Susan Deierling, Assoc. Broker
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Realty Executives Northern Arizona
Tag Archives: Mortgage Rates
Mortgage rates worsened last week in response to more indications that the U.S. economy and global economic trends are improving. Global economic data was stronger than expected; which generally boosts investor confidence and leads to higher mortgage rates in Arizona and across the country.
According to Freddie Mac, the average rate for a 30-year fixed rate mortgage was 3.53 percent with borrowers paying all of their closing costs and 0.8 percent in discount points along with a full complement of closing costs.
The U.S Department of Commerce reported that Factory Orders for December improved over November; they rose from 0.0 percent in November to 1.89 percent in December, but fell short of Wall Street’s expectation of 2.5 percent.
The ISM Services Index for January was released Tuesday and fell to 55.2 from December’s reading of 56.1 and was slightly higher than against investors’ expectations of 55.0. Readings above 50 indicate expansion of the service sector of the economy. The ISM Services Index is also an indicator of future inflationary pressure.
Homebuilders Say Markets Improve For 6th Consecutive Month
On Wednesday, the National Association of Home Builders (NAHB) released its NAHB/First American Improving Markets Index (IMI), which provided good news for housing markets in all 50 states and Washington, D. C. Metro housing markets surveyed showed expansion of improving markets for the sixth consecutive month.
259 of the 361 metro areas surveyed in the IMI showed improvement in February. By comparison, only 12 improving metro markets were reported for September of 2011.
Increasing home prices and mortgage rates suggest that now may be the time for buying a home.
The weekly Jobless Claims report released on Thursday indicated that 366,000 new claims were filed, which was higher than Wall Street’s estimate of 360,000 new jobless claims, but lower than the previous week’s 368,000 new jobless claims.
Falling U.S. Trade Deficit Signals Economic Uptick
The best economic news for last week came on Friday, when the U.S. trade deficit fell to its lowest level since January 2010. The Trade Balance Report for December shows the trade deficit at -$38.5 billion against expectations of -$46 billion and November’s deficit of -$48.7 billion. While a great boost for the economy, this is another indicator that recent low mortgage rates and home prices may soon become history.
Economic News scheduled for this upcoming week includes U.S. Treasury Auctions set for Tuesday, Wednesday and Thursday.
Retail Sales for January will be released on Wednesday and watched closely by investors. Retail sales account for approximately 70 percent of the U.S. economy and are viewed as a strong indicator of the economy’s direction.
Jobless Claims on Thursday, Industrial Production and Consumer Sentiment on Friday round out the week’s economic reports.
Last week’s National Association of Home Builders/First American Improving Markets Index (IMI) brought positive news about U.S. housing markets and the broader U.S. economy, in general.
According to the IMI, there are now 201 U.S. markets which can be considered “improving”.
To meet this standard, a local area economy must exhibit at least six consecutive months of improvement in terms of local employment, single-family housing permits and area home prices; and, at least six months must have passed since each of these readings were at their respective low points, called troughs.
The Improving Market Index added 76 metropolitan areas in December as compared to the month prior. 45 states are now represented on the list, in addition to the District of Columbia.
The cities deemed “improving” aren’t limited to recent, high-profile hot spots such as Detroit, Michigan; and Phoenix, Arizona, either. Several of the newly-included areas for December were :
- Atlanta, Georgia
- Bloomfield, Illinois
- Ithaca, New York
- Riverside, California
- Seattle, Washington
The geographic diversity of this month’s Improving Market Index suggests a nationwide economic recovery in progress. More jobs, a steady supply of available homes, plus rising home prices helps communities thrive.
Unfortunately, it may also mean less opportunity to buy homes as rock-bottom prices.
As sellers and home builders gain confidence in the economy, it may be more challenging for today’s Sedona buyers to get a “great deal”. In addition, an improving, post-recession economy will likely lead mortgage rates higher, robbing home buyers of their purchasing power.
Freddie Mac says that the average 30-year fixed rate mortgage rate is 3.32% nationwide. In a fully-recovered economy, that rate could be 5 percent or higher. The impact on monthly housing payments would be palpable.
The National Association of Homebuilders expects more markets to join the Improving Market Index list through 2013. Today’s home buyers may want to lock in today’s low rates before economic improvement leads mortgage rates higher.
The Federal Open Market Committee (FOMC) begins a 2-day meeting today, its last of 8 scheduled meetings this year.
The Federal Open Market Committee is a 12-person subcommittee within the Federal Reserve. It’s the group which votes upon U.S. monetary policy.
The monetary policy action for which the FOMC is most well-known is its setting of the Fed Funds Funds. The Fed Funds Rate is the interest rate at which banks borrow money from each other overnight.
Since late-2008, the Fed Funds Rate has been near zero percent.
Prime Rate, a business and consumer interest rate used in lines of credit and credit card rates, is based on the Fed Funds Rate. Prime Rate has been similarly unchanged since 2008.
One rate which the Federal Reserve does not set is the 30-year fixed rate mortgage (FRM) rate.
Like all other mortgage rates, the 30-year FRM is based on the market value of mortgage-backed bonds; securities bought and sold by investors.
There is no correlation between the Federal Reserve’s Fed Funds Rate and the everyday homeowner’s 30-year fixed rate mortgage rate. Some months, the two rates converge. Other months, they diverge. Since 2000, they’ve been separated by as many as 5.29 percentage points.
They’ve been as close as 0.52 percentage points.
However, although the Federal Reserve does not set U.S. mortgage rates, that doesn’t mean that it can’t influence them. The Fed’s post-meeting press release has been known to make mortgage rates get volatile.
If, in its post-meeting press release, the Fed notes that the U.S. economy is slowing and that new economic stimulus is warranted, mortgage rates will likely fall throughout AZ. This is because additional Fed stimulus would likely lend support to U.S. mortgage markets which would, in turn, boost demand for mortgage-backed bonds.
Conversely, if the Fed acknowledges stronger-than-expected growth in the U.S. economy and no need for new stimulus, mortgage rates are expected to rise.
Either way, mortgage rates will change Wednesday upon the FOMC’s adjournment — we just don’t know in which direction. Rate shoppers may see fluctuations of as much as 0.250 percent.
The FOMC adjourns at 12:30 PM ET.
Another month, another good showing for the U.S. economy.
Mortgage rates are performing surprisingly well after Friday’s release of the October 2012 Non-Farm Payrolls report. The Bureau of Labor Statistics’ monthly report beat Wall Street expectations, while also showing a giant revision to the previously-released job tallies of August and September.
171,000 net new jobs were created last month against calls for 125,000 and revisions for the two months prior totalled 84,000.
October also marked the 25th consecutive month of U.S. job growth — a period during which 3.8 million jobs have been reclaimed. This sum represents more than half of the 7.3 million jobs lost between 2008-2009.
Nationally, the Unemployment Rate rose by one-tenth of one percent last month to 7.9%. It may seem counter-intuitive to see unemployment rates rise even as job growth soars. However, it’s a sign of economic strength.
October’s rising Unemployment Rate is the result of more workers entering the U.S. workforce and actively looking for jobs, a manifestation of rising consumer confidence levels and optimism for the future.
Typically, mortgage rates in Arizona would worsen on a strong jobs report like this. This month, however, rates are improving. This is mostly the result of Hurricane Sandy, which is expected to create a drag on the U.S. economy with its $50 billion damage tag.
The storm has Wall Street looking past the strong jobs report, positioning itself for the next few months. Investors are moving into less risky assets until the uncertainty surrounding the storm’s effects subside. Mortgage-backed bonds are considered “safe” and are benefiting from this safe haven buying pattern.
For home owners and buyers in Cornville and nationwide, the shift is yielding an opportunity to lock mortgage rates at artifically-low levels. 30-year fixed rate mortgages remain well below 3.50% for borrowers willing to pay discount points, and home affordability is approaching an all-time high.
Home values are expected to rise through 2013 so consider this week’s low rates a gift. If you’re in a position to go to contract and/or lock a mortgage rate, you may want to take that step today.
The U.S. housing market appears headed for a strong close to 2012.
According to the U.S. Census Bureau, the number of new homes sold jumped to 389,000 units in September 2012 on a seasonally-adjusted, annualized basis.
Not since the expiration of the $8,000 federal home buyer tax credit in April 2010 have new homes sold at such volumes.
September’s tally marks a 5.7 percent increase from the month prior, and a 27 percent increase from September 2011. There are now just 145,000 new homes for sale nationwide and, according to the National Association of Homebuilders, buyer demand continues to grow.
At today’s pace of home sales, the entire U.S. inventory of new homes for sale would sell out in 4.5 months. By way of comparison, in January 2009, new home supply was 12.1 months.
When home supplies dip below 6.0 months, analysts say, it signifies a “seller’s market”; one in which sellers tend to benefit from negotiation leverage over buyers. The national New Home Supply has been below 6.0 months since October 2011.
Perhaps that’s one reason why the average new home sale price has climbed 14.5 percent over the past 12 months to $292,400; and why median new home sales prices have made a similar jump.
With builders reporting prospective buyer foot traffic at its highest level since 2006, home supplies are shrinking at a time when buyer demand is rising. Low mortgage rates and affordable housing choices contribute, too.
30-year fixed rate mortgage rates have been under 4 percent for all of 2012, and are now under 3.50% nationwide. Low rates make for low monthly payments but, like home prices, conditions can’t remain buyer-friendly forever.
For today’s home buyers of new construction, the outlook for finding “great deals” in 2013 may be grim. New home prices are expected to rise and supplies will continue to get scarce. The best homes in the new construction market, therefore, may be the ones you buy today.
By early-next year, low home prices may be gone, and low mortgage rates may be, too.
Mortgage rates in Arizona continue to troll near all-time lows, boosting the purchasing power of home buyers statewide.
According to Freddie Mac’s most recent Primary Mortgage Market survey, the average 30-year fixed rate mortgage is now 3.39 percent nationwide, just three ticks off an all-time low. At the start of last quarter, 30-year fixed rate mortgage rates averaged 3.62 percent.
One year ago, they averaged 4.12%.
When mortgage rates are falling, they present Cornville home buyers with interesting options. Because of lower rates, buyers can choose to tighten their household budgets, buying an ideal home but paying less to own it each month. Or, for buyers who shop for homes by “monthly payment”, falling mortgage rates put more homes with affordability’s reach.
As a real-life example, for a buyer whose monthly principal + interest mortgage payment is limited to $1,000 per month, and whom opts for a 30-year fixed rate mortgage, as compared to January of this year, the maximum property purchase price has climbed 6.6%, or $14,000 in list price.
Consider this comparison:
- January 2012 : A payment of $1,000 afforded a maximum loan size of $211,756
- October 2012 : A payment of $1,000 affords a maximum loan size of $225,771
The 6.6 percent increase in affordability outpaces this year’s rise in home prices and is one reason why the U.S. housing market is improving. Slowly and steadily, the U.S. economy is improving and “good deals” in housing are becoming harder to find. In addition, because homeownership is now less expensive than renting in many U.S. cities, home demand among buyers continues to rise.
For today’s home buyer, market conditions appear ripe. Mortgage rates are near all-time lows, low-downpayment mortgage program remain plentiful, and home values have been rising since late-2011. Within 6 months, rates may be up and homes prices, too. Purchasing power would decline, decreasing home affordability nationwide.
The best “deals” in housing, therefore, may be the ones you find today.
The Federal Open Market Committee ends a 2-day meeting today, the group’s sixth of 8 scheduled meetings this year. As a Sedona home buyer or would-be refinancer, be ready for mortgage rates to change.
The Federal Open Market Committee is a 12-person sub-committee of the Federal Reserve. Led by Fed Chairman Ben Bernanke, it’s the group within the Fed tasked with voting on U.S. monetary policy.
The act for which the FOMC is most well-known is its management of the Fed Funds Rate. The Fed Funds Rate is the interest rate at which banks borrow money from each other overnight. It’s one of several interest rates under Federal Reserve management.
“Mortgage rates”, however, is not among them.
The Federal Reserve does not set or make mortgage rates — Wall Street does. Further, there is no historical correlation between the Fed Funds Rate and the average conforming 30-year fixed rate mortgage rate. At times, the two benchmark rates move in the same direction. Other times, they diverge.
They’ve been apart by as much as 5.29 percent, and have been as near as 0.52 percent.
Today, the spread between the Fed Funds Rate and the 30-year fixed rate mortgage rate is roughly 3.34%. That will change beginning at 12:30 PM ET today. This is the time at which the FOMC adjourns and releases its public statement to the markets.
The FOMC is expected to announce no change in the Fed Funds Rate, leaving it within its current target range of 0.000-0.250%. How mortgage rates throughout Arizona respond to the Fed, though, will depend on whether the nation’s central banker adds new market stimulus in the form of a third round of quantitative easing.
If the Fed adds new stimulus and it’s deemed large enough to be propel the economy ahead, stock markets will gain and bond markets should, too. This would lead mortgage rates lower. Conversely, if the size of the stimulus is deemed too small to be effective, mortgage rates will rise. Maybe by a lot.
Mortgage rates couldn’t fall forever, it seems.
This week, for the first time since mid-June, the 30-year fixed rate mortgage rate climbed on a week-over-week basis, moving 6 basis points to 3.55%, on average, nationwide.
According to Freddie Mac, 3.55 percent is the highest average rate at which the benchmark product has been offered in close to 4 weeks.
The Freddie Mac published mortgage rate is available for prime borrowers willing to pay a full set of closing costs plus an accompanying 0.7 discount points.
Discount points are a one-time, upfront mortgage loan fee to be paid at closing where 1 discount point is equal to one percent of your loan size. In this way, a Cottonwood home buyer who pays one discount point at closing will be responsible for an additional $1,000 in closing costs per $100,000 borrowed.
However, although Freddie Mac says that the average mortgage rate is 3.55%, not everyone who applies for a conforming mortgage will get access to that rate. This is because Freddie Mac’s published rates are the ones offered to “prime” borrowers, the definition of which often includes :
- Top-rated credit scores, typically 740 or higher
- Verifiable income using two year’s of tax returns
- Home equity of at least 25%
Borrowers not meeting the above criteria should expect slightly higher mortgage rates and/or discount points. In some cases, such as when an applicant’s credit score is below 680, mortgage rates may be higher by as much as 0.500%.
Although mortgage rates are up this week, though, the impact on home affordability is muted. Mortgage payments rose just $3 per month per $100,000 borrowed this week as compared to last week. 3.55% remains the third-lowest Freddie Mac rate of all-time.
Mortgage rates remain unpredictable and there’s no guarantee for low rates to last forever — much less through August. If today’s mortgage rates meet your needs, therefore, consider locking something in.
New construction housing is in a post-recession rally.
As reported by the Census Bureau, on a seasonally-adjusted, annualized basis, last month’s Single-Family Housing Starts rose 5 percent to 539,000 units nationwide. This is the highest reading since April 2010, the last month of that year’s federal home buyer tax credit.
A “housing start” is a new home on which construction has started.
June’s strong numbers also mark the fourth consecutive month during which Single-Family Housing Starts have climbed. This, too, has not occurred since April 2010.
The data is yet one more signal to Cornville home buyers that today’s new construction market has its worst days behind it.
Home builders think so, too.
Earlier this week, the National Association of Homebuilders released its monthly Housing Market Index, a metric which tracks homebuilder confidence. Home builders report higher sales levels and massive foot traffic as compared to just 12 months ago. They also expect second-half sales in 2012 to climb sharply.
It’s no wonder that home builder confidence rose to a 5-year high. Builders are building homes and buyers are buying them.
Today’s market for new homes has been spurred forward by low mortgage rates, but rising rents have played a part, too. In many parts of the country, a comparable home is less expensive to own than to rent, which creates an incentive for renters to buy homes instead.
The availability of low downpayment mortgage programs via the FHA and other government agencies helps as well.
It’s a good time to be home buyer. Mortgage rates are at all-time records, home prices remain low nationwide, and the real estate market is believed to be entering the beginning of a sustained, multi-year recovery.
If you’re undecided about whether now is a good time to buy a new home, speak with your real estate agent. The cost of home ownership may never be as low as it is today.
When the calendar flips to a new year, analysts and economists like to make predictions for the year ahead.
So, today, with the year half-complete, it’s an opportune time to check back to see how the experts’ predictions are faring (so far).
If you’ll remember, when 2011 closed, the housing market was showing its first signs of a reboot. Home sales were strong, home supplies were nearing bull market levels, and buyer activity was strong.
Homebuilder confidence was at its highest point in 2 years and single-family housing starts had made its biggest one-month gain since 2009.
In addition, 30-year fixed rate mortgage rates had just broke below the 4 percent barrier and looked poised to stay there.
There was a lot about which to be optimistic in January 2012.
Yet, there were obstacles for the economy. The Eurozone’s sovereign debt issues remained in limbo, oil prices were spiking, and the Unemployment Rate remained high — three credible threats to growth.
At the time, analyst predictions for the economy occupied both ends of the spectrum, and everywhere in between.
As another example, American Banker said mortgage rates would rise in 2012. The LA Times, however, said just the opposite. And, the problem with these predictions is that each party can make such a sound defense of their respective positions that it’s easy to forget that a prediction is really just an opinion.
Nobody can know what the future holds.
A lot has changed since those predictions were made :
- Job growth slowed sharply after a strong Q1 2012
- Oil costs dropped rapidly beginning in early-May
- Spain and Italy have joined Greece as potential sovereign debt trouble-zones
Now, none of this was known — or expected — at the start of the year yet each has made a material change in the direction of both the housing and mortgage markets.
Today, home prices remain low and 30-year fixed rate mortgage rates now average 3.56% nationwide. Home affordability is higher than it’s been at any time in recorded history and, at least for now, low downpayment mortgage products remain readily available.
The experts never saw it coming.
6 months from now, the markets may be different. We can’t know for sure. All we can know is that today is great time to be a home buyer in Cottonwood. Home prices and mortgage rates are favorable.