New Home Buyers Need to Focus on Forward Mortgage News
With all the mortgage news coming out these days, it is important for new home buyers to distinguish between stories which primarily affect existing home owners and borrowers, and those which will impact future buyers.
As an example of the range of stories over the past week:
- Existing home sales suffered a setback in June, after showing signs of growth in May
- The long-awaited housing bill continued to inch toward passage
- 30-year mortgage rates took their biggest jump of 2008
- Oil prices took a welcome drop from their recent all-time high
New home buyers should have a different take on these stories than the angles widely reported by the media.
Existing Home Sales Decline
Sales of existing homes fell by 2.6% in June. This was unwelcome news for the housing market, as it was a greater decline than had been expected, and followed a slight increase in sales during May. That increase had been a possible signal that the housing market was finally beginning to turn around, but now it seems the recovery will be longer in coming.
A turn upward in sales volume won’t immediately boost housing prices, but it will be a first step toward working through the excess inventory on the market. With this recent step back in sales volume, the message for potential buyers is that the bargains are still out there.
The Housing Bill
The housing bill cleared two important obstacles — the House of Representatives passed the bill, while President George W. Bush reversed his earlier threat to veto the bill. This left Senate approval as the only remaining barrier to passage.
While potential buyers may be affected by this bill over the long run when they become mortgage borrowers, the most likely short-term effect is a potential lender bottleneck once existing mortgages become eligible for refinancing under the bill’s provisions, which happens as of October 1st. The message for new buyers, then, may be to act before this bottleneck has a chance to develop.
30-year Mortgage Rates Jump Higher
30-year mortgage rates jumped 37 basis points in just one week, to 6.63%. This was their largest increase of the year, and brought them to their highest level of 2008.
Mortgage rates under 7% are still relatively low on an historical basis, and what this sudden jump showed was that delays in acting on housing or mortgage decisions can be costly.
Oil Prices Show Some Relief
The jump in mortgage rates did not come as a surprise to anyone who was focusing on the accelerating inflation trend, which was bound to create upward pressure on rates. Therefore, a piece of good news in contrast to the rise in rates was the sharp slide in the price of oil. The price of a barrel of oil slid below $125, after peaking above $147 earlier in the month.
While inflation has spread to sectors of the economy beyond oil, the major impetus behind the recent inflationary trend has been oil prices. If the recent slide can be sustained, it will take some pressure off of inflation and interest rates.
While macroeconomic trends are beyond any borrower’s control, it is important to remember that one way to save on mortgage rates under any conditions is to shop around carefully by comparing lenders.
Tags: 2008, borrowers, home sales, housing prices, interest rates, lender, mortgage news, mortgage rates, refinancing
