In the News   Presented by Prairie Title

December 8, 2016

Bye-Bye Refis. What’s Next?

I’ve been thinking about the state of our industry as 2017 nears. Actions to be taken by the new Congress and new administration in Washington will have an impact on the housing market, of course, but let’s leave speculation about what might happen in Washington for another day. Something that is certainly real now is a decline in refinances as interest rates have climbed since the election, and likely will continue to rise as the Fed meets next week and is almost certain to increase rates.

As Mortgage Daily reports, based on Freddie Mac’s Refinance Outlook, refinance originations are expected to go from $228 billion in the current quarter to $105 billion in Q1 of 2017. Black Knight even suggests that the potential total refi pool has shrunk in half already with the interest rate rise.

Where do we look for good news? Home sales, naturally, but with the caveat that higher mortgage rates combined with rising home prices may slow housing market growth in 2017, especially among a key demographic: Millennials.

“Recent spikes in mortgage rates may potentially price some first-time home buyers out of the market,” NAR said recently. “The higher rates mixed with rising home prices will likely cause the housing market to slow in 2017 and see only moderate growth.” NAR’s 2017 “snapshot” does provide some positives:

·         Home prices are expected to rise 3.9 percent nationwide.

·         Existing-home sales are predicted to increase 1.9 percent to 5.46 million homes.

·         The homeownership rate is expected to stabilize at 63.5 percent, after bottoming out at 62.9 percent in 2016.

·         New-home sales are expected to increase 10 percent and new home starts to rise 3 percent.

I’m hopeful as 2016 comes to an end. I really believe that the strong movement of Millennials into the real estate market is not far off. There’s a big wave coming, we just can’t be sure exactly when.

Our next issue of In the News will come out right after New Year’s. In the meantime, I hope the coming holiday season is peaceful and relaxing for you and your family.

What’s your point of view? I’d love to start a conversation. Call or email me, or write a comment below.

Other stories we’re following:

2017 U.S. mortgages to exceed $1 trillion.

What’s coming for CFPB mortgage policies?

Where will home prices go in 2017?

Battle lines drawn over mortgage interest deduction.

In the News

Presented by Prairie Title        

Commentary by Frank Pellegrini, Prairie Title CEO  

February 29, 2016

Happy leap day everyone! Let’s all make this extra business day in February count as we align our calendar with the earth’s 365.25-day revolution around the sun.

A funny thing happened this long February on the way to higher interest rates. The Fed raised the its benchmark short-term interest rate two months ago and there was a brief rise in mortgage interest rates, but since then rates have been falling. Quoting CNBC:

“Who knew? The Federal Reserve raised its funds rate barely two months ago, and all that worry about higher interest rates for mortgage borrowers ended up being positively unwarranted. The average rate on the popular 30-year fixed mortgage began a free fall, reacting to financial markets overseas rather than monetary policy here at home.”

                                           Here’s a positive: The groundhog saw
                                           his shadow earlier this month.
                                           Let’s hope he’s right about spring
                                           arriving soon with home buyers in tow!

What happens to the real estate market if rates keep falling? No one can be sure, of course. Amidst falling rates, January was a decent month for housing. The NAR recap of January activity is titled: “Existing-Home Sales Inch Forward in January, Price Growth Accelerates.” I think the key word in that headline in “Inch.” That’s how I view the real estate market in 2016. Moving forward, but inch by inch. Unless and until we break out of the economic doldrums, we seem likely to keep treading water but not quite reaching the life raft.

NAR chief economist Laurence Yun put it this way in their Feb. 23 press release: “The housing market has shown promising resilience in recent months, but home prices are still rising too fast because of ongoing supply constraints,” he said. “Despite the global economic slowdown, the housing sector continues to recover and will likely help the U.S. economy avoid a recession.”

Avoiding a recession is certainly desirable. If we navigate the shoals of ’16 successfully, perhaps we’ll be rewarded with a stronger market later in the decade.


Let’s keep the discussion going. Call me, email me, or write a comment below.


Other stories we’re following:
CFPB Pledges Leeway in Early TRID Exams.
MBA: Commercial to Grow.
Yellen not Writing off Negative Rates.
Can Homeowners Crack the Credit Box?

In the News

December 17, 2015 

Well, the Fed has acted, at long last. Yesterday, Fed governors voted to raise interest rates for the first time since before the financial crisis began in late 2008. It was a modest increase, just 0.25 percentage points, but monumental in the sense that it was so long in coming. The New York Times called it, "a vote of confidence in the strength of the American economy at a time when much of the rest of the global economy is struggling."

The Fed announcement emphasized that any additional increases will come slowly. "The Committee expects that economic conditions will evolve in a manner that will warrant only gradual increases in the federal funds rate; the federal funds rate is likely to remain, for some time, below levels that are expected to prevail in the longer run."

Just before the announcement, a column published in the Washington Post even questioned whether the Fed would quickly end up back where it started. Wonkblog author Matt O’Brien states: "The simple story is that central bankers, who pride themselves on choosing the hard right over the easy inflationary wrong, tend to look for any excuse to end zero interest rates, even if they have to invent one. But raising rates before the economy is ready means you will have to cut them back down to zero in rather short order — which has been the case in Europe, Japan, Sweden and Israel."

What will the news mean for the real estate market? No one knows for sure, of course, but I suspect that it will be something of a non-event. The market has been churning through its own recovery in fits and starts over a number of years, and it’s hard to imagine this one event, or even a series of small increases, will have a great impact.

From my perspective, we head into 2016 in generally good shape. Builders are confident, loans are being processed despite some TRID headaches and the commercial outlook is good. We are in a much better place than we were just a few years ago, and for that we should all be grateful.

This is our final In The News of the year. Happy Holiday Season to all. See you in 2016!


Let’s keep the discussion going. Call or email me, or write a comment below.


Other stories we’re following:

Construction Spending Near 8-year High.

TRID and Lending.

Mortgages for Underserved Markets?

Economic Headwinds won’t Stop Growth.

To Raise or Not To Raise - that is the question.

When the Fed decided not to raise interest rates, at least for now, at its mid-September meeting, the action left many experts as well as lenders and real estate professionals surprised and perhaps a little bit puzzled. Leading up to the meeting, it seemed likely that rates would rise but the Fed came to the conclusion that… “in light of the heightened uncertainties abroad and a slightly softer expected path for inflation, the committee judged it appropriate to wait for more evidence, including some further improvement in the labor market,” in the words of Fed Chair Janet Yellen.

Many economists argue that the time was right for the Fed to raise rates in September (or perhaps even before that). For instance, BMO Harris Chief Investment Strategist Brian Belski maintains that the next step for the Fed “must be a rate hike.” next step for the Federal Reserve must be a rate hike.

Jeff Cox of CNBC argues that “The Federal Reserve may have missed its last, best chance to raise interest rates,” while Bill Gross of Janus urges the Fed to “Get off Zero, now.” Gross argues that, “…zero destroys existing business models such as life insurance company balance sheets and pension funds, which in turn are expected to use the proceeds to pay benefits for an aging boomer society."

As it affects housing, rising interest rates may be viewed through two lenses. There are legitimate concerns that rising rates will severely damage our industry. At the same time, we all want the economy to prosper since a healthy economy typically stimulates activity and growth in the real estate sector.

In my view, the best outcome lies in achieving just the right balance. For now, current rates are advantageous for consumers looking to get into the market, move up to a bigger house, or simply refinance existing debt. However, we know they will rise at some point. We hope that policy-makers are deliberate, cautious, and prudent in searching for the perfect balance.

What do you think?