A Timely Reminder of Just How Competitive Mortgage Rates Still Are

Real Estate Broker/Owner with Everest Peak, Inc.

An Albuquerque Journal online article certainly grabbed our attention earlier today.

The report said that latest Standard & Poor’s CoreLogic Case-Shiller national home price index, released today, is slightly above the peak it reached prior to recession in July 2006, rising 5.5% between September 2016 and September 2015.

While this offers a national snapshot, and there are naturally regional variations, it's important to consider the implications of this excellent news at a time when rising mortgage rates have been the overwhelming real estate industry focus since the election (although they do appear to have stabilized in the past few days).

Above all, the index demonstrates that house prices have completely recovered from the recession years to a point where we've kind of picked up where we left off before doom and gloom began to descend in 2007.

Given that there have been various rather exaggerated headlines about the impact of higher mortgage rates recently, we thought it would be interesting to compare where rates are now compared with a decade ago.

According to Mortgage News Daily today, 4.10% is the benchmark 30-year home loan fixed rate of interest. We then visited freddiemac.com and discovered that, in November 2006, the average 30-year fixed rate was 6.24%, with an annual average for the year of 6.41%.

As Freddie Mac provides a very easy to read chart - click here to see it in full - we just couldn't resist taking things a stage further and looking at the average mortgage rates for each complete year since then:

2007 - 6.34%
2008 - 6.03%
2009 - 5.04%
2010 - 4.69%
2011 - 4.45%
2012 - 3.66%
2013 - 3.98%
2014 - 4.17%
2015 - 3.85%   

And although we can expect the eventual 2016 figure to rise a bit following the events of this month, the average for 2016 until the end of October was 3.51%.

We found it very interesting that, even when rates were at a 6.41% average a decade ago, the housing industry was still in great health and, clearly, people were still buying in very, very large numbers.

Indeed, if we go back to just 2014, we can see that the average of 4.17% was actually appreciably higher than the current 4.10% benchmark, and homes were selling very well then too!

Of course we've all gotten nicely accustomed to mortgage rates in sub 4% territory but, as we've warned so often, this was never, ever a sustainable situation, as the above figures for the past decade tend to demonstrate.

The essential truth is that, with mortgage rates so closely tied to safe haven bond investments, any upswing in investor confidence, almost always a reflection of a healthy current economy and bright perceived future prospects, is only going to put pressure on those very low rates that we quite possibly won't be seeing again for some time, if ever (though absolutely no guarantees of that, of course).

In other words, we haven't suddenly entered a twilight zone of uncharted waters with current rates and it could certainly be argued that, due to the health of the economy and indeed the real estate market itself, what we are seeing at the moment is perhaps little more than a very long overdue correction.

Today's rates are still incredibly competitive and many buyers have been recognizing this, reflected in the Wall Street Journal report we mentioned in Friday's blog that suggested mortgage applications were up by 13% as buyers rushed to lock in low rates before they went any higher.
And if you need further convincing as to what a bargain a home loan still is, let us take you on a quick journey back to the Freddie Mac quoted 30-year home loan average interest rates between 1996 and 2005:

2005 - 5.87%
2004 - 5.84%
2003 - 5.83%
2002 - 6.54%
2001 - 6.97%
2000 - 8.05%
1999 - 7.44%
1998 - 6.94%
1997 - 7.6%
1996 - 7.81%

That's an average of 6.889% over that decade, compared with 4.69% in the past nine full years.

Hopefully you'll agree with us that, irrespective of some of the headlines, it's still a fantastic time to buy or sell, especially when we put today's still super-attractive mortgage rates in a more historical perspective.

Why not contact us today to discuss how best to take advantage of the current situation.

Comments (1)

Lise Howe
Keller Williams Capital Properties - Washington, DC
Assoc. Broker in DC, MD, VA and attorney in DC

this is great information for all thinking of buying a home any time in the next year - this is really a great mortgage market! 

Nov 29, 2016 08:20 PM