Guardian Residential Lending Industry News, July 25 – August 1, 2019

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In the Know: A Roundup of This Week’s Local and National Real Estate Stories 

Housing’s Having a Strong Summer; Cheap Rates Push Up Re-fis; Younger Americans Want in on Homeownership

“Homes are selling at a breakneck pace, in less than a month, on average, for existing homes and three months for newly constructed homes. Furthermore, homeowners’ equity in real estate has doubled over the past six years to now nearly $16 trillion. But the number of potential buyers exceeds the number of homes available. We need to see sizable growth in inventory, particularly of entry-level homes, to assure wider access to homeownership.” -Lawrence Yun, Chief Economist for NAR (July 30)


America’s youngsters want in on homeownership (HW, July 26)

The homeownership rate for Americans younger than 35 climbs to nearly 40% in Q2



Fed cuts rate for the first time in a decade, citing “global developments” (HW, August 1)

Central bankers pledge to stop selling off MBS, Treasuries

“The outlook for the U.S. economy remains favorable, and this action is designed to support that outlook,” Fed Chairman Jerome Powell said at a news conference that followed the end of the meeting. “It is intended to ensure against downside risks from weak global growth and trade policy uncertainty, and to help offset the effects these factors are currently having on the economy.”



If the U.S. economy is in good shape, why is the Federal Reserve cutting interest rates? (Washington Post, July 31)

Lowering interest rates, the Fed’s main way to boost the economy, is typically used in dire times, which it’s difficult to argue the United States is experiencing right now. Instead, top Fed officials are defending this as an “insurance cut” that’s akin to an immunization shot in the arm. They want to counteract the negative effects of President Trump’s trade war and prevent the United States from catching the same cold that Europe, China and elsewhere seem to have.



Stellar Sales Report Reinforces Housing’s Strong Summer (Mortgage Daily News, July 30)

Pending home sales put in an especially strong performance in June, the second consecutive positive report as well as the fourth in five months. The results were significantly higher than expected.



Oregon vowed not to become California — and passed sweeping housing crisis legislation (Seattle Times, July 27)



Freddie Mac: Limited homes for sale put pressure on prices (HW, July 30)

Mortgage rates are expected to remain low



Cheap rates may push refis to a 3-year high (HW, July 30)

MBA forecast says refi volume will grow to $180 billion this quarter



Pending home sales beat expectations, breaking 17-month losing streak, thanks to lower mortgage rates (CNBC, July 30)

So-called pending home sales rose 2.8% compared with May, according to the National Association of Realtors.

Sales were 1.6% higher compared with June 2018, the first annual gain in 17 months.

“Job growth is doing well, the stock market is near an all-time high and home values are consistently increasing,” wrote Lawrence Yun, chief economist for the NAR in a release. “When you combine that with the incredibly low mortgage rates, it is not surprising to now see two straight months of increases.”



First American: Consumer house-buying power could rise to new heights in 2019 (HW, July 29)

Projected fall in rates spells good news for homebuyers

“Later this week, the Federal Open Market Committee will convene and likely announce a rate cut, according to experts. The first Fed rate cut since December 2008 will trigger industry and media speculation about mortgage rates declining further,” First American Chief Economist Mark Fleming said.

“While changes to the federal funds rate don’t directly influence mortgage rates, a rate cut will indicate concern about possible economic weakness and that may increase demand for long-term Treasury bonds, which mortgage rates follow closely.”

According to Fleming, the consensus among economists is that the 30-year, fixed-rate mortgage will decline from its first quarter 2019 rate of 4.4% to an average of 3.9% in 2019. However, Fleming notes that Fannie Mae forecasts mortgage rates may actually fall to 3.8%, which could mean good news for the nation’s homebuyers.



America’s rental market heats up as its housing market takes a breather (HW, July 29)

Zillow says U.S. rental prices accelerated for the ninth-straight month in June

As of now, the average apartment costs the typical renter $1,483. This translates to a 3% annual increase, as rent is now up in 49 of the nation’s top 50 rental markets.



Economists say 2020 recession likely, but housing market won’t be hit (HW, July 25)

Current housing slowdown will make market resilient in recession

Trade policy, a geopolitical crisis and/or a stock market correction were the identifying factors found by the panelists to cause the recession. But that doesn’t mean that housing will be immune to the effects of a recession.

“Housing slowdowns have been a major component, if not catalyst, for economic recessions in the past, but that won’t be the case the next time around, primarily because housing will have worked out its kinks ahead of time,” said Skylar Olsen, Zillow director of economic research. 

Even if a housing slowdown won’t be a contributing factor to the cause of the recession, 51% of the panelists expect that home buying will be lower in 2020, while 17% think home buying will increase. 



Wages aren’t keeping pace with home-price growth, and it’s putting a dent in the housing market (HW, July 25)

A good real estate agent might tell you that the general rule of thumb when buying a home is to follow a price-to-income ratio of 2.6, meaning that if you can afford the price of the home on 2.6 years’ worth of household income, it can be considered affordable.

Portland is now 5.23; Honolulu is 8.07 and Seattle is 5.69.



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