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From Jason Payne, Market News Analyst…
Did you make a new year’s resolution to get a new mortgage in 2014?
If so, then I’ve got some bad news for you: It’s probably going to be more expensive for you this year than it would have been last year…
…and it’s probably time for you to start getting a little more creative with your resolutions!
(I say this out of love, because somebody had to tell you!)
-smile-
In any case, U.S. mortgage rates have now increased to their highest levels since September, thereby increasing borrowing costs for most homebuyers as prices continue to climb across the country.
As of this morning, the average rate for a 30-year fixed rate mortgage stands at 4.53%, which is 119 basis points higher than last January’s average rate of 3.34%, according to mortgage finance behemoth Freddie Mac.
Similarly, the average 15-year rate stands at 3.55%, up from 2.64% a year ago.
Practically speaking, this means a consumer with a $200,000 loan for 30 years will now pay $137 more per month ($1,017 per month today, compared with $880 a year ago). And someone with a 15-year loan would pay $1,435 a month today for that same amount, compared to $1,347 a year ago.
Mortgage rates have been climbing from last Spring’s near-record lows on speculation that the Federal Reserve would begin to taper its bond purchases, which have stimulated the burgeoning U.S. economic recovery. And as if on queue, the central bank announced December 18th that it would indeed begin to trim its monthly asset purchases – starting this month.
Echoing the Fed’s sentiment, Freddie Mac’s Chief Economist recently issued a statement to confirm the ongoing climb in rates stems from a "stronger economic recovery."
(He also noted that the National Association of Realtors’ pending home sales index inched up 0.2% in November, after five straight months of decline, which represents another encouraging sign of health as the U.S. housing market continues to recover.)
Out Like a Lion, In Like a Lamb
However, despite the recent gains in year-over-year mortgage rates, it appears that 2014 has begun on a somewhat muted note. Perhaps all the mortgage bankers have been taking a much-needed “breather” for the holidays…
…or perhaps there’s more to it than an extended Christmas vacation for those high-fallutin’ masters of the universe?
-fingers crossed-
"Rates were flat during last week's holiday-shortened trading week," said Erin Lantz, director of mortgages at Zillow. "This week rates should remain steady unless the December jobs report released on Friday reveals unexpected insights into the health of the U.S. labor market."
Oh, well.
I guess it’s okay for the fat cats to spend a few more days in Aspen – as long as Friday’s jobs report doesn’t prompt them to hike interest rates from their phones – right?
In any case, this chart describes the recent 7-day growth – or lack thereof – across ten of the states containing large concentrations of Mogul members. Take a look, and be heartened if you find that your home state’s mortgage rates have not gone totally berserk this year:
(Additional states' rates are available on Zillow’s helpful webpage for mortgage analysis.)
And although last year’s increase in mortgage rates has definitely slowed demand, we note that homebuyers have still been boosting prices for the limited supply of properties for sale, which includes fewer discounted foreclosures. Specifically, home prices in 20 U.S. cities rose 13.6% in October from a year earlier, the biggest gain since February 2006, according to the S&P/Case-Shiller index.
“Price growth was given a helping hand by the declining share of distressed sales,” economists at IHS Global Insight said in a recent research note. “Homes which were previously sold at a heavy discount are no longer fetching a fraction of their value; this is probably causing the index to overstate home price appreciation.”
All in all, it looks like mortgage rates and price growth might actually be sustaining a sort of momentary stability. And this is good news for investors have been dreaming of a return to “normalcy” in the residential real estate markets…
…or at least something akin to “the new normal”.
Jason Payne’s next Market News Update is scheduled for Wednesday, Jan. 15th.
Jason Payne
is a management consultant and founder of the Groundwar Group -- a private consulting firm providing premier corporate advisory and leadership training solutions for business leaders and investors worldwide. Mr. Payne is also the Senior Market News Analyst and a featured "Mindset" advisor for more than 15,000 entrepreneurs and investors at RealEstateMogul.com -- roles he has held since 2013 and 2014, respectively. In these capacities, Jason draws from more than a decade of successful business and investment research on Wall Street to provide insightful commentaries on a wide variety of investing- and leadership-related topics.
Mr. Payne began his career as a research analyst in the award-winning Equity Research department of Morgan Keegan & Company, where at 26 years of age, he became one of the youngest published analysts on Wall Street -- with a specialized focus on real estate investment trusts (REITs). Jason also holds a degree in Finance from New York University's prestigious Leonard N. Stern School of Business, and he is currently completing his professional residency within the Global Leadership Training program of Uruguay's multinational Geronimo Center for Innovation & Leadership.