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Interest Rates Improve After Volatile Week

Interest rates ended the week back at record lows, after fluctuating during the week. Following are some excerpts from this week's newsletter on interest rates from HSH Associates :

"As expected, mortgage rates retreated further from their recent upward spurt. An accumulation of economic optimism prompted that rise, but that enthusiasm has since moderated among plenty of mediocre economic data. According to the Federal Reserve, a "modest to moderate" expansion is occurring; that pace is unlikely to support conditions which can sustain higher interest rates.

Small flares in interest rates as we move forward are to be expected, though. At some point, perhaps later this year, a bump higher will hold, becoming a new plateau for rates, then another, and so on. For now, the first one in some time has passed.

 

The Federal Reserve's survey of regional economic conditions (called the "Beige Book" for the color of its cover) reported those "modest to moderate" conditions. While not exactly upbeat, the report imbued a general sense that the economy is on a much more solid stance than seen at any time over the past few years, with even residential real estate activity described as "improved in most districts."

If the economy is gaining strength, the Federal Reserve will feel much less compelled to begin any new programs to support it. The present "Operation Twist" program expires in June, and as of yet there is no indication from the Fed that it would be extended, expanded or replaced with something else. The "will they or won't they?" question is one of the factors which prompted the recent mood swing for interest rates.

Whether they will or won't remains to be seen, as the economy may or may not continue to need extraordinary support to continue to grow. For the moment, the question remains unanswered, and probably will for some weeks yet.

.Mortgage rates moved lower this week, returning to about where they were before a run-up of a few weeks moved them to 2012 highs. In addition to a flatter pattern in the domestic economy, more troubles in the Eurozone and reports that the Chinese economy had its weakest growth in three years served to get us right back where we started. In some ways, the short-lived bounce higher is an important lesson in that interest rates can and do move both up and down. Typically, rates move upward much more quickly then they decline, often surprising unsuspecting borrowers accustomed to low and falling rates.

Now that we're back at bottom, it's arguably a good time to prepare for the inevitable next bounce upward. From here, as it did before, that will require an accumulation of solid economic reports, perhaps topped off by an outsized gain in new hiring. At present, that seems unlikely to happen in April, but some encouraging news about housing next week would be a first step, should it come. Reports covering builder sentiment, housing starts and permits, and existing home sales are all due, as well as looks at consumer spending and a forward-looking economic indicator. Our bet is that March reports will report fair activity, at best, and that the warm winter stole some activity from the month, leaving us rather flat overall.

With temperate economic news expected, we think the fall in rates has completed, and might even reverse a little by this time next week. We'll figure on a couple of basis point increase in interest rates by the time next Friday rolls around."


The following are interest rate quotes from Al Hermann of American California Financial 

30 Yr Fixed FHA

Rate

APR

 

       

3.500

4.232

Details

       

 

Conforming 30 Yr Fixed up to $417000

Rate

APR

 

       

3.750

3.895

Details

       

 

Conforming Jumbo 30 Yr Fixed $417001 - $625500

Rate

APR

 

       

4.000

4.140

Details

       

 

Jumbo 30 Yr. to $1.5 Mil

Rate

APR

 

       

4.500

4.635

Details

       

 

Jumbo 7/1 ARM $1.5 Mil (higher loan amt available)

Rate

APR

 

       

3.740

3.287

Details

       

For more information about Palos Verdes and South Bay Real Estate and buying and selling a home on the Palos Verdes Peninsula, visit my website at http://www.maureenmegowan.com . I try to make this the best real estate web blog in the South Bay Los Angeles and the Palos Verdes Peninsula. I would love to hear your comments or suggestions.

Comment balloon 0 commentsMaureen Megowan • April 13 2012 12:04PM
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