The Fed and Interest Rates

Last week the Federal Reserve (the Fed) had met and decided to leave their Federal Funds Rate unchanged at 0.0% – 0.25%.  They also had mentioned that they expect the rate to stay at this level through 2022.  The Fed Funds Rate, in a nut shell, is the rate banks use to lend money to one another.  The lower the rate, the cheaper it is to borrow and the more stimulating for the economy, as money is “cheaper”. 

Even though lower Fed rates point to higher inflation, the Fed surprisingly said last week that they predict no inflation for 2020, around 1.5% inflation levels for 2021 and under 2% inflation for 2022.  Lower levels of inflation point to lower longer term interest rates. If they are predicting lower levels of inflation, that could be a good indicator for lower rates going forward.  On top of low levels of forecasted inflation, the Fed has also been purchasing over $20B a week in mortgage backed securities.  This is also very much helping interest rates stay low and aids home buyers’ affordably and homeowners’ refinance potential. 

Call your Advisors Mortgage Loan Officer today to discuss the current market in more detail and to learn what you qualify for.



Mortgage Applications Continue to Rise

According to the Mortgage Bankers Association (MBA), mortgage applications to purchase a home increased 9% from the last week, which represents a staggering 54% increase since early April.  This increase represents the sixth consecutive week of gains, and the highest levels since mid-March.   As states and businesses begin to re-open, buyers are resuming their home search, while looking to capitalize on the current ultra-low interest rate environment. 

In addition to the strong purchase demand numbers, new home sales numbers were extremely surprising to analysts.  According to the US Census, new home sales were expected to fall 22% in April, but instead rose nearly 1% for the month.

Both reports indicate that the demand for housing continues to grow week by week and as businesses continue to open, the positive outlook continues to grow.

Call your Advisors Mortgage Loan Officer today to discuss the current market in more detail and to learn what you qualify for.


Housing Market Update

New Home Sales were up 0.6% for the month of April.  This report measures signed contracts on new homes.  Year-over-year, sales were down 6.2%.  The median home price was released at $309,900, which is down from $339,000 from the prior report.  Median home price does not show that home prices were necessarily lower, but that homes for sale during this time might have taken lower price offerings. There were 325,000 new homes for sale, which was slightly lower than March’s number of 333,000 and is showing a further tightening of inventory.

The Case-Shiller Home Price Index reported a rating of 4.4% for the month of March. This report tracks the changes in the value of residential real estate across the US, and it increased by 0.2% since last release from 4.2%

The Federal Housing Finance Agency (FHFA) released their House Price Index for March, and it showed that home prices increased by 0.1%.  Compared to last year, home prices have increased by 5.9%!   This report measures home price appreciation on single-family homes with conforming loan amounts.

Overall, home pricing across the nation is still holding strong.  There might be some homes selling at a discount because of timing and the availability to find the right buyer, but as we see the economy slowly reopen, the housing market will continue to push forward as demand for homes is still out weighing supply.

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Housing Demand Heating Up

Obviously, COVID-19 has had an impact on the housing market and has created new challenges for potential home buyers to effectively locate and purchase their dream home.  It appears, however, that we have turned the corner and the spring market is finally heading in the right direction. 

According to the Mortgage Bankers Association’s seasonally-adjusted index, mortgage applications to purchase a home increased 6% week to week, which represents five consecutive weeks of improvement.  As a whole, purchase volume is just 1.5% lower than last year at this time, which is amazing considering the challenges presented by COVID-19.  To put it in perspective, just six weeks ago, purchase volume was down 35% from the same time last year. 

Combining increased purchase volume, along with record-low mortgage rates, it’s no surprise that buyers are ready and willing to come back to the housing market.  As this demand continues to build, it is fully expected that more homes will begin to hit the market in the coming weeks!


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Demand for Homes

CoreLogic released their Home Price Index (HPI) showing that homes increased in price by 4.5% from March of 2019 to March of 2020.  It also showed that prices increased by 1.3% from February to March of this year.  The HPI has increased on a year over year basis every month since February 2012!  The housing market was surely very strong pre-coronavirus, but even during this crisis, homes are still selling.  Forecasts are showing that there might be a slight dip in home appreciation, but home values will hang in there. Some experts are even saying that they might end the year up.  CoreLogic is forecasting a 0.5% year over year gain. 

When speaking of home appreciation, it is also great to focus in what areas might be getting the most attention for new home buyers in this new COVID-19 environment.  The Harris Poll showed that 39% of respondents who live in urban areas have considered moving to a less populated area.  They are saying that homes in the suburbs or more rural areas might see additional demand from new buyers.  Today, more than ever, the American worker has become more used to, and more accepting of remote work.  This means that homes outside of densely populated areas might be more desirable or sought out by those who embrace the remote working experience.

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Source: CoreLogic

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