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What’s Ahead For Mortgage Rates This Week – October 28th, 2019

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What’s Ahead For Mortgage Rates This Week – October 28th, 2019Last week’s economic news included readings on sales of new and previously-owned homes and consumer sentiment. Weekly readings on mortgage rates and first-time jobless claims were also released.

New Home Sales Dip in September

Commerce Department readings indicated fewer sales of new homes than in August. 701,000 sales were reported in September on a seasonally-adjusted annual basis; 706,000 new homes were sold in August and analysts expected 700,000  sales of new homes.

Sales fell by 0.70 percent month-to-month but were 15.50 percent higher year-over-year. September was the second time in 12 years that new home sales exceeded 700,000 in consecutive months.

Sales of new homes were lower in three of four regions. Sales fell by -2.80 percent in the Northeast and were -3.80 percent lower in the West.  New home sales fell -0.20 percent in the South but rose +6.30 percent in the Midwest. The median sale price of new homes fell in September, which indicated that builders may be building more affordable homes.

In recent years, builders concentrated on building high-end homes. Real estate pros said there was a 5.50 month supply of new homes available in September as compared to the benchmark reading of a six month supply of homes for sale that indicates markets are balanced between home buyers and sellers.

Sales of pre-owned homes also fell in September.5.38 million previously-owned homes were sold on a seasonally-adjusted annual basis. Analysts expected 5.40 million sales and  5.50 million pre-owned homes were sold in August.

Mortgage Rates Rise;   Initial Jobless Claims Fall

Freddie Mac reported higher mortgage rates last week as the average rate for a 30-year fixed-rate mortgage rose six basis points to 3.75 percent. The average rate for a 15-year fixed-rate mortgage rose three basis points to 3.18 percent.

Rates for 5/1 adjustable rate mortgages averaged 3.40 percent and were five basis points higher. Discount points averaged 0.50 percent for fixed-rate mortgages and 0.20 percent for 5/1 adjustable rate mortgages.

New jobless claims fell last week; 212,000 first-time claims were filed. Analysts expected 215,000 claims based on the prior week’s reading of 218,000 initial claims. Analysts said there were no indications of rising layoffs and noted that new jobless claims stayed near a 50-year low.

October’s Consumer Sentiment Index fell to an index reading of 95.50 as compared to September’s reading of 96.00. Consumers surveyed were less anxious about trade disputes with China than in September.

Readings for the University of Michigan’s consumer sentiment index have held steady in recent months, but remain below the post-recession peak reading of 101.40.

What’s Ahead

This week’s scheduled economic news includes readings from Case-Shiller on home prices and a statement from the Fed’s Federal Open Market Committee on monetary policy decisions.

The Labor Department also reports on Non-Farm Payrolls and national unemployment is also scheduled along with weekly readings on mortgage rates and first-time jobless claims.

Think Prices Have Skyrocketed? Look at Rents.

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Think Prices Have Skyrocketed? Look at Rents. | MyKCM

Much has been written about how residential real estate values have increased since the housing market started its recovery in 2012. However, little has been shared about what has taken place with residential rental prices. Let’s shed a little light on this subject.

In the most recent Apartment Rent Report, RentCafe explains how rents have continued to increase over the last twelve months because of a large demand and a limited supply.

 “Continued interest in rental apartments and slowing construction keeps the national average rent on a strong upward trend.”

Zillow, in its latest Rent Index, agreed that rents are continuing on an “upward trend” across most of the country, and that the trend is accelerating:

“The median U.S. rent grew 2% year-over-year, to $1,595 per month. National rent growth is faster than a year ago, and while 46 of the 50 largest markets are showing deceleration in annual home value growth, annual rent growth is accelerating in 41 of the largest 50 markets.”

The Zillow report went on to detail rent increases since the beginning of the housing market recovery in 2012. Here is a graph showing the increases:Think Prices Have Skyrocketed? Look at Rents. | MyKCM

Bottom Line

It is true that home prices have risen over the past seven years, increasing the cost of owning a home. However, the cost of renting a home has also increased over that same time period.

3 Ways To Avoid Mortgage Insurance

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3 Ways to Avoid Mortgage InsuranceWhen you are buying a home, you may run into a number of hurdles to complete the purchase. One of the items that you may be asked to purchase is called private mortgage insurance, often shortened to PMI. This is a unique insurance policy that your lender, such as the credit union or bank, may ask you to buy in order to protect themselves. In this insurance policy, the bank protects themselves against losing money if you end up defaulting on your loan.

Unfortunately, if you are asked to purchase PMI, this will increase your monthly mortgage payment. Therefore, most people try to avoid it. Fortunately, there are a few ways to do this.

Increase the Size of Your Down Payment

Typically, the lender will ask you to purchase PMI if your loan to value ratio is off. In most cases, the lender will ask you to buy PMI if you put down less than 20 percent. It is important to remember that this is still handled on an individual case-by-case basis and each lender handles this differently.

Invest in a Piggyback Mortgage

Another option to avoid PMI is to invest in something called a piggyback mortgage. In this case, you are splitting your mortgage into two policies. For example, if you put down 10 percent, you would need to take out a mortgage for the other 90 percent.

When you take out a piggyback mortgage, you split this 90 percent loan into one mortgage for 80 percent and the other for 10 percent. The drawback of this policy is that the second loan might have a higher interest rate than the first. This can help you avoid having to take out PMI.

Try Building the PMI Into the Loan

Finally, the last option is to roll them into the cost of the loan. In this case, the lender avoids asking you to purchase PMI and instead charges you a little bit more money for the loan. You won’t have a section on your bill for “private mortgage insurance” but you will have a slightly higher monthly payment anyways. Remember that you can refinance to a lower rate later, saving some money; however, it might be harder to eliminate PMI.

Avoiding Mortgage Insurance

These are a few ways that you can avoid purchasing PMI. This will help you keep your monthly payments low. As always, speak with your trusted mortgage professional for personal advice on your specific situation.

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