Last week’s employment data showed more people getting back to work. For the month of February the economy added 236K jobs vs. 170K expected. The Unemployment Rate showed a decline to 7.7% from the 7.9%, the lowest level in four years. This good news pushed the Dow Jones Stock Index to a new record high. On this economic and stock market strength there was a significant down turn in Mortgage Backed Securities (MBS) leading to higher rates.
Other recent economic news releases have also showed increased economic strength. It’s interesting since it mirrors last spring when we saw quite a bit of economic growth which then ended up faltering during the second half of the year. Still that strength at the early part of the year and people getting back to work, or feeling more secure about their employment, is what helped propel the real estate market. Though rates can be expected to head higher when the economy strengthens that is less important to the health of real estate growth than an improving job market.
As a side note, if mortgage rates go up by ½% the monthly payment on a $270,000 mortgage will go up $70. Predictions are for mortgage rates to be around 4.5% towards the end of this year. That would be a full percentage point higher than where we started the year. To put things in perspective though even a 4.5% rate is still the lowest rates have been in the last 42 years aside from last year. Last the year the average rate was 3.66%. In 2011 it was 4.45% so if predictions hold true rates will be very similar to 2011 towards the end of 2013.
Mortgage rates are significantly higher than last week.
The 10-year US Treasury Note is at 2.05%, up .20 since last time.
Credit Spread (10yr UST vs. FNMA Current Coupon) 1.20, from 1.22 last time.
Current 30-year Fixed 3.625%. Jumbo 5/1 ARM 2. 50%.
Of note, the conforming 5/1 ARM is now at 2.25%, the 7/1 at 2.625%.
If you have any questions about 203K loans or other mortgage products, or need help with a pre-approval, I am always happy to be of service.