The spring home buying market is now underway.
Warmer weather is bringing home buyers out, consumers who are ready to test local housing markets in a bid to find property. Housing prices are lower than last year and may drop further over the coming months and years. Business analyst Dr. Gary Shilling said in October 2010 that housing prices would fall another 20 percent before stabilizing, something home shoppers should take into account as they ready their offers.[1]
Competitive Rates
Interest rates on mortgages are above all-time lows, but are still attractive. Freddie Mac, a government backed supplier of capital to lenders, says that the average rate on 30-year fixed mortgages is now 4.81 percent, just the below the 4.99 rate home shoppers were seeing this time last year.[2]
Rates on 15-year mortgages are now averagin 4.04 percent compared to 4.34 percent last year. Rates were at 3.97 percent last week. For home shoppers looking for an adjustable rate mortgage, Freddie Mac data shows that number at 3.62 percent for a 5/1 mortgage compared to 4.14 percent last year.
The most notable difference can be found in a 1/1 ARM. That rate is 3.21 percent, nearly a full point lower than the 4.2 percent last year. Like all ARMs, rates are subject to change once the fixed rate period ends. With a 5/1 mortgage that period lasts five years and with a 1/1 mortgage the rate is fixed for the first year only.
Geopolitical Impact
Said Frank Nothaft, vice president and chief economist, Freddie Mac, “Mortgage rates were up this week compared to last, but still remain at relatively low levels. The rate uptick was related to higher than anticipated inflation data for February and ongoing geopolitical concerns. The 12-month growth rate in the consumer price index rose 2.1 percent in February, compared to 1.6 percent in January; however, most of the increase was due to food and energy prices, which tend to be volatile. The core index rose 1.1 percent, slightly up from 1.0 percent in January.”
Those geopolitical concerns include allied attack on Libya, the so-called “kinectic military action” or warfare that rattled markets briefly.[3] Higher fuel prices and the devastation in Japan following massive earthquakes and tsunami apparently have not affected the mortgage market.
References
[1] Business Insider; GARY SHILLING: And Now House Prices Will Drop Another 20%; March 22, 2011
[2] Freddie Mac: 30-Year Fixed-Rate Mortgage Edges Up to 4.81 Percent
[3] Slate: Birth of a Washington Word
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