30 second update:  Fed Cuts Interest Rates: How It Affects You!

On October 30th, the Federal Open Market Committee lowered its benchmark funds rate by 25 basis points to a range of 1.5% - 1.75%, which is down from 1.75% - 2.0%.  This was the third cut this year by the Fed.  Fed Chairman Jerome Powell stated, “The committee will continue to monitor the implications of incoming information for the economic outlook as it assesses the appropriate path of the target range for the federal funds rate.”

Let’s take a closer look at the Federal Funds Rate.  This rate is the rate banks charge each other for overnight lending and is tied to most forms of revolving consumer debt such as credit cards, home equity lines of credit, car loans and more.   A common misconception is that this rate is directly tied to mortgage rates.  When the Fed loosens its policy and cuts rates, this is to spur or ignite economic activity and can also stir up some inflation. Mortgage rates increase when there is a spike in inflation.  This is why we must keep an eye on the Fed rate, because sometimes it can actually push longer term interest rates higher. 

Following October 30th's rate cut, however, the Fed made several comments explaining that there are currently lower levels of inflation.  Because of these comments, the bond market improved in price which has helped keep mortgage rates low.  On top of all of this, the Personal Consumption and Expenditures (PCE) report came out, which reports on national levels of inflation, pointing to low levels of inflation as well. 

When inflation is flat or declining, mortgage rates tend to follow suit.  This is great news for those out shopping for a home or looking to refinance. 

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Consumer Demand Helps Create Equity

According to the Federal Housing Finance Agency (FHFA), single family homes purchased with conforming mortgages across the nation increased in price by 0.2% for the month of August.  They increased in price by 4.6% from August 2018 to August 2019.   Homes are still appreciating, which should continue as long as demand stays strong and interest rates remain low.

The Existing Home Sales report, which measures the sales of “existing” homes in the US, was released showing that sales dipped slightly for the month of September.  Even though sales slipped from their highs, they are still up a whopping 3.9% year over year.  Continued strong levels of demand and aggressive interest rates are helping consumers enter the market. 

Over the last twelve months, the MBA’s mortgage application data is showing that mortgage applications are much higher than where they were last year.  Purchase applications are up 5.8% and applications for refinancing are up 126%.

We are currently in a very healthy mortgage and housing environment.  This is the time to speak with a trusted resource and discuss refinancing and purchasing options.

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30-Second Update:  Homebuilder Confidence Surges to Highest Level in Two Years


According to the National Association of Home Builders (NAHB) Housing Market Index, builder confidence on single family properties surged three points in October to 71.  This jump marks the highest level since February 2018, and up from 68 in October of last year.  Any report resulting in an index of 50 or greater is considered as positive.

Low mortgage rates continue to be the driving force behind the strong housing market.  NAHB Chairman Greg Ugalde echoed that statement, “The housing rebound that began in the spring continues, supported by low mortgage rates, solid job growth, and a reduction in new home inventory.”  Within the index’s three components, current sales conditions rose three points to 78, sales expectations over the next six months jumped six points to 76, and buyer traffic rose five points to 54.

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Housing News Continues to Show Health

The Case-Shiller Home Price Index, which is for the month of July, showed that homes across the nation appreciated over the last twelve months by 3.2%.  This index also pulls information from twenty major cities across the country and showed an annual appreciation of 2.0%.

CoreLogic has also released their monthly appreciation report, which shows that homes across the nation have appreciated by 3.6% from August of last year to August of this year.  They are forecasting that homes will appreciate by a whopping 5.8% from August 2019 to August 2020!

It is apparent that homes are continuing to appreciate and continuing to add equity for those purchasers who were able to get into the housing market. This continued appreciation is due to the low interest rate environment, coupled with high levels of buyer demand.  These reports both point to the fact that this is still a great time to purchase a home.


30-Second Update:  Freddie Mac Forecasts Strong Fall Housing Market

Due to strong August and September housing numbers, Freddie Mac has forecasted that the housing market will maintain its strength well in into fall and early 2020.  Lower mortgage rates continue to be the catalyst in driving this strong housing market.  As anticipated, the Federal Reserve cut rates in September by a quarter point, and forecasts show for another interest rate cut before the end of the year.  Low treasury yields, which help keep mortgage rates subdued, are expected to decrease.  The 10-year yield is expected to average 1.8% in 2020, down from an annual average of 2.1% in 2019.

In addition, housing starts, which represent newly constructed homes, beat consensus estimates in August, increasing 1.36 million units at an annual rate, the highest level since 2007.  This is welcome news because demand and supply for housing are becoming more in-line.  Freddie Mac stated, “Given the combination of increased housing demand and a projected upward tick in housing supply, home sales are expected to rise to 5.98 million in 2019, before reaching 6.03 million in 2020.”

Lastly, Freddie Mac has also indicated that strong data over the last few months indicates home prices will continue to beat estimates in the coming months.  Their estimates indicate that home prices will appreciate 3.4% in 2019, before tapering slightly in 2020 to 2.6%. 

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