2018 predictions: Rates will rise, but loans will drop as home sales decline
By Jeff Lazerson
Rate news summary
From Freddie Mac’s weekly survey: The 30-year fixed-rate averaged 3.94 percent, 1 basis point higher than last week’s 3.93 percent. The 15-year fixed averaged 3.38 percent, 2 basis points higher than last week’s 3.36 percent.
The Mortgage Bankers Association reported a 4.9 percent decrease in loan application volume from the previous week.
Bottom line: Assuming a borrower gets the average 30-year fixed rate on a conforming $453,100 loan, last year’s rate of 4.30 percent and payment of $2,242 was $94 more than this week’s payment of $2,148.
What I see: Locally, well-qualified borrowers can get the following fixed-rate mortgages at zero-point cost: A 15-year at 3.25 percent, a 30-year at 3.875 percent, a 15-year agency high-balance ($453,101 to $679,650) at 3.625 percent, and a 30-year agency high-balance at 4.125 percent.
What I think: Here are my 2018 predictions. And, I’m hoping you’ll be so excited you won’t read further down about my 2017 lump-of-coal results.
- The 30-year fixed rate will increase, averaging 4.5 percent in 2018 because of a tax-cut heated economy.
- U.S. residential loan volume will decrease more than 12 percent to $1.5 trillion.
- First-time buyers will decrease 10 percent because of the doubling of the standard tax deduction, reducing the incentive to buy a home.
- Cash-out refinance volume will explode, increasing 15 percent. Homeowners will roll their no longer deductible home equity line of credit into a single first mortgage.
- U.S. reverse mortgage volume will increase 15 percent because fewer seniors have rainy day assets beyond home equity.
- U.S. housing starts will increase 15 percent.
- The Federal Reserve will raise short-term rates just once in 2018.
- The Consumer Financial Protection Bureau will loosen up on its ability to repay rule, allowing more borrowers to qualify for mortgages.
- Orange County home sales will drop 5 percent to avoid the $10,000 state and local tax cap?
- Orange County’s median home price will increase 5 percent. The economy is going to pot. That will increase price pressures on fewer homes going up for sale.
2017 Predictions and Results
- The 30-year fixed would average 4.375 percent. Wrong. It averaged 3.99 percent.
- Total loan volume would be $1.2 trillion. Wrong. It totals of more than $1.7 trillion.
- President Trump would create tax credits and lower tax rates. Correct, though it’s more on the tax rate side.
- Orange County home sales would decrease 12 percent. Wrong. Sales are up 2 percent this year so far, CoreLogic reports.
- Orange County’s median home price would be flat. Wrong (again). The median is up 6.6 percent this year so far.
- Reverse mortgage volume would increase 10 to 15 percent. Correct! Reverse mortgage volume increased 13.1 percent.
- California would protect consumers by banning mortgage companies from participating in payola schemes with builders, realty firms and agents. Wrong.
- Fannie and Freddie will not privatize. Yes!
- Mortgage interest deduction is not going away or getting reduced. Wrong. New mortgage interest deductions will be capped at $750,000.
- Fed Chair Janet Yellen will raise rates twice. She raised them three times. Wrong. Wrong. Wrong.
I made three out of 10 2017 predictions. Shameful.
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