interest rates Archives - Hillwood Loves Realtor

One More Fed Rate Hike in 2023?

Robert Dietz2023-09-20T18:21:07-05:00

By Robert Dietz on September 20, 2023 • The Federal Reserve’s monetary policy committee held the federal funds rate at a top target rate of 5.5% at the conclusion of its September meeting. The Fed will also continue to reduce its balance sheet holdings of Treasuries and mortgage-backed securities as part of quantitative tightening. These actions are intended to slow the economy and bring inflation back to 2%. After an increase in rates in July, the pause for September will likely be temporary. Indeed, the Fed maintained a hawkish bias by noting: “additional policy firming may be appropriate to return inflation to 2 percent over time.” The Fed’s dot-plot projections imply one more 25 basis point increase in 2023 (presumably in November), which would be the last increase for this cycle. Then the Fed will hold this higher rate for longer – with the Fed’s projections suggesting no rate cuts until the second half of 2024. And as a revision, the Fed’s projections suggest only two rate cuts for 2024. And during that time, quantitative tightening will continue, keeping the spread between the 10-year Treasury and the 30-year fixed rate mortgage elevated. It is currently near 300 basis points. The Fed faces competing risks: elevated but trending lower inflation combined with ongoing risks to the banking system and macroeconomic slowing. Chair Powell has previously noted that near-term uncertainty is high due to these risks. Nonetheless, economic data remains better than expected. The Fed stated today: “economic activity has been expanding at a solid pace,” and that “job gains have slowed but remain strong, the unemployment rate has remained low.” Despite this positive assessment from the Fed, there are ongoing challenges for regional banks, as well weakness for commercial real estate. Going from near zero to 5.5% on the federal funds rate is a dramatic policy move with possible unintended consequences. More caution seems prudent. In fact, prior risks for smaller banks will result in tighter credit conditions, which will slow the economy and reduce inflation. Thus, these financial challenges act as additional surrogate rate hikes in terms of tightening credit availability, doing some of the work for the Fed. The 10-year Treasury rate, which determines in part mortgage rates, increased to near 4.4% upon the Fed announcement. Mortgage rates will remain above 7% range, which is currently home builder sentiment. Related ‹ Housing Starts Lower on Rising Mortgage RatesTags: FOMC, home building, housing, interest rates, multifamily, single-family

One More Fed Rate Hike in 2023?Robert Dietz2023-09-20T18:21:07-05:00

Mortgage Activity Low as Rates Remain Above Seven Percent

Jesse Wade2023-09-13T10:24:55-05:00

By Jesse Wade on September 13, 2023 • Per the Mortgage Bankers Association’s (MBA) survey through the week ending September 8th, total mortgage activity decreased 0.8% from the previous week and the average 30-year fixed-rate mortgage (FRM) rate rose six basis points to 7.27%. The FRM rate has remained above 7% since the start of August. The Market Composite Index, a measure of mortgage loan application volume, fell by 0.8% on a seasonally adjusted (SA) basis from one week earlier. Purchasing activity increased 1.3%, while refinancing activity decreased 5.4% week-over-week. Interest rates remained above seven percent for the sixth consecutive week. The combination of higher rates and low existing for-sale inventory have hampered potential buyers as the purchase index remained historically low. The seasonally adjusted purchase index was 27.5% lower than one year ago while the seasonally adjusted refinancing index was 31.1% lower than one year ago. The refinance share of mortgage activity fell from 30.0% to 29.1% over the week, while the adjustable-rate mortgage (ARM) share of activity rose to 7.5% from 6.7%. The average loan size for purchases was $410,900 at the start of September, down from $413,600 over the month of August. The average loan size for refinancing decreased from $255,900 over the month of August to $255,400. The average loan size for an ARM was up at start of September to $833,000 while the average loan size for a FRM fell to $329,200. Related ‹ Revolving Credit Growth Reaccelerates in JulyTags: finance, interest rates, mba, mortgage applications, mortgage bankers association, mortgage lending, refinancing

Mortgage Activity Low as Rates Remain Above Seven PercentJesse Wade2023-09-13T10:24:55-05:00

AD&C Loans: Rising Rate & Tightening Trends Continue

Paul Emrath2023-08-25T07:37:24-05:00

Interest rates on loans for Acquisition, Development & Construction (AD&C) continued to climb in the second quarter of 2023, according to NAHB’s quarterly Survey on AD&C Financing. Quarter-over-quarter, the contract interest rate increased on all four categories of loans tracked in the AD&C Survey: from 8.50% to 8.62% on loans for land acquisition, from 8.19% to 8.70% on loans for land development, from 8.10% to 8.37% on loans for speculative single-family construction, and from 7.61% to 8.18% on loans for pre-sold single-family construction. In all four cases, the contract interest rate was higher in 2023 Q2 than it had been at any time since NAHB began collecting the data in 2018. The rates have been climbing steadily every quarter since the start of 2022 with one minor exception (for land acquisition loans in the third quarter of 2022). Meanwhile, the average initial points charged on the loans actually declined in the second quarter: from 0.81% to 0.52% on land development loans, from 0.85% to 0.81% on land acquisition loans, from 0.79% to 0.71% for speculative single-family construction, and from 0.53% to 0.44% on loans for pre-sold single-family construction. Only in the case of land acquisition, however, was the decline in initial points large enough to offset the contract interest rate and reduce the average effective rate (the rate of return to the lender over the assumed life of the loan, taking both the contract interest rate and initial points into account) paid by developers: from 11.09% in the first quarter to 10.87%. On the other three categories of AD&C loans, the average effective rate continued to climb, much as it had over the previous year: from 11.88% to 12.67% on loans for land development, from 12.59% to 12.85% on loans for speculative single-family construction, and from 12.01% to 12.67% on loans for pre-sold single-family construction. The NAHB AD&C financing survey also collects data on credit availability. To help interpret these data, NAHB generates a net easing index, similar to the net easing index based on the Federal Reserve’s survey of senior loan officers. Plotting the two indices on a single graph lets viewers compare what both the borrowers and lenders are saying about current credit conditions. In the second quarter of 2023, both the NAHB and Fed indices were slightly less negative than they had been in the first quarter, but still solidly in negative territory, indicating net tightening of credit. The NAHB net easing index posted a reading of -35.3, compared to -36.0 in the first quarter. And the Fed net easing index posted a reading of -71.7, compared to -73.3 in the first quarter. This marks the sixth consecutive quarter during which both borrowers and lenders have been reporting tightening credit conditions. More detail on current credit conditions for builders and developers is available on NAHB’s AD&C Financing web page. Related ‹ Home Improvement Loan Applications in 2021: A State- and County-Level AnalysisTags: ad&c lending, ad&c loans, ADC, construciton loans, construction lending, credit conditions, economics, home building, housing, interest rates, lending

AD&C Loans: Rising Rate & Tightening Trends ContinuePaul Emrath2023-08-25T07:37:24-05:00

Consumer Debt Growth Slows as Inflation Cools and Lending Standards Tighten

David Logan2023-08-08T15:19:45-05:00

Consumer credit outstanding growth slowed to 4.0% in the second quarter 2023 (SAAR) according to the Federal Reserve’s latest G.19 Consumer Credit report, as revolving and nonrevolving debt grew at 7.1% and 3.0%, respectively. Revolving credit growth has decelerated as of late, a result of both cooling inflation and increasingly tight lending standards. Total consumer credit outstanding stands at $5.0 trillion (break-adjusted[1] and seasonally adjusted), with $1.3 trillion in revolving debt and $3.7 trillion in non-revolving debt. Seasonally adjusted revolving and nonrevolving debt accounted for 25.3% and 74.7% of total consumer debt, respectively. Revolving consumer credit outstanding as a share of the total decreased 0.1 percentage point over the quarter but increased 0.4 percentage point over the past year. Auto and Student Loan Debt With every quarterly G.19 report, the Federal Reserve releases a memo item covering student and motor vehicle loans’ outstanding. The most recent release shows that the balance of student loans was $1.77 trillion (not seasonally adjusted) at the end of the second quarter while the amount of auto loan debt outstanding stood at $1.53 trillion (NSA). Auto loan interest rates continued to climb as the rate for a 60-month new car loan increased to 7.81% in Q2—the highest reading since 2006. The rate has surged 3.29 ppts—more than 70%–since the Federal Reserve began the current rate hike cycle in the first quarter of 2022. Together, student and auto loans made up 88.2% of nonrevolving credit balances (NSA)—the smallest share since 2010 and 0.5 ppt lower than the share in Q2 2022. [1] The results of the 2020 Census and Survey of Finance Companies–delayed by the pandemic–were incorporated in the latest Consumer Credit (G.19) statistical release, resulting in large revisions dating back to June 2021. Rather than retain the large spike in credit that now appears in the raw data, we have used the “break-adjusted” historical time series developed by Moody’s Analytics and will continue to do so moving forward. Click here for more information. Related ‹ Dramatic Apartment Construction Time Lengthening in 2022Tags: auto loans, borrowing costs, consumer credit, consumer debt, Federal Reserve, g.19, household balance sheets, household credit, household debt, inflation, interest rates, lending conditions, lending standards, nonrevolving debt, revolving debt

Consumer Debt Growth Slows as Inflation Cools and Lending Standards TightenDavid Logan2023-08-08T15:19:45-05:00

Mortgage Activity Increases Despite Rates Topping 7%

Jesse Wade2023-07-12T11:19:20-05:00

By Jesse Wade on July 12, 2023 • Per the Mortgage Bankers Association’s (MBA) survey through the week ending July 7th, total mortgage activity increased 0.9% from the previous week and the average 30-year fixed-rate mortgage (FRM) rate rose 22 basis points to 7.07%. The FRM rate has risen 30 basis points over the past month and topped 7% for the first time since November of 2022. The Market Composite Index, a measure of mortgage loan application volume, rose by 0.9% on a seasonally adjusted (SA) basis from one week earlier. Purchasing activity increased 1.7%, while refinancing activity decreased 1.3% week-over-week. With the Fed indicating that rates will remain higher until inflation has fully cooled, mortgage rates increased to their highest level since November of last year. The higher rates have kept potential buyers on the sideline and greatly diminished the demand for refinancing. The seasonally adjusted purchase index was 26.3% lower than one year ago while the seasonally adjusted refinancing index was 39.3% lower than one year ago. The refinance share of mortgage activity fell from 27.4% to 26.8% over the week, while the adjustable-rate mortgage (ARM) share of activity rose to 6.6% from 6.2%. The average loan size for purchases was $426,100 in the through the first week of July, down from $426,900 over the month of June. The average loan size for refinancing decreased from $260,700 over the month of June to $254,900 in the first week of July. The average loan size for an ARM was up at start of July to $759,200 while the average loan size for a FRM fell to $353,500. Related ‹ CPI Eases Further as Housing Inflation SlowsTags: finance, home purchases, housing finance, interest rates, mba, mortgage applications, mortgage bankers association, mortgage lending, refinancing

Mortgage Activity Increases Despite Rates Topping 7%Jesse Wade2023-07-12T11:19:20-05:00

How Interest Rates Affect Your Home Purchase

Texas REALTORS Staff2022-10-26T19:14:33-05:00

Your monthly house payment depends on many factors, including the interest rate on your mortgage. Here are some things to keep in mind about interest rates when you’re planning to buy a home. Rates Change Over Time The rate you can get on a loan today will likely vary slightly from yesterday’s or tomorrow’s rate. Over longer periods, rates can fluctuate dramatically. Interest on a 30-year mortgage topped 18% in 1981 and dipped below 3% in 2020. People will predict which direction rates are heading, but no one knows for sure. If you’re concerned rates will rise while you’re looking for a home, some lenders give you the option to lock in a rate for a period of time. Different Loans Charge Different Rates The interest on a 30-year fixed-rate mortgage is typically higher than the rate on a 15-year fixed-rate loan. Interest rates on adjustable-rate mortgages are usually even lower; however, as the name suggests, those rates can change over time. How Much Will a Loan Payment Change? The difference in a monthly payment depends not only on the loan’s interest rate but also the amount of money borrowed. A buyer who borrows $250,000 at 5% will pay $148 more per month than if the rate was 4%. On a $400,000 loan, though, the difference would be $237 each month. Interest rates are just one aspect of a mortgage, and a mortgage is one of dozens of considerations when you purchase a home. Working with a REALTOR® ensures that you have a professional at your side to guide you through the entire process.

How Interest Rates Affect Your Home PurchaseTexas REALTORS Staff2022-10-26T19:14:33-05:00

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