The Summer of Distortionby Tim Manni
Today is the official start of summer, a season typical of “languid times for real estate and housing markets.”
Last week, the extension of the Homebuyer Tax Credit’s closing deadline was the big news here on the blog (be sure to vote on our new poll if you haven’t already). Congress’ decision to extend the period of time in which borrowers can close on their home loans and still take advantage of up to an $8,000 credit, is likely to be the last government interaction in this targeted support for buyers (and sellers) that has increased, yet distorted, demand.
The latest issue of HSH.com’s Market Trends Newsletter, “Low Rates, but Summer of Distortion,” examines the “the distorting effects of government policy on that demand, and wonder how markets would have fared without those intrusions into their more natural functions.”
Let’s take a look at mortgage rates from last week:
HSH’s market-spanning Fixed-Rate Mortgage Indicator (FRMI) eased by another four basis points [last] week, (.04%) to finish HSH’s weekly survey at 5.11%. Calculated by including rates for conforming, jumbo, and the GSE’s “high-limit” conforming products, the FRMI includes covers a broad swath of the mortgage-borrowing public. A popular alternative to the 30-year FRM comes in the form of a hybrid 5/1 ARM, which closed [last] week with a six-basis-point dip to an average interest rate of 4.17%.
Private-market, non-agency jumbos continue to move toward record low territory and now stand just six basis points above their 2003 low of 5.55%. At the turn of 2010, the average for a Jumbo 30-year FRM was 6.14%, so the decline here has been steady and appreciable.
What can we expect from mortgage rates in the short term?
Mortgage rates have no real place to go at the moment. There isn’t enough domestic economic strength or demand for credit to propel them higher, and while the the influx of cash from the euro-zone mess has pressured them down, the panic rush to safety does seem to have subsided. The Federal Reserve Open Market Committee will meet [this] week to consider these and many other things, but will report no change to policy, a moderate assessment of the present economic climate and a measured concern for the overseas problems and proposed solutions.
Find out what’s in store for this week: CLICK HERE to continue reading “Low Rates, but Summer of Distortion.”
HSH.com’s free Market Trends Newsletter, an in-depth analysis of various financial markets from the week prior, is published every Monday. Email subscribers receive it in their inbox Friday night, so sign up today! Also, be sure to check in with our Market Trends blog for all news relating to any weekly shift in mortgage rates.