Sales of new single-family residences fell 0.9% in January, but an upward revision to the prior months’ data and a drop in the supply of properties on the market painted a picture of a housing sector beginning to show signs of finding a bottom. Demand is getting a boost as more homes become affordable. The National Association of Realtors’ measure of whether households earning the median income can buy a median-price property at current interest rates reached record levels in the last three months of 2011.
The median price for a new home rose 0.3% to $217,000 in January – the highest since October — while the months’ of supply of homes on the market fell to 5.6% — the lowest mark since January 2006. The actual number of new homes for sale slid to a record low of 151,000. More than half of all the new home sales in January took place in the South where the fourth-warmest January on record probably contributed to the strong pace of sales. The improvement is welcome – but the pace of new home sales is still within shouting distance of all-time lows – a condition that continues to be supportive of the prospects for steady if not fractionally lower mortgage interest rates.The coming week’s economic calendar will feature Wednesday’s revised fourth-quarter Gross Domestic Product number and Thursday’s January Personal Income and Spending data. Both reports are expected to be mortgage interest rate neutral.
In my judgment the performance of the stock markets over the coming week will exert a far stronger influence on the trend trajectory of mortgage interest rates than will the headlines surrounding the economic news. As we go into the last month of the quarter — mortgage interest rate levels will be largely determined by investors’ sentiments related to domestic and global economic growth prospects. If the majority of market participants begin to see reasons to believe growth will slow dramatically across the globe as consumer spending softens in the face of a lethargic labor market and rising energy prices – stock prices will probably begin to fall at an accelerating pace. The “flight-to-quality” movement of capital from the riskier assets classes like stocks into the relative safe-haven of Treasury debt obligations and mortgage-backed securities is virtually certain to support mortgage interest rates very near current levels.
On the other hand, if the majority of market participants see reasons to believe economic growth here at home and internationally will continue to show improvement – capital will begin to move in ever larger quantities out of safe-haven assets like Treasury debt obligations and mortgage-backed securities into riskier but much higher yielding assets like stocks.
30 year fixed 3.75% 0% origination fee or 3.5% with 1.0% origination fee
30 year fixed rate 3.75%
15 year fixed rate 3.125%
5/1 ARM 2.875%
7/1 ARM 3.125%
For Mortgage questions, or to get pre-qualified, contact Bob Strandell