Financial Friday

April 6, 2018

How the Federal Funds Rate Impacts Mortgage Rates

On March 28, the Fed raised the federal funds rate from 1.5% to 1.75% which is the highest it has been since 2008. While mortgage rates don’t move in lockstep with the short-term rates that the Fed controls, the federal funds rate does inspire the broad trend in longer-dated rates such as for mortgage and 10-year Treasury bonds.

If current trends continue and the federal funds rate reaches 2.1% at the end of the year, then mortgage rates are expected to fall somewhere between 4.7% and 5.9%. Higher home prices have so far had more of an impact than the higher mortgage rates. Buyers purchasing this year versus last year can expect to pay $168 more per month, with only 36% of that increase being driven by higher mortgage rates so far.

Certainty Home Loans offers numerous financing options to make homeownership possible for first-time homebuyers. I would be happy to pre-qualify your clients, so they have a realistic house search budget.

Spring Buyers Want This Type of House

The typical spring homebuyer this year is looking for a three-bedroom, two-bathroom house with a garage and updated kitchen, according to a new® survey.

  • 44% want a three-bedroom home and 93% say they want a home with at least two bathrooms.
  • Most important features: 27% want a garage, 24% want an updated kitchen and 20% want an open floor plan.
  • Architecture preferences: Millennials desire contemporary and colonial homes, while older buyers prefer ranches.

If you have found a home that meets your buyer’s architectural preference in their preferred location, let them know that a Certainty Home Loans renovation loan can get them their desired features.

Homebuyers Strategies For A Competitive Spring Market

The spring homebuyer season is starting with a large portion of holdover buyers, with 40% searching for a home for more than seven months, 34% have been searching for four to six months and 26% have been looking for three months or less.

In a recent survey, active buyers revealed the strategies they are using to stay ahead:

  • 42% are checking listing websites every day
  • 40% are planning to put 20% cash down
  • 33% are setting price alerts
  • 31% would put a larger earnest money deposit down
  • 26% are willing to offer above asking price
  • 24% would write a letter to the sellers
  • 20% were willing to waive home inspection and financing contingencies
  • 6% will forego any tactic to cope with competition.

The Key to Building Quality Homes Is Process

Building a home is a long series of sometimes complicated processes that must be properly executed to result in a quality product. Use these seven key principles of process management to improve the processes you use to run your business.

1. Processes are always changing. Smart companies continuously examine their processes to make improvements, streamline steps, and modify roles and responsibilities of those involved in the process.
2. Processes must be documented. Documentation should clearly outline the steps of a process and the job roles that carry out those processes.
3. The customer is the next person in line in the process. Homebuyers aren’t your only customers. Fellow employees who rely on one another for execution of shared processes are customers of anyone they rely upon. Trade partners are customers of the construction team; they need accurate schedules and job-ready homes.
4. The cost of poor process quality is exorbitant. Rework caused by error, inaccuracy, or incompleteness causes downstream effects and costs that are rarely calculated, such as wasted hours, delays, and material costs of installing a window in the wrong location, but should be.
5. Processes are best improved by the people who do the work. Process-centered companies empower the employees who work within the process to devise improvements. 
6. Focus is less on product quality and more on process quality. Home builders should design and manage processes that consistently result in quality homes and great customer experiences.
7. Best practices are standardized and made repeatable. Once a proven best practice is identified, focus on delivering that best practice through careful documentation of the process, effective training, and ongoing measurement to ensure proper execution and results.

Houston Passes New Floodplain Construction Standards

On Wednesday, Houston City Council approved a regulation that changes the way new buildings must be constructed in the 500-year floodplain. Current regulations require new structures to be built a foot above the 100-year floodplain level. The new regulation requires that all new or redeveloped homes in the regulated areas to be built two feet above the 500-year floodplains to avoid a repeat of the massive flooding that occurred during Hurricane Harvey last year when 33% of the damaged homes were in the 500-year floodplain.

The cost of building on elevated foundations is expected to range from $11,000 (city officials) to $32,000 (local home builders) per structure. The new ordinance is expected to increase the cost of a 1,500-square-foot house by $8,000 to $10,000. The new flood elevation ordinance will go into effect September 1.

The city analyzed 31,822 homes Harvey flooded in local floodplains, producing this data showing which of those homes would have been protected at various elevations:

Houston proposed floodplain




Information Courtesy of Jason Browning – Certainty Home Loans 

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