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December 9th, 2013

The positive economy means two things



Federal Reserve BuildingCould it be that we escaped from the government shutdown not only unscathed but better than we were before? “Indications are starting to accumulate that not only was the economy not seriously disrupted by the October government shutdown, but that it wallowed though that mire comfortably and perhaps has begun to accelerate,” wrote Keith Gumbinger, vice president of HSH.com and author of the weekly Market Trends newsletter.

The positive economy means two things:

  1. Tapering QE at the December Fed meeting is back on the table
  2. Higher mortgage rates

Mortgage rates rise

Speaking of higher mortgage rates, the latest weekly-mortgage-rate survey from HSH.com reveals that mortgage rates of all stripes rose last week:

  • 30-year: The overall average rate for 30-year fixed-rate mortgages (conforming, non-conforming and jumbo) increased by another eight basis points (0.08 percent) to 4.49 percent.
  • 15-year: The overall average rate for 15-year fixed-rate mortgages (conforming, non-conforming and jumbo) also saw a rise of eight basis points (0.08 percent) from the prior week’s value, increasing to 3.59 percent.
  • FHA: FHA-backed 30-year fixed-rate mortgages leapt by a larger amount, climbing by 12 basis points to 4.17 percent for the week ending December 6.
  • 5/1 ARM: The overall 5/1 Hybrid ARM moved by the least of the bunch, adding just four hundredths of a percentage point (0.04 percent) to 3.07 percent.

The economy improves

Here’s a few highlights and commentary of the economic improvement from last week:

GDP: Estimates for economic growth in the third quarter improved from 2.8 percent to 3.6 percent, marking the strongest quarter of growth since the first quarter of 2012. “While faster growth is of course welcome, there is nothing wrong with a pace somewhere around the 3 percent mark, arguably a more sustainable level,” wrote Gumbinger.

Jobs: Figures released last week showed that 203,000 new people found jobs in November and the unemployment rate fell to 7 percent. This time, the decline in the unemployment rate didn’t come from a decline in the number of people looking for jobs. “Instead, the decline this time came despite an increase in the number of people looking for work,” wrote Gumbinger. “That rise in job seekers may suggest that some formerly-disenfranchised folks are again joining the fray; whether that’s due to a change in the likelihood of actually finding work or simply folks finishing re-training and looking for new careers remains to be seen.”

New-home sales: The sales of new homes increased 25.4 percent in October. “While a great headline figure, the reality is that the 444,000 annualized rate of sales during the month was only on par with levels seen earlier this year, and that sales revived from very low levels over the summer when interest rates spiked, which had curtailed demand; mortgage rates since settled in October.”

It’s about trust

All in all, the economy is leveling out and even improving in some areas. And the more this continues, the more consumers can trust the economy.

“If folks can again begin to trust their economic situations and outlooks, can again start to trust that the economy won’t necessarily take away hard-won gains of jobs, performing investments, home equity and more, they will have the confidence to more fully engage the economy, helping to grow it,” wrote Gumbinger. “Without this confidence, we’ll no doubt slump back again.”

This week …

You can expect the positive economy to continue to influence mortgage rates, and we’ll certainly take that into consideration as we prepare to publish our latest Two-month forecast for mortgage rates by week’s end.

Mortgage rates now are at about two-month highs, and judging from the light economic calendar out this week, mortgage rates should stay pretty steady.

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About the HSH Blog

HSH.com's daily blog focuses on the latest developments in the mortgage and housing markets. Our mission is to relate how changes in mortgage rates and housing policy, as well as the latest financial news, impacts consumers, homebuyers and industry insiders alike. Our 30-plus years of experience in the mortgage industry gives us an edge as we break down the latest changes in an ever-changing market.

Our bloggers:

Tim Manni

Tim Manni is the Managing Editor of HSH.com and the author of their daily blog, which concentrates on the latest developments in the mortgage and housing markets.

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