|While the millennial home-ownership rate still significantly lags that of previous generations at a similar age, a new study by Aparment List showed that almost 90% would prefer to own than rent.
However, just 4.4% of them plan do so in the next year. But just a little further out, the numbers get quite encouraging for those wishing to do some “Adulting”. 15% more plan purchase in 1-2 years and then add another 15% on top of that for plans to purchase 2 to 3 years from now. That puts those planning to purchase a home in 1 to 3 years at 34.4% which is a large number of future homeowners hitting the market. Now, add in another 25% for those that say that they plan to purchase in 3-5 years and now the total in the 1 to 5 year time horizon jumps to 59.4%. But wait there’s more….30% said that they would purchase a home in 5 years or more from now.
Among those millennial renters who plan to eventually purchase a home, 71.5 percent cite affordability as a reason that they have yet to do so. Specifically, we find that saving a down payment is the primary financial obstacle keeping millennial renters from purchasing homes, with 61.7 percent of respondents who plan to buy saying that they can’t afford a down payment (maybe they are simply unaware of many low to no down-payment mortgages). Meanwhile, just 29.1 percent say that they can’t afford a monthly mortgage payment.
What Happened to Rates Last Week?
|Mortgage backed securities (FNMA 4.50 MBS) gained +40 basis points (BPS) from last Friday’s close which caused fixed mortgage rates to move slightly lower compared to the previous week.
Overview: We had very strong manufacturing data but tame inflation. The bond market made their gains on the back of the Federal Reserve as the top 3 Fed members (Powell, Clarida and Williams) made a point of telling the markets that the Fed’s viewpoint is closer to their neutral rate than previously thought. That caused a shift in trader sentiment to expect fewer rate hikes next year.
Jobs, Jobs, Jobs: The latest Bureau of Labor and Statistics released their big jobs report on Friday. Lets look at the Tale of the Tape:
ISM : The ISM Non Manufacturing report was red-hot with a 60.7 reading. The service sector represents more than 2/3 of our economic output. The national ISM Manufacturing Index for November jumped to 59.3 which is the second best reading since 2004. Prices paid dropped though from a 71.6 pace in October down to 60.7 in this release.
The Talking Fed: St. Louis Fed President James Bullard (non voting member in December, but will be a voting member in 2019) and noted “dove” said that the Fed has already “normalized policy” a lot. and that “inflation is low and looks to be stable”. He had previously called for the Fed to “pause” raising rates and as a new voter in 2019, the markets are taking his commentary to mean that there will be fewer rate hikes in 2019 than previously expected. NY Fed President John Williams (number 3 at the Fed) said “Given this outlook I describe of strong growth, strong labor market and inflation near our goal – and taking into account all the various risks around the outlook – I do continue to expect that further gradual increases in interest rates will best foster a sustained economic expansion and a sustained achievement of our dual mandate.”
What to Watch Out For This Week:
It is virtually impossible for you to keep track of what is going on with the economy and other events that can impact the housing and mortgage markets. Just leave it to me, I monitor the live trading of Mortgage Backed Securities which are the only thing government and conventional mortgage rates are based upon.