30-Year Mortgage Rates Make New Lows, But Look Ready To Spike

No doubt you've heard that mortgage rates are low. They're lower than they've ever been in history.  The news is everywhere.

Just check out some of these headlines from the last 24 hours:

• Mortgage rates set new lows for the 6th straight week (Reuters)
• Mortgage rates fall again; 30-year fixed at 4.54% (Wall Street Journal)
• Mortgage rates hit another low : 4.54% (NPR)

Fixed mortgage rates are now down more than 1/2 percent from the start of the year, and 3/4 percent from just 1 year ago. The drop has dramatically improved home affordability for home buyers in Plymouth while creating refinance opportunities for existing homeowners.

From a payment perspective, a conforming, 30-year fixed rate mortgage is now cheaper by $41.94 per month per $100,000 borrowed versus July 2009.

A homeowner with a $300,000 mortgage, therefore, is saving $45,295.20 over 30 years.

Low mortgage rates rarely last long and rates appear to have troughed. After a big downhill between April and July, they're now flat. This could mean rates have finished falling, or that they're gearing up for another drop lower. Either way, if you haven't talked to your real estate agent about home affordability, or your loan officer about refinancing, it may be time to make that call.

If today's market marks the end of low rates, rates are expected to rise quickly.

Falling Consumer Confidence Helps Drag Mortgage Rates Lower. For Now.

For the second consecutive month, U.S. consumer confidence is plunging. July's official reading is its lowest since July of last year and the figures run in stark contrast to just two months ago, when the index touched a multi-year high.

According to The Conference Board, July's figures are reflective of a more pessimistic consumer; one concerned about "business conditions and the labor market".

Falling confidence numbers are presumed to be poor for the economy. For homeowner and home buyers in Minneapolis , however, they can create opportunity.  Low confidence can influence the mortgage market in a positive manner, driving mortgage rates down.

Mortgage rates are already at their lowest levels of all-time.

The link between consumer confidence and everyday mortgage rates roots in consumer spending.

Consumer spending accounts for close to 70% of the overall U.S. economy so, the thought goes that, a less confident consumer is less likely to spend money, thereby retarding economic growth. This harms the stock markets and drives cash to bonds, including mortgage-backed bonds.

More bond demand leads bond prices to rise which, in turn, pushes mortgage rates lower.

The other side of lagging confidence is that Americans may be less likely to take new financial risks when they're feeling unsure, including buying a new home. This can then drag on the housing market, negatively impacting home prices across Wisconsin.

Falling home values can help buyers, harm sellers, and stymie would-be refinancers.

It's tough to predict how consumer confidence data will work its way through the economy, but in the near-term, it appears to be helping mortgage rates stay low. If you're floating a mortgage rate with your lender, or contemplating a refinance, the time may be right to lock in a rate.

Low rates can't last forever.

Case-Shiller Shows Home Price Improvement In 95% Of Cities

Standard & Poors released its Case-Shiller Index Tuesday. On a seasonally-adjusted basis, between April and May 2010, home prices rose in 19 of Case-Shiller's 20 tracked markets.  It's the second straight month of strong Case-Shiller findings.

Also, May's numbers are a mirror-image of February's. In February, 19 of 20 markets lost value.

In its press release, the Case-Shiller staff resisted calling May's data proof of a housing recovery, noting that home values remain flat as compared to October of last year. However, there are some noteworthy numbers in the Case-Shiller report.

1. 13 of the 20 tracked cities are showing home price improvement year-over-year
2. Foreclosure posterchlld San Diego has now shown 13 straight months of improvement
3. San Diego, San Francisco and Minneapolis are showing double-digit annual growth

These are all good signs for the housing market, but the Case-Shiller Index is not without its flaws. Most notably, the data is limited to just 20 cities nationwide -- and they're not even the 20 largest ones. 

Cities like Houston, Philadelphia, and San Jose are excluded from Case-Shiller, while cities like Tampa (#54) are not.

Another Case-Shiller flaw is that it reports on a 2-month delay.

Therefore, today is several days from the start of August but we're now reflecting on data from May. Given the speed at which the Minneapolis real estate market can change, May's data is almost ancient.  Today's values may be higher or lower than what Case-Shiller reports.

For home buyers, reports like the Case-Shiller Index may not be useful in making a "Buy or Not Buy" decision, but can aid in watching longer-term trends in housing.  For real-time data, talk to a real estate agent with access to local figures instead.

New Homes Sales Gain in June, But Gains Are Relative

After a down month in May, the sales of newly-built homes appears back on track.

As published by the Census Bureau, June's New Home Sales report showed:

1. A 24 percent sales volume increase from the month prior
2. A 2-month drop in the supply of newly-built home

There are now just 210,000 new homes for sale nationwide.

June's data is a major improvement over May, but it's possible that the true "new home market" may be softer than the statistics suggest.  This is for several reasons.

First, we're comparing June's sales data to the worst month in New Home Sales history.

In May, sales of new homes totaled just 267,000 units nationwide. That's one-quarter fewer sales than in the previous worst month in New Home Sales history. May's sales levels were awful by any measure but June's improvement to 330,000 units remains second-worst sales levels ever posted.

Second, although much improved, June's new home supply of 7.6 months is elevated versus the historical norm near 6.0 months.  The last year has averaged 7.7 months.

For buyers of new homes in Plymouth , this combination of low sales volume and higher-than-normal inventory may be a positive.  It's the main reason why homebuilder confidence is reeling and the downturn has opened some doors for big discounts and deals. Free upgrades and closing cost credits can make a well-priced home even more attractive.

Plus, with mortgage rates at all-time lows and expected to rise, home affordability is may never be better.

What's Ahead For Mortgage Rates This Week : July 26, 2010

Mortgage markets worsened last week for the first time in 6 weeks last week. Investors were pleased with corporate earnings reports and the European bank stress tests results.  Stocks gained on the news, and bonds lost.

Mortgage rates rose last week, but only slightly. Rate are still hovering near their lowest levels of all-time.

Of the bigger stories last week was Existing Home Sales. As reported by the National Association of Realtors®, sales volume was down in June and home supplies were up. But figures were a bit better than expected, giving some hope for housing.

Notably, the number of move-up buyers outnumbers first-timers and the national median home price rose, suggesting that mid-to-upper home prices are getting some support.

This week, the market gets additional two pieces of housing data to add to the mix:

1. New Homes Sales (Monday)
2. Case-Shiller Index (Tuesday)

Both will have an impact on mortgage rates. In general, better-than-expected data should cause rates to rise in Minnesota ; worse-than-expected data should cause rates to fall.

Also this week, there's two consumer confidence reports, the Fed's Beige Book, and late-in-the-week inflationary data.  Mortgage markets should remain volatile with so much news headed down the pipe.

It's too soon to declare the current 3-month rally over, but it's been 3 weeks since rates dipped. This can be a signal that mortgage rates have finally bottomed and that it's time to lock your rate.

If you're floating a mortgage rate, or thinking about a refinance, it's time to get locked in. Rates may drop this week, but then again, maybe they won't.  There's little sense gambling on a bet as big as a mortgage.