Mortgage interest rates have fallen to their lowest level of the year. Economists say homebuyers have the financial turmoil in Europe to thank for that, as overseas investors have put their dollars instead towards what they see as safer U.S. securities.
The mortgage industry has been bracing for a rise in interest rates now that the Federal Reserve has ceased buying mortgage-backed securities. But with international money being poured into U.S. Treasury bonds, which are closely tied to rates for home loans, that rise has yet to come about – a definite plus for the residential real estate market here in the states as it confronts an expected drop in sales activity now that the homebuyer tax credit has expired.
According to Freddie Mac’s rate report released Thursday, interest rates on 30-year fixed-rate mortgages (FRM) averaged 4.78 percent (0.7 point) this week, down from last week when the average rate was 4.84 percent. According to the GSE’s study, the 30-year FRM has not been lower since the week ending December 3, 2009, when it averaged 4.71 percent.
The 15-year FRM this week averaged 4.21 percent (0.7 point), Freddie Mac reported. That’s a slight drop from last week when it was 4.24 percent. Freddie says the 15-year FRM has not been lower since it started tracking 15-year rates in August of 1991.
“These low rates will help to elevate homebuyer affordability and soften the effects of the sunset of the homebuyer tax credit,” said Frank Nothaft, Freddie Mac’s VP and chief economist. “The latest information from Freddie Mac’s repeat-transactions home-price indexes also show some encouraging signs, with national metrics either slowing their descent or showing a modest rise, suggesting that the sharp downturn in national indexes since 2006 may be nearing an end.”
A separate study from Bankrate Thursday also puts mortgage rates at 2010 lows. Bankrate’s survey is based on data provided by the top 10 banks and thrifts in the top 10 markets.
Thirty-year fixed mortgage rates dropped to 4.92 percent (0.42 point) – a record low in Bankrate’s weekly survey. Last week, the 30-year rate came in at 4.96 percent.
The average 15-year fixed mortgage was unchanged from last week in Bankrate’s study at 4.34 percent, as was the larger jumbo 30-year fixed rate at 5.75 percent.
“The angst of investors around the globe about European debt, slower growth in China, and saber-rattling on the Korean Peninsula all feed into what is known as the ‘fear trade,’” Bankrate said in its report. “That fear trade has helped bring yields on U.S. Treasury securities considerably lower and mortgage shoppers have been direct beneficiaries.”
Friday, May 28, 2010
Monday, May 24, 2010
The housing recovery is just around the corner
The housing recovery is just around the corner – at least that’s the consensus among a panel of 92 well-known industry economists and analysts.
The Madison, New Jersey-based analytics firm MacroMarkets LLC, founded by Robert Shiller, real estate sage and father of the closely-watched Case-Shiller Home Price Index, polled the group of housing market experts and strategists from the likes of Alliance Bernstein, Columbia Business School, Deutsche Bank, Moody’s Analytics, and the GSEs.
Based on their responses, the onset of price recovery in U.S. single family real estate is widely expected by 2011.
Between 2010 and 2014, the panelists forecast a rise in home prices of more than 12 percent.
“The survey results are important because they represent a consensus view among experts with rich and diverse knowledge,” Shiller said. “In the May survey they see only the slightest hint of a downdraft in home prices this year, and after that a respectable uptrend in prices, well ahead of the likely inflation rate.”
But Shiller added, “However, there were a number of panelists more or less sanguine than average, some significantly so, and this reflects continuing volatility and risk in the U.S. housing market.”
The views of those questioned by MacroMarkets didn’t all align. Joe LaVorgna, the chief economist at Deutsche Bank, pegs home prices to rise 37 percent over the next four years.
At the low end of the scale, both Gary Shilling, president of A. Gary Shilling & Co., and Anthony Sanders, professor of real estate finance at George Mason University, expect prices to have fallen by 18 percent by the end of 2014.
“The expectations within this first survey were provided following the end of the homebuyer tax credit and of the Federal Reserve’s $1.25 trillion mortgage-backed securities purchase program,” Shiller said. “It will be interesting to see how panelist views evolve in future months.”
According to the Federal Reserve, the aggregate value of real estate owned by households at the end of 2009 was $16.6 trillion.
Terry Loebs, MacroMarkets managing director and co-developer of the survey, put that figure into perspective when he said, “This asset class is still larger than U.S.-listed stocks in aggregate market capitalization terms.”
Loebs said, “The scale of the U.S. housing market, coupled with the powerful wealth effects of prevailing home equity levels, warrant close attention to future home prices. For example, if the cumulative 12.4 percent improvement in aggregate national home value follows the path that this panel’s year-by-year averages are suggesting, consumer balance sheets will improve by $2.1 trillion in less than five years.”
The Madison, New Jersey-based analytics firm MacroMarkets LLC, founded by Robert Shiller, real estate sage and father of the closely-watched Case-Shiller Home Price Index, polled the group of housing market experts and strategists from the likes of Alliance Bernstein, Columbia Business School, Deutsche Bank, Moody’s Analytics, and the GSEs.
Based on their responses, the onset of price recovery in U.S. single family real estate is widely expected by 2011.
Between 2010 and 2014, the panelists forecast a rise in home prices of more than 12 percent.
“The survey results are important because they represent a consensus view among experts with rich and diverse knowledge,” Shiller said. “In the May survey they see only the slightest hint of a downdraft in home prices this year, and after that a respectable uptrend in prices, well ahead of the likely inflation rate.”
But Shiller added, “However, there were a number of panelists more or less sanguine than average, some significantly so, and this reflects continuing volatility and risk in the U.S. housing market.”
The views of those questioned by MacroMarkets didn’t all align. Joe LaVorgna, the chief economist at Deutsche Bank, pegs home prices to rise 37 percent over the next four years.
At the low end of the scale, both Gary Shilling, president of A. Gary Shilling & Co., and Anthony Sanders, professor of real estate finance at George Mason University, expect prices to have fallen by 18 percent by the end of 2014.
“The expectations within this first survey were provided following the end of the homebuyer tax credit and of the Federal Reserve’s $1.25 trillion mortgage-backed securities purchase program,” Shiller said. “It will be interesting to see how panelist views evolve in future months.”
According to the Federal Reserve, the aggregate value of real estate owned by households at the end of 2009 was $16.6 trillion.
Terry Loebs, MacroMarkets managing director and co-developer of the survey, put that figure into perspective when he said, “This asset class is still larger than U.S.-listed stocks in aggregate market capitalization terms.”
Loebs said, “The scale of the U.S. housing market, coupled with the powerful wealth effects of prevailing home equity levels, warrant close attention to future home prices. For example, if the cumulative 12.4 percent improvement in aggregate national home value follows the path that this panel’s year-by-year averages are suggesting, consumer balance sheets will improve by $2.1 trillion in less than five years.”
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