The average U.S. rate for the 30-year fixed mortgage fell to a record low for a fourth straight week. Cheap mortgages have helped boost home sales modestly this year. Mortgage buyer Freddie Mac said Thursday that the rate on the 30-year loan dipped to 3.78%. That's down from 3.79% last week and the lowest since long-term mortgages began in the 1950s.
The average rate on 15-year fixed mortgage, a popular option for refinancing, held steady at 3.04, matching the record low hit last week.
The average rate on the 30-year loan has been below 4% since early December. Lower rates are a key reason the housing industry is flashing signs of a recovery five years after the bubble burst.
The average does not include extra fees, known as points, which most borrowers must pay to get the lowest rates. One point equals 1% of the loan amount. The average fee for 30-year loans was 0.8, down from 0.7 last week. The fee for 15-year loans was 0.7, unchanged from last week.
The average rate on one-year adjustable rate mortgages was 2.75% last week, down from 2.78% the previous week. The fee for one-year adjustable rate loans was 0.4, down from 0.5 last week.
In April, sales of both previously occupied homes and new homes rose near two-year highs. Builders are gaining more confidence in the market, breaking ground on more homes and requesting more permits to build single-family homes later this year.
A better job market has also made more people open to buying a home. Employers have added 1 million jobs in the past five months. The unemployment has dropped a full%age point since August, from 9.1% to 8.1% in April.
Mortgage rates have been dropping because they tend to track the yield on the 10-year Treasury note. Uncertainty about how Europe will resolve its debt crisis has led investors to buy more Treasury securities, which are considered safe investments. As demand for Treasurys increase, the yield falls.
On what has been a very quiet week for economic data in the US, mortgage rates have managed to eke out new record lows. What data on the US economy has come out has been mixed, but the uncertainty over the future of Greece in the Euro Zone and the potential implications for the rest of Europe have dominated the markets this week.
The US Economy
The most significant economic reports of the week included existing and new home sales, durable goods orders and today’s consumer sentiment report. The home sales reports came in about where analysts had expected and were generally strong. This suggests that the housing market continues to improve marginally as time goes by. The durable goods report, which was disappointing in April, was expected to bounce back in May. Unfortunately, the result, while positive in direction, was somewhat weaker than forecasts. Consumer sentiment bumped up for the month relative to April’s report.
The Global Economy
This week has been filled with rumor and speculation over the future of Greece in the Euro Zone. Reports have suggested everything from the inevitability of Greece’s departure from the common currency (including preparation of printing and stamping equipment to make Drachma), to a coalescing plan to create Eurobonds as a common debt financing tool for the group of nations. The uncertainty has been magnified by recent elections in Greece, France and Germany in which support for the current Greek bailout (and overall European austerity) was dealt a significant blow.
outlook next week May 28 - june 1 2012
A lot of important economic data is scheduled for next week. The S&P/Case-Shiller Home Price Index, Pending Homes Sales, GDP, Chicago PMI, the ISM Manufacturing Index, and the all important nonfarm payroll report.
US Markets close early today (2 PM ET) and will be closed on Monday in observance of the Memorial Day holiday. Consequently a great deal of economic data will be compressed into a shortened week. Key among the reports that will be released next week are:
Tuesday—Consumer Confidence
Thursday—ADP Employment Change, Preliminary GDP Q1, Weekly Jobless Claims, Chicago PMI
Friday—Non-farm Payrolls, Core PCE, ISM Index
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