In mid-November, Janet Yellen, President Obama's choice to replace Federal Reserve Chief Ben Bernanke, indicated that she would likely continue with the Fed's economic stimulus efforts, known as Quantitative Easing.
At her confirmation hearing in front of the U.S. Senate Banking Committee, Yellen signaled that she intended to carry on with, rather than taper, current efforts until she saw a significant improvement to the economy. Yellen indicated that, at 7.3 percent, unemployment is "still too high, reflecting a labor market and economy performing far short of their potential."
In addition to the auto industry, she optimistically said that housing "seems to have turned a corner." Her remarks were especially important, and were her first public views on the monetary stimulus debate since her last public speech in mid-April. Some Republicans have remained critical about the Fed's repeated Bond-buying efforts since an easy money policy can lead to risks in bubbles.
Lenders Anticipate Dodd-Frank Regulations
Home loan credit has been tighter by historical standards, leaving only borrowers with the highest credit ratings and healthy down payments attaining the lowest rates.
Loan volume has fallen because rates have been rising. Loan originations were down nearly 20 percent in the third quarter from the same period in 2012, according to Mortgage Daily. Origination volume was also down 20 percent, or $441 billion, from the prior quarter. Though equities rose on the back of Yellen's comments, home loan rates, which take longer to react, remained largely unaffected immediately afterwards.
Refinances are also down more than 50 percent from a year ago because of higher rates, according to the Mortgage Bankers Association; whether this leads to banks easing their guidelines remains to be seen. Many await January 10, or the official effective date of the Dodd-Frank Act on mortgage qualification guidelines, which will require lenders to make a more reasonable good faith determination of a consumer's ability to repay any home loan. Lenders remain eager to understand how these rules will be implemented and enforced.
Homebuilder Sentiment Unchanged
November's homebuilder sentiment index, courtesy of the National Association of Home Builders, clocked in at 54. Despite retreating from a high of 58 in August, the reading was still well above the 45 level that was logged this time last year. Last month's reading was little changed from October and showed that for the sixth consecutive month, more builders view market conditions as good rather than poor.
Despite rate increases, home loan rates remain attractive compared to historical rates. If you have any questions about your personal situation or would like to inquire about housing and home loans, please don't hesitate to contact me. Gary Umholtz RPM Mortgage Sonoma (707) 343-9510.