More taxes equals more homes for sale?

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Published Date 3/12/2018

Realtor Report

More taxes equals more homes for sale?

You see, they have the same problem that we have here in the US, tight inventory. With inventory levels so low, they have been struggling to find a way to get inventory controlled by "hoarders" back into the marketplace.

Vancouver is slapping thousands of empty homes with a new tax as part of a government effort to tame the out-of-control Real Estate bubble that just won't quit there and is being closely watched by many U.S. metro markets to see if it works.

Approximately 4.6% or 8,481 homes in Vancouver have stood empty or underutilized for over six months in 2017, down from 10,800 in 2016 according to declarations submitted to the municipality by homeowners. Empty properties will be charged a 1% tax on the assessed value - not much, but with average detached home prices hovering below C$1.8 million, attached units going for C$715K and condominiums at C$571K, 1% is still a large sum of money.

The problem of a hot housing market and tight inventory levels gets even worse as foreign buyers move in which effectively takes a residence out of the market and it sits vacant as thousands of home buyers are scrambling to find a home for sale. According to local sales agents, investors from Hong Kong, Mainland China and other parts of Asia have been acquiring as much as 40% of the units going up for sale and just sitting on them afterwards.

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: Neutral

Mortgage rates are trending sideways so far today.  Last week the MBS market worsened by -7bps.  This probably moved mortgage rates sideways for the week. Mortgage rate volatility could be relatively high this week with all of the economic data being released.

This Week's Rate Forecast: Neutral

Three Things: These are the three areas that have the greatest ability to impact mortgage rates this week. 1) Geopolitical, 2) Inflation, 3) Across the Pond

1) Geopolitical: On one side, we have easing tensions between the U.S. and North Korea. While this is important for many reasons, on the MBS side there has been a solid "fear factor put" in long bonds which have been supportive of pricing. So, IF (and that is a big IF) the bond market buys into the headlines that there will be a peace accord, MBS could lose some of that premium. On the tariff side, Japan and the EU have officially requested that they be exempted from the new tariffs.

2) Inflation: We get both consumer prices and producer prices this week. Tuesday's CPI will carry the most weight. While the headline YOY CPI has been over 2%, the market will be watching for when the Core (ex-food and energy) will crack the 2% level, it has been stuck at 1.8%.

3) Across the Pond: A lot going on this week: China: Continued "trade war" discussions and retail sales data. Japan: BofJ minutes, Industrial Production. Eurozone: Finance Ministers Meeting, unemployment change, CPI, and we hear from ECB head Draghi.

Treasury Dump: Quick - dump our debt while we can still finance it at low rates. That's exactly what the Treasury is trying to do with rates steadily rising.

• 03/12 3 year note and 10-year note
• 03/13 30 year bond

This Week's Potential Volatility: Average

Mortgage rate volatility this week could be a bit higher than normal with the influx on economic data. The jobs and inflation data are the most significant data points the markets will receive.

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.

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Thomas Werbeckes

Mortgage Advisor

NMLS: 1543335

Finance of America Mortgage

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Company NMLS: 1071

Office: 775-332-6629

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