Last year, the question on mortgage rates was how low would they go. This year, the question may be how long will they stay this low.
The most recent unemployment report showed the jobless situation moving in the right direction, with 200,000 jobs added last month and the jobless rate dropping to an almost three-year low of 8.5%.
Consumer confidence, as measured by The Conference Board, last month rose to an eight-month high.
Meanwhile, increased fees charged to mortgage lenders on government-backed mortgages take effect April 1 and are likely to be passed along to borrowers.
Sounds like the first steps toward an increase in mortgage rates, doesn’t it?
Not yet, say rate-watchers. Conforming mortgage rates generally are predicted to stay well under 5% and near their historical lows until the last part of the year, and even then rates for a 30-year, fixed-rate mortgage will still seem attractive.
The reason for the continued good news on rates is that although some of the latest economic data is good, the market needs to see more of it to conclude there’s a pattern of economic improvement that will stick.
“I still think it is not enough,” said Asha Bangalore, an economist at Northern Trust Co. “The (unemployment) report was encouraging on all fronts. We need continued growth in hiring.”
Mortgage researcher HSH Associates predicts rates this year will range from 3.85 to 4.85%.
Meanwhile, Bankrate.com anticipates the 30-year fixed rate could drop to as low as 3.5%, but such a decline would be brief, and then rates will end the year in the low- to mid-4% range. The Mortgage Bankers Association thinks rates will end the year in the mid-4s as well.
“The economy is in much better shape than a couple months ago, but it’s not hitting the cover off the ball,” said Greg McBride, a senior financial analyst at Bankrate.
There are a number of unknowns that could swing rates in either direction. The quicker the economy finds its footing, the faster the rates will inch upward. An increase in the guarantee fees from Fannie Mae and Freddie Mac, used to fund the payroll tax cut extension, may be followed by additional fees later this year and raise rates more.
On the flip side, it’s unclear what effect the 2012 presidential election, and possible efforts to shore up the economy beforehand, will have on the mortgage market. The Federal Reserve’s recent white paper offered suggestions on remedying credit markets that have been squeezed too tightly.
Continued ultralow mortgage rates would benefit home owners seeking to refinance and consumers secure enough in their personal situation to buy a home. But Keith Gumbinger, vice president at HSH, suggests that people should be careful what they wish for and might want to take a macro versus a micro outlook.
“To wish for continued record lows for rates is to wish for continued economic malaise,” he said. “I can’t imagine anyone would want to wish another year of economic malaise upon themselves or others.”
Expectations and reality. Consumers are feeling just a wee bit better about the state of the broader economy and the housing market. For its December survey on consumer attitudes, respondents told Fannie Mae they expected their personal financial situations to improve over the next 12 months, and they predicted home prices would increase over the next year, but by only 0.8%.
Flipping still OK. The Federal Housing Administration recently temporarily waived for a second time its rule prohibiting the use of FHA-backed mortgages to purchase single-family homes if they were resold within 90 days of the previous sale. The rule was designed to prevent property flipping, but in January 2010 the FHA waived it to help investors buy foreclosures, renovate them, and then resell them. The waiver, which was to expire last month, now expires Dec. 31.
Source: The Chicago Tribune