By Mickey Lynam (NMLS 974623), IBERIABANK Mortgage, Member of CCAR's REALTOR®/Lender Committee
Today's economy is anything but stable. One day the stock market is up, the next day it falls significantly. Why? Who knows. That's why I am in the mortgage business!
However, one does not need to know the "why" to know that economic news has a direct effect on the realty and mortgage industries. This is why many home buyers and real estate professionals are keeping a close eye on the health of the U.S. economy.
So, is the economic news report good news? Bad news? Or be-on-the-lookout news? Let's take a look at all three.
Good News: Mortgage rates are at or near two-year lows
Many feel the Federal Reserve will lower bank loan rates in July; this does not necessarily coincide with lower mortgage rates but all signs and comments by those "in the know" seem to point to lower rather than higher mortgage rates overall through 2019. Currently, the U.S. economy is strong, consumer confidence is high, while unemployment is low; these factors coupled with low mortgage rates are all positive signs for a strong home purchase market (refinances are also on the rise).
Bad News: Mortgage rates are at or near two-year lows
A recent study found that 69% of U.S.-based company CFO's (the really smart people) expect a recession by the end of 2020. This also plays into the hand of lower interest rates, but also leads job fears and potentially lower home sales.
Good News: Home prices have moderated
Home prices have moderated and are going up in value at a much slower pace than the past few years; with wages increasing this makes homes more affordable. There is more inventory in the higher price segments of the market making the market more balanced.
Bad News: Home price increases have moderated
Home prices have moderated overall, but the lower priced homes ($400,000 and under) are still seeing steady increases as demand outweighs supply. This ongoing issue creates problems for FTHB's.
Good News: A favorable lending market
Since the financial meltdown of 2008 and the subsequent recovery, the underwriting guidelines in the conventional mortgage market have consistently eased; creating a more favorable lending market.
Bad News: Underwriting standards are tightening
Recently, we have seen that the FHA is paying closer attention to borrower credit scores and debt ratios and have tightened their underwriting standards. FHA loans with 3.5% down payment, lower credit score hurdles, and higher allowed debt ratios are a key product for lenders lending to FTHB's and those applicants with lesser credit quality than conventional loans.
Be-on-the-lookout: Geopolitical risks continue to influence the mortgage rate market
Trade issues with China and rising tensions in the Middle East affect the U.S. and world economy as the news changes almost daily. As investors move to safety, the demand for U.S. Treasury bonds increases pushing rates lower. When trade tensions seem to ease or resolve, "hope springs eternal" for the worldwide economy, as investors get more comfortable with other investments (stocks) and mortgage rates trend higher.
Summary: The overall economy in the United States and especially the North Texas region is very good
The overall economy in the U.S. and especially the North Texas region is very good and the housing market remains solid. We may not be in the record setting era of a few years back, but overall, it is healthy. However, as the news changes back-and-forth, it is as important as ever to form strong partnerships between REALTORS® and lenders so we can serve our clients with the expertise they deserve.
CCAR's REALTOR®/Lender Committee strives to strengthen those partnerships, allowing us all to serve our clients more effectively. To connect with the REALTOR®/Lender Committee email realtorlender@ccar.net.