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Mortgage Rates Increase as the Housing Market Continues to Improve
Posted by: QuantShare (IP Logged)
Date: November 10, 2013 10:57AM
Mortgage rates moved higher during the November 7 week despite the Federal Reserve’s October 30 announcement to continue its bond buying program. According to Freddie Mac’s weekly Primary Mortgage Market Survey, the 30-year fixed-rate mortgage (FRM) average increased to 4.16% from 4.10% the previous week. Meanwhile, the 15-year FRM also increased, adding 7 basis points to last week’s average of 3.20%.
While the Federal Reserve indicated it would continue its bond buying program at the current pace in its October meeting it also noted that economic conditions were improving. The improvements in the U.S. economic indicators likely had an effect on the week’s mortgage rate increases.
Frank Nothaft, Freddie Mac’s vice president and chief economic officer, pointed to the monthly manufacturing and non-manufacturing data which showed improvement in October.
“Production in the manufacturing industry expanded for the fifth month in a row in October to the strongest pace since April 2011. Similarly, the non-manufacturing sector grew for the second consecutive month in October,” stated Nothaft.
Weekly mortgage applications reported by the Mortgage Bankers Association showed a decrease as the rates pushed higher. According to the Mortgage Bankers Association’s November 6 report, weekly mortgage applications were down 7%. Additional measures of mortgage activity reported by the Mortgage Bankers Association also showed declines. The Association’s Refinance Index was down 8% for the week. The Purchase Index also fell 5% during the week.
In other mortgage market news for the November 7 week, CoreLogic released its September Home Price Index (HPI) report and the Commerce Department reported Housing Vacancies.
CoreLogic’s September Home Price Index showed nationwide housing prices increased 12% from September 2012. On a monthly basis home prices were also up, increasing 0.2% from August 2013.
The upward trend in home prices is expected to continue. CoreLogic’s Pending Home Price Index showed an increase of 12.5% was likely for October with a 0.1% monthly increase expected from September to October.
The value of distressed homes has also been on the rise, according to CoreLogic. The September HPI report stated a year-over-year increase of 10.8% when distressed home sales were excluded while the Index increased 12% when distressed homes were included.
The Commerce Department’s Quarterly Housing Vacancies report also showed stabilization in housing market vacancies. Homeowner vacancies remained basically unchanged on a year-over-year and quarter-over-quarter basis at 1.9%. The rate of rental vacancies reported for the quarter was 8.3%, slightly higher than 2Q13 but down 0.3% from 3Q12.
Housing market metrics continue to improve, helping valuations for mortgage lenders such as JPMorgan Chase and Goldman Sachs. Overall, markets continue to await the Federal Reserve’s tapering decision which could happen as soon as December. Mortgage market rates are likely to continue trending up as the economy improves and Federal Reserve tapering appears likely in the months ahead.
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Investment Disclosure: No holdings.
Stocks Discussed: JPM, GS,
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