Freddie Mac reported today that the 30-year fixed-rate mortgage (FRM) averaged 5.25 percent for the week, up from last week’s 5.20 percent and down from 6.52 percent last year at this time.
The 15-year FRM this week was 4.69 percent in comparison with 4.68 percent last week and 6.07 percent a year ago.
Five-year Treasury-indexed hybrid adjustable-rate mortgages edged up to 4.75 percent this week from 4.74 percent the prior week. They were 6.07 percent last year.
One-year Treasury-indexed ARMs were 4.80 percent this week versus last week’s 4.77 percent and last year’s 5.27 percent.
Commented Freddie Mac Chief Economist Frank Nothaft:
“Bond yields rose slightly higher this week on market optimism that the economy may be stabilizing somewhat, and mortgage rates followed those yields. For instance, the Federal Reserve reported in its July 29th regional review that residential real estate markets in most of its districts remained weak, but many reported signs of improvement. In addition, it noted that entry-level homes continued to perform relatively well in part due to the first-time homebuyer tax credit.
“Other economic reports confirm that the housing market may indeed be bottoming out. New home sales rose for the third consecutive month in June to an annual pace of 384,000 homes, the most since November 2008 and the number of new houses on the market fell to the lowest amount since February 1999, according to the Department of Commerce. Sales of existing homes also showed a three-month gain to 4.89 million, the most since October 2008, and the share of distressed homes fell to 31 percent compared to almost half at the beginning of the year, the National Association of Realtors (NAR) reported.”
What buyers sometimes forget is that there is an equation that determines how much they can spend on a property. You guessed it: The monthly payment consists of two variables–the amount of the loan and the interest rate.
So, even if prices continues to slide, the monthly cost of housing will rise if the interest rate overtakes the pricing advantage obtained by waiting (no doubt fruitlessly) for that elusive bottom (when buyers will be galloping into the market attempting to outbid each other).
As a result, buyers face a difficult gamble of waiting for the market to bottom in the hope that mortgage rates won’t climb prohibitively.
Licensed Associate Real Estate Broker
Senior Vice President
Charles Rutenberg Realty
127 E. 56th Street
New York, NY 10022