As of Thursday, Freddie Mac has reported that interest rates have reached near record lows, with rates on 30 year mortgages dropping as low as 3.32 percent from last week’s average of 3.34 percent and last year’s average fixed rate of 3.94 percent. This means rates are hovering just above their all-time low of 3.31 percent according to the secondary lender.
Average rates for a 15 year loan also dropped to 2.66 percent from last week’s rate of 2.67 and last year’s rate of 3.21 percent. Odds are very unlikely that mortgage rates will drop any lower to meet their all-time bottom, and have held to their current range for the past four weeks. 30 year loans have remained below 4% all year, leading to a slight increase in home sales.
In related news, sales of homes are up from a year ago even though the housing market is a long way from full recovery. While lower mortgage rates have persuaded more people to refinance and have sparked an interest in both new home and previously occupied home sales, many people remain unable to take advantage of the lower rates because of increased down payment requirements and stricter lending rules.
Applications, however, rose last week as loan requests for new purchases hit their third straight high point for the year rising 6.2 percent for the period ending Dec. 7. The Mortgage Bankers Association also reported that the seasonally adjusted index of refinancing applications rose 8.0 percent. The gauge of loan requests for home purchases rose 0.7 percent, indicating that home sales may continue to grow as it hit another high point for a fifth consecutive week.
The refinance share of mortgage activity hit 84 percent of applications this week, growing two percentage points from last week.
Application volume may have increased for the week ending December 7 for a number of reasons, to include the lowered mortgage rates, the recovering housing market and a third factor of an expected potential increase of FHA insurance premiums in 2013.
Because of the recent increase in home sales, home prices are also on the rise, increasing 0.4 percent last month after declining 0.2 percent in October. Homebuilder shares have benefited as a result, with Standard and Poor’s Supercomposite Homebuilding Index climbing (S15HOME:IND) 17.7 percent in the second half of 2012 compared with a 3.8 percent gain in the broader 500 index (INDEXSP:.INX).
Analysts remain hopeful that the housing market will continue in its state of modest recovery though consumer confidence is already starting to wane as the fiscal cliff deadline looms on the horizon. The Thomson Reuters/University of Michigan consumer sentiment index decreased in December to a four-month low, according to a projected Dec. 21. These figures contrast with the Bloomberg Consumer Comfort Index which reports these numbers within a narrow range since jumping to a six-month high in mid October.
Economists forecast a Dec. 29 report from the National Association of Realtors will show sales of previously owned homes probably rose to a 4.9 million pace, a three-year high.