Napa Mortgage News

Is Trump the Grinch or is he making Christmas Great Again!?!

February 16th, 2017 7:04 PM by Dale DiGennaro

Dear Gena,

Or..."Merry Christmas".....So which is it?

And....is the election of the new administration to blame?

It's no secret now that The Federal Reserve has raised a key interest rate in response to a strengthening U.S. economy and expectations of higher inflation, and it foresees three more rate hikes in 2017.

(see more details below)

Yes......The Fed's move will mean modestly higher rates on some loans.

But here are some facts to consider...

We are still at historically low rates. They are typically 5.5% or higher! Since the election, forecasters see Trump's policies, namely spending on infrastructure, lower tax rates, reduced regulation and deficit spending, all as triggers for inflation. When inflation is occurring (where the purchasing power of the dollar decreases over time), interest rates go up. Investors want a return on their investment and inflation will be accounted for in calculating that return. What we have seen in the market since the election is the "massive repricing of longer term inflation risks."
Historic Interest Rates - the average 30 year fixed interest rate
1970's - 8.86%
1980's - 12.70%
1990's - 8.12%
2000's - 6.29%
2010 - Present - 3.94%
Interest rates would need to reach 9.1% for renting to be cheaper than buying a home.
Since the election, rates have risen 0.75%. Average interest rates for a 30 year conforming loan are now 4.25% - this is the highest level it has been since July 2015. Mortgage loan applications have fallen 9.2% since the election.

Its quite possibly too soon to tell...as adjustments continue to take place and we move forward with the new democratic party and president into 2017.

VISIT OUR WEBSITE

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THINKING OF SELLING OR EVEN DOING A REFINANCE...
Our "Home Price Index" will take into consideration your original purchase price & date of home purchase to determine...

according to the appreciation rate for the region you live in...whether it is a good time for you to refinance now or....if you are getting ready to list your home...what a reasonable value for your area would be. You can also sign up to receive a quarterly report of your homes value based on the up to date analysis of your region.

Just a couple of ways that Custom Lending keeps you informed of our changing market place so you can make the best financial decisions for you and your family!

Fed Projects Faster Pace of hikes...

Wednesday's Fed meeting turned out to be negative for mortgage rates. Recent economic data had little impact. As a result, mortgage rates ended the week higher.

As widely expected, the Fed raised the federal funds rate by 25 basis points. Unfortunately for MBS, Fed officials also raised their outlook for the pace of future rate hikes. They now forecast three rate hikes in 2017, one more than previously projected. The faster pace was viewed as negative for mortgage rates. But why? The purpose for raising the federal funds rate is to keep inflation from rising above the Fed's target of 2%. This should be a good thing for mortgage rates.

Part of the reason for the adverse reaction stems from a more direct effect the Fed has on mortgage rates. The Fed owns over $1.7 trillion of the agency mortgage-backed securities (MBS) that it purchased during its quantitative easing (QE) days. The Fed keeps the balance of MBS around that level by buying new MBS to replace that which pays off. The Fed is currently the buyer of approximately 25% of all newly issued MBS. This added demand from the Fed drives MBS prices higher and mortgage rates lower. The Fed says that it will not allow its holdings of MBS to decline until "normalization of the level of the federal funds rate is well under way." When that will be is hard to say, but the faster they raise the federal funds rate, the sooner their demand for new MBS will be removed.

On Thursday, the December National Association of

Home Builders (NAHB) housing index showed that

home builder confidence jumped from 63 to 70,

far above the consensus, and the highest level since 2005.

. According to the NAHB, home builders are optimistic that the Trump administration will "reduce costly regulatory burdens."

Looking ahead, there will be a meeting of the Bank of Japan on Tuesday which could influence U.S. mortgage rates. In the U.S., Existing Home Sales will be released on Wednesday. Durable Orders and Core PCE will come out on Thursday. Core PCE is the inflation indicator favored by the Fed. New Home Sales will be released on Friday. Mortgage markets will close early on Friday in observance of Christmas.


Hanna & my son Travis with Tania, Jake and I

Last weekend my son Jake took us to Nashville as a belated b-day gift!

He has been a Titan fan since he was a child and has always wanted to watch them play in their hometown!

We finally did it! And I survived it!

And....the Titans won! So even better.


	HAPPY HOLIDAYS......CHEERS!

"Thank you for always trusting in us to do the best for you and your family and please feel free to call me anytime with your questions. I will be happy to share with you whatever information you may need!"