historic lows. This is big news for buyers looking to get more for their money in the current housing market.

According to Freddie Mac’s Primary Mortgage Market Survey,

the 30-year fixed-rate mortgage (FRM) rate averaged 3.60 percent, the lowest it has been since November 2016.

Sam Khater, Chief Economist at Freddie Mac, notes how this is great news for homebuyers. He states,

“…consumer sentiment remains buoyed by a strong labor market and low rates that will continue to drive home sales into the fall.”

As a potential buyer, the best thing you can do is work with a trusted advisor who can help you keep a close eye on how the market is changing. Relying on current expert advice is more important than ever when it comes to making a confident and informed decision for you and your family.

Bottom Line

Even a small increase (or decrease) in interest rates can impact your monthly housing cost. If buying a home is on your short list of goals to achieve, let’s get together to determine your best move.

The information contained, and the opinions expressed, in this article are not intended to be construed as investment advice. Stott Real Estate, Inc. does not guarantee or warrant the accuracy or completeness of the information or opinions contained herein. Nothing herein should be construed as investment advice. You should always conduct your own research and due diligence and obtain professional advice before making any investment decision. Stott Real Estate, Inc. will not be liable for any loss or damage caused by your reliance on the information or opinions contained herein.

 

Every three years, the Federal Reserve conducts its Survey of Consumer Finances. Data is collected across all economic and social groups. The latest survey data covers 2013-2016.The study revealed that the median net worth of a homeowner is $231,400 – a 15% increase since 2013. At the same time, the median net worth of renters decreased by 5% ($5,200 today compared to $5,500 in 2013).

These numbers reveal that the net worth of a homeowner is over 44 times greater than that of a renter.

Owning a home is a great way to build family wealth.

As we’ve said before, simply put, home ownership is a form of ‘forced savings.’ Every time you pay your mortgage, you are contributing to your net worth by increasing the equity in your home.

That is why Gallup reported Americans picked real estate as the best long-term investment for the sixth year in a row. According to this year’s results, 35% of Americans chose real estate. Stocks followed at 27%, then savings accounts and gold.

Bottom Line

If you want to find out how you can use your monthly housing cost to increase your family’s wealth, let’s get together to help you through the process.

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How to Increase Your Equity Over the Next 5 Years

Many of the questions currently surrounding the real estate industry focus on home prices and where they are heading. The most recent Home Price Expectation Survey (HPES) helps target these projected answers.

Here are the results from the Q2 2019 Survey:

  • Home values will appreciate by 4.1% in 2019
  • The average annual appreciation will be 3.2% over the next 5 years
  • The cumulative appreciation will be 16.8% by 2023
  • Even experts representing the most “bearish” quartile of the survey project a cumulative appreciation of over 6.7% by 2023

What does this mean for you?

A substantial portion of family wealth comes from home equity. As the value of a family’s home (an asset) increases, so does their equity.

Using the projections from the HPES, here is a look at the potential equity a family could earn over the next five years if they purchased a $250,000 home in January of 2019:

Based on gains in home equity, their family wealth could increase by $42,000 over that five-year period.

Bottom Line

If you don’t yet own a home, now may be the time to purchase. Owning or moving up to your dream home could allow you to ride the increase in equity of a growing asset.

 

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Questions continue to come up about where home prices will head throughout the rest of this year, as well as where they may be going over the few years beyond. We’ve gathered current data from the industry’s most reliable sources to help answer these questions:

The Home Price Expectation Survey – A survey of over 100 market analysts, real estate experts, and economists conducted by Pulsenomics each quarter.

Mortgage Bankers Association (MBA) – As the leading advocate for the real estate finance industry, the MBA enables members to successfully deliver fair, sustainable, and responsible real estate financing within ever-changing business environments.

Zelman & Associates – The firm leverages unparalleled housing market expertise, extensive surveys of industry executives, and rigorous financial analysis to deliver proprietary research and advice to leading global institutional investors and senior-level company executives.

Freddie Mac – An organization whose mission is to provide liquidity, stability, and affordability to the U.S. housing market in all economic conditions extending to all communities from coast to coast.

The National Association of Realtors (NAR) – The largest association of real estate professionals in the world.

Fannie Mae – A leading source of financing for mortgage lenders, providing access to affordable mortgage financing in all markets.

Here’s the home price appreciation these experts are projecting over the next few years:

Home Price Appreciation Forecast | Simplifying The Market

Bottom Line

Every source sees home prices continuing to appreciate, which is great news for the strength of the market. The increase is steepest throughout the rest of 2019, and prices should continue to rise as we move through 2020 and beyond.

This coming week has potential for some big moments; the European Central Bank’s (ECB) policy meeting on Thursday, UK Prime Minister Johnson’s trip to Ireland, and the subsequent election vote in the UK Parliament.  In data terms the highlights are Thursday’s US CPI and Friday’s US retail sales.

As for markets on Friday the August jobs report showed a slightly weaker-than-expected headline number at 130,000, plus downward revisions of 20,000 to the previous two months. However, wage growth was stronger than expected at +0.4% MoM and +3.2% YoY. Separately, Federal Reserve Chair Powell spoke in Switzerland, the last official communication before the Fed’s media blackout period before their September 18th meeting. He mentioned the latest payrolls report being consistent with a good economic outlook but highlighted “significant risks.”. That almost confirms market expectations for a 25bps cut later this month, which Fed Fund Futures are pricing in at a 94% probability.

The S&P 500 ended the week +1.79% higher (+0.09% Friday), while the DOW posted a similar gain of +1.49% (+0.25% Friday). The NASDAQ gained +1.76% on the week. Front-end US rates increased less, with the 2-year yield up +3.6bps (+1.4bps Friday), taking the 2y10y yield curve back into positive territory. The 10-year sold off nearly 20bps on the week ending at 1.55% on Friday. The move in yields wasn’t unprecedented, but it was still the biggest weekly selloff in eight weeks for the major benchmarks.  Relative performance in the 2.5% & 3.0% coupons vs. benchmark curves ended +/32nds to 1/32nds tighter versus the 3.5% through 4.5% coupons ended +/32nds to 1+/32nds wider. UMBS 30YR 3.0% closed at 101-28+ and UMBS 15YR 2.5% closed at 101-09+.

Over the weekend we received China’s August trade data with the trade balance printing at $34.8bn vs. $44.3bn expected. This is primarily due to exports declining -1.0% YoY vs. +2.2% YoY expected, while imports fell -5.6% YoY vs. -6.4% YoY expected. In terms of trade with the US, exports printed at $37.3bn, -16.0% YoY, while imports stood at $10.4bn, -22.2% YoY bringing the trade balance to $26.7bn or -13.2% YoY. Although China’s trade data was soft, Friday’s RRR cut by the People’s Bank of China (PBoC) helped equity markets to rally overnight.

Meanwhile, futures on the S&P 500 are up +0.24% and WTI oil prices are up +1.1% following the news that Saudi Arabia has replaced its long-time energy minister before an OPEC committee meeting this week in Abu Dhabi.

 

Need help? Have questions? We are here to help. Call Tracey or Melissa.