The Federal Reserve said on Wednesday that it will hold off on making any increases to its short-term interest rate, at least for a while longer. The Federal Open Market Committee voted to keep the federal funds rate at its current range between 1 percent and 1.25 percent.
“In view of realized and expected labor market conditions and inflation, the Committee decided to maintain the target range for the federal funds rate at 1 to 1 1/4 percent,” the committee said in a statement on Wednesday. “The stance of monetary policy remains accommodative, thereby supporting some further strengthening in labor market conditions and a sustained return to 2 percent inflation.”
Fed Chair Janet Yellen recently indicated to Congress that Fed officials will continue to closely monitor inflation and hinted at a third rate hike sometime this year. Yellen has said that the Fed will continue to use its short-term rate as its main tool for controlling inflation or stimulating the economy.
“The Committee continues to expect that, with gradual adjustments in the stance of monetary policy, economic activity will expand at a moderate pace, and labor market conditions will strengthen somewhat further,” the committee released in a statement on Wednesday.
The Fed has raised its benchmark rate so far twice this year (in March and June).
Mortgage rates aren’t directly tied to the Fed’s short-term interest rates but they do tend to follow them.
Source: “Fed Elects to Hold Off On Interest Rate Hike,” HousingWire (July 26, 2017) and “Fed Stands Pat on Rates, Signals Sept. Cut in $4.5T Balance Sheet,” USA Today (July 26, 2017)
The more your home buyers know about mortgages, the better prepared they’ll be. The Motley Fool recently featured a range of mortgage tips to help educate first-time buyers, including:
Know their credit score. The credit score can be a big key to knowing how much buyers can afford and how much interest they’ll be paying. Home shoppers should be encouraged to check their credit report and FICO score before even starting the homebuying process.
Estimate how much can be borrowed. Lenders generally don’t like to see a monthly housing payment—one that includes taxes and insurances—that’s more than 28 percent of a pretax income. The percentage threshold often cited for total debt—which includes the mortgage payment—is then no more than 36 percent. Some lenders will offer differing percentages but these are the most commonly used.
Gather the docs. Buyers will need documents showing their income, employment situation, identity, and more when applying for a mortgage. Encourage them to start collecting their latest tax returns, bank and brokerage statements, pay stubs, W-2s, Social Security card, marriage license (if applicable), and contact numbers for their employer’s HR department.
Get pre-approved. A preapproval is similar to a full mortgage approval and can be submitted with an offer on a home. It shows the seller the seriousness of the buyer, who has already secured financing to purchase the house.
Add up closing costs. Closing costs generally range from 2 to 3 percent of a mortgage principal amount. Make sure your buyers factor in closing costs to their overall homebuying budget.
Shop around. Buyers should be encouraged to gather several quotes from mortgage lenders; it could be worth thousands of dollars in savings over the course of a 30-year mortgage. Mortgage applications that take place over a short period of time won’t have an adverse effect on a credit score either, The Motley Fool notes.
View the full list of 15 mortgage tips at The Motley Fool.
Source: “15 Mortgage Tips for First-Time Homebuyers,” The Motley Fool (July 6, 2017)
Total mortgage application volume for refinancings and home purchases tumbled last week, plunging 7.4 percent from the previous week, the Mortgage Bankers Association reported Wednesday. Rising mortgage rates were the likely culprit, as they increased by the largest amounts since November 2016.
“Rates continued to increase last week, given increasing evidence that the Fed and other central banks are more likely to raise rates,” says Michael Fratantoni, the MBA’s chief economist. “Additionally, minutes from the June [Federal Open Market Committee] meeting showed clear plans to start reducing the size and scope of the Fed’s balance sheet and to continue raising the fed funds rate, a signal of confidence in the U.S. economy and job market.”
The MBA reported that the 30-year fixed-rate mortgage rose to a 4.22 percent national average last week, up from 4.20 percent the previous week.
Total mortgage application volume is now 36 percent lower than a year ago. The increase in rates had the biggest impact on refinancing applications, which dropped 13 percent last week and reached the lowest level since January. Refinance applications are now 58 percent below a year ago.
Applications for home purchases dropped 3 percent last week, but remain 3 percent higher than a year ago, the MBA reports. An increase in home prices is prompting more loans backed by the Federal Housing Administration, which offers low down payments and lower interest rates.
"We saw a 2.7 percent increase in government purchase applications, which contributed to a decrease in the average purchase application loan size," Fratantoni says.
Source: “Higher Interest Rates Send Mortgage Applications Tanking, Down 7.4%,” CNBC (July 12, 2017)
Homeowners doing renovations can develop feuds with their neighbors if they’re not cognizant of how work on the project affects the rest of the neighborhood. After all, one homeowner’s upgrade could be another’s downgrade. Realtor.com® recently ticked off common home improvement spats.
Additions that block views. Large additions that block views or cast shadows onto a neighboring lot are the most common sources of neighbor disputes involving a remodeling project, according to Mark Grisafe, an architect in Long Beach, Calif. Homeowners would be wise to consider what the neighbors will see from their windows—will they suddenly have a view of a brick wall?—once the addition is built.
Lengthy projects. Tension with neighbors is bound to brew if there’s “a permanent front yard landscape palette that features weeds and a chain-link construction fence that lingers for a year,” Grisafe says. Owners should work with contractors to limit construction noise and traffic congestion as much as possible to be respectful of the neighbors.
Distracting colors. “Bright primary colors are just not proper for exterior use unless you live in Key West or the Caribbean,” says Juan Carlos Daetz, a home design expert at Max Warehouse. “Any color that goes against the theme or general use of the neighborhood can be distracting and may harm property values.” Owners should consult HOA guidelines and neighborhood covenants when tackling an exterior paint job.
Too much lighting. “Make sure [construction] lights aren’t aimed at your neighbors’ windows, and be considerate about the hours that you use high-beam lights,” says Brad Woods, owner of American Turf and Tree Care in Colorado.
Source: “7 Home Improvements That Could Turn Your Neighbors Against You,” realtor.com® (June 29, 2017)
Before your clients purchase a vacation home, make sure they’re ready for the responsibilities of owning a second property. “Costs of owning and renting a vacation home can be very high,” says Todd Huettner, owner of Denver-based lending company Huettner Capital. “The hassles and costs of short-term vacation rentals are higher than most people expect. … People are way too optimistic about rental rates, vacancies, management fees, maintenance costs, and home value increases.”
Owners buying a second home in a different part of the country than their primary residence may be have to consider new climate issues, such as damaging blizzards in the mountains or corrosion from salty air in beachside communities, Huettner says.
The vacation-home market has made a full recovery in recent years, with prices returning to what they were in 2006, according to the National Association of REALTORS®. The median sales price of a vacation home increased by 4.2 percent in 2016 to $200,000. The Wall Street Journal recently featured some important considerations for buyers who aspire to purchase a vacation property.
1. Check your reason for buying. Some buyers find that a vacation home can be a moneymaker. Sabrina Robinson of Santa Cruz, Calif., told the Journal that she rents her vacation condo in Lake Tahoe to tourists year-round. The rental income covers her mortgage and utilities and generates a $20,000 profit annually.
But buyers of second homes don’t always want to become landlords. “Our buyers today are buying for a number of reasons, with the number one reason being lifestyle and use,” says Nick Cassini, senior vice president of sales and marketing for Four Seasons Private Residences in the Caribbean island of Anguilla. NAR surveys also find that vacationing is the primary motivation for buyers who purchase a second home.
2. Assess the location. Sales prices and rental demand can vary significantly between locations. “The owners who are most displeased are ones that rush the purchase decision because they are blinded by their dream,” says David Angotti, co-founder of SmokyMountains.com, a vacation rental listing site in Tennessee. “For example, they fail to understand location, view, features, and other amenities are critical to the overall revenue.”
Owners may also want to consider how far their second home is from their primary residence. Fifty-seven percent of vacation properties are located in beachside or lakeside communities at a median distance of 200 miles from owners’ primary properties, according to NAR.
“In our experience, living close is really helpful if something goes wrong, but there are a huge number of services out there to hold keys, offer concierge services, or otherwise help if you live further away,” says Laura Hall, communications director for Kid & Coe, a vacation rental website. “So anything is possible if you’re willing to pay for it.”
3. Budget for the true costs. Buyers shouldn’t just focus on purchase price, rental rates, and recent market trends when considering purchasing a second home. They need to be aware of other factors that can push up costs, such as fees for cleaning, management, routine maintenance, and repairs. For example, homeowner association fees can be more than $1,000 a month in some markets. Financial experts recommend that buyers also factor in real estate taxes, insurance costs, utilities, and state sales tax on rental income.
4. Consult the local rules. If the intent is to rent out a second home, be sure to check out local ordinances and homeowners association rules, which may reduce the pool of potential renters.
Source: “What to Consider Before You Buy a Vacation Home,” The Wall Street Journal (June 11, 2017)
Help your clients give the illusion of a perfectly manicured yard with these easy steps for sprucing up greenery from HouseLogic.
Create accents with rocks. They don’t require the same level of care, water, and sunlight that grass and plants do. Rocks are good tools for forming pathways, adding design elements, or creating dry creek beds. Spots in the yard that collect water can be kept under control with rocks, which aid water runoff.
Use colorful objects instead of flowers. Benches, birdbaths, pots, and chairs can all be used to add color to your landscape without planting flowers, which require regular maintenance. Try adding a couple of yellow ceramic flower pots—without the flowers—for decoration.
Have a rain garden. Turn that mushy chunk of yard into a rain garden—a small wetland area that looks a lot better than soggy grass. Comprised of gravel, sand, and native plants, these rainfall gathering spaces are almost maintenance-free: no mowing, watering or major weeding needed. Rain gardens help reduce stormwater runoff into the sewer system and instead utilize the water for plant life.
Build a platform deck. Without steps or railings, a platform deck is an easy yard booster. Ipe, cedar, redwood, and other composites make for long-lasting, low-maintenance hardwoods, according to Tomi Landis, president of Landis Garden Design in Washington, D.C. Landis also challenges how homeowners use their decks. “Will you be using it in the morning while having coffee?” Landis says. “If so, it should be oriented to the east. If it’s mainly for dining out in the evening and having cocktails, it should be facing west.”
Plant tall grass. Tall grasses grow quickly and don’t need much maintenance. These include switchgrass, bluestem, muhly, and fountaingrass. The taller grasses soak up water, serve as an organic privacy shade, and can even be used as mulch.
Source: "Super Simple Ideas for People Who Hate Yard Work," HouseLogic
A butler’s pantry could be a strong selling point for your listing. These spaces are often used as staging areas for meal prep and typically include a countertop and cabinets for storing tableware, dishes, serving pieces, and other items. More upscale butler’s pantries may include a dishwasher, small refrigerator, or sink.
Reba Haas, a real estate professional with RE/MAX Metro Realty in Seattle, says buyers are drawn to the accessibility of butler’s pantries. “Located adjacent to the dining room or other entertaining space, a butler’s pantry allows the host to prep for meals without having to go into the kitchen,” Haas says.
But there could be other uses, too. Some owners are using the space to store pet food, toys, and medications. The extra storage can be appealing, regardless of how buyers use it. “In every kitchen, there’s competition for storage; you need everyday dishes, glasses, silverware, and pots and pans in close proximity,” says William Hirsch, an architect and author of Designing Your Perfect House. “The butler’s pantry can become the ideal spot for storing the fancy dinnerware and linens.”
Hirsch says glass-front cabinets with interior lighting can dress up the space. Pocket doors, swinging doors, or sliding panels can help add privacy. Cabinet styles that compliment the nearby dining room rather than match the kitchen can give the pantry “a bit more formality,” he notes.
Some homeowners are opting to convert an extra closet near the dining room into a butler’s pantry. “The job can be done fairly cheaply and will typically entail removing the doors of an existing closet, filling screw holes on the door casing, stripping down the interior, and then adding back a counter-height piece of wood or remnant countertop [such as granite or quartz] and bracketed shelves above,” says Carole Marcotte, an interior designer with Form & Function in Raleigh, N.C.
Source: “What Is a Butler’s Pantry? The Multifunctional Space Between the Kitchen and Dining Room,” realtor.com® (June 15, 2017)
National Homeownership Month kicks off this month, and President Donald Trump is pledging to strengthen the middle class by reducing rules and regulations and cutting taxes that he believes will help them become homeowners.
Read about NAR's take on this: Impact of Tax Reform Options on Owner-Occupied Housing
This year’s theme for National Homeownership Month is “Find Your Place in a New Era of Homeownership.”
"For generations of Americans, owning a home has been an essential element in achieving the American dream," Trump wrote in a proclamation. "Homeownership is often the foundation of security and prosperity for families and communities and an enduring symbol of American freedom. These policies will unshackle our economy and create and sustain high-paying jobs so that more Americans have the resources and freedom they deserve to fulfill their American dream.”
Trump acknowledged many of the roadblocks young families and minorities are facing in saving up for a down payment and their struggle to access to credit. HUD Secretary Ben Carson at a recent forum on U.S. homeownership also addressed the challenges millennials are facing when trying to attain homeownership.
"We recognize the abiding value of owning a home, and rededicate ourselves toward ensuring that every hardworking and creditworthy American enjoys a fair chance at becoming a homeowner," Carson said in a statement.
The nation’s homeownership rate fell to 63.6 percent in the first quarter of 2017, down from 69.1 percent at the market’s peak in 2005, according to U.S. Census data.
Some housing experts are skeptical that Trump’s policies will lead to more Americans being able to purchase homes. For example, Ken Johnson, a real estate economist at Florida Atlantic University in Boca Raton, Fla., pointed to Trump’s proposal to double the standard deduction that taxpayers can use to lower the tax burden. He believes this could diminish the value of the mortgage interest deduction that homeowners use to lower their costs.
“The larger standard deduction should noticeably minimize the demand for homeownership,” Johnson says.
Source: “President Trump to Americans: Happy National Homeownership Month,” realtor.com® (June 1, 2017)
The Federal Reserve says that an increase in interest rates is coming soon, and quarterly hikes are likely in the future—a fundamental shift of its policy over the last few years, The New York Times reports. While the Fed has been very cautious regarding signs of economic weakness, the bank is “now willing to shrug off at least a little bad data,” according to the article.
Federal Reserve board member Lael Brainard, who advocates caution when it comes to increasing rates, according to the Times, told an economic group on Tuesday that its benchmark interest rate is likely to increase soon. It’s a sign that there is little opposition on the Fed’s board to the increase. The Fed raised rates in December and March.
While the June increase seems likely, John Williams, president of the Federal Reserve Bank of San Francisco, said this week that he considers three rate hikes this year a sensible plan, suggesting the Federal Reserve will continue to consider each increase on its own merits rather than automatically increasing the rate every quarter.
Source: "Despite Weak Inflation, Fed Is Likely to Raise Interest Rates in June," The New York Times
The U.S. boasts 95,471 miles of shoreline, and owning a small portion of that doesn’t have to necessarily set you back millions to own. Home buyers can still fetch bargains in plenty of U.S. beach towns, snagging a home for $250,000 or less.
Realtor.com®’s research team analyzed the median home prices in beach towns with populations of from 1,000 to 100,000. Towns must have had at least 30 properties on the market to be considered in the rankings. Researchers also limited ranking to only two towns per state in order to provide geographic diversity.
The following are most affordable beach towns for 2017, according to realtor.com® (listed along with the median home price):
Source: “America’s Most – and Least – Affordable Beach Towns, 2017 Edition,” realtor.com® (May 31, 2017)