Mortgage Update Jan. 6, 2010
January 11th, 201030 year fixed conforming rates (assuming excellent credit, owner occupancy and 20% down for houses and 25% down for condos) are 5.125% with no points or 4.875% with 1 point.
Jumbo 5/1 ARMS with 30% down (primary residences) are 4% with no points up to $850,000. With 25% down, the interest rate on the 5/1 ARM is 5.25% (no points).
We have entered 2010–a New Year, a New Decade–but the New Year hasn’t taken off its New Year’s Eve costume just yet. We can’t understand current credit market moves with confidence and, as an obvious result, shouldn’t be trying to make short-term predictions, though we might be able to hazard the guess that longer-term, rates are rising and the economy is, in its lumpy way, recovering.
Still, it’s fun to speculate. I am imagining, very tentatively, that the recent Freddie Mac average 30-year fixed rate is a smidge higher than where it was a year ago because rates are in the process of rising and leaving behind the lows they enjoyed last year. Who knows. Could be, but I wouldn’t count on it–or anything–for a few weeks. We await further instructions from the markets about how to expect the short-term future to look.
Steve Peterson
Branch Manager
Sierra Pacific Mortgage
Office: 888-232-7687
Cell: 775-219-7151
Fax: 866-649-3235
January 6, 2010
KEY INDICATORS
Gold $1117.30/ounce [up]Crude Oil (Brent) $80.14/brl [up]U.S. Dollar to… Euro .6965 [down] Japanese Yen 91.66 [down]6-mo Treasury Bill Yield 0.15%10-yr Treasury Note Yield 3.75%[6-mo down 5 bps, 10-yr down 8 bps]11th Dist Cost of Funds 2.094%[+]30-yr Fixed-rate Mortgage 5.58%15-yr Fixed-rate Mortgage 5.03%1-yr ARM 4.72%[HSH averages rates: 30-yrdown 1 bp,15-yr up 1 bp; 1-yr ARM up 19 bps]
Mortgage Bankers Association Mortgage Applications Index week ending 12/18[Next index report 1/6] Overall 595.8 (down 10.7%; up 0.3% the week prior) Purchase Money Loans 213.3 (down 11.6%; down 0.1% the week prior) Refinancing Loans 2889.9 (down 10.1%; up 0.9% the week prior)
Jobless Claims 12/26 432,000 – prior week 452,000 – continuing claims fell to 4.981 m
Construction Spending Nov Down 0.6%
ISM Manufacturing Index Dec Up from 53.6 to 55.9
Factory Orders Nov Up 1.1%
Weekly Commentary
The credit markets are doing their best to be incomprehensible. It’s a task at which they excel.
We should remain aware, though, that the markets go on a quiet annual binge of confusion every year at this time. Many players take a week or two off, thinning the ranks of investors. As a consequence, there was a concern, ultimately unfounded, that fewer bidders at last week’s auctions of 2-year, 5-year and 7-year Treasury notes would cause rates to rise but, buyers came from all over the world and there were between two and three bids for every T-note. Go figure.
The Freddie Mac average 30-year fixed rate, at 5.14%, moved up roughly ten more basis points last week from the week prior. (It’s measured Thursday through Thursday). A somewhat surprising benchmark: That 5.14% rate is actually four basis points higher than where the average rate stood one year ago. Why is that surprising? We have been looking for a long time at rates that were significantly lower than their year-prior counterparts. Twelve months ago, though, mortgage interest rates were declining to extremely attractive levels. Today, rates seem to be in the initial phases of a long trek north, and they may be leaving the territory pioneered a year ago.
But it’s not a good time to be making assumptions. The fact that our Treasury securities are selling so well at auction doesn’t erase the result—a vast, and growing, quantity of Treasury securities in the resale market. Demand for securities doesn’t always exceed such a massive supply, and we no longer have the Federal Reserve jumping into the markets to buy up excess securities. (That was crucial in pushing interest rates as low as they could go not long ago.)
Without this support, the markets must deal with the buying and selling of the currently huge supply of securities without governmental help. When there are more securities available than there is demand for them—as any student of supply and demand and of inflation knows—the prices will decline, which means their yields will rise. And that is the primary reason that Treasury securities seem to be in the midst of a rising trend.
It’s a trend, though, that could turn around on a moment’s notice—not the sort of thing you want to take to the bank. So we continue to watch very closely, especially the moves made by the 10-year Treasury note, in hopes that we just might know, maybe as quickly as the market knows, which way interest rates will eventually move in a sustainable fashion. Meanwhile, we eat up the leftovers from our holiday meals.
