2011: The year of record-low mortgage ratesby Keith Gumbinger
Amidst other notable items–crashing markets and tremendous natural disasters among them–2011 might also become known as “the year of record-low mortgage rates”. Not since the early 1950s–perhaps beyond–have mortgage rates plumbed these depths.
We begin 2012 with fixed interest rates almost a full percentage point below where we began 2011, at levels which not only promote affordability and refinance opportunities, but also at levels which are starting to warm up the housing market. Housing has been a drag on the economy for several years now (forecasts call for continued pressure on home prices in 2012), but that’s to the benefit of potential homebuyers, if a detriment to sellers.
Mortgage rates should continue to be a strong support for housing, even if they don’t set new records repeatedly this year.
Mortgage rates rose slightly last week
HSH.com’s broad-market mortgage tracker–our weekly Fixed-Rate Mortgage Indicator (FRMI)–found that the overall average rate for 30-year fixed-rate mortgages (conforming, non-conforming and jumbos) rose by three basis points (.03 percent) from the week ending Dec. 23, climbing to an average 4.29 percent.
The FRMI’s 15-year companion increased by two basis points (.02 percent) to finish the weekly survey (week ending Dec. 30) at an average 3.60 percent. Important to homebuyers and low-equity-stake refinancers, FHA-backed 30-year mortgages rose by five hundredths of a percentage point to 3.93 percent, while the overall average for 5/1 Hybrid ARMs rose by one basis point to 3.10 percent.
3 more reasons to celebrate
Mortgage rates weren’t the only thing to celebrate in 2011, and that’s especially the case as we ended the year and have begun a new one.
1. Pending home sales: The National Association of Realtors reported a 7.3 percent increase in their “pending sales” index for November. It was a much stronger than expected gain and the highest figure since the tax-credit-goosed levels seen in April 2010. Of course, not all pending sales become actual sales; problems obtaining mortgages and getting clear and prompt titles to properties in foreclosure situations can cause quite a bit of fallout. Still, there can be no doubt that there is improvement being seen here, and hopefully more will follow.
2. Jobs: Much of what happens on the home-sale front depends upon what happens to the job market. At the end of 2011, new claims for unemployment benefits rallied to fall below 400,000 on a consistent basis for the first time since early in the year, a period pre-Japan crisis, pre-debt-ceiling mess and pre-Eurozone crisis. During the week ending December 24, the news wasn’t quite as good as it had been of late, with 381,000 new applications for assistance filed at state windows. Still, December’s levels have been better than November’s, which were much better than October’s, and the trend suggests that there will be a slightly better reading for hiring when the December employment report comes out at the end of this week. We think that perhaps 150,000 new jobs may have been added during the month, possibly more.
3. People are feeling better about things: Consumer moods are improving, if tenuously. The weekly Bloomberg Consumer Comfort Index gave back about half of last week’s unexpected gains to land squarely in the middle of a seven-week range at a reading of minus 47.5 for the week ending December 25. Perhaps a holiday-fueled rush of enthusiasm has worn off a bit. However, continues improvement is being seen in Consumer Confidence, which moved to a value of 64.5 during December, a 9.3-point jump from November, with higher readings for present conditions, future expectations and the job market.
That attitudes are improving is believed to be a key to increased consumer spending in 2012, and moods would no doubt be enhanced by even meager gains in hiring and improvement in the housing market.
Mortgage rates seem likely to start this week low but firm a little toward the end, perhaps, especially if the ISM and employment report are a little warmer than forecast. We will likely see a few basis point increase at best.