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Richmond Mortgage Market Update
It is worth remembering that the average 30-year mortgage fixed-interest rate measured 6.12% a year ago, and that the markets were reacting to multiple financial crises.By way of contrast, this past week was a quiet one. The average 30-year mortgage rate, according to HSH Associates, eased two basis points over the course of the week to 5.54%. In a more anxious market, it is possible that the mortgage rate markets could have reacted to such things as gold’s successful run at $1,000 an ounce—the metal ended the week at $1,005.20—but rates stood firm.
While the cost of an ounce of gold rises, the exchange value of the U.S. dollar has been declining. The dollar sank to a new low for the year this past week, falling 1.1% against the euro on Monday, and totaling a 3.7% decline over the course of the year so far. Still, confidence that inflation won’t rise precipitously is growing because (1) the M2 money supply, which is a measurement of money and timed deposits currently in circulation, has fallen by 12%, declining consistently for four weeks in a row; (2) though money amounts in circulation are still very high, velocity (the speed with which cash is spent) has fallen; and (3) history tells us that inflation always declines in the first year of a recovery, largely because of the mix of stronger productivity as against slow improvement in employment. Wages generally are very slow to rise, helping to keep inflation low.
The credit markets were further calmed this week by strong Treasury security auctions, notably that of the 10-year note on Wednesday. Markets did see investor interest moving beyond the safe haven of Treasury securities, however, as was evidenced by the rising 10-year note yield after the auction. The yield rose to 3.480% by the end of the day, but eased over the rest of the week to a 3.349% close. At the same time, consumer credit was reported to have declined further, resulting in less money for retail purchases. Outstanding loan balances fell by nearly $22 billion in July, creating a full year now of monthly declines. Low demand for loans, therefore, adds to the lack of pressure on rates to rise.
CONOMIC INDICATORS (As of 9/15/2009) 10-yr Treasury note…3.44% 30-yr Fixed-Rate Mortgage (avg)5.40% Spread between 10-yr note and 30-Year FRM…2.10% Brent Crude Oil Future…69.72 Gold 100 oz Future…1009.40 Copper…286.05 Dow Jones Industrial Average …9627.00 S&P 500…1049.34 FTSE 100…5018.85 NIKKEI…10.202.06 Mortgage Bankers Association Mortgage Applications Index ~ Week ending 9/4/09 Overall- 648.3 (up 17%; down 2.2% the week prior) Purchase Money Loans- 304.1 (up 9.5%; down 1% the week prior) Refinancing Loans- 2651.2 (up 22.5%; down 3.1% the week prior)Be smart and meet with knowledgeable REALTOR and mortgage lender. Skye Bruce Properties, The Official REALTORS and Buyer’s Agents of RichmondHomeShopper.com has a support team industry experts including mortgage lendors. Contact them today!
