Le point économique aux USA par Rafic Vartan

Market update for the week ending August 4 2018

CRUDE OIL 68.68 — GOLD 1221.90 — SILVER 15.42 — EUR/USD 1.16

Strong corporate earnings overshadowed trade fears this week – With over 30% of companies reporting second quarter earnings, this earnings season is turning out mostly positive. Most companies posted results that beat expectations. While Tech stocks sunk last week after Facebook reported disappointing earnings, they soared this week after Apple’s earnings were reported. Apple became the first company to have a valuation of over $1 trillion. China and the U.S. both stepped up tariffs on more products, while The U.S. and The European Union edged toward a trade deal. Trade fears probably are the reason stocks did not rally much higher on such strong earnings. The Dow Jones Industrial Average closed the week at 25,462.08, up slightly from 25,451.06 last week. It is up 3% year to date. The S&P 500 closed the week at 2,840.30, up from 2,818.82 last week. It’s up 6.2% year to date. The NASDAQ closed the week at 7,812.01, up from 7,737.43 last week. It’s up 13.2% year to date.

157,000 new jobs added in July – The Bureau of Labor Statistics reported that 157,000 new jobs added in July. This was below the 193,000 expected by analysts, but still a healthy number. In the last 12 months job gains have averaged 203,000 a month. Wage growth, which is an indicator of inflation risk, showed average hourly wages growing by 2.7% over the past 12 months. The unemployment rate dropped to near historic lows of 3.9%, down from 4% in June. While more wage growth would be nice, 2.7% won’t put much pressure on The Fed to raise rates to combat inflation risks. Usually, with unemployment so low you would see wage growth at 3% or more. Wages have been stubborn to rise which has kept inflation in check and interest rates historically low. Especially with such robust growth.

Treasury Bond Yields unchanged this week – The 10 year treasury bond closed the week yielding 2.95% almost unchanged from 2.96% last week. The 30 year Treasury bond yield ended the week at 3.09%, unchanged from 3.09% last week. We watch bond rates because mortgage rates follow bond rates.

Mortgage rates slightly higher for the week – The August 2, 2018 Freddie Mac Primary Mortgage Survey reported that the 30 year fixed mortgage rate average was 4.60%, up slightly from 4.54% last week. The 15 year fixed was 4.08%, up slightly from 4.02% last week. The 5 year ARM was 3.93%, up slightly from 3.87% last week.

How to shop for mortgages. The guide to finding a great home loan – Mortgages might not be as much fun to shop for as new shoes or a new car, but if you know how to do some smart comparison shopping, you’re going to save yourself a lot of hassle and a huge chunk of change. Some of this will require an attitude shift. Because while most of us already know full well that you'll need to see lot of houses before you find The One, many people take the first mortgage that comes along. In fact, almost half of consumers don’t shop around at all for a mortgage, according to a report from the Consumer Financial Protection Bureau. But that's a big mistake. Don't just go with the first option you think of, even if it's the one with the coolest ads or from your own bank right down the block. It pays to look around. Here's why, and how to shop for a mortgage right. Here are several solid reasons why it pays to compare and review your options when choosing a mortgage.

Lenders offer different rates – Even if the mortgage product they are offering is essentially the same say, a 30 year fixed rate conventional loan rates can vary by more than a half percent, and that half percent can add up fast.
Lenders have different programs – Because there are so many different types of mortgages, you'd do well to talk to someone who can really sit down and articulate the pros and cons. Some borrowers are better suited to a fixed rate conventional product, while another who isnt planning to stay in the home longer than 10 years or so might end up paying a lot less with a 15 year loan or an adjustable rate mortgage. Each homeowner’s situation is different, so it’s vital to talk through the various options with a knowledgeable lender.
Lenders have different specials – Mortgage lending is a business obviously, so lenders need to make money. In a competitive environment, you might find that some are offering to pay closing costs or provide other perks while others might tout quicker processing. Shopping around allows you to find the best deal for you.
Lenders charge different fees – Many lenders charge a lengthy list of fees: loan origination, title insurance, loan application, rate lock (which protects you from rate fluctuations during the process), and more. You’ll want to find out what fees each one charges and see if any of the lenders you are considering are willing to negotiate by curtailing or all-out dropping a few of those fees.
Lenders have different standards – Have a blemish on your credit history that could keep you from getting a good loan? Different lenders have different standards, so just because one turns you down or doesn't offer you a great interest rate doesn’t mean that others will, too.

Where to look for a home loan. There are three main places you can get a mortgage.

Banks – Your bank may be the first entity you think of, because one-stop shopping for your financial matters can greatly simplify your life. A bank can be a great choice if you already have a solid working relationship. If you have been a trustworthy customer over the years, your bank can often offer excellent rates. However, sometimes you have to have a little more financial savvy when working with a bank to make sure that its proprietary products are the best ones for you and your situation.
Mortgage brokers – These professionals are also a great option mainly because they are specialists. They know more about the vast variety of loan programs that are available and can be better equipped to help you think through creative options. Since they work with a wide variety of lenders, they can do a lot of the homework to find you the best rate and specials from a variety of offerings. But, you’ll want to make sure that they are reputable and have your best interests not the lender sat heart. Check their credentials online and talk to several before settling on a provider.
Online – These days, everyone shops for everything online, so why not mortgages?

Which type of mortgage is right for you? – Mortgage are by no means one size fits all. That's right, you have options. And it's important to choose a home loan that best suits your financial circumstances, because it can save you major money and make sure those payments will likely remain within your financial reach. To help point you to the mortgage that's right for you, I'll walk you through the choices, and the pros and cons of each.

Fixed-rate mortgage – True to its name, a fixed rate mortgage means that the interest rate you pay remains fixed at the same level throughout the life of your loan (typically 15 or 30 years). The majority of home buyers prefer fixed rate mortgages because they offer long term stability. They are ideal if you plan to stay in your home for at least five years. And the longer you stay, the more sense a fixed rate mortgage makes. But keep in mind, this peace of mind comes with a price. Fixed rate loans typically have higher interest rates than the initial rates offered on adjustable rate loans.
Adjustable rate mortgage – An adjustable rate mortgage, or ARM, is a home loan that offers a low interest rate for an introductory period. After that period (typically 2 to 5 years) the rate becomes adjustable up to a certain limit, depending on market conditions. If certain economic indexes change, your rate could jump after the intro period ends. If indexes drop, your payments might stay the same or even go down. Hence, opting for an ARM can be a bit of a gamble. If you think you might outstay the introductory period, take a good look at the maximum interest rate. It's often considerably higher than that of a fixed rate mortgage. Nonetheless, if you plan to sell the home within a short period of time, an ARM may be preferable. As long as you’re ready to move on before the introductory period ends, you’ll benefit from the advantage of making lower payments while you’re living in the home. And because your lender will be qualifying you on the basis of a lower monthly payment, you could afford a more expensive home than you would with a fixed rate mortgage.
FHA loan – If your finances aren't in great shape, a Federal Housing Administration loan could be an excellent option. FHA loans were created for low and moderate income households that would otherwise be locked out of the housing market due to low credit, with qualifying credit scores starting at 580. FHA loans also enable you to qualify for a mortgage with a down payment as low as 3.5%. These mortgages are government insured, which guarantees that the lender won’t lose its money if the borrower defaults. Here's the downside. Because the federal government insures these loans, borrowers must pay an upfront mortgage insurance premium. Currently the fee is 1.75%. That’s $8,750 on a $500,000 home loan. Borrowers will also have to pay annual mortgage insurance, currently around 0.85% of the borrowed loan amount, or $4,250 more per year. FHA loans are usually capped. It’s $679,650 in Los Angeles County. This means you have limited buying power when using an FHA loan, although if you aren't looking to saddle yourself with a huge home loan, this won't be an issue.
VA loan – The U.S. Department of Veterans Affairs loan program, which began with the creation of the GI Bill of 1944, gives active or retired military personnel the opportunity to purchase a home with a $0 down payment and no mortgage insurance premium. VA loans also offer attractive interest rates. However, requirements are fairly stringent. VA lenders are typically looking for a credit score of 620, and every VA purchase loan requires a special appraisal that includes the valuation of the property and a close check of the home’s condition.
Jumbo loan – In a pricey housing market like Los Angeles, you may end up with a jumbo loan. A mortgage that's above the limits for government sponsored loans. That means $625.000 in Los Angeles County. But keep in mind. Since the amount of money being borrowed is so high, jumbo loans typically require home buyers to make a bigger down payment (up to 30% for some lenders) and have at least a 680 credit score.

Quote of the week

LUCK
that's when preparation
and opportunity meet.

Pierre Trudeau

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Bonne semaine à tous!

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