Real Estate Information Archive

Lending Rates React to a Chronic Case of Inertia

Sept. 17 came and went as expected, with nothing happening. We, along with most traders, were proven right. The Federal Reserve held the federal funds rate near zero, where it has been since Dec. 2008.

Interest rates were not formally raised, but interest rates, in general, and mortgages rates, in particular, formally fell. 

On the former, the bellwether 10-year U.S. Treasury note dropped 15-basis points when the Fed announced no increase in the fed funds rate. On the latter, rates on most mortgage products moved lower.  Depending when you called for a quote, the 30-year fixed-rate mortgage was down 10-basis points or more compared to where it was last Wednesday.  They've inched higher since – rates have been volatile – but you're still likely to get a sub-4% quote on the 30-year loan. 

Fed officials will meet two more times before the year ends: on Oct. 28 and Dec. 16.  As it now stands, traders in fed funds future contracts are betting on a 12% chance the fed funds rate will be increased at the October meeting. They're betting that there's a 32% chance it will be raised in December. 

Few people think a rate increase is in store for 2015, which has been our take since the beginning of the year.  No major central bank is looking to raise interest rates. The U.S. dollar, meanwhile, remains as strong as it has been in years, especially against emerging-market currencies. (Today, a dollar will get you nearly 17 Mexican pesos and over four Brazilian real – a multi-decade high on both.) 

Lower rates have spurred additional lending activity, though activity is being spurred by more than low rates. For the week ending Sept. 18, the Mortgage Bankers Association reports that application activity was up 13.9%.  The seasonally adjusted purchase index was up a strong 9%, and is up 27% year over year.  This is before the full impact of the Fed's rate decision kicked in.

Given the downdraft in lending rates and the updraft in lending activity, we should see an increase in home sales for September. As for August, existing home sales were somewhat sluggish, posting at 5.31 million on an annualized rate. Most economists were expecting around 5.6 million. 

That said, existing home sales have been strong through most of 2015, so a one-off month is no reason for concern. Fundamentally, things still look good. Supply has improved a bit, up to 5.2 months at the current sales pace. Price appreciation is also countenancing toward historical norms.  Year over year, the median price of an existing home is up 4.7% to $228,700.  In many markets, entry-level and lower-priced homes continue to drive aggregate price appreciation. A further deceleration in price appreciation in these niches would be welcomed news for prospective first-time buyers. 

Overall, the outlook is good for both housing and mortgage lending. Expect the outlook to remain good as we head into 2016.  

Information provided by Jessica Regan.

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When you are buying or selling property in today's Harrisburg PA real estate market, it's important to have confidence in your real estate professional. Don’s commitment as your Harrisburg PA REALTOR® is to provide you with the specialized real estate service you deserve.

When you are an informed buyer or seller, you'll make the best decisions for the most important purchase or sale in your lifetime. That's why Don’s goal is to keep you informed on trends in Harrisburg PA real estate. With property values continuing to rise, real estate is a sound investment for now and for the future.

As a local area expert with knowledge of Harrisburg PA area communities, Don’s objective is to work diligently to assist you in meeting your real estate goals.

If you are considering buying or selling a home or would just like to have additional information about real estate in your area, please don't hesitate to call me at (717) 657-8700, complete my online form, or e-mail me at don@donroth.com.

Regardless of the direction of interest rates, the housing market remains sound. We’re not alone in our bullish sentiment. Optimism among the nation's home builders continues to rise.

The National Association of Home Builders' sentiment index was up another point this month. The current reading, at 62, is at a 10-year high.  More encouraging yet, the weakest component of the sentiment index, traffic, was up two points to 47. It appears sky-rocketing rental rates are finally motivating more people to do what they want to do anyway – buy a home to occupy.

At this point, housing and mortgage lending have sufficient strength and momentum to survive whatever the Federal Reserve tosses our way. Therefore, interest rates are a non-issue for the immediate future. Unless we see a 150-basis-point spike in the 30-year loan, highly unlikely, we don't see rates derailing housing any time soon.

Information provided by Jessica Regan.

Search all Harrisburg PA homes for sale.

When you are buying or selling property in today's Harrisburg PA real estate market, it's important to have confidence in your real estate professional. Don’s commitment as your Harrisburg PA REALTOR® is to provide you with the specialized real estate service you deserve.

When you are an informed buyer or seller, you'll make the best decisions for the most important purchase or sale in your lifetime. That's why Don’s goal is to keep you informed on trends in Harrisburg PA real estate. With property values continuing to rise, real estate is a sound investment for now and for the future.

As a local area expert with knowledge of Harrisburg PA area communities, Don’s objective is to work diligently to assist you in meeting your real estate goals.

If you are considering buying or selling a home or would just like to have additional information about real estate in your area, please don't hesitate to call me at (717) 657-8700, complete my online form, or e-mail me at don@donroth.com.

The Day of Reckoning Beckons 

By the end of Thursday we'll know: Will the Federal Reserve have raised its target range for the federal funds rate, or will it have once again kicked the can down the road? 

As of Wednesday, the folks who put money on the line are betting a 23% chance that a higher fed funds rate will prevail. This is according to CME Group, which monitors trader action in the federal funds rate futures market. Of course, these same traders were betting a 19% chance last week and a 32% chance the week before that. These traders are a fickle lot. As the stock market goes, so seems to go their sentiment on the fed funds rate. 

It's all scuttlebutt, really, and scuttlebutt on the Fed and the fed funds rate is similar to scuttlebutt on the weather: There's a lot you can say, but not much you can do. You have to live with what you get. 

As for us, we still think we'll get another kick of the can. The target rate will remain as is – between 0% and 0.25%. This is where the fed funds rate has been firmly ensconced for the past six years. The rationale for our prognostication remains unchanged: low inflation, stagnating global economic growth, an unstable stock market, a strong U.S. dollar.

But what if we're wrong? What will happen to mortgage lending rates if the Fed moves to raise its target on the fed funds rate? 

The fed funds rate is a short-term rate. Indeed, it's a very short-term rate: It's the overnight lending rate among commercial banks. If the fed funds rate rises, short-term rates will likely be impacted most, at least initially. This means 1-year and 5/1-year ARMs will likely adjust first. 

On the longer end, it's possible little will change immediately. Rates on the 15-year and 30-year loans tend to act more independently of the Fed. It's possible the fed funds rate could rise, and rates on the 15-year and 30-year loans will continue to hold current levels.

Inflation also favors longer-term rates holding steady. The latest data on the consumer price index (CPI) show prices actually fell 0.1% in August. The shift down was lead by a fall in oil and gasoline prices. Given the dearth of inflation, it's possible we could see the yield curve begin to flatten, or even invert. This means short-term rates could rise, while long-term rates do nothing. 

But as we say this, the yield on the 10-year U.S. Treasury note, which influences longer-term rates, is up 15 basis points this month. In the past week, rates on long-term fixed-rate mortgages have drifted higher. As we've mentioned frequently, the long-term impetus is still for rates to rise. 

That said, predicting the flight path of interest rates is akin to predicting the flight path of a butterfly: Short term, they're all over the place; long term, there is a direction. For the butterfly, it's to head south for winter; for interest rates, it's to rise. For this reason, the best lending value just might reside on the long-end of the rate curve.  

Information provided by Jessica Regan.

Search all Harrisburg PA homes for sale.

When you are buying or selling property in today's Harrisburg PA real estate market, it's important to have confidence in your real estate professional. Don’s commitment as your Harrisburg PA REALTOR® is to provide you with the specialized real estate service you deserve.

When you are an informed buyer or seller, you'll make the best decisions for the most important purchase or sale in your lifetime. That's why Don’s goal is to keep you informed on trends in Harrisburg PA real estate. With property values continuing to rise, real estate is a sound investment for now and for the future.

As a local area expert with knowledge of Harrisburg PA area communities, Don’s objective is to work diligently to assist you in meeting your real estate goals.

If you are considering buying or selling a home or would just like to have additional information about real estate in your area, please don't hesitate to call me at (717) 657-8700, complete my online form, or e-mail me at don@donroth.com.

We've spent a good deal of time over the past month vetting the Federal Reserve and the odds of an interest-rate increase.  This stuff matters, but really not as much as the overall health of the mortgage and housing markets. Fortunately, the overall health is very good. 

Mortgage-credit availability is no longer an issue. Indeed, credit availability measured by the Mortgage Bankers Association shows that credit is as easily obtainable as it has been in years.  This is no surprise. Even when credit standards were tight, we were sure they would loosen once economic growth and job creation picked up. We've been proven right on this point.  Better yet, credit standards should remain accommodating for some time to come. 

At the same time, home sales continue to march ahead. Prices are still on the rise, but at a more reasonable pace. Starts and demand for new homes continue to trend positively. This is obviously all good news. So don't worry about next Thursday. Whatever happens with interest rates – whether up or hold – mortgage lending and housing will remain in good health.

Information provided by Jessica Regan.

Search all Harrisburg PA homes for sale.

When you are buying or selling property in today's Harrisburg PA real estate market, it's important to have confidence in your real estate professional. Don’s commitment as your Harrisburg PA REALTOR® is to provide you with the specialized real estate service you deserve.

When you are an informed buyer or seller, you'll make the best decisions for the most important purchase or sale in your lifetime. That's why Don’s goal is to keep you informed on trends in Harrisburg PA real estate. With property values continuing to rise, real estate is a sound investment for now and for the future.

As a local area expert with knowledge of Harrisburg PA area communities, Don’s objective is to work diligently to assist you in meeting your real estate goals.

If you are considering buying or selling a home or would just like to have additional information about real estate in your area, please don't hesitate to call me at (717) 657-8700, complete my online form, or e-mail me at don@donroth.com.

The Great Reprieve Appears 

In recent weeks, we've mentioned more than once that the employment report for August could sway the Federal Reserve's decision to raise or hold interest rates. The report is in, and the numbers were less than what was bargained for.  

August saw only 173,000 new jobs created. The key number has always been 200,000+ new jobs. Nevertheless, the latest job gains (plus revised gains for the prior two months) pushed the unemployment rate down to 5.1%, but there is a catch. The employment participation rate remains at a multi-decade low, at 62.6%.

Part of the lower participation rate is attributable to changing demographics – an older population and more younger people staying in school longer. Still, participation remains stubbornly low.  Too many people are not working. The good news is that wages and average weekly hours worked continue to creep higher.

The latest employment report could lead to a fiery debate when Fed officials convene on Sept. 16 and 17. The stock market should add fuel to the fire. The Dow 30 and the S&P 500 were down over 10% in the last week of August. A drop of 10% or more is considered a stock-market correction.

The Fed is supposed to act independently of stock prices, but stock prices do influence the Fed. Stock prices certainly influence traders in federal fund rate futures contracts. These traders bet on the odds of a Fed interest-rate increase. They're not giving very good odds these days. CME Group, which offers a “Fed Watch” service, says traders are pricing futures contracts with a 19% chance of a rate increase. This is down from 32% in the prior week. The decrease in traders odds correlates with the decrease in stock prices. 

Of course, stocks could rally and odds could change. Both frequently do. Still, we remain sided with the traders betting the low odds. We don't think the Fed will raise the federal funds rate come next Thursday: The U.S. job numbers were weak for August, the U.S. stock market is in a funk, inflation remains muted, and global economic growth (most notably China) is waning.  Also, the U.S. dollar remains historically strong against most world currencies. An interest-rate hike would further strengthen the dollar.  (This is a mixed blessing: Imports are cheaper, but exports cost more.)

Mortgage rates seem to side with us. Rates have drifted lower since Friday's employment report. A quote below 3.9% on the 30-year fixed-rate loan is the norm in many markets.  The 15-year fixed-rate loan is regularly quoted below 3.1%. 

This doesn't mean we are home free. Market participants move interest rates independently of the Fed. Mortgage rates can rise even if the Fed does nothing onSept. 17. 

Yes, we see mortgage rates holding current lows, but that can change in a hurry. Though we don't think it will, “a hurry” could come as soon as next week. 

Information provided by Jessica Regan.

Search all Harrisburg PA homes for sale.

When you are buying or selling property in today's Harrisburg PA real estate market, it's important to have confidence in your real estate professional. Don’s commitment as your Harrisburg PA REALTOR® is to provide you with the specialized real estate service you deserve.

When you are an informed buyer or seller, you'll make the best decisions for the most important purchase or sale in your lifetime. That's why Don’s goal is to keep you informed on trends in Harrisburg PA real estate. With property values continuing to rise, real estate is a sound investment for now and for the future.

As a local area expert with knowledge of Harrisburg PA area communities, Don’s objective is to work diligently to assist you in meeting your real estate goals.

If you are considering buying or selling a home or would just like to have additional information about real estate in your area, please don't hesitate to call me at (717) 657-8700, complete my online form, or e-mail me at don@donroth.com.

Last Friday, the employment numbers for July were released. They weren't spectacular, but they were solid. Payrolls increased by 215,000 for the month, which kept the unemployment rate steady at 5.3%. Wage rates showed some life, up 0.2%. The increase lifts the average hourly wage to just below $25.

Since the job market began to recover in earnest in late 2013, we've been saying that as long as new payrolls come in at 200,000-or-better each month, the housing market would remain in good shape. That's been the case. Since early 2014, new monthly payrolls have regularly posted greater than 200,000.  Not surprisingly, home sales and new-home construction have improved with sustained job growth. Home priceshave also kept pace, which has been something of a surprise. We thought by this time, the rate of price appreciation would have slowed significantly.

As you might expect, we remain bullish on housing. Thanks to continued low mortgage rates and solid monthly job growth, more home buyers will enter the market. As things stand, we see no reason not to expect strong home sales and rising origination activity into at least early 2016.

Information provided by Jessica Regan.

Search all Harrisburg PA homes for sale.

When you are buying or selling property in today's Harrisburg PA real estate market, it's important to have confidence in your real estate professional. Don’s commitment as your Harrisburg PA REALTOR® is to provide you with the specialized real estate service you deserve.

When you are an informed buyer or seller, you'll make the best decisions for the most important purchase or sale in your lifetime. That's why Don’s goal is to keep you informed on trends in Harrisburg PA real estate. With property values continuing to rise, real estate is a sound investment for now and for the future.

As a local area expert with knowledge of Harrisburg PA area communities, Don’s objective is to work diligently to assist you in meeting your real estate goals.

If you are considering buying or selling a home or would just like to have additional information about real estate in your area, please don't hesitate to call me at (717) 657-8700, complete my online form, or e-mail me at don@donroth.com.

China Does It Again; Mortgage Rates Drift Lower

For a newsletter focused on the U.S mortgage and housing markets, we spend a good deal of time discussing foreign events. China, in particular, has been a hot topic. In July, China's major stock markets tanked, which sent investors scurrying for cover. Many sought refuge in U.S. government securities. The 10-year U.S. Treasury note was one of the haven ports.

Over the past couple days, the yield on the 10-year note has again plunged. China is again the reason. 

The People's Bank of China twice devalued its currency, the yuan, in as many days.  This has sent the dollar rising against the yuan, and many other currencies. China devalued its currency in an attempt to stimulate its sluggish economy. China is a huge export nation. When its currency is devalued, exports are cheaper to the country the exports are headed.  Chinese-manufactured goods become cheaper to U.S. and European consumers. 

For us, lower mortgage rates are a by-product of a depreciated yuan. We've seen rates trend lower on the 15-year and 30-year loans over the past couple days. We are now seeing the 30-year loan quoted in the high threes. Up until a couple weeks, it was regularly quoted in the low fours. 

This is the way the world works today: Financial markets are intertwined. Global events impact local markets, and do so more than many people realize. A couple months ago, Greece held center stage; now it is China, and China is much more important than Greece, economically speaking. China is the world's second-largest economy, trailing only the United States. What happens in China impacts everyone, everywhere. Only the United States is more impacting.   

China's currency devaluation impacts us directly because it crimps the Federal Reserve's plans to hike the federal funds rates (which is what people refer to when they talk about the Fed raising rates).  A rate hike would further strengthen the U.S. dollar, thus hurting many U.S. exporters. Therefore, it’s no surprise that markets have trimmed the odds of a September rate hike to zero.  A week ago, it was 50%; two weeks ago, it was 33%.  Now people are gunning for December for the first rate increase.

In short, mortgage rates have been given a reprieve. Whether refinance or purchase, now is the time to act. Sub-4% on the 30-year loan looks like a gift. We say that because the long-term impetus is still for rates to rise, so no one knows how long today's rates will last.  Always keep in mind that sentiment can change in a heartbeat, and it frequently does. 

Information provided by Jessica Regan.

Search all Harrisburg PA homes for sale.

When you are buying or selling property in today's Harrisburg PA real estate market, it's important to have confidence in your real estate professional. Don’s commitment as your Harrisburg PA REALTOR® is to provide you with the specialized real estate service you deserve.

When you are an informed buyer or seller, you'll make the best decisions for the most important purchase or sale in your lifetime. That's why Don’s goal is to keep you informed on trends in Harrisburg PA real estate. With property values continuing to rise, real estate is a sound investment for now and for the future.

As a local area expert with knowledge of Harrisburg PA area communities, Don’s objective is to work diligently to assist you in meeting your real estate goals.

If you are considering buying or selling a home or would just like to have additional information about real estate in your area, please don't hesitate to call me at (717) 657-8700, complete my online form, or e-mail me at don@donroth.com.

Goldman Sachs released an interesting investment note to its clients this week. The note was titled “What's Keeping the Kids at Their Parent's Home?” Goldman concludes the job situation is a key factor, with a few other factors tossed in: high student-debt loads, poor credit scores, and rising rent-to-income ratios. It all sounds negative, but it's not.

There are a high proportion of 18-to-34 year-olds living with their parents. The number hit an all-time high after the recession, and the number just began to drift lower last year. This younger demography represents a huge pool of new household formations. (After all, you have to leave eventually, if just to maintain sanity.)  Fortunately, and contrary to some opinion makers, this young demography still wants to own a home, and it wants to own a single-family home, according to Fannie Mae data.  This is good news for the long-term outlook on housing.  There's a lot of pent-up demand in the single-family-home market that will need to be satisfied.

For the time being, though, prices are keeping many first-time buyers on the sidelines. Demand is particularly strong for starter homes, which have been on a tear. CoreLogic reports low-end homes are now priced 5.5% above pre-bubble levels.  Many first-timers have been priced out of the market. 

For the past year, we've been cheerleading for slower home-price appreciation. Entry-level affordability is the reason why.

Information provided by Jessica Regan.

Search all Harrisburg PA homes for sale.

When you are buying or selling property in today's Harrisburg PA real estate market, it's important to have confidence in your real estate professional. Don’s commitment as your Harrisburg PA REALTOR® is to provide you with the specialized real estate service you deserve.

When you are an informed buyer or seller, you'll make the best decisions for the most important purchase or sale in your lifetime. That's why Don’s goal is to keep you informed on trends in Harrisburg PA real estate. With property values continuing to rise, real estate is a sound investment for now and for the future.

As a local area expert with knowledge of Harrisburg PA area communities, Don’s objective is to work diligently to assist you in meeting your real estate goals.

If you are considering buying or selling a home or would just like to have additional information about real estate in your area, please don't hesitate to call me at (717) 657-8700, complete my online form, or e-mail me at don@donroth.com.

Will They or Won't They? (We Again Ask)

We're tired of writing about the Federal Reserve. We suspect that you're tired of reading about the Fed. But the Fed matters – to both the housing and mortgage markets – so we have no choice but to press on. 

Recent events had pointed to the Fed standing back from raising the federal funds rate in September. Specifically, economic growth remains anemic.  Gross domestic product (GDP) for the second quarter came in weaker than expected, at 2.3%. Most economists were expecting growth to post closer to 3%. 

Weakness was particularly pronounced in nonresidential fixed investment, which fell 0.6%. Commentators frequently focus on consumer spending when commenting on economic growth. To be sure, spending is important, but so is investment, because investment lays the foundation for future consumption: You have to produce in order to consume in the long run.  Production, which investment funds, paves the way for consumption.

When the disappointing GDP figures were released last Thursday, the yield on the 10-year U.S. Treasury note drifter lower by 15 basis points. In turn, rates on most mortgages, particularly the 15- and 30-year loans, drifter lower. Depending on the market, sub-4% on the 30-year loan could be had. 

But over the past day or so, yields and rates have drifted higher. One of the Federal Reserve's presidents, Dennis Lockhart, opined publicly this week that the economy could handle an increase in the fed funds rate in September. (The fed funds rate is the rate banks lend to each other overnight. It's a short-term rate, but it tends to filter through to the long end of the curve.) 

So what do private-market participants think will happen?

As for private-market traders, those who bet on interest-rate movements, the futures market has priced in a 50% chance the Fed will raise the fed funds rate next month. Last week, futures were priced at a 33% chance. So who knows what next week will bring. 

We remain skeptical that anything happens in September: Economic growth is still weak, while the U.S. dollar is still strong. Against most currencies, the dollar has appreciated significantly. A rate increase will only further strengthen the dollar against other currencies. For many multinational corporations, this is an issue. A stronger dollar makes exports more expensive and can result in significant currency-exchange losses when money is repatriated from overseas. We could see some additional push-back against a rate increase. 

With that said, we wouldn't be surprised if a rate hike occurs. The Fed may have to move to raise rates simply to maintain credibility. (You can drag people along only so far before they revolt.)  The impetus, then, is for rates to rise. (Keep in mind, they can rise without or without the Fed's blessing.)  Therefore, we're likely looking at the floor on mortgage rates. The mortgage rates we see today could be the best rates we see for quite a while.

Information provided by Jessica Regan.

Search all Harrisburg PA homes for sale.

When you are buying or selling property in today's Harrisburg PA real estate market, it's important to have confidence in your real estate professional. Don’s commitment as your Harrisburg PA REALTOR® is to provide you with the specialized real estate service you deserve.

When you are an informed buyer or seller, you'll make the best decisions for the most important purchase or sale in your lifetime. That's why Don’s goal is to keep you informed on trends in Harrisburg PA real estate. With property values continuing to rise, real estate is a sound investment for now and for the future.

As a local area expert with knowledge of Harrisburg PA area communities, Don’s objective is to work diligently to assist you in meeting your real estate goals.

If you are considering buying or selling a home or would just like to have additional information about real estate in your area, please don't hesitate to call me at (717) 657-8700, complete my online form, or e-mail me at don@donroth.com.

Chinese stocks experienced a hard sell last week. A couple of that country's major market indices dropped over 10% over a couple of trading days. The sell-off in Chinese stocks lead to a buy-in of traditionally haven investments, like the 10-year U.S. Treasury note, which saw its yield drop by nearly 15 basis points. Of course, as the 10-year note goes, so go mortgage rates, which have eased over the past two weeks.

If China's stock market remains weak, odds favor the Federal Reserve sustaining from raising the federal funds rates in September. The next meeting of the Fed's Federal Open Market Committee (FOMC) occurs September 17, and many market participants anticipate the first rate increase since 2006. We are somewhat less anticipatory.

We still think a rate increase is in the more distant future. China is one reason; our own economic growth is another. Gross domestic product (GDP) was negative in the first quarter. What's more, growth for the second quarter is expected to be positive, but weak. In addition, the U.S. dollar remains strong against most major currencies. An interest-rate increase will further raise the perception of a strong dollar, thus pressuring it to appreciate even more.

With that said, we could be wrong on the Fed come September, but even if we are, that doesn't mean long-term lending rates will rise. On the other hand, they could rise even if the Fed continues to hold the fed funds rate at current levels. China, not the Fed, could be the key factor in interest rates over the next couple months.

Information provided by Jessica Regan.

Search all Harrisburg PA homes for sale.

When you are buying or selling property in today's Harrisburg PA real estate market, it's important to have confidence in your real estate professional. Don’s commitment as your Harrisburg PA REALTOR® is to provide you with the specialized real estate service you deserve.

When you are an informed buyer or seller, you'll make the best decisions for the most important purchase or sale in your lifetime. That's why Don’s goal is to keep you informed on trends in Harrisburg PA real estate. With property values continuing to rise, real estate is a sound investment for now and for the future.

As a local area expert with knowledge of Harrisburg PA area communities, Don’s objective is to work diligently to assist you in meeting your real estate goals.

If you are considering buying or selling a home or would just like to have additional information about real estate in your area, please don't hesitate to call me at (717) 657-8700, complete my online form, or e-mail me at don@donroth.com.