Mortgage rates have been pretty erratic throughout the month of January. Last week, mortgage rates mostly made up for the subtle decline we saw the week before:
HSH.com’s overall mortgage tracker — our weekly Fixed-Rate Mortgage Indicator (FRMI) — found that the overall average rate for 30-year fixed-rate mortgages increased by a mild six basis points, landing at an average 5.11% during a holiday-shortened week. FHA-backed 30-year FRMs, a considerable and crucial part of the first-time homebuying market, ticked just three basis points upward to 4.75% for the week. Borrowers looking to alternatives to the benchmark 30-year FRM might consider a 5/1 Hybrid ARM, which is available at an attractive 3.82%, up just a lone basis point from the week prior. The gap between long-term fixed rates and the most common hybrid ARM should makes them at least a consideration for homebuyers and refinancers with short time horizons. HSH.com’s FRMI and other public data series includes rates for conforming, jumbo, and most recently the GSE’s “high-limit” conforming products and so cover much of the mortgage-borrowing public.
A lack of clear direction
So far this year, mortgage rates have been locked in a bob-and-weave pattern, an up-and-down, back-and-forth motion. One of the main reasons for this is the economy’s lack of clear direction:
Mortgage rates took back last week’s little decline, as what seems to be a lack of a clear direction for the economy has helped them to find a plateau. Unlike the last quarter of last year, when economic improvement was trending higher, it may just be that we’ve gotten to a “wait and see what develops” kind of state.
Positive sign for 2011?
As we mentioned last week, December’s existing-home sales showed quite an improvement last month, and if the sales trend continues into the winter, we should be better suited to handle the influx of housing inventory that will surely be supplied by continued foreclosures:
As we move away from distortions in the market created by on-again, off-again tax incentives, we should be able to again discern true demand levels for housing. With low interest rates still in place and affordability at very high levels, existing home sales managed to jump to an annualized rate of 5.28 million in December, the highest such figure in more than six months. The kick higher in sales came even as interest rates were firmer than many periods earlier in the year, and also drained some inventory out of the market, drawing it down to 8.1 months of available homes at the present sales pace. More inventory is slated to hit the market in 2011 as foreclosures continue unabated. Still, that there is growing demand for homes as the economy has shown signs of life does portend well for the market in 2011, and increasing employment opportunities during the year may even forestall or even cancel some expected foreclosures.
Should the economy improve enough for that to happen, it would be truly good news.
Roz Bailey
704-913-4754
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