30-Year FRM Increases .03%; Still a Full Percentage Point Lower Than This Time Last Year
For the last three weeks, mortgage rates have increased despite the fact that the Federal Reserve has reduced interest rates to historic lows in an effort to combat an uncertain global economy (though it looks like the U.S.-China trade talks are making progress on many key issues). This goes to show that general rules are just that – general. Typically, mortgage rates mirror the interest rates set by the fed, but all rules have outer bounds where they are no longer applicable.
During the week of October 31, 2019, the 30-year fixed-rate mortgage (“FRM”) increased from 3.75% to 3.78% (that’s an increase of $3,000 per year on a $1M house); this is the first time since April 2019 that we have seen the 30-year FRM rise three weeks in a row. While this may be cause for concern, it is important to note that 3.78% is still a full percentage point lower than it was this time last year (1% amounts to $10,000 per year on a $1M home), so buyers still have higher purchasing power than last year.
Similarly, the 15-year FRM increased from 3.18% to 3.19%. This comes on the heels of the Fed announcing yet another reduction in interest rates. This should not cause alarm, however, as the Feds interest rate changes tend to effect short-term rates more than long term rates; mortgages fall into the latter category.
Ultimately, those involved in the housing market will have to take a wait-and-see approach. Consumer spending has remained strong, indicating the employment market is thriving. When more people are employed, more people will buy houses. Paired with the fact that we are still facing a shortage of houses in comparison to high demand, potential home sellers are still in good shape.
At the Chernov Team we understand that knowledge is power, and knowledge of how the housing market is behaving is powerful knowledge indeed. At the Chernov Team we know that whoever comes to the table the most prepared leaves with the most, and the Chernov Team always leaves the table with the most.