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January 9th, 2012

Mortgage rates start 2012 at 60-year lows

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falling ratesOut with the old year, in with the new. After several months of improving economic reports, optimism appears to be growing for the moment that the new year will bring steadily improving economic growth. There will no doubt be challenges both expected and unexpected as 2012 progresses, and probably, some beneficial surprises as well.

Will the housing market be one of them? It could be. Sales of existing homes are nudging higher, builders are building again (at least multifamily stock) and mortgage rates, well, mortgage rates really don’t get any lower than they are at the moment and are starting 2012 at approximately 60-year lows. That said, better economic news, should it persist, will tend to bump rates higher as we go.

Mortgage rates: A basis point or so off record lows

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 slid by three basis points (.03 percent) last week, easing to an average 4.26 percent, while the FRMI’s 15-year companion lost four basis points (.05 percent) to finish last week’s survey at an average 3.56 percent.

Important to homebuyers and low-equity-stake refinancers, FHA-backed 30-year mortgages retreated by four hundredths of a percentage point to 3.89 percent, while the overall average for 5/1 Hybrid ARMs erased three basis points to end at 3.07 percent. All the averages are within a basis point or so of record lows.

Jobs mean a lot to housing

Aside from fantastic mortgage rates and lots of affordable housing stock, the key to a housing market improvement is fewer folks losing jobs and more getting them. In that regard, the end of 2011 points to a hopeful warming trend.

Seasonal adjustments aside, over the past five weeks new claims for unemployment assistance have been in their most favorable pattern since March 2011. During the week ending December 31, that trend continued with 372,000 new applications for benefits filed at state windows. Fewer people losing jobs is a key to rebuilding shattered consumer confidence as we roll forward.

New hires are 100 percent higher

Fewer layoffs are welcome, but perhaps more important is that more unemployed people find new jobs. After a 2011 low point of just 20,000 new hires in June, job growth has turned more solidly positive, with no month since then sporting fewer than 100,000 new hires. December’s figure was expected to improve on November’s 100,000 increase by perhaps 50 percent, but the employment report last Friday was actually 100 percent higher, closing out 2011 with a sound 200,000 new jobs created. The nation’s rate of unemployment eased back to 8.5 percent, partially driven there by a 50,000 contraction in the nation’s workforce.

Mortgage rates are at quite favorable levels, and it would take monumental economic change for better or worse to move them in either direction very much. At the moment, the warmer economic climate here is providing some much-needed distraction from the troubles in Europe, but those issues continue to influence the markets.

Will the good news continue?

Look for little change in mortgage rates this week, perhaps a couple of basis point upward movement at most.

For a longer-range outlook for mortgage rates and the economy, one which will take you up until mid-February, have a look at our new Two-Month Forecast.

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One Response to “Mortgage rates start 2012 at 60-year lows”

  1. 2012: The Year for First Time Home Buyers | Orange County 203k Contractor & 203k Consultants Says: January 11th, 2012 at 9:30 am

    [...] deals…it’s definitely the year for first time home buyers. In fact, did you know that interest rates are at 60-year lows right now (for most buyers*)? With rates below 4% for some loans, it’s a shock to those [...]

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About the HSH Blog

HSH.com's daily blog focuses on the latest developments in the mortgage and housing markets. Our mission is to relate how changes in mortgage rates and housing policy, as well as the latest financial news, impacts consumers, homebuyers and industry insiders alike. Our 30-plus years of experience in the mortgage industry gives us an edge as we break down the latest changes in an ever-changing market.

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Tim Manni

Tim Manni is the Managing Editor of HSH.com and the author of their daily blog, which concentrates on the latest developments in the mortgage and housing markets.

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