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Mortgage Rate Trends: Weekly Market Trends & Forecast

HSH Market Trends
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Looking Backward And Forward

May 29, 2015 -- For mortgage rates, it's all about where we are going (or expect to go), not where we have been. Although the economic climate is by no means brilliant at the moment, it's certainly better than the one we endured to begin the year. Even so, there is perhaps more hope and optimism being expressed in current interest rates than is borne out by the most recent economic data.

The economy continues to struggle to find reliable traction, most especially in the first quarter of this year and last. Last year's stumble gave way to several quarters of strong growth and gains in hiring, and there is a chance that this pattern will be repeated again this year. If so, the lowest mortgage rates of the year may be fading into the rearview mirror, but they don't seem poised to go all that far, at least for the foreseeable future.

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 eased by a single basis point (0.01%) this week to an average of 3.97 percent. The FRMI's 15-year companion moved in reverse of that, climbing by one basis point to an average interest rate of 3.27 percent. Popular with first-time homebuyers, rates on fully-insured FHA-backed 30-year FRMs remain considerably below their conforming counterparts but were at a standstill this week, holding at an average 3.73 percent. Meanwhile, the overall 5/1 Hybrid ARM followed the lead of the 15-year FRMI by adding a single basis point to bump up to an average 2.98 percent. HSH's FRMIs include both conforming and jumbo rates, providing borrowers with a broader view of mortgage conditions.

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

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Like 2014, the first quarter of 2015 was an economic dud. The already poor preliminary rise of just 0.2 percent in GDP was revised away in the advance estimate, leaving the economy in a 0.7 percent decline for the period. Last year's final review of conditions left a 2.1 percent dip for the quarter, but it appears that 2015's starting period won't have contracted as much when all is said and done. That being said, there are no indications at present that the kind of marked acceleration seen after the contraction last year is likely to be repeated, so any second-quarter rebound from the soft patch is likely to be more muted.

Although sales of existing homes didn't seem to benefit all that much, what with tight levels of inventory and amid rising prices, the downtrend in mortgage rates in April appears to have helped sales of new homes to improve. The Census Bureau reported that sales of newly-built homes rose by 6.8 percent for the month, climbing to a 517,000 annualized rate of sale. Inventory levels here are somewhat more elastic; that is, more new homes can be built to meet demand. According to the report, there is about 4.8 months of built and ready-to-sell stock available; this is thinner than optimal at about 205,000 units. Builders continue to express caution about adding to stock even as the housing market continues on an overall path of slow improvement. The 5.3 percent month-over-month rise in prices may see a little more enthusiasm for that, though -- it was the first increase in prices seen since last November.

Orders for durable goods -- items expect to last longer than three years or so -- have been in an up and down pattern for the last five months. This is a pretty common occurrence, as the influence of pricey aircraft and other transportation-related items are a strong influence. Orders declined by 0.5 percent in April as a slump in aircraft dragged down the headline figure. Excluding those from the tally, the news was a little better, where a rise of 0.5 percent was noted. As well, "core" durable orders (exclusive of both defense spending and aircraft) rose 1 percent, so there seems at least a little modest underlying strength.

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The unevenness of the economy (not to mention firming gasoline prices) has taken a bit of a toll on consumer moods. The University of Michigan reported that their final May reading of Consumer Sentiment showed a 5.1 point decline for the month, leaving this barometer at 90.7, the lowest it has been since last November. Assessments of current conditions suffered more than did those for the future, but suffice it to say that there's not a lot of enthusiasm to be seen here.

Conversely, the Conference Board reported that their measure of Consumer Confidence improved just a bit in May, edging 1.1 points higher to reach 95.4 for the month. While the increase was of course welcome, as it may indicate some additional spending by folks just down the road (plans for buying homes, cars and appliances all edged higher), the gauge is nonetheless still below the the 2015 peak and even below the average of the first three months of the year. Unlike the Sentiment index above, the indication is that there is more satisfaction with the way things are at the moment but less so about the future.

  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

Jobs remain the key to expanding and re-energizing the recovery and the housing market. The Federal Reserve has continued to indicate a slowly diminishing amount of labor resource "slack", what with the resumption of job growth and an unemployment rate falling. If new claims for jobless benefits are any indicator, we will likely see around 225,000 hires for May when the employment report comes out next Friday. In the week ending May 23, initial claims were 282,000, continuing a growing string of sub-300K readings and indicating a firming job market. If employment puts in a second solid month after the March stumble, it probably cements a Fed move in September and would even increase the odds for a July change.

Local manufacturing conditions improved in the Richmond Federal Reserve district; after two months in negative territory, their indicator moved to a positive value of 1 in May. That's encouraging, given that manufacturing has had a difficult time of it for a fair stretch now, especially those companies focused on exports. A sub-index of orders did also move from negative to positive, but employment metrics diminished.

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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
  May 22 Apr 24 May 23
6-Mo. TCM 0.08% 0.10% 0.05%
1-Yr. TCM 0.23% 0.24% 0.09%
3-Yr. TCM 0.98% 0.87% 0.79%
5-Yr. TCM 1.56% 1.36% 1.55%
FHFA NMCR 3.78% 3.80% 4.22%
SAIF 11th District COF 0.687% 0.700% 0.709%
HSH Nat'l Avg. Offer Rate 3.98% 3.78% 4.20%

Long-term interest rates (and mortgage rates) are of course forward-looking by their nature. Soft economic patches aside, interest rates have nudged higher this spring not because the current climate is much to write home about, but rather that the prospects for more widespread growth (here and abroad, especially in the Eurozone) are improving. That said, it seems as though it will be more of a slowly rising tide lifting all boats for this go-round, rather than the U.S. pulling hard to help keep afloat many other economies.

Also, no panic here and certainly less over there seems to have softened the conditions which produced recent lows for rates, which are likely to be sticky around these levels, give or take a little. If everything goes according to expectations (a process not likely, or at least not smoothly) we may be soon be at or near the start of a long and gradual upturn for rates. Before then, we will need to take the first step, probably in September, and see where we'll go from there.

Next week's got a cascade of fresh data to ponder. The employment report for May will be joined by the twin ISM surveys, the Fed's regional survey of economic conditions, personal income and spending, auto sales and more. All the May data is likely to be better than any remaining April data, but all that seems at stake is a reaffirmation that September is the likely starting point for a change to rates, a happenstance that seems mostly "built in" to rates already. At the moment, we appear to be on a level plane for rates next week, but a stronger tenor to the data might see a couple of basis point rise.

For a longer-range outlook for rates and the economy, one which will take you up until late June, 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".


Still underwater in your mortgage despite rising home prices? Want to know when that will come to an end? Check out our KnowEquity Underwater Mortgage Calculators to learn exactly when you will no longer have a mortgage balance greater than the value of your home.

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Daily FRMI rates are available at HSH.com Check out our weekly Statistical Release here (and archives here).

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