Mortgage Rates Make New Lows At 3.66%

Mortgage rates have resumed their downward trend.

According to Freddie Mac's weekly Primary Mortgage Market Survey, the national average 30-year fixed rate mortgage rate fell 5 basis points to 3.66% this week. The rate is available to "prime" borrowers who are willing to pay, on average, 0.7 discount points plus a full set of closing costs.

30-year fixed rate mortgage rates are down in seven of the last eight weeks but, depending where you live, the mortgage rates made available to you will vary. The Freddie Mac survey notes that mortgage rates vary by region.

For example, mortgage applicants in the West Region received the lowest rates from lenders, on average, but also paid the highest number of discount points. Discount points are a specific type of closing cost where 1 discount point is a fee equal to one percent of your loan size.

Average mortgage rates in the five U.S. regions, as tracked by Freddie Mac :

• Northeast Region : 3.70% with 0.7 discount points 
• West Region : 3.62% with 0.8 discount points
• Southeast Region : 3.68% with 0.7 discount points
• North Central Region : 3.65% with 0.7 discount points
• Southwest Region : 3.68% with 0.7 discount points

Nationally, one year ago, the average 30-year fixed rate mortgage rate was 4.50%. Today, it's 3.66%. This 84 basis points difference yields a monthly savings of $49 per $100,000 borrowed at today's rates, or $588 per year.

A $400,000 mortgage would save $2,352 annually at today's mortgage rates as compared to June 2011.

The 15-year fixed rate mortgage rate is also low, averaging 2.95% nationwide with 0.6 discount points. This is the second-lowest reading in recorded history. However, when the 15-year fixed averaged 2.94%, banks required an average of 0.7 discount points to get it. One could argue that this week's average rate-and-points combination is actually a better "deal" because closing costs are lower.

Mortgage rates continue to break new lows so, if you're eligible to refinance, the timing may be right to explore your mortgage options. Similarly, if you're in the market to buy a home, today's low rates will help to keep your home affordability high.

Talk to your loan officer about capitalizing on the lowest rates of all-time. Rates in Minneapolis may not rise starting next week, but when they do rise, they'll expected to rise quickly.

A Simple Explanation Of The Federal Reserve Statement (June 20, 2012)

The Federal Open Market Committee voted to leave the Fed Funds Rate unchanged within its current target range of 0.000-0.250 percent Wednesday.

For the fifth consecutive meeting, the Fed Funds Rate vote was nearly unanimous. Just one FOMC member, Richmond Federal Reserve President Jeffrey Lacker, dissented in the 9-1 vote.

The Fed Funds Rate has been near zero percent since December 2008. 

In its press release, the Federal Reserve noted that the U.S. economy has been "expanding moderately" this year. Beyond the next few quarters, the Fed expects growth to "pick up very gradually". 

In addition, the Fed re-acknowledged that "strains in global financial markets" continue to pose "significant downside risks" to the U.S. economic outlook. This statement is a repeat from the FOMC's April press release and is in reference to the sovereign debt concerns of Greece, Spain and Italy, plus the potential for a broader European economic slowdown.

The Fed's statement also included the following economic observations :

1. The housing sector remains "depressed"
2. Labor conditions have "slowed in recent months"
3. Household spending is "rising at a somewhat slower pace" than earlier this year

With respect to inflation, the Fed said that pressures have declined, led by falling oil and gasoline prices. Longer-term inflation expectations remain stable.

The biggest news of the FOMC meeting is that the Federal Reserve will be extending its "Operation Twist" program. The program sells shorter-term securities on the Federal Reserve's balance sheet and uses the proceeds to purchase longer-term securities. This move puts "downward pressure on longer-term interest rates" and makes "broader financial conditions more accommodative."

The Fed also pledged to keep the Fed Funds Rate at "exceptionally low" levels at least through late-2014.

Mortgage markets are muted post-FOMC. There has been no real change in rates, although that may change later in the day, or weel. Mortgage rates in Plymouth remain at all-time lows.

The FOMC's next scheduled meeting is a two-day event slated for July 31-August 1, 2012.

Housing Starts Up 26% In Last 12 Months

Sometimes, the housing data headlines tell just half the tale. The stories on May's Housing Starts figures are proving to be a terrific illustration.

Tuesday, the Census Bureau released its monthly Housing Starts report. A "housing start" is a home on which construction has started.

The report is separated by property type with a separate count for single family homes such as detached residences and town homes; for multiple-unit homes such as 2-unit, 3-unit and 4-unit structures; and, for buildings of 5-units of more such as new condominiums.

In May, Housing Starts fell 4.8 percent nationwide. This runs contrary to recent housing market statistics and home builder confidence data which both have suggested a recovery. The press picked up the story and ran the following headlines :

• Housing Starts In U.S. Fall 4.8% In May (BusinessWeek)
• Housing Starts Plunge, But Permits Surge In Mixed Market (CNBC)
• Housing Starts Slump In May (US News)

Although factually correct, these headlines are somewhat misleading. 

Housing Starts did slip 4.8 percent last month but that figure accounts for all Housing Starts. It fails isolate the single-family starts that matter to today's buyers and sellers throughout Minnesota. Homeowners rarely buy multi-unit homes or entire apartment buildings.

If we remove the report's tally of 2-4 unit homes and apartment buildings, we find that, in May, single-family housing starts rose for the 4th straight month, registering 516,000 homes started on a seasonally-adjusted, annualized basis. This is the highest tally since April 2010, the last month of that year's frderal home buyer tax credit. 

Single-family housing starts are up 26% as compared to last year. 

The housing starts report, therefore -- headlines aside -- is the latest in a series of housing market data that points to a sustained recovery nationwide. If you're planning to buy a home in 2012, consider buying in between now and September because after that point, home prices and mortgage rates are likely to be higher.

Building Confidence Rises To 5-Year High

Home builders anticipate growth in the market for newly-built, single-family homes.  

For June 2012, the National Association of Homebuilders reports its monthly Housing Market Index at 29 -- an increase of more than 100% from one year ago and the highest HMI value since May 2007.

When the Housing Market Index reads 50 or better, it's meant to indicate favorable conditions for builders in the single-family, new-construction market. Readings below 50 suggest unfavorable conditions for builders.

The index has not been above 50 since April 2006. 

The NAHB Housing Market Index is not a "single survey" -- it's a composite. Three separate surveys are sent by the trade association to its members and roughly 400 builders respond. The NAHB's survey questions query builders on their current single-family home sales volume; their projected single-family home sales volume for the next 6 months; and, their current levels of buyer "foot traffic".

The results are then compiled into the NAHB Housing Market Index.

In June, home builders provided mixed replies :

• Current Single-Family Sales : 32 (+2 from May)
• Projected Single-Family Sales : 34 (Unchanged from May)
• Buyer Foot Traffic : 23 (Unchanged from May)

Of particular interest to today's new construction buyers is that builders are reporting higher levels of single-family sales, and expect their sales volume to increase over the next six months. This expectation is rooted in housing market momentum and low mortgage rates.

Never in recorded history have homes been as affordable as they are today and home buyers are taking notice. Foot traffic through builder models remains strong and is at its highest pace in more than 5 years. 

When demand for homes outweighs the supply of homes, home prices rise. If builder expectations are met, therefore, buyers in Plymouth should expect new home prices to rise in 2012's second half.

Planning to buy new construction this year or next? Consider moving up your time frame.

What's Ahead For Mortgage Rates This Week : June 18, 2012

Mortgage markets improved last week, moving mortgage rates in Minnesota back on a downward trajectory. Wall Street investors bid down mortgage bond yields on weaker-than-expected economic data from the U.S. and concern for events within the Eurozone.

Freddie Mac reports the average 30-year fixed rate mortgage rate at 3.71% for borrowers willing to pay 0.7 discount points plus accompanying closing costs. 

It's the second-lowest reading in Freddie Mac's recorded history and, as a point of comparison, one year ago, the 30-year fixed rate mortgage averaged 4.50% nationwide.

A homeowner giving a $200,000 mortgage at last year's 4.50% rate would have paid $1,013 monthly for principal + interest. Today, that same homeowner pays just $922 per month -- nine percent less.

Mortgage rates may drop even more this week.

Sunday, in Greece's bid to re-elect a government, a pro-bailout party won the most votes in a highly-watched election, dampening fears that Greece may leave the European Union. However, the winning party must still form a new government and it beat the "anti-bailout" party by just 3 points -- 30% to 27%. Some analysts question whether Greece can form a coalition government within its required 3-day window.

If Greece fails to form a government, the nation-state's future in the European Union will, again, be in doubt -- a potentially positive development for U.S. mortgage rates.

Also this week, the Federal Open Market Committee meets for its fourth scheduled meeting of the year, a two-day event beginning Wednesday. The FOMC doesn't set mortgage rates, but it does set U.S. monetary policy which can have an effect on mortgage rates. If the Federal Reserve votes to add new stimulus, mortgage rates may rise on concerns for inflation.

The FOMC is not expected to add new stimulus.

And, lastly, this week will see the release of several housing reports including the homebuilder confidence survey, the Existing Home Sales report, and the Housing Starts report. Strength in housing may be viewed as a plus for the economy, which can cause mortgage rates to rise.

Expect volatility this week as mortgage markets wrestle with events at home and abroad. This may be aprudent time to lock a floating mortgage rate.