Here's an interesting video (Wall Street Journal) explaining a little bit about why mortgage rates are rising. There's also a little bit in here about how "staying on the fence" could lead to a higher monthly payment. That said, rates are still historically low and it's a great time to buy. (Feel free to forward this to a friend who might be interested.)
Last week was jam-packed with economic news; here are some highlights with emphasis on housing and mortgage related news:
Monday: Retail sales for April increased to -0.1 percent from the March reading of -0.5 percent and also surpassed Wall Street’s downward forecast of -0.6 percent. Retail sales are important to economic recovery as sales of goods and services represent approximately 70 percent of the U.S. economy.
Tuesday: The National Federation of Independent Business (NFIB) released its Small Business Optimism Index for April with encouraging results. April’s index rose by 2.6 points to 92.1. A reading of 90.7 indicates economic recovery. This index is based on a survey of 1873 NFIB member businesses.
Wednesday: The National Association of Home Builders/Wells Fargo Housing Market Index (HMI) for May matched investor expectations with a reading of 44. At three points above the March reading of 41, this report suggests that builders are slowly gaining confidence in national housing markets.
Thursday: The U.S. Commerce Department reported that Housing Starts fell by 16.5 percent in April to a seasonally-adjusted annual level of 853,000 from 1.02 million housing starts in March. This reading fell short of investors’ consensus of 965,000 housing starts, however, this decrease was caused by the volatile apartment construction sector.
Friday: Consumer sentiment for May surpassed investor expectations of +0.3 percent and came in at +0.6 percent. As consumer sentiment improves, it’s likely that more consumers will buy homes.
Rising Interest Rates Show Strengthening Economy
Mortgage rates rose last week according to Freddie Mac. The average rate for a 30-year fixed rate mortgage rose from 3.42 percent to 3.51 percent with borrowers paying 0.70 in discount points and all of their closing costs.
15-year fixed rate mortgages rose from 2.61 percent last week to 2.69 percent this week with borrowers paying 0.70 in discount points and all of their closing costs.
This news is consistent with a strengthening economy, but is narrowing opportunities for home buyers seeking both affordable home prices and low mortgage rates.
Federal Open Market Committee Minutes To Be Released This Week
Looking ahead, economic news for this week includes the Existing Home Sales report for April with an expectation of 5.00 million homes sold on a seasonally-adjusted annual basis against the March tally of 4.93 million homes sold.
Also set for release on Wednesday are the Federal Open Market Committee (FOMC) Minutes for the meeting held April 30 and May 1. The FOMC meetings typically include discussions of the Federal Reserve’s current policy on quantitative easing (QE) which consists of the Fed buying $85 billion per month in MBS and treasury bonds.
When the QE program ends, mortgage rates will likely increase as bond prices decline due to lesser demand.
Thursday brings the weekly Jobless Claims Report along with New Home Sales for April. The consensus for new homes sold is 430,000 as compared to the March reading of 417,000 new homes sold.
The Federal Housing Finance Agency (FHFA), which oversees Fannie Mae and Freddie Mac, will release its Home Price Index for March on Thursday.
Mortgage rates rose last week with average rates a 30-year fixed rate mortgage rising from last week’s 3.35 percent to 3.42 percent with buyers paying all closing costs and 0.7 percent in discount points.
Average rates for a 15-year fixed rate mortgage rose from 2.56 percent to 2.61 percent with buyers paying their closing costs and 0.7 percent in discount points.
Freddie Mac also reports that average rates for a 5/1 adjustable rate mortgage rose from 2.56 percent last week to 2.58 percent with buyers paying their closing costs and 0.5 percent in discount points.
Here are noteworthy points from last week’s economic news:
Monday: In spite of improving economic conditions, a majority of participants in the Senior Loan Officer Opinion Survey on Bank Lending Practices indicated that their lending institutions would not be relaxing residential mortgage lending standards. Lenders perceive a significant risk in terms of being required to absorb losses incurred on defaulted mortgage loans.
Mortgage owners including Fannie Mae and Freddie Mac, along with mortgage insurance companies can require mortgage lenders to buy back defaulted loans or make them whole for losses related to foreclosed and otherwise defaulted mortgage loans.
Tuesday: CoreLogic reported an increase of 1.9 percent in national home prices for March. This news represents the 13th consecutive increase and a year-over-year increase of 10.5 percent.
Home prices were boosted by strong increases in the West; Nevada posted a 22.2 percent gain from last March and California posted a 17.2 percent year-over-year gain.
CoreLogic predicted a year-over-year increase of 9.6 percent for home prices for April, with a monthly increase of 1.3 percent increase expected between March and April.
Thursday: Weekly jobless claims brought good news as they came in at 323,000; this was lower than expectations of 335,000 new jobless claims and the 327,000 new jobless claims reported in the prior week.
Friday: The Treasury Department reported that the federal budget has a surplus of + $113 billion for April. This was $54 billion higher than for April 2012 and the highest monthly surplus since April, 2008.
Increasing home values and federal budget surpluses, along with falling consumer debt pointed the way toward overall as well as personal economic recovery last week.
What‘s Coming Up
This week brings a couple important economic reports affecting the real estate industry including the Home Builders Index on Wednesday and the Weekly Jobless Claims and Housing Starts numbers released on Thursday.
The Consumer Sentiment and Leading Indicators reports will round out the week on Friday. Consumer Sentiment is important in terms of housing markets and mortgage lending; consumers typically don’t buy homes or move up to a larger home if they aren’t feeling secure about economic conditions.
This week’s economic data may provide further evidence of a stronger U.S. economy as well as a snapshot of retail spending and consumer costs.
Mortgage rates fell last week and approached or reached record low levels.
According to Freddie Mac, the average rate for a 30-year fixed rate mortgage (FRM) fell from 3.40 percent to 3.35 percent. Average rates for a 15-year FRM moved from 2.61percent to 2.56 percent.
Average rates for a 5/1 adjustable rate mortgage (ARM) fell to 2.56 from last week’s average of 2.58 percent Discount points for last week’s mortgage rates ranged from 0.7percent for 30 and 15 year FRM loans to 0.5 percent for a 5/1 ARM.
Rock-bottom mortgage rates can offset the impact of rising home prices.
Last Week Was A Strong Showing For The US Economy
Last week’s economic news provided further indications of economic recovery, with housing related reports contributing to overall confidence in a stronger economy.
Highlights of last week’s news include:
Monday: Pending home sales moved up to 1.50 percent in March from February’s -1.07 percent. This reading also surpassed Wall Street’s forecast of 0.90 percent for March.
Tuesday: The Case-Shiller Home Price Index for February reported that the national average home price had increased by 9.3 percent year-over-year between February 2012 and February 2013. By comparison, the average national home price between January 2012 and January 2013 increased by 8.1 percent year-over-year. Rising home prices are contributing to the economic recovery, but in some areas demand for homes exceeds supply, which also contributes to rising home prices.
Wednesday: The Federal Open Market Committee (FOMC) issued its scheduled statement after its meeting concluded. Committee members noted signs of an improving economy, and cited housing markets as a leading contributor to the recovery. The FOMC statement also indicated that economic conditions were not sufficiently improved for the FOMC to change or cease the Federal Reserve’s quantitative easing policy. The Fed’s goal for its current quantitative easing program is keeping long-term interest rates including mortgage rates low.
Thursday: The weekly Jobless Claims Report brought better-than-expected news with new jobless claims coming in at 324,000, less than the expected reading of 345,000 new jobless claims and also higher than the previous report’s reading of 342,000 new jobless claims.
Friday: The Bureau of Labor Statistics issued its monthly “Jobs Report,” which consists of the Non-farm Payrolls Report and the national Unemployment Rate. Again new jobs added exceeded expectations for April with 165,000 jobs added against expectations of 135,000 new jobs added. April’s reading also surpassed the March reading of 138,000 new jobs.
The unemployment rate dropped to 7.5 percent as compared to a consensus of 7.6 percent and last month’s reading of 7.6 percent. To put this reading in perspective, the FOMC has targeted an unemployment rate of 6.5 percent as a benchmark for adjusting its current policies including quantitative easing.
What To Look For This Week
This week’s economic events include latest Jobless Claims report on Thursday. It will be interesting to see if this week’s reading will be lower than last week’s reading of 324,000 new jobless claims.
On Friday, the Federal Budget will be released; this could influence financial markets depending on what programs and services are cut or reduced.
Mortgage rates fell again last week and are again near record lows.
According to Freddie Mac, the average rate for a 15-year fixed rate mortgage did achieve a record low of 2.61 percent as compared to 3.1 percent one year ago.
The average rate for a 30-year fixed rate mortgage fell to 3.40 percent and near the record low of 3.31 percent.
Low mortgage rates are helping homeowners with refinancing and are boosting housing markets as more buyers can qualify for mortgage loans.
Home Values Continue To Rise
Last week’s economic news was mixed; The Federal Housing Finance Agency, which oversees Freddie Mac and Fannie Mae, released its Home Price Index for February.
According to this index, home prices increased by 0.7 percent between January and February, and increased by 7.1 percent year-over-year on a seasonally adjusted annual basis.
According to the National Association of REALTORS®, existing home sales for March fell short of the expected 5.03 million and came in at 4.92 million existing homes sold on a seasonally adjusted annual basis.
This reading was also 0.7 percent shy of February’s reading of 4.95 million existing homes sold.
Some homeowners may be taking a wait-and-see stance as they wait for home values to continue rising.
Employment Numbers Gaining Steam
Weekly jobless claims fell to 339,000 and were short of the consensus of 351,000 and the prior week’s 355,000 jobless claims filed.
As more workers gain employment, those able to buy homes increases.
The economy in general also benefits as households gain income they can use for purchasing goods and services.
Consumer Sentiment rose by 2.1 points to 76.4 over the March reading of 72.3 percent.
April’s reading also surpassed expectations of 74.0 percent.
As consumers gain confidence in the economy, they are generally more likely to buy homes and make other major purchases that contribute to the U.S. economy.
Coming Up this Week
This week’s economic news calendar includes several reports that impact the housing sector as well as the general economy:
While we can’t predict what will happen with mortgage rates, some industry analysts indicated that they expect rates to remain low in the near-term.
These lower rates should continue to support growth in the Cottonwood real estate market for home buyers and sellers as well as those looking to refinance their home.
Mortgage rates fell for the third consecutive week.
According to Freddie Mac, the average rate for a 30-year fixed rate mortgage fell by two basis points to 3.41 percent as compared to last week’s 3.43 percent and 3.90 percent year-over-year.
The average rate for a 15-year fixed rate mortgage was 2.64 percent as compared to last week’s 2.65 percent and 3.13 percent year-over-year.
Falling mortgage rates were attributed to reduced consumer spending.
Last week’s economic news includes the NAHB Wells Fargo Housing Market Index (HMI), with a reading of 42 for March.
This is four points below investor expectations and two points below February’s results.
A reading of 50 or above indicates that more of the builders surveyed have a positive outlook.
March results were impacted by builder concerns over tight builder credit, a lack of available lots and increasing construction costs.
Housing Starts Increased In March
More good news for housing arrived Tuesday when the U.S. Department of Commerce issued its monthly Housing Starts report.
Housing starts for March came in higher than anticipated at a seasonally adjusted annual rate of 1.04 million, against a consensus of 933,000 and also beat February’s reported 968,000 housing starts.
Housing starts rose by 7 percent over February, and rose 47 percent over March 2012, the highest year-to-year increase since 1992.
The Federal Reserve issued its Beige Book Report which is compiled from reports by the 12 districts of the Federal Reserve.
5 districts reported moderate economic growth, 5 districts reported modest growth, and 2 reported slight economic growth.
Based on the data contained in the Beige Book Report, economists are not expecting the Fed to make changes to its current quantitative easing (QE) program of purchasing $85 billion monthly in bonds and MBS; this may help mortgage rates remain steady; when MBS prices fall, mortgage rates typically rise.
What‘s Coming Up Next
The National Association of REALTORS® releases its Existing Home Sales report for March today.
The consensus is for 5.03 million homes sold on a seasonally adjusted annual basis, and against February’s 4.98 million existing homes sold.
Tuesday brings more housing news with the FHFA Home Price Index for February; FHFA is the federal agency overseeing Fannie Mae and Freddie Mac.
The U.S. Department of Commerce releases its New Home Sales for March on Tuesday.
The consensus is 421,000 new homes sold against February’s reading of 411,000 new homes sold.
Thursday’s Weekly Jobless claims are expected to come in at 351,000 as compared to last week’s 352,000.
Employment is a key factor in terms of consumers buying homes and qualifying for mortgage loans
Mortgage rates saw little change last week amidst mixed economic news.
Treasury auctions held on Tuesday, Wednesday and Thursday saw weak demand; this could have been caused by the FOMC minutes that were released on Wednesday.
The minutes indicated that some FOMC members supported ending the current quantitative easing (QE) program within a few months.
The Fed is currently purchasing $85 billion monthly in bonds and Mortgage Backed Securities.
If the QE program is ended, demands for bonds and MBS will decline, which usually raises mortgage rates.
Employment Numbers Show Promise For Housing Market
Thursday’s jobless claims offered some positive news for the Cottonwood real estate market.
Jobless claims fell to 346,000, which is well below Wall Street’s estimate of 365,000 jobless claims and the prior week’s report of 385,000 jobless claims.
As more people find work, more families become able to buy homes.
Demand for homes will boost the housing market, which is already expanding in many areas.
While higher home prices are good for the economy, higher mortgage rates may be likely to follow.
This potentially presents a “double-edged sword” to home buyers with little financial flexibility.
Slower Retail Sales Largely Due To Autos
Retail Sales, which represent approximately 70 percent of the U.S. economy, moved from February’s level of 1.1 percent to -0.4 percent in March.
Expectations were for 0.0 percent change.
The Retail Sales report exclusive of the volatile automotive sector was nearly identical except for the February’s reading of 1.0 percent.
These reports suggest that while the economy is improving in some areas, it has a way to go before it has truly recovered.
What‘s Coming Up Next?
This week, investors will be paying attention to the Consumer Price Index (CPI) and the closely-related Core CPI, which is nearly identical except for its excludes the more volatile food and energy sectors.
These reports will be released on Tuesday for March, with little change expected for the CPI and no change expected for the Core CPI as compared to February.
The CPI is considered an important indicator of inflation.
Unexpected changes in inflationary growth can cause rapid and volatile responses in the financial markets.
Wednesday brings the Fed’s Beige Book, which presents key economic data for each of the Fed’s 12 regions.
Investors watch the Beige Book for signs of the Fed’s position on economic policy during the upcoming FOMC meeting.
Jobless claims will be released Thursday with the expectation of 350,000 claims filed as compared to last week’s 346,000 jobless claims.
Last week’s economic news includes several factors that drove U.S. mortgage rates lower.
The Bank of Japan announced that it would increase its purchase of bonds by $1.4 trillion over the next two years.
This news caused yields on Japanese bonds to fall, which made U.S. bonds more appealing to international investors, that in turn increased MBS prices and caused mortgage rates to fall.
Bumpy Employment Numbers Support Lower Interest Rates
Other significant economic news involves an unexpected drop in the number of new jobs created last month.
The Bureau of Labor Statistics (BLS) Nonfarm Payrolls Report issued Friday indicated that 88,000 jobs were added in March, which fell considerably short of the expected 190,000 jobs added as well as the 236,000 jobs added in February.
Average hourly earnings remained flat against February, which indicates another stall in U.S. economic growth.
Expanding employment sectors for March included professional and business services and healthcare, while retail jobs decreased.
Jobless claims increased last week in concurrence with lower than expected jobs added for March.
New jobless claims came in at 385,000 and were higher than expectations of 345,000 new jobless claims and the prior week’s jobless claims of 357,000.
The monthly unemployment rate fell from 7.7 percent to 7.6 percent, but this isn’t encouraging news.
According to the BLS, the unemployment rate fell due to workers leaving the work force instead of workers finding jobs.
Next week, Treasury Auctions will be held Tuesday, Wednesday and Thursday.
On Wednesday, the Federal Reserve will release FOMC minutes.
Fed Continues Monthly Bond Purchases
Investors and analysts review the minutes for predicting future economic developments and also for gauging the Fed’s sentiment about how or if changes should be made to the current quantitative easing program (QE).
The current QE program involves the Fed’s monthly purchase of $85 billion in bonds and MBS is intended to keep long-term interest rates including mortgage rates low.
Retail Sales will be released Friday, and as indicated by falling job numbers in the retail sectors, analysts are expecting no growth for March in either report.
Global news concerning North Korea and the European Union economic situation could also move U.S. markets up or down depending on the nature of the news.
While not encouraging in terms of an economic recovery, these events show that the recovery is proceeding with ups and downs; this doesn’t provide investors a clear picture and may cause them to seek safe haven in bonds.
The good news for Cornville homeowners is uncertainty and low expectations of the financial markets typically help keep mortgage rates lower.
European Market Jitters Continue To Affect The US Economy
Mortgage rates fell last week as investor concerns over the European economy grew.
Fears of growing differences between wealthier European nations and European nations needing economic aid brought higher bond prices and lower mortgage rates.
Positive news for Cyprus came when an agreement for an EU bailout was reached, but strict terms indicate that Germany and other nations are growing less enthusiastic about bailing out the banks of EU nations with shaky economies.
Meanwhile, the Italian government has not been able to agree on a coalition government, which reduces the chances for economic reform in the EU’s third largest country.
European trade with the U.S. could fall as the result of the EU’s ongoing economic challenges; this in turn would likely reduce U.S. inflation, which is good for lower mortgage rates.
Low inflation could also prolong the Fed’s commitment to its quantitative easing program that is designed to keep long term interest rates, including mortgage rates, lower.
Last Week‘s Economic News Quiet, No Major Surprises
On Tuesday, New Home Sales for February were released, and came in short of investor expectations of 420,000 home sales on an annual basis.
February’s figure came in at 411,000 new homes sold as compared to January’s revised reading of 431,000 new homes sold.
Winter weather conditions are one reason for the decline in new home sales, which was the largest decline since February of 2011.
The National Association of REALTORS® released its Pending Home Sales Index for February on Wednesday; pending home sales reflected the results for New Home Sales with a reading of -0.4 percent as compared to expectations of a 2.0 percent reading.
January’s reading for Pending Home Sales was also higher at 4.5 percent.
Home prices and mortgage rates move according to supply and demand; if demand for homes falls, home prices are likely to do likewise as are mortgage rates.
But as demand for homes increases and prices rise, mortgage rates typically rise as well. Would-be buyers who have been waiting for their best deal may want to get into the housing market now, as strong signs of economic improvement are in play, but home prices and mortgage rates haven’t yet gone through the roof.
In other economic news, Thursday’s Jobless Claims Report fell short of Wall Street projections and came in at 357,000 new jobless claims against expectations of 340,000 new jobless claims.
The previous week’s jobless claims came in at 336,000 new jobless claims.
Analysts typically view a four-week rolling average of jobless claims as a more accurate indicator for the economy as jobless claims can vary widely week-to-week.
Consumer Sentiment for March was released Friday and came in at 78.6 and exceeded expectations of 72.5 for March.
The current reading also surpassed the prior reading of 71.8 percent. As consumers gain confidence in the economy, they are more likely to buy homes.
This week, the European Central Bank (ECB) meeting scheduled for Thursday and monthly Employment Data set for release Friday are among anticipated economic news events.
Last week’s positive employment reports were good news for the economy, which typically causes mortgage rates to rise, but mortgage rates ended the week lower.
As of Thursday, Freddie Mac reports that the average mortgage rate for a 30-year fixed rate mortgage was 3.63 percent with borrowers paying their closing costs and 0.8 percent in discount points.
The average mortgage rate for a 15 year loan was 2.79 percent with borrowers paying their own closing costs and 0.8 percent in discount points.
Strong Retail Sales Show Consumer Confidence Improving
In other economic news, retail sales for February surpassed Wall Street expectations and grew by 1.1 percent against predictions of 0.5 percent and January’s reading of 0.1 percent.
Retail sales account for 70 percent of the U.S. economy and growing retail sales are a strong indicator of economic recovery, which generally causes mortgage rates to rise as bond prices including Mortgage Backed Securities fall.
With this strength in the retail sector, it may be a good time to consider locking interest rates for purchase and refinance transactions.
Results of Treasury auctions held Tuesday, Wednesday and Thursday were mixed.
Tuesday’s auction of 3-year notes saw average demand, Wednesday’s auction of 10-year notes was strong, and Thursday’s auction of 30-year bonds drew a weak response.
Financial Reporting Strong Across Multiple Indices
The Producer’s Price Index (PPI) for February met expectations at 0.7 percent and exceeded January’s level of 0.2 percent.
The Consumer Price Index (CPI) for February came in at 0.7 percent and exceeded expectations of 0.5 percent and January’s reading of 0.0 percent.
The Core CPI, which excludes food and energy sectors, demonstrates the impact of high fuel prices on the CPI with its lower numbers.
The Core CPI for February is 2.0 percent higher than for February 2012.
Upcoming Federal Reserve Meeting May Bring Interest Rate Changes
The Federal Reserve is not likely to modify its bond purchase program until the inflation rate reaches 2.5 percent.
Next week, the Federal Reserve will meet on Wednesday; investors will be waiting to see how the Fed responds to recent positive economic news in terms of potential changes to its bond purchase program, which is helping to keep mortgage rates lower.
As the deadline of March 27 for funding the Federal government approaches, investors will be following legislative talks to see how or if funding will be approved by the deadline.
Mortgage rates and the major stock market indices rose last week in response to a strong jobs report and lower national unemployment rate.
The Department of Labor’s Non-farm Payrolls report for February surpassed expectations with 236,000 new jobs reported against expectations of 170,000 new jobs expected by Wall Street.
This stronger than expected showing in jobs numbers points to a stronger economy and may lead to less pressure to hold mortgage interest rates lower.
The Dow Jones Index also reached record levels last week. This strong stock market performance is to be expected with better than expected employment reports.
February’s numbers also exceeded January’s reading of 157,000 new jobs added to the economy.
Lower Unemployment Rates Help Economy, May Push Interest Rates Higher
The Unemployment Report for February also provided good news as February’s reading dropped to 7.7 percent from January’s unemployment rate of 7.9 percent.
While good news, it’s important to bear in mind that the Fed has established and unemployment rate of 6.5 percent as a benchmark for ceasing its monetary stimulus program.
The Federal Reserve released its Beige Book Report for March on Wednesday, and summarized reports from its 12 districts by noting modest to moderate economic improvement in 10 districts and slower economic growth in 2 districts.
Residential real estate markets are improving in most districts with home prices rising and inventories of available homes shrinking.
This news, coupled with last week’s rising mortgage rates is further emphasizes the upward trend in home prices in many areas and the rising cost of financing or refinancing a home.
While rising home prices are good for the economy, they impact affordability of homes, particularly for first-time home buyers.
Busy Upcoming Week In Financial News
Next week has a busy calendar of scheduled economic news; here are a few highlights:
It will be interesting to see how or if Consumer Sentiment reacts to recent signs supporting progress toward economic recovery.
If you’ve been watching interest rates to see when the best time is to lock in, this may be a good opportunity.
As the economy continues to improve, mortgage interest rates will continue an upward climb.
U.S. Budget Stalemate, Italian Elections Stir Concerns
Mortgage rates were lower last week as investors sought safety in bonds in the wake of US legislators’ failure to agree on budget cutbacks, and after Italy’s elections failed to reveal a leader committed to continuing economic reform.
When bond prices including Mortgage Backed Securities rise, mortgage rates typically fall.
While the March 1st deadline for passing budget cutbacks for the U.S. government passed without a resolution, emergency legislation passed last year will keep the government running until March 27.
If a budget is not passed by then, the federal government could face shutdown.
As it stands, $85 billion in cuts are scheduled over the next seven months, but this represents only about 2 percent of the federal budget.
Investor concerns are likely to rise if the March 27 deadline approaches without a resolution.
Italian Elections Influence Investor Sentiment
On Monday, Italian elections were held, but the results did not reveal a leader dedicated to continuing economic reforms necessary for stabilizing Italy’s economy.
Another round of elections may be required to determine Italy’s new leader.
There is deep conflict in Italy as citizens do not agree with the need for economic austerity measures.
As the Eurozone’s third largest economy, Italy’s division on future economic reforms raises two concerns for investors.
First, without a clear reform leader established in last week’s elections, Investors fear that austerity measures may be relaxed and increase Italy’s debt risk.
A less likely risk is that Italy may leave the EU if it cannot resolve its need for economic reforms with its citizens’ wishes.
Upcoming Economic Releases
The coming week’s scheduled economic releases include:
As spring approaches, demand for homes typically increases, which in turn may drive up home prices and mortgage rates.
Consider getting pre-approved for a mortgage and looking for your new home sooner than later.
A quiet past week in economic news caused mortgage rates to worsen slightly.
This week, however, will be packed with economic reports which may have an impact on interest rates going forward.
Freddie Mac reported that the average rate for a 30-year fixed rate mortgage rose by 3 basis points from 3.53 percent to 3.56 percent with borrowers paying 0.8 in discount points and all of their closing costs.
The average rate for a 15-year fixed rate mortgage was unchanged from last week at 2.77 percent with borrowers paying 0.8 in discount points and all of their closing costs.
In other economic news, the Consumer Price Index (CPI) for January fell slightly to 0.0 percent as compared to Wall Street expectations of 0.1 percent and December’s reading of 0.1 percent.
The Core CPI, which measures consumer prices exclusive of volatile food and energy sectors, was 0.3 percent for January and surpassed analyst expectations of 0.2 percent and December’s reading of 0.1 percent.
Inflation Remains Low
These readings remain well below the 2.5 percent inflation level cited by the Fed as cause for concern.
According to the Department of Commerce, Housing Starts for January fell to 890,000 from December’s 954,000 and below Wall Street projections of 910,000.
These seasonally adjusted and annualized numbers are obtained from a sample of 844 builders selected from 17,000 newly permitted building sites.
Falling construction rates could further affect low supplies of homes reported in some areas; as demand for homes increase, home prices and mortgage rates can be expected to rise.
Full Economic Calendar This Week
This week’s economic news schedule is full; Treasury auctions are scheduled for Monday, Tuesday and Wednesday. New Home Sales will be released Tuesday.
Fed Chairman Ben Bernanke is set to testify before Congress on Tuesday and Wednesday.
Wednesday’s news includes the Pending Home Sales Index and Durable Orders.
Thursday’s news includes the preliminary GDP report for Q4 2012, the Chicago Purchasing Managers Index, and weekly jobless claims.
Friday brings Personal Income and Core Personal Expenditures (CPE).
Consumer Sentiment, the ISM Index and Construction Spending round out the week’s economic news.
Mortgage rates worsened last week in response to more indications that the U.S. economy and global economic trends are improving. Global economic data was stronger than expected; which generally boosts investor confidence and leads to higher mortgage rates in Arizona and across the country.
According to Freddie Mac, the average rate for a 30-year fixed rate mortgage was 3.53 percent with borrowers paying all of their closing costs and 0.8 percent in discount points along with a full complement of closing costs.
The U.S Department of Commerce reported that Factory Orders for December improved over November; they rose from 0.0 percent in November to 1.89 percent in December, but fell short of Wall Street’s expectation of 2.5 percent.
The ISM Services Index for January was released Tuesday and fell to 55.2 from December’s reading of 56.1 and was slightly higher than against investors’ expectations of 55.0. Readings above 50 indicate expansion of the service sector of the economy. The ISM Services Index is also an indicator of future inflationary pressure.
Homebuilders Say Markets Improve For 6th Consecutive Month
On Wednesday, the National Association of Home Builders (NAHB) released its NAHB/First American Improving Markets Index (IMI), which provided good news for housing markets in all 50 states and Washington, D. C. Metro housing markets surveyed showed expansion of improving markets for the sixth consecutive month.
259 of the 361 metro areas surveyed in the IMI showed improvement in February. By comparison, only 12 improving metro markets were reported for September of 2011.
Increasing home prices and mortgage rates suggest that now may be the time for buying a home.
The weekly Jobless Claims report released on Thursday indicated that 366,000 new claims were filed, which was higher than Wall Street’s estimate of 360,000 new jobless claims, but lower than the previous week’s 368,000 new jobless claims.
Falling U.S. Trade Deficit Signals Economic Uptick
The best economic news for last week came on Friday, when the U.S. trade deficit fell to its lowest level since January 2010. The Trade Balance Report for December shows the trade deficit at -$38.5 billion against expectations of -$46 billion and November’s deficit of -$48.7 billion. While a great boost for the economy, this is another indicator that recent low mortgage rates and home prices may soon become history.
Economic News scheduled for this upcoming week includes U.S. Treasury Auctions set for Tuesday, Wednesday and Thursday.
Retail Sales for January will be released on Wednesday and watched closely by investors. Retail sales account for approximately 70 percent of the U.S. economy and are viewed as a strong indicator of the economy’s direction.
Jobless Claims on Thursday, Industrial Production and Consumer Sentiment on Friday round out the week’s economic reports.
Mortgage rates worsened last week amid evidence of an improving economy. Conforming mortgage rates climbed in Arizona and nationwide, rising to a 4-month high.
Freddie Mac has the average 30-year fixed rate mortgage rate at 3.53% for borrowers willing to pay 0.7 discount points plus a full set of closing costs.
There was plenty of news on which for rates to move last week.
First, the Federal Open Market Committee (FOMC) met and voted to hold the Fed Funds Rate in its current target range near 0.00 percent. The Fed also recommitted to purchasing mortgage-backed securities (MBS) and Treasury securities on the open market until such time as the national Unemployment Rate reaches 6.5%, or until inflation rates rise.
Then, Friday, it was shown in the Non-Farm Payrolls report that the national jobless rate had climbed to 7.9 percent, a statistic Wall Street pinned to Hurricane Sandy. In addition, it was shown that 157,000 net new jobs were added to the U.S. economy in January.
This was a slight improvement from the month prior’s revised figures, and marked the 27th consecutive month of U.S. job growth.
Also last week, the National Association of REALTORS® reported the December Pending Home Sales Index to be lower than expected; largely the result of shortages of available homes in many areas.
In addition, Durable Orders for December were more than twice what investors expected; a further indication of a strengthening U.S. economy.
Lastly, the ISM Index for January surpassed Wall Street’s expectations. This manufacturing index is considered an indicator of future inflationary trends. An upward trend in this index suggests rising mortgage rates. While current mortgage rates remain relatively low, they can be expected to continue rising as the economy improves.
This upcoming week will be quieter with fewer economic series scheduled for release. Factory Orders for December will be announced, as will the ISM Services Index and Jobless Claims. Mortgage rates may continue to rise.
Susan Deierling, ABR, CRS
Assoc. Broker
RE/MAX Sedona
Sedona AZ
(928) 451-6098 mobile/text/VM
(888) 494-0470 (US & Canada)
susan@sedonaemail.com
Troy Deierling ABR CRS
RE/MAX Sedona
Sedona AZ
(928) 202-0700 mobile/text/VM
troy@sedonaemail.com
