June 21st, 2010 12:37 PM by Nick Rapplean
The HSH Associates average for a 30-year FRM (including jumbos) fell 4 basis points this past week to 5.11%. Private jumbos, by the way, have reached about 5.55%, down from 6.14% at the beginning of the year.
The Freddie Mac average 30-year mortgage rate edged up 3 basis points from the prior Thursday to last Thursday, reaching a mere 4.75%.
Mortgage rates, in other words, are incredibly attractive, and there is little evidence that they will climb (or fall) significantly in the near term.
Still, there are reasons to expect rates to edge very slowly higher—so long as the markets don’t go through another worry shock regarding European debt problems. The MBA Mortgage Applications Index overall rose about 17.7% in the week ending May 28, with interest-rate-sensitive refi applications up by 21.1%.
Also significant: The index for new purchase money applications rose by 7.3%--after the weeks of precipitous declines that followed the demise of the $8,000 and $6,500 homebuyer tax credit programs.
For me, the turnaround for purchase money mortgage applications argues against extending the tax credit program further. One would hope we could let the real estate market recover on its own strengths and merits and stop depending on government programs to keep it going. We have already seen how disruptive these programs can be to market recovery.
What does argue well for a brief extension, though, is the fact that the last rush to get purchase transactions on the books created a logjam, and many people may lose the tax credit because of the mess that was created, not because they were in any way tardy or thoughtless in their own actions.
Now, I realize I am talking about a real estate market that continues to give us indications that it is both fragile and capable of slowing further. Housing starts in May came in at an uninspiring 10% decline, for example. This is a rather logical result of the end of the tax credit program, but it is still dismaying. Permits for future construction also fell.
Probably connected to these figures, the National Association of Home Builders survey of builder optimism translated into a significant decline (from 22 to 17) in the organization’s index. What we see here, though, is again a result of the expected decline in home sales following the termination of the homebuyer tax credit programs.
In spite of this apparent gloom, home builders continue to buy up finished lots and to build new developments; investors continue to elevate the share price of many builders’ stocks; and consumers are responding well to the new developments whose home designs were developed in accordance with the findings of careful surveys of potential homebuyers.
Perhaps, as usual, people are terribly worried about a real estate market that is already in its initial phases of sustainable recovery. What the case may be—we do have great interest rates to work with, and probably will for at least weeks (if not months). That should help.