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One day soon low mortgage rates will be seen just in rearview mirror

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POSTED March 22, 2012 6:25 p.m.

By now you have probably seen at least one AT&T commercial that talks about how fast their phone service is and how they use the expression “That’s so 42 seconds ago”...Well that is pretty much the same thing that can be said for mortgage rates. Any advertising you see this week about rates is going to be off by more than ¼% because those ads per place more than a week ago.

With the continued improvement in the economy, the Federal Open Market Committee keeping financial policy unchanged, and little or no negative economic coming out of Europe, the feeling is we are going to see continued and steady economic growth. It is this good economic news that is causing mortgage rates to rise more than a ¼% this week.

Refinances have been slowing down since rates moved off of their record lows. This week’s rate jump will certainly dampen refinance demand in the coming weeks. On the bright side, although unofficial information (because the media outlets don’t listen to me), many real estate and mortgage experts are excited that they are seeing many more buyers and sellers in the market. The Mortgage Bankers Association reported that last week that purchase mortgage applications increased 4.4%. This is a just another confirmation that things are improving in housing.

This week coming up is going to be loaded with housing data. My thinking is that the housing data will be a little behind the times as the recent uptick in activity will not be reflected in the housing data being released.

Further validation that economic conditions are improving is the release of the February Retail Sales Report. This week it was reported that sales jumped 1.1% in February which was almost half a percent more than experts predicted. In addition, the prior month’s report was revised upward to .6%. This is all further evidence that gas prices are not curbing consumer spending. There was a time when $4.00 a gallon for gasoline stopped us from doing things…doesn’t seem like that is the case anymore.

Inflation continues to be a non factor. Higher energy prices have moved the Producer Price Index higher, however when you look at the core number which excludes volatile energy pricing, inflation on the wholesale and retail levels indicate that inflation is well under control.

Lastly, the unemployment numbers continue to improve. First Time Jobless Claims continue to trend lower.

Housing Recommendation: The last few weeks I have been talking about how if you are in the market to purchase a home, now is the time to act because home affordability was at its highest level. The recent mortgage rate increase changes the equation a little bit, but nothing significantly. Housing is still a great buy! However, the trend right now is that rates may rise even more, so it’s time to take action. If you are selling, then make sure you price your home to sell because more homes are coming on the market every day. The Spring buying and selling season is upon us.

 

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