Real Estate Information Archive

Blog

Displaying blog entries 1-2 of 2

Signs of economic weakness relieve pressure on mortgage rates!

by Ingrid Miles, CBR, REALTOR®

Signs of economic weakness relieve pressure on mortgage rates!

Purchase loan demand falls as FHA raises premiums!

Mortgage rates fell for a second consecutive week on signs of weakness in the economy, Freddie Mac said in releasing the results of its latest Primary Mortgage Market Survey.

Rates on 30-year fixed-rate mortgages averaged 4.78 percent with an average 0.7 point for the week ending April 28, down from 4.8 percent last week and 5.06 percent a year ago.

The 30-year fixed-rate mortgage, which hit an all-time low in Freddie Mac records dating to 1971 of 4.17 percent during the week ending Nov. 11, 2010, this year has ranged from 4.71 percent in early January to a high of 5.05 percent in February.

Rates on 15-year fixed-rate mortgages averaged 3.97 percent with an average 0.7 point, down from 4.02 percent last week and 4.39 percent a year ago. The 15-year fixed-rate mortgage hit a low in records dating back to 1991 of 3.57 percent in November.

The 5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) loan averaged 3.51 percent with an average 0.6 point, down from 3.61 percent last week and 4 percent a year ago. The 5-year ARM hit a low in records dating to 2005 of 3.25 percent in November.

Rates on 1-year Treasury-indexed ARM loans averaged 3.15 percent with an average 0.6 point, down from 3.16 percent last week and 4.25 percent a year ago.

"Mortgage rates followed Treasury bond yields lower this week amid weak local economic data reports on business conditions and house prices," said Frank Nothaft, Freddie Mac chief economist, in a statement.

"Regional Federal Reserve Banks reported that business and manufacturing activities declined in Philadelphia, Dallas and Richmond in April," Nothaft said. "In addition, the Standard & Poor's/Case-Shiller 20-city composite home price index recorded year-over-year declines through February in 19 of the 20 markets."

Looking back a week, a separate survey by the Mortgage Bankers Association showed demand for purchase loans falling a seasonally-adjusted 13.6 percent during the week ending April 22 compared to the week before.

The decline was driven by a 26.6 percent decrease in applications for government-backed loans, as premium increases on FHA loans announced Feb. 14 went into effect. Buyers trying to beat the deadline were probably responsible for a 20 percent increase in government purchase loan applications during the preceding four weeks, said Michael Fratantoni, MBA's chief economist.

Demand for purchase loans slipped to its lowest level since Feb. 25, and was down 28.8 percent from the same week a year ago.

In an April 14 forecast, MBA economists said they expect rates on 30-year fixed-rate loans will average 5.1 percent during April, May and June, and climb to an average of 5.6 percent during the final three months of the year.

MBA economists expect a more gradual rise in rates on 30-year fixed-rate loans next year, to an average of 6 percent in the final three months of 2012.

By Inman News

Mortgage Market Report 1/3/11

by Ingrid Miles, CBR, REALTOR®

Market Comment

Mortgage bond prices started the week in negative territory.  Those losses were short-lived as trading was thin and choppy with continued large market swings.  There were few data releases.  The Treasury auctions showed relatively strong foreign demand for US debt instruments, which helped carry over to the mortgage bond market Wednesday afternoon.  Weekly jobless claims came in better than expected which was not good for bonds early Thursday morning.  Fortunately mortgage bonds ended the week positive by about 1/2 of a discount point. 

The employment report will be the most important release this week.  This data will set the tone for trading this month.  We ended last year with considerable volatility and this is expected to continue for some time.

 

Looking Ahead

Economic

Indicator

Release

Date and Time

Consensus

Estimate

 

Analysis

Construction Spending

Monday, Jan. 3,

10:00 am, et

Up 0.2%

Low importance.  An indication of economic strength.  Significant weakness may lead to lower rates.

ISM Index

Monday, Jan. 3,

10:00 am, et

57

Important.  A measure of manufacturer sentiment.  Weakness may lead to lower mortgage rates.

Factory Orders

Tuesday, Jan. 4,

10:00 am, et

Down 0.5%

Important.  A measure of manufacturing sector strength.  Weakness may lead to lower rates.

Fed Minutes

Tuesday, Jan. 4,

2:00 pm, et

None

Important.  Details of the last Fed meeting will be thoroughly analyzed.

ADP Employment

Wednesday, Jan. 5,

8:30 am, et

75k

Important.  An indication of employment.  Weakness may bring lower rates.

Weekly Jobless Claims

Thursday, Jan. 6,

8:30 am, et

400k

Important.  An indication of employment.   Higher claims may result in lower rates.

Employment

Friday, Jan. 7,

8:30 am, et

9.8%,

Payrolls +110k

Very important.  An increase in unemployment or a large decrease in payrolls may bring lower rates.

Consumer Credit

Friday, Jan. 7,

3:00 pm, et

Down $6.5b

Low importance.  A significantly higher than expected figure may lead to lower mortgage interest rates.

The Year Ahead

The future of the economy, recovery or additional weakness, will continue to be debated.  There is no certainty in predictions.  Data can be used to support both sides of the debate.  What we can be certain of is the fact that until the economy gains some stability, mortgage interest rates are likely to remain volatile.  Historically, mortgage interest rates seem to improve slowly.  In contrast, when rates increase, it is often fast and furious.  One negative day often erases a week of positive improvements.  Of course even that maxim was tested the last few months of last year as market swings of 1/2 a discount point both up and down were often seen in very short spans of time.  

It is possible for mortgage interest rates to push lower considering the Fed still wants to keep rates relatively low.  However, we are in unprecedented times and we have seen rates jump off the lows from last year.  The Fed isn’t the only player in the financial markets and there are many others buying and selling securities.  Remember that the Fed does not directly dictate that mortgage interest rates will be at a certain rate.  Rates are determined by the supply and demand for mortgage-backed securities. 

Despite spikes near the end of 2010, the Fed kept rates low.  The big unknown is how things will play out this year.  Now is a great time to take advantage of mortgage interest rates at these still historically favorable levels.

Leader Bank, Jeffrey Esterkes

Displaying blog entries 1-2 of 2

Contact Information

Photo of Ingrid Miles, CBR, SRES, Lead REALTOR, Stephen Mil Real Estate
Ingrid Miles, CBR, SRES, Lead REALTOR, Stephen Mil
Keller Williams Realty
11 South Main St & 1 Merrimac St
Topsfield & Newburyport MA 01983 & 01950
Direct: 978-471-9750
978.861.4218
Fax: 978-861-4218

The property listing data and information, or the Images, set forth herein were provided to MLS Property Information Network, Inc. from third party sources, including sellers, lessors and public records, and were compiled by MLS Property Information Network, Inc. The property listing data and information, and the Images, are for the personal, non-commercial use of consumers having a good faith interest in purchasing or leasing listed properties of the type displayed to them and may not be used for any purpose other than to identify prospective properties which such consumers may have a good faith interest in purchasing or leasing. MLS Property Information Network, Inc. and its subscribers disclaim any and all representations and warranties as to the accuracy of the property listing data and information, or as to the accuracy of any of the Images, set forth herein.”