February 11th, 2019 11:48 AM by Richard Sardella MLO.100007700/NMLS 233568
'Aging in Place' helps to fuel housing shortage
As the baby boomer generation has aged, it has also stayed put. And for all the innovations builders and product manufacturers have come up with to help seniors “age in place.” they may have also made it difficult for would-be homebuyers, causing a lack of housing inventory.
According to a new report from Freddie Mac, 2019 will see a significant shortage of available homes here in the U.S., failing to meet needs by 2.5 million units. It doesn’t help that at the same time millennials are buying fewer homes at this point in their lives compared with previous generations at similar periods.
As seniors continue to prefer to stay where they are as the optimal way to live out their remaining years, housing inventory has tightened nationally. According to the report, for people between the ages of 67 and 87, homeownership rates dropped by 11.6 percent for previous generations but only 3.6 percent for the current (leading edge) generation of seniors, identified as having been born between 1931 and 1941.
New advances in information technology may be the culprit, as well as accessibility to better healthcare and education, with the report crediting those advancements as “boosting and extending” housing demand among seniors. The result? The current senior generation has become much slower in transitioning out of homeownership than prior generations.
The U.S. Census Bureau says lost units will need to be replenished at a rate of 350,000 homes per year in order to bring the market to a “well-functioning” status. “Vacant homes increase liquidity in the market, enable prospective buyers to find a match, and give prospective sellers confidence to list their home for sale,” the Freddie Mac report states. “Vacancy rates are an important indicator of housing market vitality. Too high a vacancy rate reflects a moribund market, while too low of a rate reduces the efficiency of the marketplace.”
While this does not bode well for home shoppers, it will boost spending on renovations, according to Chief Economist Sam Kater. “We believe the additional demand for homeownership from seniors aging in place will increase the relative price of owning versus renting, making renting more attractive to younger generations.” If that is true, however, those in a position to purchase the limited number of homes available may well see their property values increase more quickly than anticipated.
Source: Realtor, Reversemortgagedaily, FreddieMacTBWS
How Rates Move:
Conventional overnment (FHA and VA) lenders set their rates based on the pricing of Mortgageand G-Backed Securities (MBS) which are traded in real time, all day in the bond market. This means rates or loan fees (mortgage pricing) moves throughout the day, being affected by a variety of economic or political events. When MBS pricing goes up, mortgage rates or pricing generally goes down. When they fall, mortgage pricing goes up. Tracking these securities real-time is critical. For more information about the rate market, contact me directly. I’m among few mortgage professionals who have access to live trading screens during market hours.
Rates Currently Trending: Neutral
Mortgage rates are trending slightly sideways so far today. Last week the MBS market improved by +13bps. This may've been enough to slightly improve mortgage rates or fees. Rates experienced low volatility throughout most of the week.
This Week's Rate Forecast: Neutral
Three Things: These are the three areas that have the greatest ability to impact mortgage rates this week. 1) China Trade, 2) Government Shutdown and 3) Inflation.
1) China Trade: This week, trade talks accelerate with China. U.S. and Chinese officials will continue trade talks this week with a focus on intellectual property which has been the major hurdle so far. Meetings will be held each day this week with higher level discussions happening on Thursday and Friday. There will continue to be a swirl of news reports on the progress on these talks. The more positive these talks appear to be, the worse it will be for your rates as a new deal will remove a considerable global economic uncertainty as well as kick start trade and growth.
2) Government Shutdown 2.0: Congressional lawmakers continue to struggle to find common ground to avoid another government shutdown. They have until Friday to get a deal done, but it appears that the markets are pricing in that we won't get a deal done by then and it could go on a little longer.
3) Inflation: We get both PPI and CPI this week. The focus will be on Wednesday Consumer Price Index YOY number which came in at 2.2% last time and is expected to remain above 2.0% with a 2.1% reading. Any reading above 2.3% will be negative for rates, any reading in the 1.9% range or below will be very good for rates. We also get some important economic readings with retail sales being the second most significant release of the week.
Fed: We will hear from a few members of the Federal Reserve this week.
02/12 Esther George, Loretta Mester
02/13 Raphael Bostic, Atlanta Fed Business Inflation Expectations
This Week's Potential Volatility: Average
Mortgage rates continue to trade at lower levels due to all of the uncertainty in the markets. Look for the same this week. However, if we avoid a shutdown or make significant progress on China trade talks, rates could push higher.
If you are looking for the risks and benefits of locking your interest rate in today or floating your loan rate, contact your mortgage professional to discuss it with them.
Richard Sardella has been actively managing and providing services in the mortgage industry for over 27 years. Richard serves on the board of directors as President of Colorado Home Mortgages Inc.
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