Low rates pushing refi’s up | Stocks hit new highs | International buyers pulling back | Pokémon as marketing tool
> Post-Brexit rates create ideal time for refinancing
Due in part to the ongoing investor uncertainty blamed on Britain’s exit from the EU, interest rates are near 3-year lows. Now is the perfect time to refinance a home loan. Since no one knows how long rates will stay this low, prudent borrowers are getting locked in while they can.
With so many homeowners looking to take advantage of this opportunity, some mortgage companies can get overwhelmed and their processing times suffer. But at busy times like these, Opes Advisors shines. We’re more committed than ever to taking care of our clients and providing fast closes. As refinances ramp up, our experienced operation and production teams are working diligently to hold the line on our closing dates, and we keep clients updated throughout the process.
> Stocks rally to record highs banking on positive economic data
Bullish investors have rallied in July, pushing the US stock market to new highs. Factors include higher than expected consumer spending and a strong jobs report for June, along with data showing a strengthening Chinese economy. Now on record as the second-longest bull market in history at more than seven years, the S&P is up 216% since October 2007.
While the Federal Reserve has been slow to raise interest rates due to concerns over global economic instability, analysts say the economy’s current stability means that a Fed rate hike may be back on the table for the end of this year.
> Foreigners easing back on US real estate purchases
The NAR reported this month that foreign buyers spent 1.25% less on property in the US during a 12-month period ending in March 2016. While that’s a relatively small decrease, some analysts think it may be indicative of a trend, due mainly to the strength of the dollar coupled with increasing home prices. Jonathon Smoke, chief economist at realtor.com, says, “Now with Brexit, the dollar has strengthened even more, so we’re likely to see a further decline in foreign buyers this year, especially from the United Kingdom.” Smoke suggests that this trend may be responsible for some gains in inventory in several markets, including San Francisco. On the other hand, some speculators believe that Brexit will cause more buyers to move to America.
A few interesting statistics from the report of the one-year period ending March 2016:
- $28 billion Amount that Chinese buyers spent on US residences
- 24% Percentage above the overall US median of $223,058 foreign buyers spent on an existing residence
- 59% Percentage of foreign buyers who reside in the US
> Should you use Pokémon Go as a real estate tool?
They’re seemingly everywhere— online game players lurking in your neighborhood, smart phone extended in front of them, searching for Pokémon wherever they may be—including your open house. According to an article at Inman.com, some agents are already using geographic reference points from the game in their listing descriptions, in hopes of attracting more millennials, who are flocking to the game in droves. It’s anyone’s guess how long the Pokémon Go fad will last, but its epidemic popularity may be a harbinger of similar social media applications to come.
Our Advisors know that the Federal Reserve's rate-setting actions don't always affect mortgage rates the way one would expect. For instance, In December 2015, the Fed raised the federal funds rate. The logical assumption would be that mortgage rates would increase as well. But no. They did change briefly, but not by much and then they continued to steadily fall.
On June 23 the United Kingdom voted to leave the European Union. As it turns out, today's mortgage rates are about a quarter of a percentage point below their level in mid-December, when the Fed hiked the federal funds rate. That's not the only time when the Fed acted and mortgage rates moved in the opposite direction. In early 2008 the Fed cut the federal funds rate by three-quarters of a percentage point, to 3.5%. Then, a week later, the Fed aggressively cut the federal funds rate another half of a percentage point.
Mortgage rates sprang upward by more than a percentage point over the next 6 months. Having said that, Opes and our clients are well aware of the state of the mortgage world at that time. Banks were dropping like flies. As a result, the economy began to run into a liquidity crisis. Although it was a traumatizing time in the economic world, the rise in mortgage rates had little to do with monetary policy. And so we advise our clients to take it with a grain of salt when “experts” lecture and warn about the rate hikes that the Federal Reserve is expected to deliver this year.
Mortgage rates just might follow in the same direction, or they might not. It depends on what else is going on in the economy, in the presidential campaign, and in developments abroad – like Brexit. Remember, our financial universe is quite the intricate and dependent structure. But for now Opes Advisors is happy providing our clients are enjoying the low rates.
Delivering Peace of Mind
Susan McHan, CEO of Opes Advisors, shares how we deliver peace of mind and financial stability - as well as mortgages - to clients.
While we rarely toot our own horn, the first six months of the year have been a resounding success for our colleagues and clients. Thanks to our outstanding team, you get the best of both worlds: a Top 25 Lender that’s nimble enough to provide exceptional personal service and a fast close.
> Fast close:
One of the primary advantages of choosing Opes Advisors is that we provide local underwriting and decision-making, which means we close loans more quickly and decisively.
> We shop many sources:
We have dozens of funding sources to meet your clients’ varied needs, including more than 400 loan products and over 130 Jumbo options up to $15 million.
> Our numbers:
- Funded over $3 billion in loans in 2015
- Top 25 Mortgage Lender in the entire nation, according to Scotsman Guide
- 34 retail branches in California, Oregon and Washington.
Opes Advisors is nimble enough to provide the exceptional personal service that your customers want, yet large enough to provide the security and stability your customers need.
The vote by the United Kingdom to exit the European Union reminded Opes’ employees and clients that, regardless of what happens in the United States, our rates continue to be influenced by overseas activities. Still, what happens here in this country does influence mortgage rates.
Leading up to the Federal Reserve Open Market Committee’s meeting last month practically no one thought it would raise short-term rates. Janet Yellen confirmed that idea, pretty much saying that any fed funds interest rate hike will be put on hold until at least the July 27 meeting, but there would need to be a strong economic and labor showing for that to happen.
Recent economic data in the U.S. is decent. The 1Q real GDP growth has been revised from the initial estimate of 0.5% annualized, to 0.8%. Consumer spending in April was strong, gaining 0.6% (after accounting for higher prices).
But as our Advisors know, what has caused the interest rate hike to be put on hold was the May employment report, and then the Brexit vote. Only 38,000 net new payroll jobs were added, although the numbers rebounded in June as shown by last Friday’s figures. And productivity growth has been very weak, both the May ISM Manufacturing Index and the May ISM Non-Manufacturing Index showed employment sub-indexes below 50, indicating a contraction in employment for the month.
Through all of this we are reminded that we must be careful what we wish for. Low rates are typically an indication of a slowdown somewhere in the world. And if this spreads to our economy, the last thing our financial sector needs is another slowdown.
No one has a crystal ball, but given the turmoil caused by European events the low interest rate environment will continue into the foreseeable future – and that is good for Opes Advisor’s borrowers!