Housing Prices Are Higher
Conforming base limits are rising from $417,000 to $424,100 and high-cost area limits are rising to $636,150. This is the first increase in loan limits since 2006. The Housing and Economic Recovery Act of 2008 (HERA) established the baseline loan limit of $417,000 and requires this limit to be adjusted each year to reflect the changes in the national average home price. However, after a period of declining home prices, HERA also made clear that the baseline loan limit could not rise again until the average U.S. home price returned to its pre-decline level.
Until this year, the average U.S. home price remained below the level achieved in the third quarter of 2007 and thus the baseline loan limit had not been increased. Many areas between the base and high-cost limits have changed as well and the county-by-county limits can be found here. For example, in high cost areas such as Washington, D.C., the limit for one-unit properties has risen from $625,500 to $636,150.
The new limits are effective for loans delivered on or after January 1, 2017.
Source: Federal Housing Finance Agency
Election a Factor
The biggest news with regard to the markets since the election has been the spike in long-term interest rates. The stock market has been rising as well, but there seems to have been a greater reaction on the bond market side. First, before anyone pins these trends to the surprise results of the election, one can clearly see that the movement of these markets started before the election took place. The stock market rallied strongly the day before the election and rates started rising several weeks before the election. Thus, while these movements have accelerated since the election, it was certainly not a reversal of trends.
Yes, the election definitely is a factor. With a new President coming in, the markets look at all the promises made during the campaign and start adding up the costs of implementing these promises. For example, take a look at the stimulus package of President Obama, which was in reaction to the Great Recession taking place when he came into office. The difference today is, the markets can see that the same level of stimulus is not needed now, as compared to then. While the economy could be doing better, no one would argue with the fact that the we are in a hundred times better shape than we were eight years ago. Thus, while the markets may fear a huge spree to fulfil promises such as infrastructure spending, this spending does not have to come all at once, and it is not likely that Congress will be writing checks to bust a budget already in deficit.
The bottom line is that rates are increasing because the economy is doing better, and that is good news. The markets were already factoring in an increase in rates by the Federal Reserve Board before the election. That increase is still expected to come in December. As long as the Fed does not surprise the markets with a 0.5% increase, instead of the expected 0.25%, then calm might return to the markets. Remember that long-term rates do not necessarily rise in reaction to the Federal Reserve moving short-term rates upward. As a matter of fact, after the increase last December, rates on home loans decreased due to other factors. Even with the present increase, keep in mind that rates are still very low by historical standards — and that is the best news.
The Weekly Market Update
Rates rose again in the past week to their highest level of the year. For the week ending November 23, Freddie Mac announced that 30-year fixed rates rose to 4.03% from 3.94% the week before. The average for 15-year loans increased to 3.25%, and the average for five-year adjustables moved up to 3.12%. A year ago, 30-year fixed rates were at 3.95%, slightly lower than today's levels.
Attributed to Sean Becketti, Chief Economist, Freddie Mac -- "In a short week leading up to the Thanksgiving holiday, the 10-year Treasury yield rose 8 basis points. The rate on 30-year fixed rate loans followed suit, rising 9 basis points to 4.03 percent. This increase marks the first week since 2015 that mortgage rates have risen above 4 percent."
Note: Rates indicated do not include fees and points and are provided for evidence of trends only. They should not be used for comparison purposes.
Special Event: Business Planning 2017
This webinar is focused upon helping those in the real estate industry set up a plan for success in 2017. Whether you are a real estate professional or a loan officer, this program will give help you determine what actions you need to take to achieve your goals.
Title: Business Planning 2017 Date: Wed, December 7, 2016 Time: 2:00 to 3:30 pm EST
For real estate agents and loan officers, last year again was one of the most interesting for our industry. We started the year with expectations for higher interest rates, fewer refinances and a reinvigorated housing market.
Though things started slowly, rates stayed lower than expected and it was a strong year for real estate and refinancings.
Again this year higher rates are expected. This will bring new challenges and opportunities in 2017, for example serving millennial homebuyers and finding more listings. Those who plan for success will find success is not an accident. Too many of us go through life expecting success but a lack of planning leaves us short of our goals.
Now, industry expert Dave Hershman will lead us through a very special webinar that is designed to help you build your business plan for next year and beyond. So that you can make the best of 2017, join us for this session presented before and after the Holiday Season -- a time for reflection and planning.