Homeownership remains a top priority among consumers

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Published Date 9/18/2017

Realtor Report

Homeownership Remains a Top Priority among Consumers

The dream of owning a home is still viewed as the number one as a long-term financial goal for Americans, with 54% saying it was their primary long-term financial objective – an 11% increase from last year. That is according to a recent survey conducted by Report Linker. In fact, 81% say homeownership is the best long-term investment a person can make.

The investment advantage is one of the forces driving Millennials’ interest in buy In the first quarter of this year, the number of new-owner households was double that of new-renter households, an indication the younger generation is moving into the buyers’ market.

A major challenge for would-be homeowners is the lack of housing inventory. The US is in the midst of a housing shortage, largely because members of the Millennial generation want to live closer to urban areas – and the numerous restaurants, attractions and short commute times they offer. In response, builders have focused on urban housing rather than the less expensive suburbs, leading to a decline in overall housing starts and a focus on higher-priced city homes. But as Millennials marry and look to leave their rentals behind, starter homes are beginning to make a comeback and builders are now shifting their focus from luxury homes to lower price points that first-time buyers can afford. They’re also expanding beyond urban areas into the exurbs where land is cheaper.

Among homeowners, 31% have a mortgage, while 15% own their home outright. Those most likely to be mortgage free are those 55 and over (36%), while half of those aged 35 to 44 are more likely to still be chipping away at their payments. More than a quarter of respondents to ReportLinker’s survey say they rent from a private landlord. Renting is especially common among older Millennials aged 25 to 34 (44%), while four in 10 young Millennials (age 18-23) say they stay with friends or family for free.

Source: ReportLinker

This Week's Mortgage Rate Summary

How Rates Move:

Conventional and Government (FHA and VA) lenders set their rates based on the pricing of Mortgage-Backed Securities (MBS) which are traded in real time, all day in the bond market. This means rates or loan fees (mortgage pricing) moves throughout the day, being affected by a variety of economic or political events. When MBS pricing goes up, mortgage rates or pricing generally goes down. When they fall, mortgage pricing goes up.

Rates Currently Trending: Higher

Mortgage rates are trending slightly higher today. Last week the MBS market worsened by -57 bps. This was enough to worsen mortgage rates or fees. Mortgage rates experienced relatively low volatility after the first part of the week.

This Week's Rate Forecast: Higher

Three Things: These are the three things that have the greatest ability to impact mortgage rates this week: 1) Fed, 2 )Geopolitical and 3) Japan

1) Fed: The Federal Open Market Committee (FOMC) will start their policy meeting on Tuesday and conclude on Wednesday with their 2:00 EDT release of their interest rate decision and policy statement. The bond market currently has almost no chance of a rate hike at this meeting but has recently moved up their probability from 30% to 51% for a potential rate hike in December.

The bond market will be paying very close attention to any new hints or even actual policy on their massive balance sheet that has been used to keep a tight lid on interest rates by gobbling up Treasuries and MBS at a pace that a true open market could never support. Even the most "dovish" Feds have expressed the need to address the issue. They have outlined a plan in the past where they still buy Treasuries and MBS but at a slower pace while allowing maturing notes and bonds to roll off the balance sheet instead of reinvesting the principal in new purchases. We even have seen timelines from them...but will this meeting be the meeting that they start it or give us an official start date. That is the major focus for bond traders this week. We also get a live press conference with Fed Chair Janet Yellen at 2:30EST to explain their new policy.

Feds this Week:

09/19 - Start of FOMC Meeting
09/20 - Interest Rate Decision and Policy Statement, live press conference with Janet Yellen
09/22 - John Williams, Esther George and Robert Kaplan speak. We also get the Atlanta Fed Business Inflation expectations.

2) Geopolitical: The focus this week will be on the United Nation's meeting in New York. President Trump will speak at the event. The U.N. voted last week to increase sanctions against North Korea which has not, as of yet, had the desired effect as N.K. fired another missile over Japan last week. The bond market will also react to any significant movement in policy over Tax Reform.

3) Japan: The Bank of Japan will be in the spotlight as we hear from their Central Bank on Thursday. We will get their interest rate and policy statement. The market is not expecting a change but will focus on forward guidance.

Location: We get a lot of housing industry news this week.

09/18 - Home Builders Sentiment Index
09/19 - New Home Starts and New Building Permits
09/20 - Existing Home Sales
09/21 - FHFA Home Price Index

This Week's Potential Volatility: High

We expect mortgage rates to be relatively flat with low volatility until Wednesday's interest rate decision. While the Fed is unlikely to move rates, their comments could move mortgage rates and cause market volatility.

Bottom Line:

If you are looking for the risks and benefits of locking your interest rate in today or floating your loan rate, contact your mortgage professional to discuss it with them.

Source: TBWS

All information furnished has been forwarded to you and is provided by thetbwsgroup only for informational purposes. Forecasting shall be considered as events which may be expected but not guaranteed. Neither the forwarding party and/or company nor thetbwsgroup assume any responsibility to any person who relies on information or forecasting contained in this report and disclaims all liability in respect to decisions or actions, or lack thereof based on any or all of the contents of this report.