Mortgage Rates Have Given Up Half of Gains So Far This Year: Zillow
Mortgage rates have been on the decline for most of June and into the beginning of July, erasing some of the gains so far in 2018. The recent dip has resulted in mortgage rates giving up about half of the increase since the middle part of January, according to the online real estate company Zillow.
“Mortgage rates trended lower over the past week, touching their lowest levels since the last few days of May, which themselves were the lowest rates since the middle of April,” wrote Aaron Terrazas, economic research director at Zillow, in a report. “Incoming economic data – including inflation and retail sales numbers – were generally strong, which should have pushed rates higher. But comments from Federal Reserve Chair Jerome Powell in testimony before Congress suggested a slightly less hawkish monetary policy stance than had been expected.”
[Check out Investopedia’s mortgage calculator see how much home you can afford.]
During testimony before Congress this week, Fed chairman Powell told lawmakers that the Fed will raise interest rates gradually and that strong job gains and economic growth have enabled the central bank to dial back the intervention brought on by the financial crisis and subsequent recession back in 2008 and 2009. The Fed expects the job market to remain strong and for inflation to be around 2% over the coming years. The Fed chairman did point to trade policies and tax legislation as two things that could change his forecast. With the trade tensions between the U.S. and China ratcheting up, some investors are worried that a full-blown trade war could ensue, which would temper growth around the globe and could usher in a global economic slowdown.
“Over the coming week, markets are likely to pay more attention to housing data than they would have otherwise given fears that the sector may be slowing,” said Terrazas. “Mortgage rates could dip further if housing data come in particularly weak; Zillow expects June existing and new home sales, out next week, to show small declines from May.”
While much of the focus has been on the impact that rising mortgage rates will have on home sales, what is hurting the market more is the lack of affordable properties available. It’s one of the reasons the Mortgage Bankers Association reported that mortgage applications dipped 2.5% for the week ending July 13 compared with the week earlier. On an unadjusted basis, the Market Composite Index, which measures mortgage loan application volume, increased 22% compared with the week earlier. Meanwhile, the Refinance Index increased 2% from the week earlier, while the adjusted Purchase Index dipped 5% from the week earlier. The unadjusted Purchase Index increased 19%. The refinance share of mortgage activity was able to increase, accounting for 36.5% of total applications, up from 34.8% in the week earlier. The share of adjustable-rate mortgages decreased to 6.1% of all loan applications.
Source: Read Full Article