Guardian Residential Lending Industry News, August 1-8, 2019

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

Since 1971, the lowest average 30-year fixed mortgage rate was 3.31% in November 2012.

Americans have never felt better about buying a house than they do right now (HW, Aug. 7)

Fannie’s housing sentiment index reaches all-time high

In July, housing confidence increased as more Americans reported now is a good time to buy, according to Fannie Mae’s latest Home Purchase Sentiment Index.

According to the GSE’s report, sentiment rose by 2.2 points in July to 93.7. Not only is this a 7.2-point increase from last year’s level, but it also marks a new survey high.

Fannie Mae Senior Vice President and Chief Economist Doug Duncan said despite ongoing housing supply and affordability challenges, the HPSI reached a new high thanks to strong job confidence and favorable mortgage rate expectations.

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Luxury housing market sees prices stabilize (HW, August 6)

It’s been a brutal year for the luxury real estate market, but it looks like things may finally calm down. Maybe.

High-end home sales signaled a recovery in the second quarter of 2019, according to the latest report from Redfin, which showed that prices rose a mere 1% to $1.64 million. While the gain is nominal, it could be a sign that the bleeding has stopped after several quarters of falling sales.

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Economists warn of dangers trade war escalation poses to housing and economy (HW, August 6)

NAR’s Yun says mortgage rates are falling “for the wrong reason”

“Mortgage rates this week will reach fresh lows, but for the wrong reasons,” Yun said. “If there is a job-cutting recession, which often occurs with delayed lag after a stock market correction, then low interest rates will not help home sales nor home prices.”

Another dire warning came from Lawrence Summers, who headed the White House’s National Economic Council during 2009 and 2010 as the nation’s leaders were trying to keep the economy from tumbling into a depression. Summers also was U.S. Treasury secretary under President Bill Clinton and is the former president of Harvard University.

Summers tweeted on Monday evening:

“We may well be at the most dangerous financial moment since the 2009 Financial Crisis with current developments between the US and China.”

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Just When You Thought Rates Wouldn’t Go Any Lower (Mortgage Daily News, August 5)

Mortgage rates were already in great shape on Friday after having fallen to the lowest levels since November 2016.  Rather than draw inspiration from the week’s big-ticket events (Fed announcement and jobs report), the biggest source of inspiration was a flare-up in trade tensions following Trump’s announcement of new tariffs on Chinese imports.

Mortgage-backed securities (MBS)–the bonds that directly influence mortgage rates–have a hard time keeping up when financial markets are this volatile.  Mortgage lenders also tend to proceed cautiously when dropping rates to multi-year lows in the midst of these sorts of big market swings.  That means mortgage rates haven’t dropped nearly as quickly as Treasury yields, but they’re nonetheless at the lowest levels since November 2016 today.  

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US credit card interest rates hit 25-year high (Portland Business Journal, August 6)

US consumers are paying higher interest rates on their credit card balances than they have in more than a quarter-century, and the Federal Reserve’s rate cuts are no guarantee that they will receive much relief.

The average rate on interest-bearing card accounts topped 17 per cent in May, according to Fed data, the highest in the 25 years that the central bank has been making the calculation. Weekly data based on a Creditcards.com survey of 100 national card issuers found an average rate of 17.8 per cent at the end of July, another multi-decade high.

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FHA moves to limit cash-out refinances (HW, August 1)

Lowers LTV requirements from 85% to 80%

In effect, the new rule will limit the number of people who qualify for a refinance to extract some of their home equity in cash. The FHA said the change will mitigate its risk and preserve the housing wealth of FHA borrowers.

The agency also said the change, which will be effective for loans with case numbers assigned on or after September 1, 2019, aligns the FHA’s max LTV rules with those upheld by Fannie Mae and Freddie Mac.

This is the first time in a decade that the agency has moved to alter LTV requirements for FHA cash-outs.

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10-Years of Economic Expansion (Realtor.com)

Before everyone starts talking about the next recession, let’s all take a second to celebrate and recognize everything that has happened over the last decade. The U.S. economy is booming! Just take a look at some of these key stats: 

  • Gross domestic product in the first quarter of 2019 outpaced the average for the past decade
  • The economy added 21 million new jobs during 2010 to 2019, and pushed the unemployment rate to 3.7 percent
  • The U.S. population has grown about 8 percent in the past decade, and America skews younger
  • With over 60 percent of the population under the age of 50, demand for housing remains solid

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Portland sees slowdown in rent growth (HW, August 2)

The increase in rent is only half of the national rate

Despite adding 21,800 jobs in a 12-month period ending in March 2019, Portland’s rent growth rose at less than half the national average rate. 

According to a recent study by Yardi, year-over-year rent growth in Portland slowed to 1.2% as of May. During this same period, Phoenix led the nation in rent growth, with a rate of 6.8%. For comparison, the U.S. average rent growth sits at 2.5%. 

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Portland ranked second nationally in gentrification over the last decade (Portland Business Journal, August 2)

A study released in July by the Federal Reserve Bank of Philadelphia found that a very high share — 41.3 percent — of Portland’s low-income central city neighborhoods in 2000 experienced gentrification by 2010-14.

Areas identified as gentrifying were especially concentrated in Portland’s historically African-American communities such as Mississippi, Alberta and Cully in Northeast Portland, where increasingly white in-migrants have located. Formerly working-class enclaves like St. Johns in North Portland, the Pearl District in Northwest and Foster-Powell in Southeast were also gentrification hotspots.

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This is how grocery chains affect a home’s value (HW, August 3)

Trader Joe’s, ALDI, and Whole Foods appear to have positive impact

The average home seller return on investment for all ZIP codes over a five-year period with these grocery stores nationwide is 37%.

Homes located near a Trader Joe’s average a home seller ROI of 51%, and have added equity, owning an average 37% in their homes, or $247,445.

Homes flipped near a Trader Joe’s offer an average gross of flipping at 31%. Properties near Trader Joe’s also offer a 5-year home price appreciation of 33%.

Homes located near a Whole Foods realized an average home seller ROI of 41% and have an average of 31% equity, or $187,035. They also had an average gross flipping ROI of 35% and a 5-year home price appreciation of 31%.

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Thanks for reading!