Market is finally reacting to record-low mortgage ratesby Tim Manni
With mortgage rates holding at record lows, it seems the real estate market is finally taking notice. In fact, the National Association of Realtors said the housing recovery is finally underway (déjà vu anyone?).
Recent reports on home sales, home loan applications and mortgage rates all seem to back up the NAR’s statement—even if we’ve heard it all before.
According to HSH.com’s Weekly Mortgage Rates Radar, rates on the most popular types of mortgages moved in slightly different directions recently. The average rate for conforming 30-year fixed-rate mortgages declined by 4 basis points (0.04 percent) to a new record low of 3.87 percent. Conforming 5/1 hybrid ARM rates increased by a single basis point from last week’s new low, closing the Wednesday-to-Tuesday wraparound weekly survey at an average of 2.86 percent.
“While mortgage rates managed another slight ease over the last five days, there are some signs they are stabilizing,” said Keith Gumbinger, vice president of HSH.com. “The good news is that these rates seem to be attracting homebuyers back into the market.”
Recent figures for both existing and new-home sales were up recently, according to industry sources. The NAR reported on Tuesday that existing home sales were up 3.4 percent in April and 10 percent higher than a year ago.
“It is no longer just the investors who are taking advantage of high affordability conditions. A return of normal home buying for occupancy is helping home sales across all price points, and now the recovery appears to be extending to home prices,” said Lawrence Yun, NAR chief economist. “The general downtrend in both listed and shadow inventory has shifted from a buyers’ market to one that is much more balanced, but in some areas it has become a seller’s market.”
Low mortgage rates also continue to support refinance activity.
According to the Mortgage Bankers Association, for the week ending May 18, mortgage applications were up 3.8 percent from the week prior. The MBA’s Refinance Index was up 5.6 percent from the week prior, marking the third-straight weekly increase. The MBA’s Refinance Index now sits at its highest level since February 10, 2012.
Positive effects all around
“Persistently low interest rates are starting to have positive effects on the housing market,” noted Gumbinger. “HARP 2.0 refinances will start to put money back in homeowners’ pockets, and strong affordability at these interest rate levels should foster demand for both new and existing homes. Provided the economy holds fairly firm, we could be in for a solid close to the spring homebuying season.”