2010 has been the year of "near record low" mortgage rates. Regular readers are probably used to hearing us say:
- "We're bouncing along just above record lows"
- "Lenders won't go any lower"
- "The rewards of floating don't outweigh the risks of floating"
- "It would take a serious economic downturn for mortgage rates to go lower"
Well. MBS prices are at all-time highs (AGAIN) and I think we can officially say mortgage rates are priced at their best levels ever. If not, we're pretty darn close!
Major lenders were actually buying 4.25% note rates today! As far as I remember, that was the lowest rate I saw on a rate sheet last year (that didn't cost 3 points). There were some days last year when 4.125% loans were traded, but seldom few. Those loan rates would've been quoted last March and early August.
For the most part I think it's safe to say this is just about as good as it's ever been...
Don't get me wrong. I'm not talking "no closing cost" deals here. To close at these rates a consumer would have to pay more than one discount point, plus an origination fee. But the option is there if the borrower plans to live in their house forever and can afford to pony up the extra $$$ at closing. In reality, while record low rates are on the table, the best borrowers are finding their sweet spot around 4.625% while below average borrowers are priced around 4.875%.
What's funny is this all happened after the Federal Reserve stopped buying mortgage-backed securities. THIS POST EXPLAINS WHY
What drove mortgage rates this low?
After all the "European Union/Greece/Spain/Portugal/China/North Korea/Iranian/Germany" drama we've gone through over the last 3-4 months, global markets have finally turned a skeptical eye on the U.S. ECONOMY. And at the moment, attention is firmly focused on U.S. HOUSING
Here is quick recap of recent housing data...
- The Mortgage Bankers Association (MBA) today released its Weekly Mortgage Applications Survey for the week ending June 18, 2010. IT WAS DISAPPOINTING. Mortgage loan application volume, decreased 5.9 percent on a seasonally adjusted basis from one week earlier. The Refinance Index decreased 7.3 percent from the previous week. Refinances now make up 74.8 percent of new apps. The seasonally adjusted Purchase Index decreased 1.2 percent and is at 13-year low. READ MORE. SEE CHARTS
- The FHFA Purchase Only Home Price Index rose 0.8 percent in April. READ MORE
- Existing-home sales, which are completed transactions that include single-family, townhomes, condominiums and co-ops, declined 2.2 percent to an annualized rate of 5.66 million units in May. WORSE THAN EXPECTED First-time buyers purchased 46 percent of those homes, down from 49 percent in April. But home prices are up 2.7 percent from last year! READ MORE. SEE CHARTS
- Sales of new single-family houses in May 2010 fell 32.7 percent to an annual rate of 300,000. MUCH WORSE THAN EXPECTED! And...April, which was supposed to see tax credit expiration rush, was revised lower, from 504,000 to 446,000. READ MORE. SEE CHARTS
- The OCC/OTS says mortgage payment delinquencies are on the decline but foreclosures are on the rise. Yikes Shadow Inventory. Borrowers who've already had their loan modified are re-defaulting ! READ MORE
We are going to hear more and more about a "double dip" in housing. Wait what? When did housing start recovering enough to warrant the classification of a double dip? We've seen some stabilization but the business feels the same now as it has over the past 10 months. Slow!
The fact is, purchase business was seasonal (around expirations) at best and borrowers looking to refinance over the last 10 months have been in no huge hurry to close. Mortgage operations haven't been overwhelmed by an onslaught of borrowers as much as they've been delayed by long lists of underwriting approval stipulations that send originators on wild goose chases. Yes business is slow right now, but business has been slow for quite some time!
How much worse can it really get at this point?
The only way mortgage rates move any lower is if global investors really start to believe that an economic double dip is imminent. Unfortunately, at that point, low mortgage rates wouldn't mean a darn thing! So I guess I am saying I wouldn't mind seeing mortgage rates increase a few basis points. Anything to avoid seeing the housing market go under a global microscope. Then everyone will know how slow the market has really been over the past 10 months!
Keep your head up everyone. We've seen worse days...