Experts: Florida Insurance Market Solid
Despite warnings from two leading insurance rating agencies that Hurricane Milton weakened or threatened Florida’s troubled home insurance market, local experts say the market can manage losses from Milton and are ready to cover yet another hurricane, if one should come.
AM Best and Fitch Ratings each issued reports last week warning that Milton could stretch liquidity of Florida-based insurers that are primarily focused on protecting in-state homeowners.
But experts closer to Florida’s insurance industry cast doubt on AM Best’s and Fitch Ratings’ assertions. One reason is the two companies don’t rate most of the domestic Florida insurers whose financial strength they question, said Paul Handerhan, president of the Fort Lauderdale-based consumer-focused Federal Association for Insurance Reform.
“So AM Best and Fitch don’t have direct access to their reinsurance programs or financials,” Handerhan said. (more…)
Imperial Golf Estates Open House Friday October 4
THE ISLAND
1510 IMPERIAL GC BLVD, 133
2 Bed, 2 Bath
3rd (TOP) Fl, Garage
Dramatic Golf Course, Lake Views
1538 Sq.Ft , $418,000
OPEN HOUSE FRIDAY 11:30-1:30 or call me on 617.834.8205 for a private showing
Go HERE for photos, video, floor plan, etc
Andrew.Oliver@Compass.com
What drives Mortgage Rates – and no it’s not the Federal Reserve
I am always astonished by the number of reports I read, before and after the Federal Reserve (Fed) makes a change in its interest rate, about the effect such a change will have on mortgage rates.
No doubt it came as a surprise to those writers when there was virtually no change in the Freddie Mac weekly survey of mortgage rates this week.
Myth
“Mortgage rates react to the Fed.”
Look at this chart for the last year:
The FFR rate was unchanged at 5.5% for over a year until last week, but during that time frame the FRM varied between a high of almost 7.8% last October and a low of just over 6% last week before the Fed cut its inetrest rate by 0.5%.(The Freddie Mac survey takes place from Monday-Wednesday each week, so the 6.09% reported on September 19 reflected rates before the Fed cut its interest rate).
What happened after the Fed cut rates?
Precious little. The rate before the Fed cut rates was 6.09% and afterwards…. 6.08%.
In simple terms, there is no correlation or link between the Fed’s interest rates and the rate on 30-year Fixed Rate Mortgages.
What does determine Mortgage Rates?
Take a look at this chart which compares the FRM with the yield on the 10-year Treasury note (10T).
Note that the two charts follow each other closely.
Why do Mortgage Rates track the yield on the 10-year Treasury?
Most conventional mortgages (i.e.those meeting the terms set by Fannie Mae and Freddie Mac) are sold by the originator to Fannie and Freddie, thereby freeing up the lenders’ capital to make more loans. Exactly why Fannie and Freddie were founded.
And what do Fannie and Freddie do with these loans? They package them into large pools and sell them to investors in the public market as Mortgage-Backed Securities (MBS). Because investors demand a higher yield to buy MBS than they would to buy a Treasury Note – because the risk is higher – they demand a premium – or spread – above the yield they would receive from the Treasury Note with a similar maturity to the expected life of the mortgages – and that is the 10T.
Is the spread consistent?
Good question. The answer is no.
For most of this century the spread was in the 1.6 – 1.8% range and averaged around 1.75%. The exceptions were:
2008 – the Great Recession and the height of the foreclosure crisis making mortgages unattractive to investors, who demanded higher yields
2020 – at the outset of the pandemic, amidst widespread uncertainty, spreads widened before the Fed started its huge program of pouring money into the economy, buying both Treasuries and MBS and igniting an asset boom
2022-23 – when the Fed finally, belatedly, stopped injecting liquidity into the system, the market reacted to two main factors: the Treasury would need to sell a lot more Securities to fund the spending, and the growing Budget deficit; and the biggest buyer of Treasuries – the Fed itself – was switching from being a buyer to a seller.The Fed also continues to hold a huge amount of MBS, which it is slowly reducing by not reinvesting.
Fannie and Freddie have increased fees to lenders
In addition to the fact that the Budget deficit continues to increase, while the Fed has been a seller of Treasuries, Fannie and Freddie have increased the fees they charge to lenders. These two factors have combined to increase the spread to more than the historic 1.6-1.8% , as shown in this chart, again for the last year:
Where are Mortgage Rates headed?
Thw two biggest questions facing the Treasury market are: will Congress take steps to rein in the soaring Budget deficit, and will foreign investors retain their appetite for US securities?
I don’t know, but to know where mortgage rates are headed,the most important number to watch is the yield on the 10-year Treasury Note.
Cheaper Mortgages are available
The Freddie Mac weekly survey is a national report. I work with lenders in both Florida and Massachusetts who are offering 30-year FRM for 5.5%. And other options are as low as 5%. Call me for details.
Recent Market Reports
Naples Mid-Year 2024 Market Report
Bonita Springs Mid-Year 2024 Market Report
Fort Myers Beach Mid-Year 2024 Market Report
Please contact me for a market report that includes properties in your area which were recently listed or sold.
Economic and mortgage commentary
The Federal Reserve’s new buzzword: Recalibrate
Federal Reserve Chair Powell:The Time has Come
Earth to Federal Reserve: What are you waiting for?”
The Federal Reserve’s Analysis Paralysis
Andrew.Oliver@Compass.com
Open Houses Sunday September 22: Bay Forest and Imperial Golf Estates
BAY FOREST
15535 CEDARWOOD LN, 5-304 (BERMUDA BAY 1)
2 Bed+DEN, 2 Bath
3rd (TOP) Fl, Impeccable
Updated KITCHEN/Baths
1538 SF, Garage
$460,000
Go HERE for photos and video
OPEN HOUSE SUNDAY 11:30-1:00
IMPERIAL GOLF ESTATES
1510 IMPERIAL GOLF COURSE BLVD #133 (THE ISLAND)
3rd (TOP) FL, Garage
2 Bed, 2 Bath
Dramatic Golf Course, Lake Views
Extra large rooms, 1538 Sq.Ft, Garage
$418,000
Open HOUSE SUNDAY 1:30-3:30 (will be listed in MLS on Monday with photos and video)
Recent Market Reports
Naples Mid-Year 2024 Market Report
Bonita Springs Mid-Year 2024 Market Report
Fort Myers Beach Mid-Year 2024 Market Report
Please contact me for a market report that includes properties in your area which were recently listed or sold.
Economic and mortgage commentary
The Federal Reserve’s new buzzword: Recalibrate
Federal Reserve Chair Powell:The Time has Come
Earth to Federal Reserve: What are you waiting for?”
The Federal Reserve’s Analysis Paralysis
Andrew.Oliver@Compass.com
The Federal Reserve’s new buzzword: Recalibrate
At Wednesday’s press conference after the Fed – finally – cut rates by 50 basis points (bp)(0.5%) – Fed Chair Powell introduced a new phrase to explain their action: “recalibrate.”
We have been through “transient inflation”; “data dependent”; “higher for longer”; and “data-dependent, not data point dependent” and have reached “recalibrate”.
Chair Powell denied that they were playing catch up because they waited too long to start cutting rates (they are, and they did).
Frankly, after their slow and deliberate approach this year, I expected only 25 bp. BUT…the next meeting is not until November 6, the day after the Election. And who knows what the environment will be on that date? It is certainly not out of the question that there will be a lack of clarity about the outcome. And while the Fed states that it not influenced by political considerations, they will naturally be aware of an environment which may well make it difficult for them to make an accurate forecast of the future.
So 50 bp now is “not a catch up” – but it would have been more consistent – and raised fewer questions – if they had cut 25 bp in July and a further 25 bp now.
Mortgage rates
I will update my 2023 article Why Mortgage Rates will fall in 2024 in the next few days. In that article I predicted that the 30-year Fixed Rate Mortgage (FRM) would drop below 6% by the end of 2024. I also explained why mortgage rates do not follow the Federal Reserve’s interest rate decisions, but are market driven based on the yield of the 10-year Treasury.
And to make to make that point more clearly: in both Massachusetts and Florida it is already possible to get FRMs for 5.5%, a sharp drop from from earlier in the year.
Recent Market Reports
Naples Mid-Year 2024 Market Report
Bonita Springs Mid-Year 2024 Market Report
Fort Myers Beach Mid-Year 2024 Market Report (more…)
Bay Forest Open Houses Sunday September 15
15455 ROYAL FERN LN N, #37A
LAKESIDE VILLA IN RARELY AVAILABLE LA JOLLA
2 Bed+DEN, 2 Bath
1582 SF, GARAGE
$579,000
Go HERE for photos and video
OPEN HOUSE SUNDAY: 12:00 – 1:30
15535 CEDARWOOD LN, 5-304 (BERMUDA BAY 1)
2 Bed+DEN, 2 Bath
3rd (TOP) Fl, Impeccable
Updated KITCHEN/Baths
1538 SF, Garage
$460,000
Go HERE for photos and video
OPEN HOUSE SUNDAY 1:3O-3:00
15435 ROYAL FERN LN N #22B
3 bed +Den; 3 bath; 2127 SQ FT; $775,001.
Currently off market can be shown by appointment.
Go HERE for photos and video
Recent Market Reports
Naples Mid-Year 2024 Market Report
Bonita Springs Mid-Year 2024 Market Report
Fort Myers Beach Mid-Year 2024 Market Report
Please contact me for a market report that includes properties in your area which were recently listed or sold.
Economic and mortgage commentary
Federal Reserve Chair Powell:The Time has Come
Earth to Federal Reserve: What are you waiting for?”
The Federal Reserve’s Analysis Paralysis
Andrew.Oliver@Compass.com
Federal Reserve Chair Powell:”The Time has Come”
“The time has come,” the Chair announced,
“For easing to begin—
From tightening strings, and cautious holds—
And dovish, hawkish spin
And then the market breathed a sigh—
When at last the Fed gave in.”
Read:
Earth to Federal Reserve: What are you waiting for?
The Federal Reserve’s Analysis Paralysis
Andrew.Oliver@Compass.com
Earth to Federal Reserve: What are you waiting for?
This is the same headline I used in February 2022 in this article
Earth to Federal Reserve: What are you waiting for?,
when the Federal Reserve (Fed) was dithering about raising rates. It is just as applicable today as they dither about cutting rates.
Indeed, sometimes I wonder if the Fed is more concerned about coming up with catchy phrases: “transient inflation; “data dependent”; “higher for longer”; and now “data-dependent, not data point dependent” – than actually taking decisions.
“Date-dependent mean the Fed doesn’t have a clue”
This was a heading in an earlier Bloomberg article, which continued: But perhaps the bigger takeaway is that Chair Jerome Powell and his fellow policymakers really don’t have a clue what’s going to happen in the economy. They’re shooting in the dark. “They’re making it up as they go along.”
These comments may seem harsh but it expresses the frustration many feel about what I described in this recent article: The Federal Reserve’s Analysis Paralysis
The data is unreliable and subject to change
Mohamed El-Erian, whom I often quote, captured the current state of affairs when he observed: “I think the major issue is that the market has become overly data-dependent, just like our central banks have become overly data-dependent. So, we’re not looking beyond the next data release because we’re worried about what will the Fed do in September, what will the ECB (European) Central) Bank) do in September.”
Central bankers and markets should be aware of the risks associated with an overly data-dependent approach to monetary policymaking. In 2019, Powell himself highlighted the basic challenge: “We must sort out in real time, as best we can, what the profound changes underway in the economy mean for issues such as the functioning of labor markets, the pace of productivity growth, and the forces driving inflation.”
Yet economic data are often unreliable. Official statistics undergo multiple and often substantial revisions. For instance, the payroll numbers undergo subsequent revisions —sometimes large ones that give the lie to the initial perceptions.
Richard Fisher, a former Dallas Fed president, once offered an example of the dangers involved. Data pointing to excessively low levels of inflation had prompted the Fed to keep rates low in 2002 and 2003. Subsequent revisions, he acknowledged, showed that “inflation had actually been a half point higher than first thought. In retrospect, the real fed funds rate turned out to be lower than what was deemed appropriate at the time and was held lower longer that it should have been.”
In a recent Financial Times article, Mohammed-El Erian asked a number of questions, amongst them:
Why did Fed forecasts get it so wrong, be it on inflation or unemployment — the so-called dual mandate — in recent years? And to what extent has this resulted in a longer-term shift to excessive data dependency in the formulation of the central bank’s policy?
Ongoing structural and secular changes in how the US and global economies function are more consequential for policy design than “noisy” short-term data. So, is it not now time to combine data dependency with a much greater injection of forward-looking strategic thinking? (more…)
Fort Myers Beach Mid-Year 2024 Market Report
Fort Myers Beach has been in recovery and rebuilding mode since Hurricane Ian hit with devastating effect in September 2022, as is still evident when driving through FMB.
“Every street on the island has a house that’s either been erected or is being erected, with many more permits in place to go to build,” said Mayor Allers.
This amount of growth reflects itself in (assessed) property values. They’ve increased nearly 50%, which is much higher than the county average of a 5.86% increase.
“We were obviously excited to see that number, it gets us closer back to where we were before the storm,” said Allers. “We’re still not all the way there yet, but it’s a testament to our aggressive (attitude) in getting people in their houses with their permits and getting businesses back open.”
The chart below shows the median price of the properties that have sold, bearing in mind that these range from fully renovated properties to those being sold “as is.”
The median Price per Sq.Ft.(PSF) has decreased since Ian, reflecting the mix of renovated and as is sales. (more…)
Fort Myers Beach, Lee County will keep FEMA flood insurance discount
Fort Myers Beach Lee County property owners who have flood insurance policies through the National Flood Insurance Program will be able to maintain their 25% discount, FEMA notified the town and county Friday. The City of Cape Coral also received a similar letter.
The news followed an appeal by the county, Fort Myers Beach, Cape Coral, Estero and Bonita Springs of a FEMA ruling earlier this year which would have taken away the discount over concerns FEMA had over permitless repair work done throughout the county after Hurricane Ian.
According to spokespersons for the town and county, FEMA restored the county’s rating while the town and county continue to work on a plan to address some continuing issues. That plan will be due Nov. 18.
“We feel as though we responded to FEMA’s request for information and felt that the information was accurate while meeting the requirements that were established prior to Hurricane Ian; however, we do look forward to working with FEMA to address any outstanding issues as they continue to explore the future of the Community Rating System and focus on ways that they can improve,” Town of Fort Myers Beach Manager Andy Hyatt said.
“We believe this is a positive step toward keeping the CRS rating for our unincorporated Lee County residents while we continue to remediate outstanding issues with FEMA,” Lee County Manager Dave Harner said. “Essentially the notification today provides the county an extension to further clarify our processes and preserve the CRS rating in the future.” (more…)
Bonita Springs Mid-Year 2024 Market Report
For Bonita Springs overall, median prices continued to increase in the first half of 2024, while sales dropped back to pre-COVID levels.
The median Price per Sq.Ft. also showed increases in 2024, while the DTO – Days To Offer – the number of days a property is listed before an accepted offer is received – increased in 2024, but remained below 2020 levels. (more…)
Naples Mid-Year 2024 Market Review
Despite some media reports suggesting a decline in Naples’ property prices, the data on completed sales supports my view that the market remains stable in overall terms as far as prices, while sales have returned to pre-COVID levels. This table shows Median Prices and Sales for Single Family, Villa and Condos
The median Price per Sq.Ft. increased for SFs in line with median prices, and was stable for Villa and Condos.
DTO – Days To Offer – the number of days a property is listed before an accepted offer is received – increased, but was still below 2020 speeds. (more…)
The Federal Reserve’s Analysis Paralysis
In November 2023, I wrote: “The question now is whether the Federal Reserve, having been extremely slow to start raising rates and reversing Quantitative Easing, will be similarly late in easing (rates). The Fed claims to be data dependent, but data tells us what happened in the past – and the Fed’s actions impact the future.”
The answer to that question is “yes” – and here we are, 8 months later, and the Fed is still “data dependent”, although this year’s mantra has become “higher for longer.”
(more…)