Low mortgage rates may drive home purchase lending to 14-year high

The recent drop in mortgage interest rates is already having an impact on overall mortgage demand as well as the demand for refinances, but just how much could the return of low interest rates impact the market? 

Quite a bit, according to new data from iEmergent.

iEmergent, a mortgage forecasting and advisory firm, is projecting a 3.9% jump in total home-loan volume this year. That puts iEmergent at the head of the forecasting pack.

Freddie Mac is expecting a gain of 1.5% for total mortgage lending, according to its March mortgage finance forecast. The Mortgage Bankers Association pegs the increase at 1%, and Fannie Mae expects a drop of about half a percentage point.

Mark Watson, iEmergent’s director of forecasting, said the difference in outlooks is due to expectations about home sales.

In fact, he’s calling for $1.2 trillion in home purchase lending this year. That would make it the best year for that category since 2005. And the reason? Low interest rates.

“We think the lower mortgage rates will create a huge push, partly from Millennial buyers, that’s going to support strong growth in home sales over the next several years,” Watson said in an interview.

The decline in mortgage rates this year is due to two factors, said Watson. One is Brexit, Britain’s stalled efforts to leave the European Union. British government missteps have caused a "flight to safety" among international investors that increased demand for U.S. dollar-denominated bonds, which translated into lower rates for homebuyers, said Watson.

The second reason for lower rates? The U.S. economy’s “hangover” from federal tax cuts that became law more than a year ago, he said.

“The tax changes were a positive for the economy at first, but a big part of the stimulus from that is over and now it’s going to be more of an economic hangover because deficits are going to be higher,” he said.

At first, many economists thought those deficits would result in higher mortgage rates because the government would have to increase borrowing, Watson said. But, signs of a slowing U.S. economy at 2018’s end caused the Federal Reserve to stop raising rates at its January meeting, and recently signal that it does not plan to raise rates again this year.

Instead, the policy makers pledged to be “patient” before pushing up borrowing costs.

“Before that time, everyone thought they were going to do at least two, or maybe even three, rate-rises this year,” said Watson. “That’s clearly not going to happen, now.”

In March, Fed Chairman Jerome Powell said there will be no rate hikes in 2019. And, because Fed policy makers are loath to look like they are influencing national elections, they may hold steady in 2020 as well, Watson said.

The reason the Fed has the option to hold rates steady is the low rate of inflation, he said.

“It looked for a period of time like inflation was going to go over the Fed’s 2% target,” said Watson. “Then it dipped down and that gave the Fed a lot of cover to say we’re going to slow down on rates rises.”

And because of that, mortgage rates could very well stay low for a while, which could mean good news for those in the housing market.

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Buyers Face a Brighter Affordability Picture This Spring

Slower home price growth, deflated sales, and lower mortgage rates could create abundant opportunities for potential home buyers this spring.

Though home prices are still up year over year in all 50 states, the overall affordability outlook is improving, according to Black Knight’s latest Mortgage Monitor Report. The decline in mortgage rates has helped increase consumers’ buying power by more than 6 percent and reduced mortgage payments on an average-priced home by $62, according to the report.

“There is good news in these numbers for prospective home buyers,” says Ben Graboske, president of Black Knight’s data and analytics division. “Combined with the average 30-year fixed-rate mortgage declining by more than half a point over the last three months, housing is now the most affordable it’s been since early in the 2018 homebuying season.”

With a 30-year fixed-rate loan, it currently takes 22.2 percent of the national median income—along with a 20 percent down payment—to cover the mortgage costs of an average-priced home, Graboske says. That’s down from a post-recession high of 23.4 percent just a few months ago and well below the long-term average of 25 percent in the late 1990s and early 2000s, he adds.

Home prices have slowed the most on the West Coast, particularly in California and Washington, the report notes. For example, California has seen its annual rate of appreciation drop from more than 10 percent in February 2018 to 3 percent at the end of 2018. The slowdown is most apparent in San Jose, Calif., San Francisco, and Seattle.

Nationwide, annual home price appreciation slowed for the 10 consecutive months ending in December 2018. Home price appreciation has dropped from a high of 6.8 percent annual growth in February 2018 to 4.6 percent by the end of the year, according to Black Knight. The lower home prices and mortgage rates will certainly help buyers who had been struggling with affordability, the report notes. Still, “while this is all welcome news for consumers heading into the spring homebuying season, it remains to be seen whether recent rate declines and easing affordability will be enough to halt the deceleration in home price growth,” Graboske notes.

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FHA Single Family Draft Handbook Appraiser Requirements

The Federal Housing Administration posted four draft appraiser-specific policy documents that will be part of the Single Family Housing Policy Handbook. FHA specifically encourages FHA Roster appraisers, and mortgagee staffs that underwrite appraisals, to submit feedback through September 2.

See the FHA Single Family Policy Drafting Table for more information.

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Blog: The Jewelry in Your Kitchen Design

By Melissa Dittmann Tracey, REALTOR® Magazine

Great lighting is definitely stealing more of the spotlight in kitchen design lately. Pendant lights that hang from the ceiling above your kitchen island—usually in a row of two or three–is really a place to show off lighting to dress up your kitchen.

Some designers refer to pendant lights as the jewelry of your kitchen. They add a little decorative sparkle to catch the eye.

Blown glass pendants are one of the top trends. This is a clear glass light fixture with an exposed Edison light bulb inside. Glass pendants in geometric shapes, like a glass boxed pendant or a glass sphere, are popping up in more kitchens lately.

Glass pendants can be a great choice for smaller kitchens or kitchens within an open floor plan. That’s because the see-through glass doesn’t disrupt the line of sight in your kitchen space. The lighting adds just enough statement and shine to accent that kitchen island.

Check out a few examples.

Source: Styled, Staged & Sold