The party is over for the lowest mortgage rates in US history.
After hitting an all-time low of 2.65% in the first week of January, Freddie Mac’s 30-year fixed index climbed to 3% this week. That’s a whopping 35 basis point pop.
Raymond Sfeir, research director at the Anderson Center for Economic Research at Chapman University, points to the Fed’s monthly binge buying of $ 120 billion bonds (including $ 40 billion for mortgage bonds) as a factor major reduction in borrowing costs.
âThere has been a 25% increase in the money supply,â Sfeir said. “The deficit is climbing through the roof.”
My God. Even the Federal Reserve has finally woken up.
He acknowledged that the traces of inflation are here in the minutes of this week’s April Fed meeting. The meeting notes indicate that if the economy continues to move rapidly towards the Fed’s targets, it could discuss adjustments to the pace of asset purchases. This is the code to put a kibosh on the $ 120 billion bond buying spree.
The labor market is in the foreground. Unemployment insurance claims fell to their lowest level since March 14, 2020, to 444,000, according to the Labor Department’s database this week.
Data from the Department of Labor shows a staggering 8.1 million job openings in the United States.
Participants at the Fed meeting cited everything from expanded unemployment benefits to childcare constraints, health issues and retirement as barriers to returning workers.
Wages will have to increase considerably to attract more people to the labor market.
With the cost of everything from gasoline to groceries soaring to the sky, today’s workforce isn’t too happy either. Even McDonald’s workers are worried. When was the last time you remember McDonald’s workers striking for higher wages?
Sfeir sees the 30-year fixed rate climb to 3.4% by the end of the year. And he sees mortgages at 4.7% by spring 2023.
The monthly payment was $ 2,015 on a $ 500,000 mortgage in January, when 30-year fixed rates fell to an all-time low of 2.65%, according to Freddie. At the current rate of 3%, this payment increases by approximately 5% to $ 2,108.
Assuming Sfeir’s prediction of a 3.4% rate at the end of the year, that payout would rise another 5% to $ 2,217. At 4.7%, we see a huge increase to $ 2,593, or about 15%.
From 2.65% in January to 4.7% just two years later, we would see a 29% increase in the house payment for that same $ 500,000 mortgage.
Wages cannot keep pace.
Are we at the top of the house price mountain? Are house prices going to flatten? Or will we see a bubble burst?
Jordan Levine, chief economist for the California Realtors Association, estimates mortgage rates to be around 3.5% by the end of the year.
âI’m not very concerned about inflation,â Levine said.
Levine says CAR’s accessibility index was 27% in the first quarter of this year, compared to 11-12% accessibility during the 2006-2007 bubble.
Still, Levine provided some caution.
âBuyers who are currently bidding 20% ââmean property values ââmust continue to rise by 20%,â he said.
Freddie Mac assesses the news: The 30-year fixed rate averaged 3%, 6 basis points higher than last week. The 15-year fixed rate averaged 2.29%, 3 basis points lower than last week.
The Mortgage Bankers Association reported a 1.2% increase in mortgage application volume from the previous week.
At the end of the line: Assuming a borrower gets the 30-year average fixed rate on a compliant loan of $ 548,250, last year’s payment was $ 72 more than this week’s payment of $ 2,294.
What I see: Locally, qualified borrowers can obtain the following fixed rate mortgages with a cost of 1 point: A 30-year FHA at 2.25%, a 15-year conventional at 2%, a 30-year conventional at 2.69%, a 15- One-year conventional high balance ($ 548,251 to $ 822,375) at 2.25%, a 30-year conventional high balance at 2.875% and a 30-year fixed jumbo at 2.625%.
Eye-catcher loan of the week: A period of 30 years fixed at 3% free of charge.
Jeff Lazerson is a mortgage broker. He can be reached at 949-334-2424 or [email protected] Its website is www.mortgagegrader.com.