Fed Leaves Rates Alone, But Hikes Coming –The Federal Reserve voted recently to leave its benchmark interest rate unchanged, but it continues to leave the door open to future increases this year. The Fed’s benchmark rate will remain in the range of 1.25 percent to 1.5 percent, which is low by historical standards. Fed committee members said that by leaving the rate unchanged, they hope the low rates will help support broader job growth and stronger inflation. Lawrence Yun, chief economist of the National Association of REALTORS®, predicts the Fed will still do three short-term rate hikes later this year and that will have an impact on mortgage rates for home shoppers. “The series of rate hikes will nudge up mortgage rates, though not in one-to-one fashion,” Yun says.”
Crucial Turning Point in Homeownership Rate –According to the U.S. Census Bureau, the U.S. homeownership rate ticked up for the first time in 13 years, and millennials are behind the long-awaited boost. The homeownership rate among households headed by someone under the age of 35 increased to 36 percent in the fourth quarter, up from 34.7 percent a year prior. It was the largest increase of any age group during that period. Millennials are projected to be the largest homebuying generation since the baby boomers. They are entering the housing market after years on the sidelines and saddled with low wages, tight credit, and high student debt.
Housing Market Starts 2018 on Positive Note –Based on the National Association of REALTORS® reports, contract signings on home sales rose slightly in December, reaching their highest level since last March. NAR’s Pending Home Sales Index, a forward-looking indicator based on contract signings, moved 0.5 percent higher to a reading of 110.1 last month, 0.5 percent higher than a year ago. “Another month of modest increases in contract activity is evidence that the housing market has a small trace of momentum at the start of 2018,” says Lawrence Yun, NAR’s chief economist. “Jobs are plentiful, wages are finally climbing, and the prospect of higher mortgage rates are perhaps encouraging more aspiring buyers to begin their search.” But Yun cautions that these positive indicators won’t necessarily equate to a stronger sales pace in the long run: “Buyers throughout the country continue to be hamstrung by record-low supply levels that are pushing up prices especially at the lower end of the market.”
Buyers Don’t Grasp Mortgage Basics ––According to a new survey by Ally Home, many Americans begin looking for a home to buy without understanding the fundamentals of applying for a mortgage or what it takes to qualify for one. Ninety-two percent of more than 2,000 U.S. adults who responded to the survey admit they don’t know how much mortgage they can afford. Further, most say they’re confused about “rates” versus “points,” and only a third have a general idea of what their average closing costs might be.