Shiny Trinket

It pays to be a homeowner in much of the U.S. right now

If you’re a homeowner and live in certain parts of the country, your net worth just got larger. Why? Because right now it pays to own a home.

“Nationally, the average homeowner with a mortgage saw their equity shoot up by nearly $16,200 in the past year alone, according to a recent report by CoreLogic,” reports Claire Trapasso, senior news editor of realtor.com and an adjunct journalism professor at St. John's University.

Comparing the second quarter of this year to the second quarter of the previous year, that’s a 12.3% annual increase of home prices across the country.

Trapasso goes on to quote CoreLogic’s chief economist Frank Nothaft: ”It's good news if you're an existing homeowner. ... You can certainly use that additional wealth as collateral you could borrow against if you're looking to make some home improvements.”

Left coasters accrued even more equity, with Californians gaining an average of $48,800 in just one year. If you think about it, that’s more than many folks earn in a year and all these homeowners had to do was make their mortgage payments and pay their taxes.

The Realtor.com article goes on to quote a San Francisco Bay Area market analyst as saying, ”The first half of 2018 was probably the most ferocious market since the year 2000 in terms of buyer demand, competition between buyers, and overbidding. In the Bay Area, we saw some huge jumps in median sale prices. It’s crazy.”

These huge equity gains could slow down or reverse themselves, however, with inventories expected to rise soon. If buyers have more to choose from, prices are less likely to be driven up by bidding wars. There is, after all a limit on what people can afford to pay for a home.

According to the article, California’s gains were followed by Washington, where average home equity was up $41,100; Nevada, at $32,193; Hawaii, at $29,565; and Massachusetts, at $23,527.

States experiencing a loss in equity include Louisiana, Connecticut, and North Dakota, but in less than $1K amounts.

How Rates Move:

Conventional overnment (FHA and VA) lenders set their rates based on the pricing of Mortgageand G-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.  Tracking these securities real-time is critical.  For more information about the rate market, contact me directly.  I’m among few mortgage professionals who have access to live trading screens during market hours.

Rates Currently Trending: Neutral

Mortgage rates are trending sideways to slightly higher so far this morning.  Last week the MBS market worsened by -17bps.  This was enough to move rates slightly higher last week. There was moderate mortgage rate volatility last week.

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) Fed, 2) Inflation and 3) Trade War

1) Fed: We will get their FOMC Policy Statement and Rate Decision at 2:00 pm ET on Wednesday. The bond market is pricing in a 25 basis point rate increase. However, the real volatility will be driven not by a rate increase but by comments by Fed Chair Powell during his live press conference and by the release of their updated Economic Projections. Markets will focus on the "dot plot chart" which will show what the aggregate projections among all of the Fed members (not just the voting members) as to where interest rates will be at the end of this year and the next two years. Traders take that and "reverse engineer" how many rate hikes there may be assuming a 1/4 point hike each time.

2) Inflation: Friday's PCE report is the most important domestic economic release of the week. As the Fed's "official" inflation rate, the Core (Ex-food and energy) YOY reading hit 2% last time around, it is expected to remain at 2%. If it ticks up, it will pressure rates.

3) Trade War: The most recent round of $200B in tariffs on Chinese products and $60B on U.S. products go into effect today on both sides. This, by itself, is not going to move markets. But we'll be focusing on any new announcements of additional tariffs, scheduled trade talks, movement in NAFTA, etc.

Treasury Auctions this week:

• 09/24 2 year note
• 09/25 5 year note
• 09/27 7 year note

This Week's Potential Volatility: High

We could see some rate volatility this week. The biggest factor is likely to come from the inflation numbers on Friday. Of course, the Fed meeting also has the ability to move markets and cause 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.

Dona Knapp has over 20 years of experience, which is evidenced by her extensive knowledge of the lending industry, making her a great source of information for their clients. Her commitment to excellence has earned her a reputation of customer satisfaction and building relationships that last far beyond the original transaction. Her team was strategically designed to provide superior service, uninterrupted accessibility and extraordinary products to meet all your lending needs. Don't settle for less, when you can work with the best!

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.