Why Mortgage Rates Are Dropping

After the Federal Reserve raised its key interest rate about a month ago, mortgage rates were expected to increase as well. Instead, they've been dropping in recent weeks. The 30-year fixed-rate mortgage averaged 4.08 percent last week, its lowest point so far in 2017 and its fourth consecutive week for declines, Freddie Mac reported.

When the Fed raises its federal funds rate, it becomes pricier for banks to borrow money, which generally leads to higher borrowing rates for consumers. Mortgage rates, on the other hand, tend to coincide more with the 10-year Treasury note. Lately, investors have been buying them up, and the higher demand has been sending mortgage rates lower, CNNMoney reports. The 10-year Treasury yield is about 2.23 percent; a month ago, it was about 2.62 percent. Mortgage rates have moved lower as the 10-year Treasury has inched lower.

"We will probably see rates higher at the end of the year—around 4.5 percent," says Len Kiefer, Freddie Mac's deputy chief economist. The lower mortgage rates may have come as a welcome surprise to home shoppers this spring, particularly as many markets' inventory woes are pressing home prices higher overall.

"We know that with every move higher with mortgage rates, it adds to the cost, but that is only going to limit purchases on the margin," Mark Hamrick, senior economic analyst at Bankrate.com, told CNNMoney.

SOURCE: DAILY REAL ESTATE NEWS

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Self-made millionaire: Not buying a home is the single biggest millennial mistake

While opponents of homeownership claim it's "the American nightmare," self-made millionaire David Bach is doubling down on his faith in real estate. 

He thinks that not prioritizing homeownership is "the single biggest mistake millennials are making."

Buying a home is "an escalator to wealth," he tells CNBC.

Young adults in particular aren't hopping on this escalator, and it's a costly mistake, Bach warns: "If millennials don't buy a home, their chances of actually having any wealth in this country are little to none. The average homeowner to this day is 38 times wealthier than a renter."
 
The self-made millionaire is quick to say that the smartest investments he's ever made have been the three homes he's purchased. He tells CNBC: "I first bought a home in San Francisco. It skyrocketed in price. I moved to New York and bought another home. It skyrocketed in price. My net worth has gone up millions and millions of dollars, simply because I've lived."

Bach argues that you have to live somewhere for the rest of your life, so you might as well invest in a home that you could own permanently.

As he writes in "The Automatic Millionaire," "As a renter, you can easily spend half a million dollars or more on rent over the years ($1,500 a month for 30 years comes to $540,000), and in the end wind up just where you started — owning nothing. Or you can buy a house and spend the same amount paying down a mortgage, and in the end wind up owning your own home free and clear!"

If you want to get in the game of homeownership, start by crunching the numbers, Bach says: "Actually do the math. Look and see what things costs, starting with the smallest options. This way, you're really clear on your goals and you won't just say to yourself, 'I'll never afford this.'"

A good rule of thumb is to make sure your total monthly housing payment doesn't consume more than 30 percent of your take-home pay. He also recommends having a down payment of at least 10 percent, though more is always better. Finally, recognize that "oftentimes, buying your first home means you're not buying your dream home," Bach tells CNBC. "You're just getting into the market."

A lucrative market, that is. "The fact is, you aren't really in the game of building wealth until you own some real estate," Bach writes.

SOURCE: CBNC 
By: Kathleen Elkins

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