The NASDAQ just hit 5000 for the first time in 15 years. Which is great news for Technology Stocks in general, and we wanted to see what effect the Economy is having on Mortgage Rates going into March of 2015. “Although not significant in terms of cumulative up or down moves, it’s fair to say that mortgage markets and mortgage rates have become more volatile of late,” according to one Economist. In January we saw pretty significant mortgage rate declines that then evaporated in February as mortgage rates followed gas prices higher.
All of this has created a three eights to a quarter percentage point range for mortgage interest rates so far this year. One day it’s higher, the next day it drops – These swings in Mortgage Rates will continue this year, as we get closer to the point where the Fed actually does begin the process of raising rates.
At some point, most believe later this summer, a Fed move seems imminent, and once that timing is clear, mortgage rates will head up pretty quickly from recent ranges. When that will be is still not clear, and based upon the minutes from last week, it appears the Fed remains noncommittal at the moment.
Mortgage Rates For The Week
According to a glance at the CFPB Fixed-Rate Mortgage Indicator (FRMI) , we found that the overall average rate for 30-year fixed-rate mortgages declined by four basis points this week (0.04%) slipping to 3.92 percent, breaking a two-week increase. We call that positive (even though the CFPB doesn’t quote an APR).
Popular with first-time home buyers, perhaps more so now that the FHA PMI rates moved lower, rates on Mortgage News reports that FHA-backed 30-year FRMs remain well below their conforming counterparts. More erratic than fixed-rate mortgages of late, the overall 5/1 Hybrid ARM decreased by six basis points (0.06%), drifting back down to 3.08 percent for the week.
My question is – why would you take a 5/1 ARM, that you KNOW is going to go up, when it’s less than $11 a month in most cases? Maybe I’m just a girl, and like the Insurance of knowing what my payments will be?
What’s Pushing Mortgage Rates This Month
Although she did testify last week to Congress, Fed Chair Janet Yellen didn’t provide much in the way of clarity as to the Fed’s “forward” thinking. In fact, she may have further muddied the waters with regards to the potential timing of a move by noting that even changes in the Fed’s “forward guidance” (language they use to describe the potential for future policy) doesn’t necessarily mean an imminent move in Fed policy.
“In essence, the Fed seems ready to drop use of the word ‘patience’ in describing how long it will wait to begin raising rates, but doing so doesn’t mean that it will start that process anytime soon.”
With this in mind, we’ll be watching to see if a pattern develops — relatively stable rates in the valley between meetings, with more volatility both before and after them. The next Fed meeting occurs on March 17 and 18, so we’ll know soon enough.
“The latest estimate put GDP growth at just 2.2 percent, down from a preliminary estimate of 2.6 percent, with the entirety of the year now sporting just a 2.4 percent growth rate. The deceleration in the fourth quarter leave us with considerably less forward momentum for the first three months of 2015, and there remain plenty of offshore headwinds to temper any uptrend in growth,” said one Analyst.
Housing could drive the economy higher in the months ahead, but traction remains tough to come by. Sales of newly constructed homes declined by 0.2 percent to start the year, easing to an annual pace of 481,000 for the month. Sales of new homes remain in an overall uptrend, even as they struggle to attain levels perhaps half of the peak of the last decade.
Sales were mostly solid in all but the northeast, and with 100 inches of snow on the ground in some places this year – I guess that’s pretty easy to understand. It’s been brutal, who wanted to dig out enough to go look at houses? It could be a great “spring” market for the Northeast, because of some “pent-up demand” – but there will be repairs that need to be made, and all that water’s got to go somewhere, so our guess is that it could be this summer before that area gets back to “normal.”
The supply of new homes for sale remains on the lean side, with just 5.4 months of stock available Nationwide – it’s actually less than that in North Carolina. However, the total inventory of home available keeps creeping higher. 3,000 new housing units ready for sale were added to last month’s pile, which now totals 218,000 units.
“Unlike new homes, where more can be built, it’s not as easy to expand the number of homes available for sale, which rely more on a range of factors and happenstances than a single decision to build. Very thin stockpiles of homes for sale seem to be a cause for limited growth in sales of existing homes, and this situation may come to vex the spring housing market this year.” READ: Most of the First Time Home Buyers we are talking to can’t get a bid accepted on a home. Especially if the house is priced right at the market – because many times, you find multiple offers being made.
Median home prices are still some 6.2 percent above the same period last year, and even slightly higher, depending on the price range you are looking for.
An improved job market, improving incomes, low mortgage rates and loosening underwriting criteria continue to be positives for the housing market, but all the demand created by these factors is for naught if there is nothing to buy.
The Federal Reserve is always on inflation watch. They always have been, and they always will be. To that end, most measures show tepid price pressures, and the pronounced decline in energy costs is having the expected effect on at least “headline” prices. Inflation, at least in the most recent reports does not seem to be a problem.
Gasoline prices are now slightly higher from January’s dip. With no real inflation worries, we are likely to see no changes in headline CPI as we go forward. This means Mortgage Rates, barring something like a sudden dip in Oil and Gas prices, or a huge problem with Global tensions, including Greece, China and Russia/Ukraine should remain steady through the month.
The Consumer Sentiment also eased in February, the final report on sentiment for the month showed a 2.7 point decline, with the indicator easing to 95.4 for the month. The small back slide took the indicator down from January’s 11-year high. A measure over 94% has always been considered a great “Consumer Confidence” number, and most economist see it as a sign that folks will continue to buy things – which is good for the economy.
If there is a diminished confidence by the consumer, it is likely also reflecting the less-certain nature of the job market. We know that new hiring did decelerate to start the year, at least relative to how 2014 ended, and we also know that initial claims for unemployment benefits have become more erratic to the upside since 2015 began.
This new pattern could be an indication that jobs are harder to find, especially for those who are recent college graduates – but it could also be from all of that darn snow they’ve had in the Northeast.
“With the Fed in non-committal mode and with the data suggesting patience can continue for at least a while longer, interest rates in general and mortgage rates in specific have found some space to fall again. Absent some new or unforeseen financial crisis, they probably don’t have all that much space to fall, but they seem likely to drift back somewhat closer toward the middle of the recent range we’ve seen this year.“
If only… Mortgage rates have been in a fairly tight range during 2015. We hit a bit slump, and then they popped back up. Another slump, tied with great weather, as opposed to all the snow we’ve had in NC this past few weeks would be WONDERFUL! We’re not counting on another dip. We expect rates to remain pretty much where they are now, which in our way of thinking, is a sweet spot!
If you have questions about buying a new house, how to get the best deal on a new house, today’s mortgage rates, or how the Mortgage Tax Credit works – please call Steve and Eleanor Thorne 919 649 5058. As you can tell, if you’ve read all the way through this, we are Economic News Junkies – we are constantly working to get you the best mortgage rates, and we would love to help you buy a house in North Carolina!
The information contained in this post is for informational purposes only and is not an advertisement for products. Mortgage Rates are subject to change daily – and frankly we’ve seen them change in 15 minutes, that’s why we’ve only highlighted openly published averages that reflect a general direction of best mortgage rates on a national level. Local, North Carolina mortgage rates are generally different, often lower, and vary by mortgage product type and the fees associated with the program. EVENTUALLY – later this year, we believe we could see significantly higher mortgage rates.