The historically low interest rates, set since the recession, has had a positively high impact for the property and money lender markets. In March 2016, an average rate on a thirty-year mortgage was hovering around 3.57% (lowest on record since 1971).
Benefits of low-interest rates:
Interest rates are usually set low after an economic collapse, mainly because of these advantages:
- It’s very cheap to borrow, which means less expenditure for the consumer while creating more demand for loan markets.
- It also means more money for homeowners if they refinance their home (a lucrative option if struggling with money in a challenging economy).
- Creates more demand for homeowners to move, as well as affordability for first-time buyers – prevents the property market from stagnating.
In 2015 over 366,000 homes were purchased in the USA, which was the first annual sales increase since 2005. In effect, this brought more jobs back to trades like construction and engineering – as future building plans for the year reached over 946,000, the highest since June 2008.
Other benefits of cheaper borrowing:
Cheaper loans have also created more luxury purchases, like the automobile industry. In the first 11 months of 2012, US citizens borrowed over 19.9m car loans, which was worth a staggering total of $388 billion – the benefits to the economy were:
- Higher profits for companies.
- Higher employment (especially those employed for credit transactions – totaling the highest in almost four years)
- A more prosperous and richer economy – higher returns in taxes for the state.
How higher house prices promoted a return to an economic boom:
Rising home prices have consequently made homeowners feel wealthier, which gives them greater willingness to spend.
Rising prices also helped stock markets perform better, from having low-interest rates – especially with S&P 500 and Dow Jones Industrial Average reaching their highest records since the recession, last March.
However, the same data in March did show a significant drop in American consumer confidence.
— The Capitalist (@Capitalist_Site) May 6, 2016
What’s in store for mortgage rates in the future?
As the idea of higher interest rates is becoming more of reality, as we get further into an economic recovery, it is expected for costs of mortgages and borrowing to become more expensive.
Even if you shop now for a mortgage, rates can still vary. It is advisable to purchase a fixed-rate mortgage, so when the rates do go up, your mortgage repayments also don’t go up.
Top tips to finding the best mortgage rates
Watch out for artificial advertised rates:
Always remember mortgages may come with closing costs or additional points – so always check all terms and conditions before agreeing to deal with your chosen lender.
Also, a low credit score or a cash-out loan will mean your interest will increase – ensure your bank is given full details from the beginning so that you can obtain a very accurate quote for your property circumstance.
Don’t get caught out by points
In case you are not aware, this is an interest payment, which is paid upfront to bring down mortgage rates – your price will seem artificially low while giving a boost to closing costs.
However, if you are not in your home for a very long-term duration, then it’s tough to break even with your high upfront costs. So make sure to have forward planned in place, to minimize any costly mistakes.
Check the rate lock expiration.
At the start, you can have the most competitive mortgage rate on the market, but if it expires or your required to pay for an extension, then this will hit your financial situation very hard.
Be very organized for when it comes to the terms of your mortgage and personal finance.
Zero closing Mortgages should dictate the comparisons
The comparisons will entirely depend on the duration you want the loan, but these are available for only 12.5 basis points (0.125%) being added to your mortgage rate – even though payment may rise by $25 – $60 per month, it can reduce up to $4,000 from your closing costs.
Price out mortgage lenders on the same day
As rates may vary, especially between days, then ensure you price out a couple of banks on the same day – ensuring that you are getting the most competitive comparison on the market.
Banks should not dictate your credit score
Make sure to obtain only one credit report, which should be a three-merge consisting of:
Multiple loan applications will bring your credit score down, and may harm chances of getting accepted for a new mortgage or loan.
Choose one mortgage lender, and if you are unlucky to be rejected, then wait six months before reapplying – credit check sites like Experian can help you monitor your credit rating, along with advice for improvement, while not causing any damage to your score.
To round it off
Although the US economy is in a recovery, and the property market did make a rebound – many other areas like the exchange rate, stock market, and other sectors are still struggling, which is still holding us back from a boom.
Some economists even speculate that rates could instead drop again, bringing us back to a new recession.
Moderna Vaccine ‘Actively Preparing’ for Distribution
In light of advanced stages in its clinical trial, a Moderna vaccine is actively preparing for distribution. One of the Covid-19 vaccine leaders, Moderna’s mRNA-1273 vaccine is expecting trial results by November. An independent data monitoring committee will conduct an interim review in November. This involves sifting through data from 30,000 volunteers.
Also, by the end of 2020, Moderna aims to produce 20 million doses, with another 500 million to 1 billion doses by next year.
Phase III Trial Infection Rates Meet Expectations
Moderna reported that trial infection rates were on track with expectations. Chief Medical Officer Tal Zaks said that they are “following the ZIP codes and the counties from which these participants come, we have pretty sophisticated models of what to expect.” He added that “I think we’re on track for those expectations.”
During Thursday’s results call, CEO Stephane Bancel said they hope for FDA approval soon. A U.S. regulatory green light for Moderna’s vaccine would endorse the biotech’s vaccine platform.
In a press release, Bancel wrote: “We are actively preparing for the launch of mRNA-1273 and we have signed a number of supply agreements with governments around the world. Moderna is committed to the highest data quality standards and rigorous scientific research as we continue to work with regulators to advance mRNA-1273.”
How does the Moderna vaccine work?
mRNA-1273 uses synthetic messenger RNA (mRNA) to mimic the surface of the coronavirus. It then “teaches” the immune system to recognize and attack it. This technology is the same used by Pfizer and BioNTech to create a rival COVID-19 vaccine. The method has yet to produce an FDA-approved vaccine.
The Phase III trials, which involve 30,000 participants, expects to end by early November. Moderna’s board will conduct its analysis only after there are 53 diagnosed cases of Covid-19.
The FDA will require a two-month safety data follow up after the final trial. So, Modena will have to file for emergency use authorization. This can happen as early as mid-November, upon completion of the trial review.
Moderna vaccine Getting Supply Deals Ready
This early, Moderna is readying its supply deals to its early customers. This includes governments of the US, Japan, Canada, and Israel. The US pre-ordered 100 million doses of the vaccine valued at $25/dose. They also have an option to buy an additional 400 million doses. All in, Moderna holds $1.1 billion in deposits from its customers. This includes grants and performance payments.
The most recent deal came via Takeda of Japan. Moderna announced earlier today that they will supply Takeda with 50 million doses. Pending local approval, this batch will arrive during the first half of 2021.
More inquiries are coming in. The company is in talks with the European Union for possible supplies to its members. It is also negotiating with the World Health Organization group COVAX. Discussions include vaccine distribution and scalable pricing.
Moderna Shares Up by 13%
Moderna stock prices rose as much as 13% in Thursday trades as investors warmed up to a potential vaccine. Shares traded higher by as much as 13%, as it reiterated that it is “actively preparing” for its vaccine launch.
During the earnings call, Moderna reported a 3rd quarter loss of $233.6 million, or 59 cents a share. This is greater than Refinitiv’s prediction of 43 cents per share. Moderna generated $157.9 million in revenue. This is more than double the expected $77.5 million.
Watch this as Yahoo! Finance reports that pharmaceutical firm Moderna is getting ready to distribute its vaccine across the globe:
Do you think a vaccine will be ready and available for Americans within the year? Or should we wait a bit more? Let us know what you think. Share your thoughts in the comment section.
Stocks Post Its Worst Day in A Month
Wall Street took a beating Monday as stocks posted its worst day in a month. Rising coronavirus cases and a fading stimulus relief led investors to sell-off.
The Dow Jones Industrial Average closed 2.3% lower. It fell down 935 points during the day before settling 650 points lower. All Dow stocks closed in the red except Apple, which eked out a .01% gain. It was the Dow’s worst day since September 3.
Meanwhile, the S&P 500 closed for the day at 1.9%, marking its worst day since late September. The tech-heavy Nasdaq Composite, which bounced back from its lows in the morning, finished lower at 1.6%.
While all sectors across the board experienced losses, some got crushed more. These include energy, industrials, and financials.
Higher Cases of Coronavirus
With eight days remaining before the elections, investors are starting to get jittery. Despite lots of talks, Congress has yet to approve a stimulus package. Cases of coronavirus are jumping in all states, and it recently hit a daily high average of 68,767 last Sunday.
Meanwhile, big tech companies are set to report earnings later this week. This lot includes Microsoft, Apple, Google, Facebook, and Twitter. Fawad Razaqzada of Think Markets noted that the reports can inject further volatility. In the note, Think Markets believed that “on a more macro level, ongoing US stalemate over US fiscal stimulus and the rapidly spreading Covid-19 is going to determine the direction for the wider markets.”
Tom Lee, head of research at Fundstrat Global Advisors, thinks Covid is a big influence over the market. He said “It’s almost as important as the Fed right now. Covid is suppressing the economy, and it’s essentially offsetting easy money. If we didn’t have Covid, people would be going out and spending money. It’s acting as a huge headwind.”
No Relief in Sight
Brad McMillan, CIO of Commonwealth Financial Network, thinks the reality hit investors hard. He told CNN business: “I think a big difference this time around [is]…there’s been a tremendous amount of hope baked into the market for quite a while, and we saw some things over this weekend that hit those assumptions hard.” The negotiations for a new relief package is gone at least until after the elections. Senate Majority Leader Mitch McConnel adjourned the Senate after confirming new Chief Justice Amy Coney Barrett. They will resume their session on November 9, or six days after the elections.
Without a clear stimulus plan, the US economy could start to double-dip. And if the rise in coronavirus cases continues, the business will shut down again. This nightmare scenario is haunting the market at present. Steven Wieting, the chief strategist at Citi Private Bank, sees dimmer prospects. “The ability to fight the virus further right now is very much in question, and it’s a political question.” Wieting believes that Washington could take months before anything gets done. This made investors tentative.
Tom Lee added that “We have a lot of things to be anxious about in the next couple of weeks. That’s why this is a pre-election market. But post-election, I think a lot of things that make people nervous turn into a tailwind. The post-election stimulus is a when not an if. Even if it’s a mixed Congress, I think there’s still some common ground. It’s just the scope that’s different. It would be a smaller package.”
Eight Days Remaining
The final eight days before the elections usually brings good vibes for Wall Street. This year, the bulls will need some extra running following Monday’s selloff spree.
Sam Stovall, chief investment strategist history, observed this bull phenomenon. Since 1944, the S&P 500 rose on average 2.5% in the eight days before elections. The index is up 17 out of 19 times, or 89%. The biggest rise came during the recent financial crisis, with the S&P 500 roaring back 18.5% in a bear market rally. That year, Democrat Barack Obama won over the GOP’s John McCain. The market sunk back to new lows after the election. It bottomed out four months later. The first decline in 1968 (-0.8%), happened as Richard Nixon won over Democrat Hubert Humphrey. The other was in 1988 when Republican George H.W. Bush won against the Dems’ Michael Dukakis.
Wall Street needs to get its act together with eight days remaining. A short, decisive victory by either party can help uplift America’s image. And with all the drama removed, maybe the market can go back to its winning ways.
Watch this as Stocks fall sharply at open amid Covid-19 resurgence:
Stock investors of The Capitalist, are you selling off right now, or are you holding off for a bigger payday? Do you think the market will rally in the next few days, or do you foresee better days after the elections? Share with us your stock scenarios as we count down to the elections. Leave your thoughts in the comment section below.
US Housing Sales Boom Will Last Until 2021
Redfin CEO Glenn Kelman told CNBC on Thursday that he sees the US housing sales boom will last until 2021. Total US Home sales increased 9.4% in September, surpassing estimates. Meanwhile, median prices went up 15% year over year. This is according to data provided by the National Association of Realtors.
Shares of Redfin, a real estate brokerage firm, were higher by 1% Thursday to $45.60. The stock more than doubled during this year. It now has a market cap of $4.5 billion.
Why do people buy houses during a recession?
During this time when the economy is reeling and jobs are tight, people buy homes. Why? There are a couple of reasons.
The bigger acceptance for remote work freed many people from living in the city. The opportunity to leave cramped apartments and expensive city living. The pandemic gave enough reason for workers to pack up and head for greener pastures. Next, interest rates are going down hard. From 3.7%, 30-year mortgage rates are now 2.9%, the lowest rates ever. Despite higher prices, people know this is the best time to buy on the cheap.
The intent is there. The pandemic allowed you to work anywhere. And interest rates allow you to pay the lowest interest rates. People are taking the plunge and buying. So what’s the problem? We’re running out of houses to buy.
Demand coming from the rich
Rich professionals who can work from home are the reason for the uptick in housing demand. Kelman said that many remote workers moved from major cities to distant suburbs. Kelman said these workers began “taking a permanent vacation where they’re working from those homes.”
People are taking advantage of low-interest rates to snap up homes. Kelman noted that “part of what is fueling this boom is that the economy has just split into two and rich people are able to access capital almost for free.” The opportunity to buy homes for cheap may be too much to resist. “Of course, they’re going to use that money to buy homes,” he added.
Meanwhile, there’s another group of people who would like to buy but can’t. Kleman said: “There’s just another group of Americans who are still struggling, who can’t access the credit because we’ve raised credit standards, and you have high unemployment. I just think those two trends, at some point, have to collide.”
Kelman foresees demand to continue until 2021 at least. Many undecided buyers will buckle down next year and take the plunge. He said: “There’s no way it can last forever. This level of demand is absolutely insane. I would expect it to last into 2021, at least.” Why 2021? “There are so many people now who have decided they’re not going to be able to buy a home by year-end,” he said. Kelman expects them to buy next year, “as their kids shift school districts. I do think we’re going to see this for some time.”
Shrinking inventory of houses for sale
With homes fast disappearing from the market, higher purchase prices are coming back. Based on data from the National Association of Realtors data, only 2.7 months’ supply of houses is available last month. This represents the lowest level since 1982 when the NAR began tracking data.
Kleman expects supply to increase after the elections. Uncertainty will decrease after voters elect a new president. Listing and selling a home can take months to process. That’s why sellers have a lower risk tolerance than buyers. “Buyers, when they see a house they love, they pounce,” he said. “I think the sellers are just looking long term in the economy and still feeling some anxiety. Many of them are going to put their homes on the market in January and February.”
Demand won’t last forever
The Wall Street Journal’s Justin Lahart thinks not everybody can live outside the big cities. A remote job in a vacation spot may pose difficulties for some. Winter conditions may also make some remote workers rethink their strategy. He also believes that the housing boom now made people buy houses sooner than later. He thinks many of the workers who moved to the suburbs would’ve done so in a few years. When the pandemic subsides, a smaller group might follow the exodus out of big cities.
The number of people who can afford houses will shrink as well. Many workers’ careers derailed during the year. Many millennials got burned during the financial crisis in the early 2000s. Now, a new career-threatening crisis is in full swing. The post-coronavirus landscape may depend on how well the economy rebounds. We’ll have next year to find out.
Watch this as CNBC reports on the US housing sales boom. Redfin CEO Says “people are buying vacation homes, then taking a permanent vacation:
Are you house hunting right now, or have you already bought a house this year? Why are you doing so? Let us know why buying a home is a good idea right now. Share your thoughts in the comments section below.
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