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November 26th, 2012

Mortgage rates ticked upward in holiday-shortened week

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Below is an excerpt from the latest Market Trends newsletter:

PercentMortgage rates held at record levels during the holiday-shortened week, as there was little strong economic data to move them around much.

Mortgage rates tick upward

HSH.com’s broad-market mortgage tracker–our weekly Fixed-Rate Mortgage Indicator (FRMI)–revealed that the overall average rate for 30-year fixed-rate mortgages (conforming, non-conforming and jumbos) rose by three basis points (0.03 percent) to 3.66 percent, rising from a record low.

Meanwhile, the overall average rate for 15-year fixed-rate mortgages (conforming, non-conforming and jumbos) also moved higher by three basis points (.03 percent) to increase to 2.99 percent, regaining a level of two weeks ago.

FHA-backed 30-year fixed-rate mortgages rose by two hundredths of a percentage point to see its average increase to 3.31 percent.

Finally, the overall average rate for 5/1 Hybrid ARMs increased by three basis points to close the survey week at 2.71 percent, backing up into the middle of a recent range.

Benefactors of low mortgage rates

Among the benefactors of low mortgage rates are the nation’s homebuilders.

In November, the National Association of Homebuilders index of member sentiment rose to a recovery high of 46, driven there by improvements in sales of single-family homes and a brightening outlook for the next six months.

Builders are happier when they are building. Housing starts rang in with a 3.6 percent rise in October, nudged upward largely from an expanding multi-family market. Single-family starts were about flat, but the overall annualized figure of 894,000 homes initiated was the highest figure since mid-2008. Permits for future activity were a little softer, though, easing to an annualized rate of 866,000 for the month.

Existing Home Sales bumped higher during October, too. The 4.79 million annualized rate was about 100,000 higher than September’s value and the second highest reading of 2012.

With the rise in sales came a drawdown in available inventory for sale, which dwindled to 5.4 months, the tightest since 2006 when a robust market saw demand still outstripping supply. Tight inventories are fostering higher prices, and the value of homes sold this October was more than 11 percent higher than this time last year.

Little rate movement expected this week

We don’t expect much movement in mortgage rates this week, which seem content to drift gently downward, if a direction can be discerned at all.

Pattern says mortgage rates will rise

Loan officer Dan Green warned last week that record-low mortgage rates could begin trending upward on a consistent basis beginning this week through the end of the year.

Need proof?

Green said just look at the numerous patterns that have held true over the last three years:

  1. In late November, holiday shopping and year-end calls for economic recovery begin. Consumer spending rises and so does optimism of better times ahead in the new year. “In response, mortgage [rates] inch higher as Wall Street seeks investment risk. This patterns continues through December and January.”
  2. From February through April, with consumer sentiment on the rise, employment increases as well. “The spring hiring binge drives even more investors out of bonds, and mortgage rates have run higher until mid-April.”

But then, Green explained how April trends take a turn. “Then, coincidentally (or not), with the last three Aprils being unkind to Europe, investors have used that month to move back into U.S. mortgage bonds, triggering a 7-month slide through which mortgage rates plunge and refinance activity soars. It’s why mortgage rates are at all-time lows even today.”

Two-month forecast for mortgage rates

Looking for an extended outlook for mortgage rates? Be sure to read HSH.com’s Two-month forecast for mortgage rates.

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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.

Our bloggers:

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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