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Grim news about the housing and mortgage industries didn't have much effect on mortgage rates this week.
The benchmark 30-year fixed-rate mortgage dropped 1 basis point to
6.49 percent, according to the Bankrate.com national survey of large lenders. A
basis point is one-hundredth of 1 percentage point. The mortgages in this week's
survey had an average total of 0.35 discount and origination points.
One year ago, the mortgage index was 6.42 percent; four weeks ago, it was 6.32 percent. The benchmark 15-year fixed-rate mortgage, a popular mortgage choice for people considering a mortgage refinance, moved down 1 basis point to 6.17 percent. On bigger loans, the average jumbo 30-year fixed fell 3 basis points, to 7.24 percent.
Adjustable-rate mortgages also dipped. The popular 5/1
ARM fell 11 basis points, to 6.26 percent, while the 1-year ARM
fell 1 basis point, to 6.13 percent.
 |
| Weekly
national mortgage survey |
|
| This week's rate: |
6.49% |
6.17% |
6.26% |
| Change from last week: |
-0.01 |
-0.01
|
-0.11 |
| Monthly payment: |
$1,041.83 |
$1,407.56 |
$1,017.01 |
| Change from last week: |
-$1.08 |
-$0.90 |
-$11.84 |
On the hopeful side, consumer inflation was just about what investors and economists expected in September. The consumer price index clocked in with a core inflation rate of 0.2 percent in September, which did not surprise anyone when the report was released Wednesday morning. Bond traders, who ultimately set mortgage rates, are seldom in the mood for surprises. When the bond market doesn't hear unexpected news, mortgage rates don't move much -- and that's the case here.
Also on Wednesday, investors learned that housing starts and building permits were worse than expected in September. Although starts and permits were below forecasts, the report didn't come as a shock. Investors figured that if their predictions were off, they probably were too high, and that was the case. The federal government reported that housing starts were at a pace of 1.19 million units, while the consensus forecast among economists and investors had been about 1.29 million.
No bottom yet
It's beginning to sink in that the slowdown in housing is causing overall economic growth to decline, too. Doug Duncan, chief economist for the Mortgage Bankers Association, sums it up as a headline that goes this way: "The big picture: The economy slows, with housing as its primary cause, and credit market turmoil delaying recovery."
He expects the country's total economic output to decline to an annual rate of 1.5 percent in the final three months of this year, then slowly gain momentum through 2008. But things will go worse in housing.
"We have a ways to go in the housing recession," Duncan says. "It's clearly a deep recession at this point."
He figures that the housing recession will begin to dissipate about a year from now. By that, he means that he expects residential investment to begin to rise as people begin to buy used houses and builders construct new ones.
But people are going to buy houses a year from now because prices will have fallen further by then. Buyers will be chasing good deals after having waited for a long time. Duncan expects house prices to continue to decline into the end of 2008 and maybe into 2009.
Gruesome hangover
At this week's annual meeting of the Mortgage Bankers Association,
the dominant emotions were melancholy and regret for the excesses
of the go-go years in which the main criterion for getting approval
for a mortgage was the borrower's ability to fog a mirror. This
subprime mania hit particularly hard in 2005 and 2006.
"Really, in theory, we never should have done it," said Ted Tozer, a servicing executive for National City Mortgage, at a panel discussion at the MBA convention. He was speaking about the entire industry and not just his company. He added: "The party was hearty for a while, but the hangover is going to be gruesome."
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This week: July 30 - Aug. 5
