Mortgage Trends This Week: Nov. 22

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There is some evidence that the U.S. housing market has finally hit bottom – a good sign for the real estate market if it's true, and probably a driver of the current rise in mortgage rates that we’ve seen during the past few weeks.

Fannie Mae’s Economics and Mortgage Market Analysis Group has some of the best data. The group reports that total U.S. housing sales will be down 8% by the end of 2010, a level that will signal the official end of the long, painful housing downturn.

Yes, the foreclosure mess still has to be sorted out. But banks are already starting to resume foreclosure activity after getting the green light from state attorney general’s (Illinois’s Cook County is the latest region to open up home foreclosures). That’s a big reason why Fannie Mae (Stock Quote: FNM) says 2011 should see a gain in home sales.

“We expect home sales to increase by about 3% in 2011, says Fannie Mae chief economist Doug Duncan. “However, the pace of the recovery will be largely determined by labor conditions. If hiring improves at a faster pace than expected, home sales will likely see a stronger gain in 2011 and visa versa.” Fannie Mae reports that a stronger economy and an improving jobs picture should lead the way for a modest housing recovery next, the group adds.

Overall, the Fannie Mae analysis group says that gross domestic product (GDP) growth will reach 2.5%, up a few percentage points from the expected 2.2% growth by the end of 2010.

As the data on and about the U.S. housing market crystallizes, the mortgage rate market seems to be heading north. The benchmark 30 year fixed mortgage, as calculated by the BankingMyWay Weekly Mortgage Rate tracker, rose again last week. The 30 year rate rose from 4.454% to 4.603%, a fairly significant boost of 49 basis points. While that won’t happen every week, just a few more weeks of healthy 30- or 40-point spikes in the mortgage rate market and we can kiss those halcyon days of low mortgage rates goodbye.

There’s more news impacting mortgage rates as well. As we noted last week, bond market investors have caught some inflationary headwinds that have resulted in a big sell-off in mortgage-backed securities. That helped to boost rates from two-month lows to higher levels in just about five to 10 days.

Now, last week’s Consumer Price Index (CPI) numbers show little sign of inflation. But bond investors aren’t buying that – many think the CPI relies too much on housing prices, which were artificially high in the first place. With gasoline and food prices creeping upward, inflation is a prospect that big investors aren’t embracing, but they’re not avoiding it either. And from where we’re sitting, it looks like the financial markets are pricing in higher inflation, and that would further boost mortgage rates in the months a head.

The moral of the story? If you can lock in a low mortgage rate now, do it – don’t wait until the classic “spring home-buying season” to get the job done. The rate you see now may be long gone by then.

Let’s get to the real numbers, as they stand right now. Here’s a look at where mortgage rates are today, as measured by the BankingMyWay Weekly Mortgage Rate tracker.

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Description   This Week  Last Week

One Year ARM  4.043%  3.534%
Three Year ARM  3.459%  3.586%
Five Year ARM  3.506%  3.479%
15 Year Mortgage  4.020%  3.913%
30 Year Mortgage  4.603%  4.454%

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The message this week is all about locking in a low mortgage rate – today, if you have to.

That’s where BankingMyWay’s Mortgage Rate Search can help. Week to week, it’s your best bet for finding the best mortgage rate deal possible.

—For the best rates on loans, bank accounts and credit cards, enter your ZIP code at BankingMyWay.com.

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