Are low, low mortgage rates over?
Yesterday, I mentioned how the bond market was affecting the stock market. Well, of course, it also affects the housing market. This week, mortgage rates hit their highest level of the year, thanks to the tepid buying of Treasury bonds.
As I’m writing this, rates on a 30-year fixed are around 5.3%. That’s still low of course, but rates have been below 5.25% all year. It’s hard to predict where they’ll go from here. From CNN Money:
“The demand for Treasurys won’t grow [this year] as rapidly as the supply. Mortgage rates will take a direct hit. You can kiss 5% goodbye,” said Stuart Hoffman, chief economist for PNC Financial Services, the nation’s fifth-largest bank…
Of course, the possibility of rising interest rates could convince people to buy, according to Tom Kunz, CEO of real estate agency franchiser Century 21.
“There’s a segment of the market saying, ‘Prices are still falling. I’ll wait for the bottom,’” he said. “These people will probably miss the bottom. Even if they could save $15,000 or $20,000 on the purchase price, the savings could be wiped out by the rise in interest rates.”
Bank economists and real estate CEO’s obviously have a vested interest in encouraging people to take out loans now, but historically, home loan rates are closely tied to the 10-year T-note, so what they’re saying makes sense.
The Fed has committed up to $300 billion for buying Treasury bonds in the next six months to prop up prices. But Mark Zandy, the chief economist at Moody’s.com thinks the Fed might have to spend a trillion dollars to accomplish that.
How much more tinkering and spending should the government do to prop up the housing market? Home sales have been dismal even with rates below 5%, so it’s pretty easy to argue that another $700 billion isn’t worth it.
I find it hard to believe that mortgage rates will go up significantly anytime soon. But I’m not a prospective buyer at the moment. Seems like a pretty tough call.
Are you in the market? Do you think it’s the time to buy or wait?
- May 29, 2009 1:46 PM — Scott Jagow
- 2 comments
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Comments (2)
May 30, 2009 7:11 AM PT
FWIW, on Thursday I thought I was locked in at 5.1 but I found out my lock-in didn’t take place until I paid the lock-in fee. I was sick that it had risen to 5.37 by the next afternoon.
I locked it in at 5.37.
Yesterday I checked and I see that Chase is up to 7.1 per cent.
No major bank was below 5.37. There were a few online places offering slightly less but points had to be purchased to get that rate.
I’m still feeling very bad that I missed the boat.
May 30, 2009 12:33 PM PT
I’ve had the refi papers waiting for me for two months - why? I have to get copies of our paystubs, copies of tax returns, copies of all of our bank and investment account statements. Last time we refi’d in 2006, it was a breeze. Now I’m feeling dopey for missing it, but we’ll still save about 1 full point on a 30 yr fixed. Hopefully in the next month, rates will drop again.