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Mortgage Rate Trends: Weekly Market Trends & Forecast

HSH Market Trends
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Mortgage Rates Holding Firm

New Two-Month Rate Forecast at HSH.com

June 26, 2015 -- If the economic data is mostly firm, it's a fair bet that mortgage rates will be, too. Not all that long ago, financial markets focused on each piece of weak data, and mortgage rates found regular space to fall. Of late, though, the markets seem to be looking solely at the bright spots and paying less attention to any data that suggests there may yet be some dullness in the overall economic shine. In a climate such as this, it will likely take a fair bit of weak data (or an economic event, such as a Greek default) to push them down at all.

Even with an improving economic tenor relative to the winter and early spring, there is nothing yet to suggest that we are experiencing outsized or above-par growth that would cause a regular upward march for rates. All signals considered, the economy is certainly back on more solid footing, and this has merely returned mortgage rates to levels we visited when we were last on similar solid footing.

HSH.com's broad-market mortgage tracker -- our weekly Fixed-Rate Mortgage Indicator (FRMI) -- found that the overall average rate for 30-year fixed-rate mortgages rose by three basis points (0.03%) this week to an average of 4.13 percent. The FRMI's 15-year companion was flat this week, remaining at an average interest rate of 3.39 percent. Popular with first-time homebuyers, rates on fully-insured FHA-backed 30-year FRMs remain considerably below their conforming counterparts but rose by six basis points this week, ticking back up to an average of 3.90 percent. Meanwhile, the overall 5/1 Hybrid ARM moved up as well, adding just two basis points to last week's average to land at 3.07 percent this week. HSH's FRMIs are combined averages, including both conforming and jumbo rates, providing borrowers with a more wide-ranging view of mortgage conditions.

See this week's Statistical Release and Mortgage Trends Graphs.

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Mortgage rates certainly can have direct impacts on home sales. Existing home sales (the largest component of the housing market) powered ahead by 5.1 percent in May, rising to a 5.35 million (annualized) rate of sale. This was the best annualized monthly rate in over five years. As existing home sales are counted in the month the closing on the property occurs, this often reflects demand conditions 45 to 60 days prior. Mortgage rates reached the lowest levels of 2015 during this period, and it wont be clear for months is the recent mild bump in rates tempered demand at all.

Despite the strong bump in sales, inventory levels of homes available to buy only edged down from 5.2 months to 5.1 months available, so it would seem that more supply came onto the market. Thin inventory levels of desirable and affordable properties have been a considerable deterrent to sales growth for a while and have served to lift prices more quickly. If it continues, more supply should temper the 7.9 percent annual rate of price increases experienced this month, and the lift in mortgage rates may contribute to this as well.

Last week we learned that the nation's homebuilders were in considerably better moods in June. This week we learned why: sales of newly-built homes rose by 2.2 percent to a 546,000 annualized rate of sale. This was the best monthly rate of sales since early 2008, and while below historic norms, the trend continues to be a modestly positive one, and sales have nearly doubled from their recession bottoms. The supply of new homes remains tight, though, and shrunk by one tick in May to 4.5 months. Unlike existing home sales, sales of new homes are counted in the month when the contract to buy is signed, so even though mortgage rates had firmed in May, more folks bought anyway. That's a very positive signal that the conditions beyond rates which support home purchases are improving.

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Improved, of sorts, was the final review of Gross Domestic Product for the first quarter of 2015. The last look back at that period showed a 0.17 percent decline, a much better level than the 0.75 percent fall that the previous estimate suggested. As such, the economic dip this spring was considerably more shallow than the one we saw to start 2014, even if last year's strong second-quarter rebound doesn't seem to have been repeated this year. Given that the Federal Reserve is keying on data, the mild rebound is helping to damp upward pressure on rates.

That mild rebound is seen quite clearly in the latest National Activity Indicator from the Chicago Federal Reserve. Sporting a value of -0.17 for the month, the NAI put in a fifth consecutive decline in May. The NAI covers a group of 85 economic indicators and seeks to show if the economy is growing above or below its natural rate of expansion, believed to be a GDP rate of 2.6 percent or so. In this regard, we have been subpar for months now, if less so in the second quarter than in the first; current indications are that we may be running a GDP rate a touch better than 2 percent at the moment.

Despite the modest pace, personal incomes have improved of late. In May, personal incomes rose by 0.5 percent, with wage growth rising by a like amount, the fastest pace since January. With more income came more outgo; personal-consumption spending rose a stout 0.9 percent for the month, which in turn should help to power economic growth a bit higher. With more outgo than income, though, the nation's rate of savings eased back to 5.1 percent. With consumers reluctant to add to credit card balances, increases in wages and savings are likely what will continue to support retail sales, even if the "saving first then spending later" delays immediate gratification.

  Find these only at HSH.com!
  
   Mortgage data: Today's Surveyed Rates Historical Mortgage Rates Mortgage Trend Graphs
   Calculators: Downpayment Decisioner Tri-Refinance Calculator PMI Cost Calculator
   Resources: Housing & Salary Study Mortgage Rate Surveys Website Tools and Widgets
  

With perhaps more money available to spend, consumer moods improved in June. The University of Michigan survey of Consumer Sentiment found a 5.4 point lift in spirits, lifting the headline indicator to a value of 96.1 for the month, the best showing here since January. The assessment of present conditions created the most lift with an 8.1 point gain, and even hopes for the future were improved, too, rising by 3.6 points. As happier folks are believed to be more likely to loosen their purse strings, it's possible that we might see another lift in retail sales in June when that report becomes available next month.

News about the labor market continues to be good. Claims for new unemployment benefits continue a remarkable string of sub-300,000 readings, with the week ending June 20 being no exception. During that week, only 271,000 new applications for assistance were filed around the country. It would appear that we are on track for another solid showing in labor growth when the June employment report comes next Thursday.

Among the duller spots to be seen was the report covering durable goods orders placed in May. The 1.8 percent decline was deeper than expected, and we've notched gains in only two of the five months of 2015 to date (in fact, these were the only two gains since last July). Despite the headline fall, all the news here wasn't bad since the decline was concentrated in transportation (mostly aircraft). Orders excluding those sported a 0.5 percent rise, and so-called "core" orders by businesses featured a 0.4 percent rise. Still, manufacturers continue to have a bit of a rough time of it all around, keeping the recovery from gaining both strength and speed.

See fresh mortgage rates every day at HSH.com Follow us on Twitter for even more need-to-know news!
Does mortgage history repeat? Usually. Find out what happened last week/month/year with MarketTrends archives!

HSH's Statistical Release features charts and graphs for eleven mortgage products, including Hybrid ARMs.
Our state-by-state statistics are now here.
Current Adjustable Rate Mortgage (ARM) Indexes
Index For The Week Ending Year Ago
  Jun 19 May 22 Jun 20
6-Mo. TCM 0.09% 0.08% 0.06%
1-Yr. TCM 0.27% 0.23% 0.10%
3-Yr. TCM 1.05% 0.98% 0.95%
5-Yr. TCM 1.65% 1.56% 1.72%
FHFA NMCR 3.75% 3.78% 4.24%
SAIF 11th District COF 0.680% 0.687% 0.701%
HSH Nat'l Avg. Offer Rate 4.10% 3.98% 4.25%

A couple of local looks at manufacturing bore this out. In June, the Richmond Federal Reserve did see a small improvement in their local conditions; their indicator measuring this rose from 1 in May to 6 in June, the best showing since January. Orders rebounded from very soft levels and employment metrics did as well. Some improvement was also seen over in the Kansas City Fed's region, where their indicator improved from -13 in May to -9 in June; orders and employment both sported lesser declines. The strong dollar continues to put pressure on export business, and less business from the gas and oil industries is hurting growth here, too. Overall, expansion in the factory sector could be said to be uneven at best; we'll see if there is any uptick for June in the Institute for Supply Management barometer report next week.

With even a modestly improving backdrop, mortgage rates are firm and really don't have much space to drop at the moment. As we write this, the brinkmanship between Greece and its creditors remains unresolved, and this could have some unknowable effects on mortgage rates next week. The deadline for a deal is Tuesday, so we'll need to see what happens over the weekend. At the moment, it doesn't seem as though the markets are acting in a defensive fashion as there is no evident flight-to- safety purchase of bonds to be seen anywhere. In fact, U.S. and other bonds were seeing a bit of a selloff mid-day on Friday, lifting yields.

Not knowing what will happen overseas, it would appear that we are in for pretty steady mortgage rates next week, with perhaps a touch of upward bias. Call it a couple of basis point increase overall, but all bets are off if the Greek mess isn't resolved to the liking of the markets.

For a longer-range outlook for rates and the economy, one which will take you up until late August, have a look at our new Two-Month Forecast. For a really long-range outlook, you'll want to check out "Federal Reserve Policy and Mortgage Rate Cycles".

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