Recently the stock market has had more good days than bad. Unfortunately, as the stock market rises, rates have been rising as well. That seems to be the trend for the past few months.
There were actually a few days in the past few weeks in which the markets have ignored this trend. For a few days we saw the stock market go up and stable rates. Unfortunately, the new trend did not continue because a massive supply of government borrowing released earlier in the week affected things for a few days. So we will anxiously wait for a look at what this coming week will bring.
Why are we so concerned with these trends? With the stock market still down so far from the peak, it would be healthy for the economy to continue the rally. But we don't want this happening at the expense of higher rates which could delay recovery of the economy. So we hope for the best of both words.
We could be in for a volatile week to say the least with the employment report due this week on the heels of the first snapshot of the second quarter economy which showed a smaller than expected drop of 1.0 percent. It is even harder to discern trends when there is volatility. Even the real estate market's recovery will be subject to volatility.
The good news is we are seeing price stabilization and rising sales. On the other hand, there are still many foreclosures coming on the market. Many Americans are deciding that this is the time to purchase and the experts seem to agree with this conclusion.
Rates were up slightly for the second week in a row. Freddie Mac announced that for the week ending July 30, 30-year fixed rates averaged 5.25 percent, up from 5.20 percent the week before. The average for 15-year mortgages rose slightly to 4.69 percent. Adjustables were also up marginally with the average for one-year adjustables barely rising to 4.80 percent and five-year adjustables increasing slightly to 4.75 percent. A year ago 30-year fixed rates were at 6.52 percent.
"Bond yields rose slightly higher this week on market optimism that the economy may be stabilizing somewhat, and home loans followed those yields," said Frank Nothaft, Freddie Mac vice president and chief economist. "For instance, the Federal Reserve reported in its July 29 regional review that residential real estate markets in most of its districts remained weak, but many reported signs of improvement. Other economic reports confirm that the housing market may indeed be bottoming out."
New home sales rose for the third consecutive month in June to an annual pace of 384,000 homes, the most since November 2008 and the number of new houses on the market fell to the lowest amount since February 1999, according to the Department of Commerce. Sales of existing homes also showed a three-month gain to 4.89 million, the most since October 2008, and the share of distressed homes fell to 31 percent compared to almost half at the beginning of the year, the National Association of Realtors reported.
David Walden is a Certified Mortgage Planning Specialist and Certified Divorce Planning Professional in Pleasanton.