Real Estate
What’s Ahead For Mortgage Rates This Week : August 29, 2011
by Jeff Underwood on Aug.29, 2011, under Mortgage, Real Estate
Last week was another volatile week for mortgage rates. Wall Street alternately sought risk and shunned it, causing mortgage-backed bonds to rise and fall rapidly.
There was a lot to move markets, too, including banking concerns across Europe, inflation figures within the U.S., and a public speech by Fed Chairman Ben Bernanke.
Conforming rates in Arizona rose to their highest levels of the week Wednesday afternoon, then receded into the weekend. 3
0-year fixed rates remain above their all-time lows set 2 weeks ago. 5-year ARMs are at all-time lows.
This week, mortgage rates figure to be equally jumpy. As well as a full slate of economic data, because of Labor Day, bond markets will be light on volume. When volume is light, pricing gets volatile.
The week’s calendar of data includes:
- Monday : Pending Home Sales Index; Personal Income and Outlays
- Tuesday : FOMC Minutes; Fed President Kocherlakota speaks
- Wednesday : Factory Orders
- Thursday : Jobless Claims; ISM Manufacturing Index
- Friday : Non-Farm Payrolls
Of all the reports, though, it’s Friday’s Non-Farm Payrolls that might move mortgage markets the most.
Jobs are crucial to the ongoing economic recovery and, from Wall Street to Capitol Hill, it’s top of mind.
If the jobs report shows more jobs created than expected, or a positive forward trend, expect bond markets to fall, pushing mortgage rates up. On the other hand, if the jobs report is soft, mortgage rates may improve.
We can’t know what rates in Gilbert will do on any given day, so the best strategy for a shopper is to shop with purpose. Know what you want, and be ready to lock when you see it.
If you wait too long, the rate will be gone.
Also, join me at Facebook.com/TheUglyTruthAboutMoney.
Jeff Underwood, The Street Economist
The Ugly Truth About Money
Ranking The Best Places To Live In The U.S. (2011 Edition)
by Jeff Underwood on Aug.25, 2011, under Economy, Personal Finance, Real Estate
CNNMoney recently released its Best Places To Live 2011 list.
The annual survey is based on data from Onboard Informatics. Using Quality of Life factors such as education, crime and “town spirit”, and focusing on towns with between 8,500 and 50,000 residents, the CNNMoney survey ranks the country’s best “small towns”.
To be eligible, towns must be have a median household income greater than 85 percent, and less than 200 percent of the state median income; must not be a categorized as a “retirement community”; and must be racially-diverse.
From a list of 3,570 eligible towns nationwide, Louisville, Colorado was ranked #1.
The complete Top 10 Best Places to Live as cited by CNNMoney, and their respective average home listing prices :
- Louisville, Colorado ($383,569)
- Milton, Massachusetts ($577,008)
- Solon, Ohio ($291,162)
- Leesburg, Virginia ($486,018)
- Papillion, Nebraska ($218,520)
- Hanover, New Hampshire ($643,500)
- Liberty, Missouri ($177,678)
- Middleton, Wisconsin ($347,770)
- Mukilteo, Washington ($345,487)
- Chanhassen, Minnesota ($418,607)
Rankings like these can be helpful to home buyers nationwide, but it’s important to remember that the Best Place To Live survey is subjective. You may find none of the above towns to be to your liking.
You may also find the lowest-ranked city to be your favorite.
In other words, before making a decision to buy, connect with a real estate agent who has local market knowledge. That’s the best, most reliable way to make sure you get the housing data that matters to you.
Also, join me at Facebook.com/TheUglyTruthAboutMoney.
Jeff Underwood, The Street Economist
The Ugly Truth About Money
Existing Home Sales Slip In July
by Jeff Underwood on Aug.23, 2011, under Economy, Real Estate
Home resales slipped in July.
According to the National Association of REALTORS®, Existing Home Sales nationwide fell to 4.67 million units on a seasonally-adjusted annualized basis last month. It’s the fourth straight month below the 5 million mark, and the report’s lowest reading since November 2010.
An “existing home” is a home that’s been previously occupied or owned.
In addition, the Existing Home Sales report showed home supplies rising nationwide. At the current pace of sales, in other words, the complete, national “For Sale” inventory would be exhausted in 9.4 months. This, too, is the worst reading since November 2010.
On a units basis, however, the number of homes for sale actually fell in July. As compared to June, home resale inventory dropped 65,000 units to 3.65 million.
From these figures, we can infer that, despite low mortgage rates and lagging home values, buyer activity is slowing in Arizona and nationwide. This may be seasonal, or it may be a long-term trend.
Either way, there’s opportunity for today’s home buyers.
With mortgage rates at all-time lows, home affordability is peaking. More households can afford housing payments than during any time in history and with the fall season approaching, buyers in Chandler may find contracts negotiations to be more “friendly”.
This can mean lower sale prices and larger concessions from sellers — the hallmark of a Buyer’s Market.
It’s a good time to look at your options. Talk to your real estate agent and see what’s out there for you. Low home prices may persist, but low mortgage rates likely won’t.
Also, join me at Facebook.com/TheUglyTruthAboutMoney.
Jeff Underwood, The Street Economist
The Ugly Truth About Money
What’s Ahead For Mortgage Rates This Week : August 22, 2011
by Jeff Underwood on Aug.22, 2011, under Mortgage, Real Estate
Mortgage markets improved again last week, pushing mortgage rates in Arizona to an all-time low; lower than the lows set last November, even.
Last week’s low mortgage rate drivers are primarily European. Joining the debt concerns that have dogged Europe since March, a fresh wave of doubt has surfaced about the health of some Eurozone banks. The fears sparked a new wave of safe haven buying.
Global equities were socked last week and the Dow Jones Industrial Average fell for the 4th straight week. For home buyers in Chandler , though, the timing may be perfect. As stock markets lose, bond markets gain and when bond markets gain, mortgage rates drop.
According to government-group Freddie Mac’s weekly mortgage rate survey, the average 30-year fixed rate mortgage fell to 4.17% last week with 0.7 points. This is the lowest rate-and-points combination in history.
The 5-year ARM fell to 3.08 with 0.5 points.
As mortgage rates fall, though, be wary of trying to “time the market”. It’s impossible to know when rates have bottomed and mortgage rates tend to spike without notice. That’s what happened in May 2010. And then again in November 2010. And then a third time in April 2011.
When rates rise, they could tack on 0.500% or more overnight.
This week, there is a lot that can move mortgage rates. With housing data set for Tuesday release, the Eurozone stories still unfolding, and three Treasury auctions planned, it’s best to be ready for locking.
If you’re floating a mortgage rate or still shopping, consider locking your rate as soon as possible. Rates trended higher to close out last week and will be riding that momentum forward. Rates are lower than they’ve been in history.
Take advantage of it.
Also, join me at Facebook.com/TheUglyTruthAboutMoney.
Jeff Underwood, The Street Economist
The Ugly Truth About Money
Mortgage Rates Don’t Move With The Fed Funds Rate
by Jeff Underwood on Aug.19, 2011, under Economy, Mortgage, Personal Finance, Real Estate
Last week, at its 5th scheduled meeting of the year, the Federal Open Market Committee voted to leave the Fed Funds Rate in its target range near zero percent.
The Fed Funds Rate has been near zero percent since December 2008 and, in its official statement, the FOMC pledged to leave the Fed Funds Rate untouched for at least another 2 years.
This doesn’t mean mortgage rates will be untouched for 2 years, though.
Mortgage rates and the Fed Funds Rate are two different interest rates; completely disconnected. If mortgage rates and the Fed Funds Rate moved in tandem, the chart at right would be a straight line.
Instead, it’s jagged.
To make the point more strongly, let’s use real-life examples from the past decade.
- June 2004, 529 basis points separated the Fed Funds Rate and the 30-year fixed mortgage rate
- June 2006, 168 basis points separated the Fed Funds Rate and the 30-year fixed mortgage rate
Today, the separation between the two benchmark rates is 407 basis points.
1 basis point is equal to 0.01%.
Between now and mid-2013, when the Fed may begin changing the Fed Funds Rate, the spread between rates will change based on economic expectation — not Fed action (or non-action). If the economy is expected to improve, mortgage rates in Chandler will rise and the spread will widen.
Should mortgage rates cross 6 percent before the Fed starts raising rates, it will create the widest interest rate spread in history, surpassing the 615 basis point difference set in August 1982.
At the time, the Fed Funds Rate was 10.12% and mortgage rates averaged 16.27%.
On the other hand, if the economy shows signs of a slowdown for late-2011 and beyond, mortgage rates are expected to drop.
Shopping for a mortgage can be tough — especially in a volatile environment like the current one. Mortgage rates move independent of the Fed Funds Rate. Make sure you’re watching the proper market indicators. It’s your best chance to lock the lowest rate possible.
Also, join me at Facebook.com/TheUglyTruthAboutMoney.
Jeff Underwood, The Street Economist
The Ugly Truth About Money
What’s Ahead For Mortgage Rates This Week : August 15, 2011
by Jeff Underwood on Aug.15, 2011, under Mortgage, Real Estate
Mortgage markets improved again last week. The combination of global economic uncertainty plus a dour outlook from the Federal Reserve pushed mortgage bonds to highs for 2011, and drove mortgage rates below their all-time lows.
Bonds were volatile, driven by the stock market’s gyrations.
On 4 consecutive days, the Dow Jones Industrial Average moved by more than 400 points. Rate shoppers in Arizona had no choice but to go along for the ride.
The week began with the market’s reaction to Standard & Poor’s U.S. credit rating downgrade. Mortgage bonds caught a boost on the news, and pushing rates lower throughout the day.
Tuesday, rates idled ahead of the Federal Open Market Committee meeting. There was speculation that the Federal Reserve would introduce a new round of economic stimulus but that didn’t happen. Instead, the Fed pledged to keep the Fed Funds Rate in its current range near zero percent until mid-2013, at least.
Mortgage rates dropped on the announcement and continued to drop until they fell to their lowest levels of the year — and of all-time — late Wednesday afternoon.
This proved to be the lowest rates of the week.
Thursday and Friday were marked by better-than-expected jobless figures and an improving Retail Sales number. Mortgage rates rose slightly.
This week, mortgage rates should be equally as volatile.
In addition to new bailout talks within the Eurozone, there is a bevy of economic data due for release in the U.S., as well as a full Fed speaker docket:
- Monday : Homebuilder Confidence Survey; Fed President Lockhart speaks
- Tuesday : Housing Starts; Building Permits
- Wednesday : Producer Price Index; Fed President Fisher speaks
- Thursday : Existing Home Sales; Fed President Dudley speaks
- Friday : Fed President Pianalto speaks
Mortgage rates have been trending lower in recent weeks and there are few reasons to think that trend will reverse. However, mortgage markets can be wildly unpredictable — especially when acted upon by an outside force such as the Federal Reserve or the U.S. government.
Stimulus and rheotoric can change mortgage rates in a hurry.
Therefore, if you see today’s rates and they fit within your budget, consider locking something in. Once rates start to rise, they’re going to rise quickly.
Also, join me at Facebook.com/TheUglyTruthAboutMoney.
Jeff Underwood, The Street Economist
The Ugly Truth About Money
What’s Ahead For Mortgage Rates This Week : August 8, 2011
by Jeff Underwood on Aug.08, 2011, under Mortgage, Real Estate
Mortgage markets were especially volatile last week, taking rate shoppers in Arizona on a roller-coaster ride. The week’s news schedule was full. It included debt ceiling debates, jobs figures, and ongoing maneuverings within the Eurozone.
Each story a material impact on mortgage rates and, as a result, rates varied wildly from day-to-day.
Throughout the early part of the week, mortgage rates fell.
Monday, bond markets improved as leaks of the congressional debt ceiling agreement surfaced. Investors approved of the accord’s general terms and bought U.S.-backed debt to prove it. Tuesday, when the final agreement was reached and the terms were made public, mortgage rates dropped again.
This is because the debt ceiling agreement is based on spending cuts and tax increases. In response, analysts revised lower their respective growth estimates for the United States, benefitting bonds.
By Thursday, markets were in full rally mode.
On the eve of the July jobs report, traders flocked to the ultra-safe bond market; “whispers” put the net jobs created figure at a negative. Wall Street feared the worst. By Thursday’s close, mortgage pricing was at its best levels since November 2010.
Friday morning, though, markets recoiled. When the Non-Farm Payrolls report showed much-better-than-expected growth, it triggered a bond market sell-off and rates reversed higher. Rates rose more Friday than on any single day since November 30, 2010.
If you were quoted a mortgage rate on Thursday, on Friday, the same mortgage rate cost 1 discount point more.
This week, rates may rise or fall — it’s too soon to tell.
Friday afternoon, after markets closed, S&P downgraded the long-term debt of the U.S. government a notch. Typically, lower credit ratings means higher borrowing costs which leads to higher mortgage rates, among other things. However, it’s unclear how markets will react to the S&P decision.
Plus, the Federal Open Market Committee meets Tuesday and that, too, can affect markets.
As always, the prudent move is to lock your mortgage rate if its payment and terms are sensible. There’s too much volatility to know what markets might do tomorrow.
Also, join me at Facebook.com/TheUglyTruthAboutMoney.
Jeff Underwood, The Street Economist
The Ugly Truth About Money
What’s Ahead For Mortgage Rates This Week : August 1, 2011
by Jeff Underwood on Aug.01, 2011, under Mortgage, Real Estate
Mortgage markets improved last week as the U.S. debt ceiling debate continued on Capitol Hill. Bonds traded in a range Monday through Thursday before breaking higher Friday morning.
30-year fixed conforming mortgage rates improved in Arizona last week, falling to levels just north the product’s all-time low set in November 2010.
5-year ARMs improved last week, too. The benchmark adjustable-rate mortgage’s average national rate is now tied with its all-time low, also set last November.
This week, the direction of mortgage rates depends on two events:
- The resolution of the U.S. debt ceiling debate, due Tuesday
- The July Non-Farm Payrolls report, due Friday
Mortgage rates will be volatile as markets grapple with the expectations for the above events, and their eventual outcomes.
Sunday evening, for example, congressional leaders reached an agreement to raise the U.S. debt ceiling by $2.1 trillion, and to introduce $2.5 trillion in budget cuts within 10 years. The deal must pass Congress, however, and until it does, speculation will push mortgage rates around.
Friday’s jobs report should swing mortgage rates, too.
After starting the year strong, the 2011 jobs market has faded. Net new jobs have dropped 5 months in the row and the national Unemployment Rate is climbing. Weak job growth portends weak consumer spending and a weak economy — typically two outcomes that are good for mortgage rates.
Because of doubt cast by the debt ceiling debate, though, it’s too soon to know how Wall Street will react to the jobs data — strong or weak.
For now, mortgage rates remain low. They may fall further, or they may not. The “safe bet” is to lock.
Also, join me at Facebook.com/TheUglyTruthAboutMoney.
Jeff Underwood, The Street Economist
The Ugly Truth About Money
What’s Ahead For Mortgage Rates This Week : July 25, 2011
by Jeff Underwood on Jul.25, 2011, under Mortgage, Real Estate
Mortgage markets worsened last week as the Greek sovereign debt situation came closer to final resolution, and as the U.S. housing market showed signs of life.
After many weeks, European leaders agreed on a financial package for Greece that featured favorable loan terms designed to slow Eurozone contagion, along with a built-in, 37 billion euro “haircut” for private-sector investors.
The accord pleased Wall Street. Equities rallied after the announcement. Mortgage bonds sank.
Bonds also sank after a strong home builder confidence report Monday.
Last week, conforming and FHA fixed mortgage rates increased in Arizona and for the first time in 3 weeks. Adjustable-rate mortgages slipped slightly.
The interest rate spread between the Freddie Mac 30-year fixed rate and 5-year ARM is back near its all-time high.
This week, mortgage rates will be guided by Congress’s on-going U.S. debt ceiling debate. The United States government is expected reach its legal $14.294 trillion debt limit August 2, 2011. Congress must either vote to raise the debt ceiling, or take steps to reduce debt prior to August 2.
The debt ceiling was last raised February 12, 2010.
It’s unclear in which direction Congress will vote. Therefore, mortgage rates may be erratic until a deal is reached. If the debt limit is raised, expect mortgage rates to rise. This is because carrying high levels of debt can devalue the U.S. dollar and mortgage bonds are less valuable as the dollar weakens.
On the other hand, if Congress votes to make cuts in the budget, mortgage rates should fall. This is because fewer treasury securities will be issued, creating fewer inflationary pressures on the U.S. economy. Inflation is linked to higher mortgage rates.
Also this week : New Home Sales (Tuesday), Pending Home Sales (Thursday), Consumer Sentiment (Friday), plus Treasury auctions of 2-year, 5-year and 7-year notes. Each event can move mortgage rates so be ready to lock at a moment’s notice.
Mortgage rates remain low. By August 2, they could be much higher.
Also, join me at Facebook.com/TheUglyTruthAboutMoney.
Jeff Underwood, The Street Economist
The Ugly Truth About Money
What’s Ahead For Mortgage Rates This Week : July 18, 2011
by Jeff Underwood on Jul.18, 2011, under Mortgage, Real Estate
Mortgage markets worsened last week as concerns for the global economy drove new rounds of “safe haven” buying. Fear continues to dominate mortgage bond market movement and Arizona rate shoppers are benefiting.
Conforming and FHA mortgage rates fell for the second straight week last week, and closed out Friday with favorable momentum to the downside.
There were three main mortgage market drivers last week.
The first is tied to the Eurozone.
Although the Greek Parliament reached agreement on austerity measures for the nation-state two weeks ago, concerns that a debt crisis could spill into Italy, Portugal, Ireland, and/or Spain resurfaced last week. The debt of both Ireland and Portugal was downgraded to Junk status, and Italy and Spain may follow soon.
U.S. bond markets gained on the news.
The second story was the just-released Fed Minutes. Notes from the FOMC meeting showed that Ben Bernanke & Co. debated a slowing U.S. economy, the weakening domestic jobs market, and whether a third round of economic stimulus would be necessary. This, too, dragged mortgage rates lower.
The third story is one that’s still forming — the U.S. Debt Ceiling Debate. For now, the issue remains on the market periphery, but as the August 2 debt limit deadline nears, expect more influence over day-to-day mortgage rates.
Other factors in mortgage rates this week include the Existing Home Sales report; Housing Starts data; Homebuilder Confidence Survey; and, Jobless Claims.
Mortgage rates are low but remain volatile. If you’re wondering whether now is a good time to lock your rate, consider that it’s better to be safe than sorry. If mortgage rates rise this week, the rise may be permanent.
Rates can only stay low for so long.
Also, join me at Facebook.com/TheUglyTruthAboutMoney.
Jeff Underwood, The Street Economist
The Ugly Truth About Money
