RealNews

Thursday’s weekly mortgage report from Freddie Mac showed an increase of more than half a percent in the 30-year Fixed Rate Mortgage (FRM) rate average, confirming the the results of Wednesday’s report from the Mortgage Bankers Association. The increase puts long term mortgage rates at an 8-week high and all three longer term rates reported by Freddie Mac, 15-year and 30-year FRM and 5-year Treasury indexed hybrid adjustable rate mortgage (ARM), above 6%. The 1-year ARM remained at a relatively low 5.16%, up one one-hundredth from last week.

All three longer term rates are slightly above their levels from this time last year, while the 1-year ARM rate is still below year ago levels.

Freddie Mac Conforming Rates At a Glance

• 30-year FRM: 6.46%, 0.6 point
• 15-year FRM: 6.14%, 0.6 point
• 5-year hybrid ARM: 6.14%, 0.6 point
• 1-year ARM: 5.16%, 0.6 point

According to Frank Nothaft, Freddie Mac chief economist:

ARM rates, which tend to be based on shorter-term benchmarks, showed smaller gains in part due to the Federal Reserve’s October 8 inter-meeting rate cut in the overnight lending rate.

Also Thursday, the National Association of Homebuilders and Wells Fargo reported that their Housing Market Index, which measures builder confidence based on current sales, sales expectations and buyer traffic, dropped three points in October to a new record low of 14. The biggest decline was in sales expectations, which fell 32%. Buyer traffic fell by 14% (not seasonally adjusted).

NAHB’s chief economist cited three factors in causing the decline:

builder assessments of the recent events on Wall Street, the rapid deterioration in job markets and the corresponding weakness in consumer confidence.

Though there was no note of it in the report, it’s reasonable to expect that at least some homebuilders may be discouraged by difficulties in the credit market. In the last two weeks, I’ve heard the first actual reports of previously credit worthy builders having trouble rolling over construction loans, closing new loans, etc. I would note that the last time I heard similar things was in 2000/2001 just as the housing boom started, so while it’s negative news for new building, it doesn’t necessarily reflect much else.

MORTGAGE RATES SHOOT UP FOLLOWING BOND YIELDS
Only the 1-Year ARM Remains Nearly Unchanged From Last Week
McLean, VA – Freddie Mac (NYSE:FRE) today released the results of its Primary Mortgage Market Survey® (PMMS®) in which the 30-year fixed-rate mortgage (FRM) averaged 6.46 percent with an average 0.6 point for the week ending October 16, 2008, up from last week when it averaged 5.94 percent. Last year at this time, the 30-year FRM averaged 6.40 percent. This week’s increase of 52 basis points was the largest weekly increase since the week ending April 17, 1987, when the 30-year FRM rose 84 basis points.
The 15-year FRM this week averaged 6.14 percent with an average 0.6 point, up from last week when it averaged 5.63 percent. A year ago at this time, the 15-year FRM averaged 6.08 percent.
Five-year Treasury-indexed hybrid adjustable-rate mortgages (ARMs) averaged 6.14 percent this week, with an average 0.6 point, up from last week when it averaged 5.90 percent. A year ago, the 5-year ARM averaged 6.11 percent.
One-year Treasury-indexed ARMs averaged 5.16 percent this week with an average 0.6 point, up from last week when it averaged 5.15 percent. At this time last year, the 1-year ARM averaged 5.76 percent.
(Average commitment rates should be reported along with average fees and points to reflect the total cost of obtaining the mortgage.)
“Interest rates for 30-year fixed-rate mortgages rose this week to an 8-week high,” said Frank Nothaft, Freddie Mac vice president and chief economist. “ARM rates, which tend to be based on shorter-term benchmarks, showed smaller gains in part due to the Federal Reserve’s October 8 inter-meeting rate cut in the overnight lending rate.
“Recent economic reports suggest the economy is still slowing. For instance, retail sales fell for the third consecutive month by 1.2 percent in September. In addition, in its latest Beige Book, released October 15th, the Federal Reserve indicated that economic activity weakened in September across all twelve Federal Reserve Districts and that several Districts also noted that their contacts had become more pessimistic about the economic outlook.”
Freddie Mac is a stockholder-owned corporation established by Congress in 1970 to provide liquidity, stability and affordability to the nation’s residential mortgage markets. Freddie Mac raises capital on Wall Street and throughout the world’s capital markets to finance mortgages for families across America. Over the years, Freddie Mac has made home possible for one in six homebuyers and more than five million renters.

Builder Sentiment Retreats In October

October 16, 2008 - Reflecting profound uncertainties tied to the financial market shocks of recent weeks, builder confidence in the market for new single-family homes receded to a new record low this month. The National Association of Home Builders/Wells Fargo Housing Market Index (HMI) declined three points to 14 in October after having edged up slightly in the previous month.
 
“Not surprisingly, builder confidence has taken a heavy hit from the recent financial market crisis,” noted NAHB Chairman Sandy Dunn, a home builder from Point Pleasant, W. Va.  “We applaud the coordinated government efforts that have been undertaken to try to stem the panic on Wall Street and ease the impacts on Main Street, and we stand ready to support additional efforts to help stabilize housing and the national economy going forward.”
 
“Undoubtedly, today’s HMI reflects builder assessments of the recent events on Wall Street, the rapid deterioration in job markets and the corresponding weakness in consumer confidence,” noted NAHB Chief Economist David Seiders. “This report provides clear evidence that an additional economic stimulus package is needed, including a substantial incentive to spur home buying.  The impacts of the record-breaking housing contraction have spilled over to other key sectors of the economy and weighed heavily on financial markets, and stabilizing housing is now the best chance we have to limit the severity of recession.”
 
Derived from a monthly survey that NAHB has been conducting for more than 20 years, the NAHB/Wells Fargo HMI gauges builder perceptions of current single-family home sales and sales expectations for the next six months as “good,” “fair” or “poor.” The survey also asks builders to rate traffic of prospective buyers as “high to very high,” “average” or “low to very low.” Scores for each component are then used to calculate a seasonally adjusted index where any number over 50 indicates that more builders view sales conditions as good than poor.
 
All three component indexes fell this month. The indexes gauging current sales conditions and sales expectations for the next six months each hit new lows, falling three points to 14 and nine points to 19, respectively. The index gauging traffic of prospective buyers declined two points, returning to July’s record low of 12.
 
Every region posted declines in builder confidence in October, with four-point declines recorded in the Northeast and South, to 17 and 16, respectively, a three-point decline to 10 registered for the West, and a one-point decline to 14 posted in the Midwest.