Check out this chart from the Mortgage Bankers Association published in Ned Davis Research letter…record low mortgage rates and of course we are at or near record low home purchases – at least going back to 1996 – so we can call it a modern low.
Housing Wire is reporting that mortgage applications jumped 10% last week as interest rates remain low. Much of this jump is due to refinancing. Until we see a jump like this for new purchases, the housing market will not turn.
While rates remain relatively low, this is a huge, sharp spike higher in interest rates for the U.S. 10 Year Bond. Is it just the Federal Reserve selling and moving its money out to the 30 year bond or are foreign countries selling as well. This is a massive move.
Chart: Yahoo! Finance
Alex Stenback from RMG has some good insight on the latest “operation twist” from the Federal Reserve and it’s likely impact on mortgage rates. He says it’s quite possible we’ll see mortgages in the mid 3′s – certainly upper 3′s is a no brainer.
Those involved in purchase transactions or even refi’s and are waiting to lock, stay in close touch with your loan officer to see if you won’t be able to pick up an extra 1/4 to 3/8ths of a point over the next week or two.
- Federal Reserve “Operation Twist” Is a Plan That Even Oliver Wouldn’t Want More of (bonjupatten.wordpress.com)
- Lack of equity can derail attempt to refinance mortgage (thefairclothteam.wordpress.com)
- US Federal Reserve agrees new stimulus for economy (telegraph.co.uk)
Given all that has gone on in the past 3 weeks, it looks to me we might have another volatile week particularly with regard to interest rates. Remember, as the stock market was hit hard, money flowed in the the bond market which is a safe haven for investors. If investors feel like stepping up to more risk, it’s likely they will move in to stocks and sell bonds. If they sell bonds, interest rates will rise.
The big event this week is Fed Chairman, Ben Bernanke, speaks at Jackson Hole on Friday. All those tuned in to the financial and investment business will be watching that closely.
If you’re purchasing a home and your looking for lower interest rates, consult with your loan officer to see if he/she thinks you should lock.
- The Fed: Bernanke ready for action, but when is in doubt (marketwatch.com)
- Traders Speculating (Praying) That Bernanke Will Announce New Stimulus Scheme This Week In Jackson Hole (businessinsider.com)
- U.S. Yields Price in QE3 as Traders Anticipate $500 Billion (businessweek.com)
- Why Markets Will Get Worse Before They Get Better (curiouscapitalist.blogs.time.com)
- Treasury Yields Price in QE3 as Traders Anticipate $500 Billion (businessweek.com)
As the U.S. and global markets resume their crash from last week, investors are fleeing stocks and moving in to U.S. Treasuries which has pushed yields briefly to below 2.0% which is a record low for the 10 Year Bond. Rates have slightly recovered today, but clearly fear is ruling the market given the bond yields.
Mortgage rates track relatively closely to the U.S. 10 Year so if the 10 Year closes under 2.0%, expect to see conventional mortgages under 4% shortly thereafter.
Twin Cities Real Estate Market Continues to Show Signs of Improvement: Pending Sales Up 40%, Inventory Down 18%
The Minneapolis Area Association of Realtors just published the latest weekly report. I’ll post the full commentary below along with a link to the complete weekly report.
While day traders continue along their roller coaster ride, 997 Twin Cities home buyers made the smart investment in real estate. That’s 40.0 percent more than those who made the investment last year. As this year’s pending sales trend line rounds off its seasonal peak, you’ll notice that purchase demand is coming back in line with historical trends.
Sellers were another story. There were 1,433 new listings, 18.7 percent fewer than this time last year. Seller activity has also likely reached its seasonal peak but remains below historical levels for this time of year. Consequently, buyers have effectively absorbed existing supply. That’s a good thing. The number of active listings is down 18.5 percent to 24,362 available homes for sale.
With strong sales and less new supply entering the market, the balance is shifting toward neutral. Both the prevalence and magnitude of seller concessions have stabilized, and absorption rates improved in July after 12 months of sizable increases. Though still slightly lower than last summer, prices have increased nearly 18.0 percent from March to June of this year.
This picture below is a very important indicator about the market in the Twin Cities. Housing inventory is continuing its steady decline. This means that in some segments of the market there are actually shortages of good houses for buyers. And with mortgage rates now around 4%, there are some opportunities out there for buyers willing to step up. At this point, perhaps the market will bottom prior to 2013 as so many economists are currently predicting.
The Minneapolis Area Association of Realtors has a number of excellent research reports. The one I like the best as it provides a snapshot of each of the cities in the Twin Cities metro is the Top 200 Report.
- Twin Cities Housing Market – Pending Sales Increase by 49% Year over Year (johnmurphyreports.com)
- Builders Association of the Twin Cities Hot Sheet – Plymouth, MN Leads Metro in Building Permits for June 2011 (johnmurphyreports.com)
- Home Price Recovery Seen in 2013 (johnmurphyreports.com)
Today was the much anticipated public comments from the Federal Reserve and Chairman Ben Bernanke specifically. He stated that they would continue with the zero interest rate policy at least until in to 2013. (The Fed will try to stay out of getting in the way of the election I suppose). Larry Kudlow says it’s no time to panic. Karl Denninger says the Fed is basically expecting a recession. The markets initially weren’t quite sure what to do with the statement but several minutes later they took off. The DOW ended positive by over 400 points and interest rates on bonds plunged.
I received a note today from my friend and business partner, Alex Stenback, who said just because bond yields on government bonds are falling sharply does not necessarily mean mortgage interest rates will follow. This is going to be a very interesting and important topic for us to follow.
30 Year Mortgage Rates – Will We Soon See Sub 4% 30 Year Mortgages in the Face of the Debt Ceiling Debate?
It seems the whole world is expecting interest rates to jump as the US government debt rating inevitably gets downgraded soon. The contentious debt ceiling debate continues and yet the rates on the 10 year treasuries are dropping like a rock.
I believe we’ll see sub 4% 30 year conventional mortgage rates in the near future. I can’t really explain it, but it looks like it’s coming. For some nice graphs for the 10 Year Bonds and how they are reacting to all this news, check out The Market Soul.
BTW, FHA loans will be even lower…yes, lower.