Loan Diets and Drought – from the Fed’s recent Beige Book we learned that many banks are going on a “Loan Diet” meaning they are extending smaller credit lines and are being more selective about who they lend to. In the residential world guidelines and standards have not changed for conventional and government loans but commercial banks can be more heavy-handed in their policy. Another interesting fact from the Beige Book is that drought conditions in the Upper Midwest has caused near-record-low water levels on the Mississippi River which limits the tonnage barges can carry, ultimately forcing shipping costs to increase. Some farmers had to leave crop in their field due to prices.
Mortgage Rates improved slightly this week as the price of Mortgaged Backed Securities bounced back. Rates are up approximately 3/4% from this time last year.
Inflation – the Fed’s favorite measure of inflation (PCE) showed that inflation rose 0.4% in September. Year over year this index decreased from 3.5% to 3.4%. Personal income rose 0.3% last month while spending rose 0.7%. Savings rate fell to 3.4% compared with a 2.4% clip recorded at the depths of the Great Recession.
Loan Performance – the share of mortgages seriously delinquent (90+ days late) fell to the lowest level in nearly 25 years at 0.9%.
Rents – Realtor.com Rental Index reported median asking rents fell 0.3% in September and are down 0.7% year over year. An influx of new multifamily units on the marked drove prices down – multifamily completions are up 15% year over year.
GDP – Q3 GDP came in at a 4.9% annualized pace, higher than estimates of 4.3%. This high reading was due to an increase in consumer spending, which isn’t necessarily sustainable. Overall delinquencies continue to remain very low and loans in foreclosure remain near record lows at 0.3%. Remember that approximately 34% of homes are owned free and clear and this report applies to the portion of homes that are mortgaged.
Mortgage Applications to purchase homes fell 2% and are down 22% year over year. Refinances rose 2% and are down only 8% year over year making up 1/3rd of all transactions.