Freddie Mac’s Primary Mortgage Market Survey came out this morning, and they found that mortgage rates declined for the third consecutive week as rising oil prices and unrest in the Middle East continues to roil the markets.
The average rate on a 30 year fixed rate mortgage fell from 4.95 percent to 4.87 percent last week, while the rate on a 15 year fixed rate mortgage declined from 4.22 percent to 4.15 percent. Adjustable rate mortgages also continued to fall, as 5/1 ARMs dropped 8 basis points to 3.72 percent, and 1 year ARMs fell 17 basis points to 3.23 percent.
The tenuous situation in the Middle East (as well as China, North Korea, and other places across the globe) has spooked the stock market to a degree, and investors have fled to the relative safety of the bond market, driving down bond yields, which mortgage rates generally track (its worth noting that the stock market is rallying this morning, and bond yields are surging – we will see if the rally holds up).
Although rates have declined over the past three weeks, mortgage applications have also dropped. Excess housing supply, and weak demand suppressed by continued high unemployment is causing continued weakness in the housing market. We will likely continue to see declining home prices until supply and demand come back into equilibrium. It is worth noting that sentiment amongst many home buyers is that housing has yet to hit bottom, so they may be a lot of potential buyers that are staying on the sidelines until the market does actually hit a nadir.