Maureen Megowan's Blog

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Interest Rates nudge up a little again this week

Interest rates moved up a bit this week but remained near record lows. following are some excerpts from this week's newsletter on interest rates from HSH Associates :

"Mortgage rates bumped higher this week, climbing from near or actual record low levels to, well, former record levels. Rates moved back to early December 2011 levels; at the time, these rates were cheered with enthusiasm. This week, though, they were met with fear and concern. The fact is that mortgage and other interest rates go both down and up, and the increase in rates is reflective of good news. To cheer for lower and lower mortgage rates is to wish continued economic gloom; at this stage of the still-forming recovery, we can't imagine why anyone would wish for that.

 

A legitimate question is whether or not an increase in rates might affect home sales trends, which had been gaining at least some strength as interest rates declined over the past few months (see below).

<!-- END HOUSE AD --><!-- CONTENT HERE: 2 to 4 PARAGRAPHS -->The answer to that question is "probably not". Demand has been forming because the job market has improved somewhat, and consumer moods about the future have risen to some degree. It's also true that affordability has improved greatly; affordability is an intersection produced by the combination of home price and interest rate (this produces a needed loan amount and a monthly mortgage payment, which is then applied against a potential homebuyer's budget). Affordability is a balance between the two; should one factor rise, if affordability is to remain constant, the other must fall, and should a sustained rise in rates occur, home prices would be negatively affected again. There was a time when borrowers, faced with higher fixed-rate mortgages would switch their choice to some form of ARM, but that's less the case these days. If there is no offsetting factor (i.e. prices cannot fall, there are no viable choices of mortgage product) then demand would become affected over time. At the moment, a sustained rise in rates is unlikely, but it will also be hard for rates to fall if the economy continues to move ahead.Supporting home sales is an improving job market.

The rise in mortgage rates over the past seven business days was inevitable. The economic news has been suggesting it since perhaps mid-January if not earlier, and in the face of such evidence the market will eventually show confidence that the reports are real and that the pattern has become more trustworthy. That said, the bump in rates is small, little better than an eighth percentage point for conforming 30-year FRMs. As well, there are no indications that rates will inexorably rise in the days and weeks just ahead, but if the good news keeps coming it makes it less likely we will return to record lows.

More likely, the blast of enthusiasm which prompted the rise will become tempered by the injection of reality: We don't yet have robust growth, we don't yet have serious inflation concerns, there are serious challenges which may yet sidetrack the recovery (or at least temper it for a time), and we have a Federal Reserve committed to reviving the economy through low interest rates and mortgage price supports. Sounds like a recipe for low rates for a while yet, even if not record lows.

Given the bounce this week, it would be reasonable to expect a slight decline in rates next week of perhaps a few basis points. Mortgage and interest rates are notorious for overshooting their marks, and this is likely the case this time, too. "

 

 


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

30 Yr Fixed FHA

Rate

APR

 

       

3.750

4.437

Details

       

 

Conforming 30 Yr Fixed up to $417000

Rate

APR

 

       

3.990

4.137

Details

       

 

Conforming Jumbo 30 Yr Fixed $417001 - $625500

Rate

APR

 

       

4.250

4.392

Details

       

 

Jumbo 30 Yr. to $1.5 Mil

Rate

APR

 

       

4.625

4.761

Details

       

 

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

Rate

APR

 

       

3.875

3.327

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 1 commentMaureen Megowan • March 23 2012 06:51PM

Comments

Maureen, buyers need to move this year.  Interest rates will not stay this low forever.

Posted by Kay Van Kampen, Realtor®, Springfield Mo Real Estate (RE/MAX Broker, RE/MAX) almost 7 years ago

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