Economical Updates June 9, 2017

Another Good Deal?

This week was the fourth consecutive one in which Freddie Mac reported a decline. The 30-year fixed-rate dipped another 5 basis points to 3.89%, the lowest rate in seven months.

Last Friday’s Employment Situation report, however, was a major disappointment. Analysts had expected the economy to add another 185,000 new jobs in May, adding to the excellent April total of 211,000. Instead, the Labor Department announced the creation of only 138,000 new jobs, below even the lowest of the expert predictions. Further, the April number was revised down to 174,000 and the March number was reduced as well.

The unemployment rate did tick down from 4.4% to 4.3%, the lowest rate since 2001, but Econoday said that was a factor of the participation rate which was down 0.2%. Hourly wages rose 0.2% for the month, and are up 2.5% year-over-year.
Lawrence Yun, chief economist of the National Association of Realtors, said, while the May employment figure was soft, the annual figures have consistently remained over 2 million, and he expects housing demand, which is more determined by consistent long-term trends, to remain strong.
Factors Contributing to Low Inventory
We know we keep talking inventories, but so does everyone else and Black Knight Financial Services has some interesting input on the subject. It notes, in its latest edition of Mortgage Monitor, that there are two interest rate-related factors that could be keeping existing homes off the market.
From an analysis of Multiple Listing System (MLS) data, they concluded that homeowners with adjustable rate mortgages (ARMs) are more likely to put their homes up for sale than are those with fixed-rate mortgages. The per-capita likelihood of an ARM mortgaged home being for sale averages 2.4%, almost twice that of properties with fixed-rates. However, the pool of homes carrying ARMs is at the lowest level since 2002. That is Point 1.
Point 2. Among the much larger universe of homes with fixed rate mortgages, an average of 1.3% will be for sale. But that percentage fluctuates with both the homeowners’ interest rate and the prevailing one; the lower the rate on a homeowner’s existing mortgage, the less likely the house will be for sale. Today about 40% of active mortgages have a rate below 4%.
That this may be a factor in the record tight inventories makes perfect sense. It can be hard to walk away from a good deal.