Interest rates for buying a home on the Palos Verdes Peninsula stayed steady this week but the rate of increases is slowing and may decline slightly next week. The following are excerpts from the newsletter on interest rates published by HSH Associates :
“Mortgage rates rising in the 15 of the last 18 weeks coupled with steadily rising home prices are combining to make this a pretty quiet spring homebuying season. The average rate for the benchmark 30-year FRM edged higher again this week and has now risen by three quarters of a percentage point since last Thanksgiving.
As you might expect, this has literally crushed refinancing activity; according to the Mortgage Bankers Association, applications to refinance a mortgage have fallen to an 18-year low. However, given pretty solid economic and demographic fundamentals, rising rates weren’t supposed to have all that much effect on sales of homes, and likely wouldn’t, except that they have also come after years of steadily rising home prices.
To be fair, the tempering of existing home sales can also be attributed to a lack of supply of available and desirable homes to buy. However, but supply’s not so much the issue for new homes, where inventory can be added, but where higher starting costs and higher rates challenge affordability to an even greater degree.
The Fed expressing comfort with a greater level of inflation and not considering a stronger or faster policy response soothed the markets, and the underlying yields that influence mortgage rates declined measurably as the week progressed. The decline wasn’t reflected in this week’s Freddie Mac survey, but it will show up next week.
With the federal funds rate perhaps halfway to its terminal point (or at least closing in on it soon) the Fed is also looking to change the messaging it uses to describe the stance of monetary policy, so we’ll be watching for how their characterization of the position of interest rates changes in the coming months (perhaps as soon as next month).
After weeks of headlines of “Higher mortgage rates!”, there is a good chance that we’ll see a meaningful decline next week. The Fed’s unconcerned stance about even higher-than-desired inflation took a little edge out of interest rates for at least the moment. As well, some slowing in growth in the Eurozone and in Japan, a softening of oil price and other considerations also helped to press the yield on the influential 10-year Treasury down from about 3.07% to about 2.93% by the close of the week. A 14-basis point move is considerable, but not all of that passes down to mortgage rates… but some is likely to.
Memorial Day Monday means the unofficial start of summer… and the unofficial end of the spring homebuying season. April housing market wasn’t much to get excited about and odds favor that May won’t be either. As far as rates go, a little dip can be expected next week, perhaps enough to erase the five-basis point increase Freddie Mac reported this week or even a bit more”
The following are interest rate quotes from John Alvin of American California Financial:
30 Yr Fixed FHA
Conforming 30 Yr Fixed up to $453,100
Conforming Jumbo 30 Yr Fixed $453,101 – $679,650
4.750 4.864 D
Jumbo 30 Yr. to $1.5 Mil
Jumbo 7/1 ARM $1.5 Mil (higher loan amt available)
For more information about Palos Verdes and South Bay Real Estate and buying and selling a home on the Palos Verdes Peninsula, visit my website at http://www.maureenmegowan.com . I try to make this the best real estate web blog in the South Bay Los Angeles and the Palos Verdes Peninsula. I would love to hear your comments or suggestions.