Mortgage Rates – “The average rate on the popular 30-year fixed loan is now at its lowest level of the year and could potentially head lower into new record territory.”
Home Loan Rates: How Low Is Low?
A Video Report
When the Fed raised interest rates at the end of last year, most everyone in the industry believed that would bring on a rise in mortgage rates. Well, that shows how much the “folks in the know” … know. The big real estate news of 2016 (so far) is that exactly the opposite has happened … and continues to happen.
Here’s a video report from Diana Olick of CNBC about current home loan rates, and what we might see in the near future.
Lower Mortgage Rates Still Ahead?
A few weeks ago in these pages, we pointed out the fact that home loan rates tend to follow the action of the 10-Year US Treasury bond prices. We stated then that the bond prices were indicating lower mortgage rates still to come … and that is exactly what we’ve seen during the ensuing days. At this point, the relationship between the two prices is still the same: the bonds are still trading downwards and there is no reason to suspect anything other than that Mortgage Home Loan Rates will continue to follow them for the short term.
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A potpourri of political and economic factors are behind the fall in mortgage rates, which follow loosely the yield on the U.S. 10-year Treasury. Both the Fed and the European Central Bank expressed concern this month about the trajectory of the global economy. Consumers and investors are on edge because of three factors: Oil prices can’t seem to make a decided move higher; some analysts are concerned about a stock correction; and the race for the White House has been highly volatile.
Mortgage Rates – “Mortgage rates held steady this week at 3.65 percent for a 30-year, fixed-rate loan. It’s the first time all year that rates didn’t fall …”
Do Treasury Yields Indicate Still Lower Rates Ahead?
Home Loan Rates Usually Follow Treasury Bond Yields
Will This Hold True Again?
We’ve been predicting in these pages that you could pretty much rely on continued home loan prices in the “relatively low” range for the near future. Here comes an indicator that confirms that predicition, but also says we may see even lower mortgage rates here in the near future. If you’ve been sitting on the sidelines waiting for the “perfect moment” (not a good strategy to try to pick the bottom or top of any market, by the way), then you may just see it here over the next coupld of weeks.
Treasury Bond Yields are usually a good indicator of where the mortgage market is going. Home loan rates seem to follow the Treasury yields pretty closely. As you can see in the chart above, Treasury yields have fallen signifigantly since the beginning of the year. Home loan rates have too, but they’ve not kept pace with the bond yields. This is a good indicator that we may see even lower home mortgage loan prices ahead in the near future as the two markets attempt to come back to a more normal balance.
So what about mortgages? Look at how quickly Treasury yields are falling compared to mortgage rates. The yield on the 10-year Treasury has dropped 54 basis points since the beginning of this year. Mortgage rates have fallen only 36 basis points, according to Freddie Mac.
Is History A Good Indicator Of Performance In Home Loan Rates?
So, is history a good indicator of what we can expect in the near term in mortgage rates? The short answer is “yes”. History is a good indicator in all markets when it comes to predicting what they’ll do in the future. I know it sounds old fashioned, but there really is nothing “new under the sun”. All markets are creatures that repeat the same actions again, and again, and again … with an occasional explosion of unexpected deviance from the norm. The funny thing is that after most of those abnormal variances we can look back and say, “Oh, sure! We should have seen that coming”!
Barring anything like that right here in this situation … and I don’t see anything like that coming here … we can see the possibility of even lower home loan rates in the very near future … say the next week or two. How long things will last at that lower level would be anyone’s guess.
We’ll keep our eyes out for two things here: 1) If and when these lower mortgage rates actually do materialize and come into alignment with the Treasury Yields; and, 2) Any indicators after that of when those rates might start climbing once again … and how far how fast..
Mortgage Rates – “WASHINGTON (AP) — Average long-term U.S. mortgage rates fell this week for a fourth straight week amid persisting turmoil in stock markets and global economic worries..” …
Mortgage Rates Still In Down Trend
Freddie Mac Reports Rates Drop Once Again
Just the day before yesterday I put up a post concerning home loan rates and what we could expect in the near future. Well, we have confirmation today that the trend continues. Freddie Mac reports today that mortgage rates have fallen again. That makes the 4th consecutive week in a row. As of today, the national average for a 30-year fixed-rate home loan is 3.79 percent, down from 3.81 just a week ago.
We won’t go into a whole lot of discussion here. We talked about this and what it might mean for the future in our previous post. If you’d like a bit more background, you can read that by CLICKING HERE.
The sustained decline in mortgage rates in recent weeks has spurred prospective homebuyers. Applications for mortgages increased 8.8 percent in the week ended Jan. 22 from the previous week, according to the Mortgage Bankers Association. The number of people signing contracts to purchase homes managed to inch up last month, thanks to unseasonably warm weather in the Northeast, data issued Thursday by the National Association of Realtors showed. The tiny bump suggests that home sales may plateau this year after a solid increase in 2015.
California Mortgage Rates
All states are a bit different, and California is usually just a tad higher than the national averages. Here are the home loan rates for California as of today. Right now we are where the national average was just a couple of weeks ago.
By the way … You can see this graph updated daily in the sidebar to your right here on this web site. Where you see the little widget that tells you Mortgage Rates, simply click on the little link that says “Trends”, and you see this up-to-the-minute report.
Mortgage Rates – “Mortgage rates fell for the third week in a row, with the average 30-year, fixed-rate loan going for 3.81 percent, down from 3.92 percent last week.. …”
Low Rates Are Likely Here For The Near-Term
In Spite Of Fed Rate Hikes, Turmoil In World Markets Keeps Interest Rates Low
There was some worry that the recent rise in interest rates put in place by the Federal Reserve last month was a precursor to higher home loan rates. This may be true in the longer run, especially if the Fed continues with incremental rate increases, but, for now, home interest rates are still historically low. If they’re not actually declining, at least they’re steady. Last week the average 30-year fixed-rate mortgage fell to as low as 3.81 percent. The 30 Year Fixed Rate Today is back up to 3.84 … but that’s not a big climb.
So … what’s the deal? And, more importantly, what does it mean to the consumer?
Amid current world-stock market troubles, price-war induced low oil prices, and economic chaos going on in China, most indicators show that Mortgage Home Loan Rates should remain low for the immediate future and may even get a bit cheaper in the near-term!
“That’s (3.81 percent) the lowest they’ve been since October, according to Freddie Mac, which surveys lenders every week. And given all that’s going on in the world–stock market woes, falling oil prices, and economic unease in China–it’s a decent bet home loans will get even cheaper, at least in the near term.”
Home Loan Rates And You
What do low rates for home loans mean to you? Well, considering what the exact expectations are here, if you’re someone considering buying a home in 2016, now could be the right time to begin the process. The fact is, when financial markets are in turmoil elsewhere … as in China, for instance … and things are fairly stable here at home, it becomes less expensive for the U.S. to borrow money. That sort of action / reaction is usually transferred to the home loan market in just a short amount of time. That means we will probably see prices dip a bit further for a short period of time before they start to rise again. At any rate, they should hover near where they are for a while.
When considering whether the time is right to enter or move up in the real estate market, there are many factors to consider. But if we’re speaking simply about home loan rates, then all the factors we’ve discussed above provide the prospective buyer with a time window in which to initiate the approval, shopping, and closing process that allows them to take advantage of the current low rates. So, if you’re considering taking the plunge this year, as far as home interest rates are concerned, now is a great time to start the process.
In the meantime, whenever you want to check the average current rate on a home loan, you can do that by visiting us right here at BrionCosta.com. There’s a great little widget right there in the sidebar to your right that provides that very information, plus a ton more. It’s updated daily, and you’re welcome to come here and use it any time you like!
Mortgage Rates – “Down go mortgage costs despite latest cut in Fed’s rate-lowering stimulus program. … Mortgage rate freakout a year ago proved unfounded.” …
Loan Rates Down Over Last Year
Last year at this time, market watchers were basically freaking out with predictions of skyrocketing home loan interest rates. In June of 2013 the Federal Reserve announced that it was pulling back on a stimulus program that had been seen as helping to keep rates very low. When the announcement came, many “in the know” were convinced we’d see a jump in rates that could kill the recovering real estate market.
As a result of that announcement … and the near-panic it engendered in some corners … interest rates that week jumped from 3.93% to 4.46%, the biggest one-week jump since the late 1980’s. Many forecasters were certain the real estate market had been prematurely euthanized. What actually occurred has been quite different than what these folks expected.
This last week, average interest rates were reported being offered on 30-year fixed products at 4.14%, down from 4.17% the week before. When you turn that number into actual rates offered to buyers, it means a 30-year fixed rate loan at 4.125%, as opposed to 4.5% last year at this time. That’s nearly $1,000 less in payments on a yearly basis than folks were paying in June of 2013.
Here’s a really comprehensive article by E. Scott Reckard from today’s Los Angeles Times:
The great rate freakout of June 2013 looks awfully panicky in the rearview mirror, with fixed mortgages now far cheaper than they were back then. It’s been a full year since the Federal Reserve unnerved home lenders and buyers by announcing it would choke back a stimulus program that had sent long-term borrowing costs to record lows.” …
Mortage Rates Show Housing Market Strong … Economic Growth Slow
The good news on mortgage rates can teach us a few things and indicate a few financial realities as well:
First off, panic can blind anyone, even those who usually know what they’re doing. In our experience, pronostications of either wildly pessimistic drops or amazingly explosive booms, in any “market”, are usually hot air. The reality is much more likely to be somehwere in the “Great Middle Way“. Market traders who understand the concepts of “contrarian” trading will know what I mean. When a whole lot of folks suddenly predict a great Boom or a great Bust, you can usually expect a very high liklihood of the exact opposite being the true course of things.
Secondly, we know that loan prices are pressured upwards by many factors. One of those can be economic growth in general. When the economy grows quickly we see the danger of inflation and rising prices on everything. The fact that the Fed was able to reduce its stimulus activities in the home mortgage market and rates have actually gone down is a reflection of a generally sluggish economy. The economy is growing, but slowly. The current prices of home loans shows us that there is no great upwards pressure from inflation. Thus, the withdrawal of Fed stimulus had no great upwards effect.
And, thirdly, the rates today are another good indicator that the real estate market is strong. “Supply and Demand” are still the two great arbiters of any market, and home loans are no exception. There is solid “demand” for home loans, which helps to keep rates down, and further assures us the housing market is set on a good course for the near future.
Mortgage Rates – “For three decades, the U.S. middle class enjoyed a rare financial advantage over the wealthy: lower mortgage rates … Now, even that perk is fading away …
Middle Class Suffers In Loan Market
Current Mortgage Rates & Lending Conditions Favor Wealthy Over Middle Class
When we look at today’s real estate market we see some very clear indications that the market is very good for some, but not so wonderful for most. The Middle Class is getting “priced out” of the market in many areas by high prices and high interest rates.
For many years the Middle Class was being encouraged by lenders to become home owners. They could count on paying a lower interest rate on a “normal” loan than someone financing using a “Jumbo” loan. Now that’s no longer possible. A conventional loan and a “Jumbo” are demanding interest rates that are basically the same.
Additionally, the price of housing these days, in many areas, has made the use of “Jumbo” loans a requirement. In many areas there are no homes available below the “Jumbo” loan range. This has simply knocked many potential homeowners right out of the market completely, or at least forced them to look elsewhere if that’s possible for them.
For a detailed explanation of the numbers, the facts on the ground, and how they all work together to create a situation that … like so much else these days … is favorable for the wealthy, but puts most everyone else at a disadvantage, let’s look at an article by Josh Boak, the Economic Writer for the Associated Press, as it appeared just the other day in The Pasadena Star-News.
http://www.pasadenastarnews.com Friday, April 25, 2014 9:56:09 AM
WASHINGTON — For three decades, the U.S. middle class enjoyed a rare financial advantage over the wealthy: lower mortgage rates … Now, even that perk is fading away … This trend reflects the widening wealth gap between the richest Americans and everyone else. Bankers now view jumbo borrowers as safer and shrewder bets even though conventional borrowers put less capital at risk.
Lending Conditions Reflect Greater Economic Realities
When reading Mr. Boak’s article, it doesn’t take much perception to see that the mortgage market and the real estate market are both reflecting realities that exist in the economy on a wider scale. From employment to wages and all manner of measurements, the economic recovery we’re experiencing as a nation, though undeniable, has been quick to accrue to the benefit of the wealthy, while it tends to leave behind the middle class behind and anyone not in the top percentages of earners.
The real estate market is generally considered “good” right now. Good for whom is an interesting question, and one we’ll need to discuss more in the coming days.