Recent economic reports show the economy is strengthening, and that's "supposed" to be pushing rates up, says Michael Becker, a mortgage banker at WCS Funding in Baltimore. "But Greece seems to be holding them down."
U.S. economy crawling toward recovery
Manufacturing figures released this week show production volume in U.S. factories increased in January and was better than expected in December. Production increased 0.7 percent in January and 1.5 percent in December, says the Federal Reserve. December was the month with the biggest growth in manufacturing in five years.
"This is the longest period of sustained improvement we have seen in the HMI since 2007, which is encouraging," says David Crowe, NAHB chief economist. "However, it is important to remember that the (index) is still very low, and several factors continue to constrain the market. Foreclosures are still competing with new home sales, and many builders are seeing appraisals come in at less than the cost of construction. Additionally, prospective homebuyers are finding it difficult to qualify for a mortgage."
During the boom, the index was in the 70s. In 2009, it reached a low of 8.
The January retail sales report, also released this week, was less than what economists had expected, but it shows sales picked up slightly. Sales rose 0.4 percent last month, according to the Commerce Department. While that's a slight increase, it's better than December, when sales were flat.
Thank the Greeks for the low rates
"The numbers coming out seem to show the economy is turning the corner a bit," says John Walsh, president of Total Mortgage in Milford, Conn. But until investors feel confident about the debt situation in Greece, they will leave their money parked in safe investments such as U.S. Treasury bonds, he says. When investors seek safety in bonds, mortgage rates tend to drop.
On Wednesday, Greek leaders agreed to terms of a new financial bailout to prevent the country from defaulting on its debt. Investors were hopeful a deal would be reached soon, but there is talk that some of Greece's eurozone creditors may delay the bailout until after Greek elections in April.
"That's adding to the uncertainty," Walsh says. "Once (the bailout) is approved and implemented, you could see rates go back up a little, maybe a half of a percentage or so."
For those who are trying to decide whether to refinance now or wait, Walsh says:
"If it makes sense to refi today, do it," he says. "You never know what's going to happen to home values, interest rates and underwriting guidelines."