And then, the 15 Year Mortgage Hit a Historic LOW
Last week I shared that Sandra Thompson gave us all Christmas in July by undoing the FHFA Adverse Market Fee. The Rueth Team passed it onto our clients immediately.. even those who were locked and closing. So exciting! And then, the 15 year mortgage hit a historic low…
This week the bond market gave us another gift as the 10 year Treasury stayed below 1.30 all week, dropping the 15 year fixed mortgage to a historic low.. lower than it hit even during the historic rate slide in 2020. Freddie Mac posted a national average for the 15 year fixed of 2.12% with a .7% discount. The Rueth Team was locking 1.99% 15 year fixed this week.. whoop whoop! To say we are locking in interest rates that starts with a “1” is crazy!! We’ve seen historical lows in rates over the last eighteen months but nothing like this.
The catch is… on a 15 year fixed, you have to budget payment verses savings. I am a huge fan of the 30 year fixed as it allows for flexibility, budging, saving for additional investments, and lower monthly payments that allow you to qualify for more opportunities. However, you can save tens of thousands of dollars on a 15 year. This is a situation where you need to figure out if what you gain trumps what you have to give up. But right now…it’s certainly not an option you want to dismiss.
Watch below to learn more and to see the numbers on a $400,000 purchase with a $300,000 loan. And if you want to know how much you could gain by financing over 15 years, give my team call! Our AWESOME sales manager Eric is on call and his information is posted below.
Consumer Confidence Is Volatile As Prices Continue To Surge
The Conference Board survey published on June 29th, jumped to it’s highest level in nearly 1 1/2 years in June as growing labor market optimism amid a reopening economy offset concerns about higher inflation. Consumers were shown to have a healthy appetite for motor vehicles, household appliances, homes, vacations, and entertainment.
Then 17 days later, the University of Michigan’s consumer sentiment for the US published on July 16th, showing a drop of consumer confidence to a 5 month low. The erosion in morale was attributed to less favorable prospects for the national economy amid growing concerns about inflationary pressure, with consumer’ complaints about rising prices on homes, vehicles, and household durables. Strong purchases continued, however, as a benefit from record increases in accumulated savings and reserve funds.
Wait, what? The same factors that were dismissed and pushed to a 16 month high turned tail and dropped us to a 5 month low. Then the Fannie Mae survey was released stating 64% of buyers think its a bad time to buy a home. Since 70% of the American economy consists of consumer spending, it’s no wonder we all obsess on the mood of the American consumer.
This confusion and indecision showed up in several other reports this week:
- Initial Jobless Claims increased 51,000 to 419k, retreating to their May 15th number
- Forbearance exits reversed slightly, as 10,000 more FHA and portfolio borrowers went into forbearance plans
- New home housing starts were up 6.3% in June and will eventually lead to a little more supply once they are completed. But looking beyond, permits are 5.1% lower and supply constraints appear to be in place for quite some time, supporting home price appreciation
- Homes authorized but not started are up almost 60% year over year, due to higher costs and labor issues
- Stock sell off on Monday was attributed to the widespread risk of the Delta variant; but not only did the stock market recover, the Dow closed above 35,000 for the first time ever. The Delta variant did not subside between Monday and Friday
- Mortgage purchase applications fell 6% last week after a gain of 8% the week before. Even with low rates, buyers are exhausted and distracted
Bottom Line – the economy is strong, liquidity is high, demand is being fueled by excess savings, manufacturing and building is limited by increased cost and labor shortages, and inflation is not all transitory.
How do you cure inflation? You keep raising prices until the buyer says, “No thank you”
Why Did Rates Drop This Week?
Treasuries are predominantly behaving well because there is fear we’re going to see a slowdown in GDP. Some believe we may be approaching recessionary conditions in 2022 and 2023, which will keep rates low. If inflation bounces back, that will keep rates in line; however while some of it will prove to be transitory, some will be sticky. There’s also the fact that from a foreigner’s perspective, the yields here in the US while low, are multiples of what they could achieve in their country, so there’s an influx of foreign capital coming in. And of course, the biggest driver of our low rates is Powell and the Fed monetizing it by purchasing mortgage backed securities.
At some point, the Fed will stop buying Mortgage Backed Securities, people will go back to work loosening supply constraints, the price of goods will soften, and rates will go up. Until then, enjoy the gift because the cost of waiting will be painful.. especially for our first time homebuyers.