Mortgage Trends This Week: May 10

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Some disturbing news on the housing front leads our weekly “Mortgage Rates Monday,” with data from the real estate firm Clear Capital revealing that home prices dropped by 5% in the first quarter of 2010.

Month-to-month, the home sales numbers do look better – the last quarterly numbers posted by Clear Capital (using a “rolling” monthly survey formula) in April showed only a 3.9% decline.

For impactors, you have to look at foreclosures first. The survey numbers show that foreclosures were the reason for 29.6% of all sales for the most recent quarter. That’s a 1% up-tick from last month, and that’s not the number that economists wanted to see.

On a more macro level, the rest of the story resides in Greece, where a major fiscal funding shortage led the EU Commission to pour a $146 billion bailout into one of the major Western economic powers, with the actual threat of default only all too real. International trading market thought the EU waited too long to act, and financial markets suffered as a result last week. In the U.S., the anxiety over the Greek tragedy cut 5.7% off the stock market last week (fueled by a still-unanswered glitch in the trading system that caused the Dow Jones Industrial Average to drop by 1,000 points last Thursday). The Dow has climbed back this morning, rising 400-points after news from the EU that it would establish a $1 trillion fund to help out struggling member economies.

We also saw a week-to-week 30-point decline in benchmark U.S. Treasury yields, which tends to push mortgage rates downward as skittish investors flee the stock market for the relative safety of bonds. Historically, when Treasury yields decline, the price of mortgage backed-securities move upward. That gives cash-flush banks and other lenders enough wiggle room to lower mortgage rates, which means good deals for home shoppers.

The last peg on the mortgage rate board is the unemployment rate. Obviously, stronger employment numbers would signal a stronger economy – and drive mortgage rates higher, as more homebuyers would enter the real estate market, and presumably narrow that pesky “supply-demand” gap that’s helped drive U.S. housing prices lower.

But are we really seeing that? The U.S. Bureau of Labor Statistics is out with its monthly reading of the U.S. jobs picture and it’s a mixed bag. Net jobs are definitely up, at 162,000 as measured by U.S. non-farm payrolls. But about 56,000 of those jobs come straight from the U.S. Census, and the unemployment rate actually rose from 9.7% to 9.9%. Translation?  More long-term unemployed individuals  - not counted by the U.S. government – are back looking for jobs again. They’re not really finding jobs yet – but in a major stretch, the Labor Dept. counts the long-term unemployed as back in the work force when they start looking for work again.

Taken together, the economic news from last week was not well received by mortgage lenders. Rates are down for 15 and 30-year fixed mortgages as lenders continue to look for some genuine glimpses of wide, blue skies, instead of the slivers of light that have teased economists – and the U.S. public – so far in 2010.

The  numbers tell the story, as usual. The BankingMyWay Weekly Mortgage Rate Tracker lays it out:


Description            This Week    Last Week
One-Year ARM         3.810%         3.748%
Three-Year ARM       4.338%        4.218%
Five-Year ARM          3.921%        4.051%
15-Year Mortgage    4.455%        4.562%
30-Year Mortgage    5.078%        5.262%

With rates down, strike while the iron is hot. For the best deals, check out BankingMyWay’s Mortgage Rate Search. Week-to-week, it’s your best bet for finding the best mortgage rate deal possible.

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