Fed Stands Firm: No Interest Changes This Month

As expected, the Federal Reserve made no interest-rate-change decisions at its meeting this week, and it didn’t signal a propensity for changes in early 2020.

WASHINGTON – The Federal Reserve made no changes to its benchmark interest rate, according to an announcement released when its meeting ended on Wednesday. Federal interest rate changes, either up or down, can directly impact adjustable-rate mortgages and, indirectly, fixed-rate mortgages.

In addition, nothing in the Fed’s accompanying statement suggests that further interest rate cuts are on the horizon, assuming nothing major in the economy changes. That likely means little change early next year, though economists are split on whether another interest rate cut may occur later in 2020.

Fed Chairman Jerome Powell once worried that a robust job market would push consumer prices higher than the 2% level. However, inflation appears stable even with almost full employment. The current unemployment rate is at 3.5% – a 50-year low – but inflation was well under the 2% benchmark in October when it stood at 1.3%.

Economists usually scour the Fed statement to look for signs of intention – whether the Fed is leaning toward lowering or raising rates at its next meeting. However, the latest statement appears to suggest neither, at least over the short term.

© 2019 Florida Realtors®

Florida’s Housing Market Shows Positive Trends in 3Q

From Florida Realtors

Sales, prices and pending inventory rose statewide year-over-year. Single-family sales up 8.1%, median price up 3.9%; condo sales up 2.2%, median price up 4.1%.

ORLANDO, Fla. – Florida’s housing market experienced positive trends in 3Q 2019, with more closed sales, higher median prices, more pending sales and rising pending inventory, according to the latest housing data released by Florida Realtors®. Closed sales of single-family homes statewide totaled 78,759 in 3Q 2019, up 8.1% from the 3Q 2018 level.

“Median sales prices for both existing single-family homes and for condo-townhouse properties rose in Florida during the third quarter – continuing the ongoing trend,” says 2019 Florida Realtors President Eric Sain, a Realtor and district sales manager with Illustrated Properties in Palm Beach.

“Florida’s business-friendly outlook continues to attract investment and growth, as well as new residents, which provide a strong foundation for the state’s housing market. The latest report from the state’s economists show that Florida’s annual private-sector job growth rate of 2.8% continues to outpace the national job growth rate of 1.6%. Job growth, an unemployment rate of 3.2% in September and a growing population continue to keep Florida’s economy strong.”

The statewide median sales price for existing single-family homes in 3Q 2019 was $265,000, up 3.9% from the same time a year ago, according to data from Florida Realtors Research department in partnership with local Realtor boards/associations. The statewide median price for condo-townhouse properties during the quarter was $190,000, up 4.1% over the year-ago figure. The median is the midpoint; half the homes sold for more, half for less.

Looking at Florida’s condo-townhouse market, statewide closed sales totaled 29,539 during 3Q 2019, up 2.2% compared to a year ago. Closed sales typically occur 30 to 90 days after sales contracts are written.

“Inventory levels – particularly among single-family homes for sale – continued to fall throughout the third quarter,” says Florida Realtors Chief Economist Dr. Brad O’Connor. “But so did mortgage interest rates, which provided opportunities for both prospective and current homeowners. Many current owners locked into low mortgage rates from a few years back have been waiting for a chance to buy a bigger or better home at similar rates, and that’s exactly what we saw happen throughout the summer. As a result, we saw an increase in new listings as well as closed sales across all price tiers above $200,000, with many first-time buyers getting a shot at those newly listed homes located at the more affordable end of the price spectrum.”

In 3Q 2019, new pending sales for existing single-family homes rose 4.4% while pending inventory was up 1.7%. During the same three months, condo-townhouse new pending sales rose 0.5% while pending inventory increased 0.9%. Pending inventory is the number of listed properties that were under contract at the end of the month or data collection period.

Inventory was at a 3.6-months’ supply in 3Q 2019 for single-family homes and at a 5.3-months’ supply for condo-townhouse properties, according to Florida Realtors.

According to Freddie Mac, the interest rate for a 30-year fixed-rate mortgage averaged 3.67% for 3Q 2019, significantly lower than the 4.57% average recorded during the same quarter a year earlier.

To see the full statewide housing activity reports, go to Florida Realtors Research & Statistics section on floridarealtors.org. Realtors also have access to local market stats (password protected) on Florida Realtors’ website.

© 2019 Florida Realtors®

Responsible buyers with low credit get new options

Source: Responsible buyers with low credit get new options

BOSTON – April 8, 2019 – Here’s some good news for anyone whose credit scores aren’t quite as high as they’d like them to be: Three new financial tools have come to market – or soon will be available – that could give your scores a shot of adrenaline when you need it most.

All three tools come from well-established players: FICO, developer of the ubiquitous FICO score; Experian, one of the national credit bureaus; and CreditXpert, a financial technology company whose products are used extensively in the mortgage arena.

FICO’s Ultra score is expected to be widely available from lenders this summer. It raises scores by importing data from your checking, banking, savings and money-market accounts into your credit report when calculating your score. If you have some savings, maintain your bank accounts over time and avoid negative balances, you’ll likely get a higher score.

Seven out of 10 consumers who exhibit good banking and savings behavior should see increased scores using Ultra, according to FICO.

Experian’s new Boost option, introduced in March and now becoming available nationwide, offers another score-enhancement approach. It imports your on-time utilities and telecom payments and includes positive data into your score calculations, raising scores in the majority of cases.

According to Experian, three-quarters of consumers with scores below 680 saw an increase in their scores from Boost.

The new Wayfinder, from CreditXpert, is different. Working with their loan officer, borrowers select a target credit score they’d like to achieve to qualify for a loan or get the best interest rate and terms possible. The Wayfinder software then runs dozens of scenarios to get the borrower that score within a designated time period by taking steps to modify accounts in their credit reports.

Say you have a 640 score but need at least a 680 to get a lower interest rate. Your loan officer plugs your 680 target into the software, and the program delivers specific steps you can take to achieve that score within days or weeks. Plans might call for a partial paydown of one or more accounts that are needlessly depressing your current score.

But since you may not want to spend the money, Wayfinder offers alternatives that won’t cost as much but might take a month or more to complete. Score improvements average around 27 to 30 points but have ranged as high as 179 points, according to CreditXpert.

All three of these tools could be practical if you find yourself in a score pinch. You simply need to ask your loan officer about them.

But Fico’s Ultra and Experian’s Boost come with a crucial handicap for anyone seeking a home mortgage: Under current regulatory restrictions, the two biggest sources of mortgage money cannot accept the FICO scores they produce.

Fannie Mae and Freddie Mac both confirmed to me that at least for the time being, their underwriting systems don’t permit either UltraFICO or Boost. Both can be used for most other credit purposes using Experian credit reports, such as applying for credit cards or auto loans – but not for mortgages destined for purchase by Fannie or Freddie.

Wayfinder, by contrast, is designed for the mortgage market. The higher scores it leads to are acceptable because they reflect credit report changes that can be incorporated into scoring models that Fannie and Freddie have used for years. So if you’re seeking a mortgage and need a higher score, Wayfinder is worth mentioning to your loan officer.

Another key fact you should know about Wayfinder: It’s not free. It costs about $15 to $18 if you want to run it on your files at each of the big three credit bureaus. Plus, it typically involves “rapid rescoring” of your credit reports by a vendor working with your loan officer, and that can cost an additional $75 to $150.

But if the process lands you a loan that costs thousands less over the years, the small upfront expense should be worth it.

Copyright © 2019, Richmond Times-Dispatch, Richmond, VA, Kenneth R. Harney. Kenneth R. Harney heads his own consulting firm in Chevy Chase, Md.

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Housing market will be slower, steadier in 2019

Source: Housing market will be slower, steadier in 2019

Photo by rawpixel.com on Pexels.com

NEW YORK – Jan. 4, 2018 – Forget fevered bidding wars and snap home-buying decisions. Slower and steadier will characterize next year’s housing market.

That follows a 2018 that started off hot but softened into the fall as buyers – put off by high prices and few choices – sat out rather than paid up.

Affordability issues will remain a top concern going into 2019, exacerbated by rising mortgage rates. But some of 2018’s more intractable issues will begin to loosen up. The volume of for-sale homes is expected to rise and diversify, while the number of buyers is forecast to shrink.

“For home sellers, they need to recognize those days of frenzied market are over. They must price competitively to sell their home,” said Lawrence Yun, the chief economist at the National Association of Realtors. “For buyers, there will be challenges when it comes to rising interest rates, but they don’t have to make hurried decisions anymore.”

Still, some cash-strapped first-time buyers will simply be priced out, while a cohort of potential move-up buyers will decide to stay in their existing home, make renovations and enjoy their current low mortgage rate. Price increases will moderate, and everyone in the market will need to adjust.

Finally, more homes to choose from

One of the biggest complaints among buyers in the last several years is that there weren’t enough homes for sale. In fact, the supply of houses hit historic lows in the winter of 2017 and has yet to rebound substantially. That fueled bidding wars, price increases and frustration.

The supply crunch is expected to ease some in 2019 with inventory rising 10 percent to 15 percent, according to Yun.

But the increase will be skewed toward the mid-to-high end of the market – houses priced $250,000 and higher – especially when it comes to newly built houses, said Danielle Hale, chief economist of realtor.com. That’s good news for move-up buyers, but not so much for the first-time millennial buyer. “There’s still a mismatch on the entry-level side,” she said.

Houses in all shapes and sizes

If you’re a first-time buyer, you won’t be completely out of luck if you stay open-minded. If a single-family home is out of the question, consider a mobile home or townhouse as a starter home, both of which are on the rise.

The volume of shipments for manufactured houses – also known as mobile homes – is expected to finish above 100,000 this year, up from 93,000 in 2017, according to Robert Dietz, chief economist of the National Association of Home Builders. The trend is expected to continue next year.

These homes are also significantly cheaper than other home types. Not including land costs, the cost to buy a mobile home averages $70,600, compared with $257,900 for an existing single-family home and $309,700 for a new home.

You may also consider a townhouse, an attached single-family home located in a community of homes. Construction of townhomes also is experiencing year-over-year growth and is outpacing the single-family detached home market, Dietz said.

“The market is being supported by millennials moving from renting to their first-home purchase,” he said. “If you’re in a high-cost area with wage and job growth, townhouses are appropriate for entry-level. And they still get that suburban feel with their own front door.”

Affording a home remains hard

Housing values are still expected to increase next year, but not at the gang-buster pace seen in recent years. NAR’s Yun forecasts modest price growth between 2 percent and 3 percent, down from close to 5 percent this year and over 5 percent in 2017.

At the same time, mortgage rates are expected to hit 5.5percent by the end of 2019. Both factors make it more expensive for buyers to purchase a home. Hale estimates that the expected increase in prices and interest rates translates to an 8percent rise in the average monthly mortgage payment.

Interest rate trap

Shrinking affordability will convince some buyers – especially first-timers – to sit out the market altogether next year because they can’t make the numbers work. Homeowners considering selling their home may also stay put because of rising mortgage rates – a so-called interest rate trap. Most outstanding mortgages have an interest rate of 4.5 percent or less, according to a report this year from Black Knight, a data analytics firm.

“They have a nice low mortgage rate, lower than the current rate, so there’s no reason to move,” said Mark Fleming, chief economist of First American Financial Corp.

Tax worries linger

The first few months of 2019 will reveal how the new tax changes affect homeowners. One key rule is the new cap on the mortgage interest deduction.

Before, homeowners could deduct interest they paid on up to $1 million in mortgage debt – including interest on home equity loans and lines of credit – reducing their taxable income.

Now, you can only deduct interest on up to $750,000 in mortgage debt. Interest paid on home equity loans and lines of credit is deductible only if the funds were used to pay for home improvements or renovations.

The only taxpayers who will exceed those limits are high-end homeowners and buyers and those with multiple homes with mortgages.

The bigger question mark is if and how the $10,000 limit on state and local taxes deduction – known as SALT – will affect housing markets in high-tax states such as New Jersey, New York, Connecticut and California.

Buyers may be reluctant to purchase homes in those states – or choose a smaller house – if they calculate they will pay too much in non-deductible taxes. “These states may see softer housing markets compared to the rest of the country,” said Yun, if the SALT cap hurts enough homeowners.

The bottom line

If you’re a seller: Price realistically and be ready to cut the listing price or offer other incentives to get a deal done. “It’s still a seller’s market, but not like it was,” Hale said. “Sellers need to be mindful of competition, especially for more expensive properties.”

If you’re a buyer: Don’t worry about going slow when making decisions. “There is less buyer competition and more inventory,” Yun said. “Buyers can take time to find the home that fits into their budget.”

Copyright 2019, USATODAY.com, USA TODAY, Janna Herron