Economic news this week underscores the positive momentum we have been observing throughout the third quarter.
Pending home sales grew slightly in September but also registered the first year-over-year gain since the summer of 2013. While we are in the slower time of the year for listing count and sales activity, it appears that home buyer demand is strengthening.
The housing market now has the potential to grow even more as mortgage rates remain near one-year lows and credit is starting to loosen.
What is ultimately driving demand is the strength in the labor market and related improvements in consumer attitudes.
Jobless claims in October remained beneath 300,000: The last month that averaged under 300,000 weekly claims was June 2000. Continuing claims were last this low at the height of the housing boom.
Consumer confidence and consumer sentiment are both now at seven-year highs.
The first estimate of the third quarter GDP indicated the economy expanded 3.5% as all sectors including government spending contributed to growth. The condition of the U.S. economy is clearly improving.
In every year of this recovery we’ve seen growth fade as we reached the fourth quarter, but now almost all fundamentals are much healthier. Expect to see solid employment numbers for October next week and more positive momentum to carry us through the winter.
After dropping to their lowest levels in more than a year, mortgage rates rebounded this week but still remain below 4%.
Some mortgage experts say that trend may not last and recommend locking in over the next week—before the October employment report is released.
“The end of QE3 was baked into the rate cake, so there won’t be much effect on mortgage rates,” said Holden Lewis, assistant managing editor of Bankrate.com, which surveys experts in the mortgage industry to see if mortgage rates will rise, fall or remain relatively unchanged. “I recommend locking before the morning of Nov. 7, when the October employment report is released.”
The average for a 30-year fixed-rate mortgage rose to 3.98% from 3.92% last week, according to the latest survey from mortgage buyer Freddie Mac. A year ago at this time, the 30-year average was 4.10%.
The average rate on a 15-year fixed loan also rose this week, inching up to 3.13% from 3.08% last week. It averaged 3.20% at this time a year ago.
Similarly, averages for the two most popular hybrid adjustable-rate mortgages edged up slightly. The five-year ARM rose to 2.94% this week, from 2.91% last week. A year ago, it averaged 2.96%.
The one-year ARM average is trending at 2.43% this week, up from 2.41% last week. It was at 2.51% at this time last year.
“Mortgage rates grew across the board this week, rebounding from the lowest rates of the year,” Frank E. Nothaft, Freddie Mac vice president and chief economist, said in a statement. “New home sales grew at an annual rate of 467,000 sales in September, the fastest rate observed during the recovery. Meanwhile, the National S&P Case-Shiller House Price Index grew at a seasonally adjusted annual rate of 0.4% in August.”
Rates fell this year after rising at the end of 2013, when the Federal Reserve announced it would begin to curb its bond-buying stimulus program. The program has helped offset dramatic gains in real estate prices and kept affordability elevated while the market has stabilized.
In the latest Mortgage Rate Trend Index by Bankrate.com, 55% of the loan analysts polled believe mortgage rates will continue to hover around their current levels, while 36% predict rates will increase.
“Fed says fed funds rate to remain low for considerable time period. Fed sees labor market improvement. It’s official. The Fed ends QE3,” said Shaun Guerrero, sales manager for Fairway Independent Mortgage in Silverdale, WA. “I see rates finally starting to climb toward the upper 4s by the end of the year … unless the rumors QE4 start to ramp up. Lock your rates if you can.”
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