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30 Year Fixed-Rate Mortgage Hits 5.05%, Highest Since April 2010

Tyler Durden's picture


To those who look for confirmation of the wealth effect in every nook and cranny, better keep looking away from housing. The 30 Year Fixed Rate mortgage, that indicator of just how much "piggy bank" value US housing has, just jumped by a whopping 24 basis points in the last week to 5.05%, the highest since April 2010. And as the observant ones will point out, it was in April of last year, when the market topped out after hopes and dreams of a self-sustaining economic recovery collapsed (with Europe lending a helping hand in the process), leading to QE Lite and QE 2 several months later. In other words, in the last 2 months, housing, at least that part that has a mortgage associated with it, has lost roughly 10% of its value as incremental purchasing power has just declined by the same amount courtesy of the spike in rates. In spiking the market, Ben has once again planted the seeds of his own monetary policy destruction.

And to those who thought yesterday's whopper of a 10 Year auction may have set a floor in the Treasury complex, we have some bad news: the yield is back to pre-auction levels. 

In other words, more mortgage "poverty effect" pain is coming.


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Thu, 02/10/2011 - 11:49 | Link to Comment LawsofPhysics
LawsofPhysics's picture

"Ben has once again planted the seeds of his own monetary policy destruction."

All part of the plan.  Move along, nothing to see here.

Thu, 02/10/2011 - 11:53 | Link to Comment ghostfaceinvestah
ghostfaceinvestah's picture

The rise in rates is all due to "optimism" according to Brian Sack, so don't worry.

Thu, 02/10/2011 - 11:54 | Link to Comment Jason T
Jason T's picture

yet everybody and their mother is buying SPG with a 3% yeild.  negative real rate of return on everything except real estate of all things.

Thu, 02/10/2011 - 11:55 | Link to Comment subqtaneous
subqtaneous's picture

Taking a page from yesterday's Market Ticker?



Thu, 02/10/2011 - 12:01 | Link to Comment Tyler Durden
Tyler Durden's picture

From Zero Hedge December 10:

Um, Chairman, so what happens now, a month after your Op-Ed justifying
QE2, when the prevailing mortgage rate is about 1% higher, and is
resulting in about a 10% decline in home prices to maintain the same
level of affordability?

From Zero Hedge September 26:

Correlation Of Mortgage Rates With Real Housing Prices II

And many more...

So the answer to your question is no.

Thu, 02/10/2011 - 12:29 | Link to Comment In Fed We Trust
In Fed We Trust's picture

Related, on NPR this morning, I further learned from the experts the following:

After the bailouts, because of Freddie /Fannie the US gov "footprint in the mortgage market" is TOO BIG and steps would be taken reduce "the foot print."

Seeing how the FED just bought all those MBS, it would seem as it was their foot print that is too large, not the gov.

They said the 3O fixed mortgage is a thing of the past. Mortgages will be different going forward.

They mentioned bringing "private capital" to fix the problem. 

Bernake testified yesterday that "failure to pay the interest on the debt would result in higher interests rates thus making it even more difficult to pay , thus startung a vicious spiral.

Well, here we are, rates are already 1% higher! Time to raise the debt ceiling.

To bad that the price of a home isn't in the CPI, core infaltion measure, then we would have no inflation for the next 10 years. 

My prediction is that as Real Estate continues to plummet 20-30% over the next couple of years, the Fed will be acquirinf more and more receipts, for these troubled properties. By the end, maybe they will own over half the properties in the US.

Rates have only one way to go. Up!! Ben has been trying to slip this idea to us.

I imagine that private money they mentioned on NPR to fix Freddie /Fannie Mae belongs to Goldman and JP Morgan. They will buy the whole lot off the FED.


Thu, 02/10/2011 - 12:35 | Link to Comment In Fed We Trust
In Fed We Trust's picture

Once the securitization and collaterization processes where invented to box mortgages and resell them in addition to risk related derivatives, it is GAME OVER,

Now the entire real estate market could be controlled as anu other commodity market.

In commodities, they use the margin rule, to disrupt or PIVOT the market.

With houses, it is the interest rate that is the level to do the same, distrupt, and take back the physical asset.

Thu, 02/10/2011 - 13:03 | Link to Comment Boxed Merlot
Boxed Merlot's picture

The fly in this ointment is however, the faulty construct of the securitization and collaterization process arrived at.

The construct was built on sand so much so that when any breeze blew, the structure collapsed. Title transfers, trust accounts and tax rolls are not ideas or hurdles one must avoid in order to experience profit. They are necessary components to ensure the stability of the asset.

Real estate values are about as close to the federal reserve in their nature to conjure up debt as most US individual's will likely experience.

However, the ultimate owner of real estate will always revert to the state due to that being the entity that issues the initial deed. No payey the taxes, no owney the property.

Thu, 02/10/2011 - 13:07 | Link to Comment In Fed We Trust
In Fed We Trust's picture

OK here is a hypothical.

Lets the US were to default, it would never happen, but lets say it did.

Wouldn't the national forests and highways be sold to private corporations.

Would the entire military be sold to ah, Halburitan for example.

Would not the FEd, a growing holder of the MBS bag of toxic assets, be entitled to all those homes at the bottom f the bag?

Then the Fed will resell the homes back to you at a steep price, and 50 year mortgage!

Thu, 02/10/2011 - 12:46 | Link to Comment Boxed Merlot
Boxed Merlot's picture

I imagine that private money they mentioned on NPR to fix Freddie /Fannie Mae belongs to Goldman and JP Morgan. They will buy the whole lot off the FED.

All "money" is private. The GS / JPM currency used is all private federal reserve notes conjured up and "sold" in house for zirp.

Still, there is no need to get angry, threatening or pout. What is needed is for our elected officials to act like adults and use the temporary power and authority the US citizens have entrusted in them.

Begin immediately to mint intrinsically valuable coinage for circulation and instruct the executive to have the treasury department issue US notes to back it.

It's only a matter of time before another sovereign nation does this and the first to do so will become the real global reserve currency.

Of course, if our freedom, rights and honor aren't worth it, continue on, pay homage to the chairman.

Thu, 02/10/2011 - 13:10 | Link to Comment PeterSchump
PeterSchump's picture

That is exactly the whole idea,  Fed buys with fabricated $'s at face value, then sells them back to "private hands" at pennies on the $.  Private hands here are only the friends of Uncle Sam.  Try, as a private citizen, to get in the the action.  Sorry common taxpayer unwashed serf, there is no room for you.

Thu, 02/10/2011 - 11:55 | Link to Comment lsbumblebee
lsbumblebee's picture

Yield back up. Well at least they bought themselves another 24 hours.

Thu, 02/10/2011 - 11:56 | Link to Comment TeMpTeK
TeMpTeK's picture

I pledge allegiance.........

"With illiquidity and Ben Bernankruptcy for all"

Thu, 02/10/2011 - 11:58 | Link to Comment DonnieD
DonnieD's picture

Ah, the irony of the Fed's incompetence. His money printing is crushing housing, the one sector he's desperately trying to prop up. At least the banks paid record bonuses again.

Thu, 02/10/2011 - 12:01 | Link to Comment Obaminator
Obaminator's picture

Wow....5.05%....Shit, does ANYONE friggin remember when a "Good" mortgage rate was like um...8% - Yeah that was for a 720 FICA no debt in 1995.

God, I remember when rates went "down" to 6.5% back in 96-97, Paying that 8% was a PIA, so I refinanced.

Interestingly my house value increased almost lock-step with the decrease in interest rates. Sold that house in 2002 thinking a bubble had formed...only to kick myself later, but thats another story.

5% is still too low of a rate for a 30-yr mortgage based on knowledge we now have of a falling house market and potential for distaster economically. Were in a catch-22...low rates = too much risk and future failures, high rates = lower prices and failures. Choose your poison.

Thu, 02/10/2011 - 12:17 | Link to Comment SheepDog-One
SheepDog-One's picture

Yea well back then people also had jobs and bankruptcies werent at all time record highs. Rate monkey, why not pay no rate, if you want a house pay cash.

Thu, 02/10/2011 - 12:32 | Link to Comment dark pools of soros
dark pools of soros's picture

many sizes to choose from at your local Uhaul box section

Thu, 02/10/2011 - 12:02 | Link to Comment RobotTrader
RobotTrader's picture

Investors are celebrating the rise in yields by buying more REITS.

IYR now yielding a paltry 4% compared to nearly 7% in 2009.

Maybe this will stop going up once the 10-year gets to 4%?


Thu, 02/10/2011 - 12:17 | Link to Comment SheepDog-One
SheepDog-One's picture

By 'investors' I guess you mean the FED?

Thu, 02/10/2011 - 15:32 | Link to Comment Minyan Vince
Minyan Vince's picture

4% on the 10-year is the magic number...why because all these pension and macro funds have that number in their allocation models, so once it's triggered, the migration from equities to bonds commence

Thu, 02/10/2011 - 12:06 | Link to Comment TruthInSunshine
TruthInSunshine's picture

Ben S. Bernanke (aka 'The Bernank'; aka 'ChairCreature'; aka 'ChairSatan'; aka 'Bernank--Hewlett-Packard') is 100% confident that those rates must be misprints.

Thu, 02/10/2011 - 12:19 | Link to Comment SheepDog-One
SheepDog-One's picture

Ben Shalom doesnt see it, just like he doesnt see inflation anywhere, therefore it does not exist. And the emperors robes are splendid.

Thu, 02/10/2011 - 12:13 | Link to Comment Kayman
Kayman's picture

America, from manufacturing giant to slice and dice paper tiger in one generation.

Thanks for the one sane place left Tyler.


Thu, 02/10/2011 - 12:39 | Link to Comment Sophist Economicus
Sophist Economicus's picture

Uhmm, not quite.   US manufactures more now as a percentage of GDP than in 1970


US manufacturing sector, if treated as a country, is NUMBER 5 - about tied with Germany's ENTIRE GDP, larger than China's manufacturing sector by far

US Manufacturing DOES employ less people now than is did in 1970....THAT FACT is true

Thu, 02/10/2011 - 13:14 | Link to Comment In Fed We Trust
In Fed We Trust's picture

Just all the operations have moved abroad, but yes they maintain mailing,billing address in the US along with a marketing and design departemnts.


Capital will soon be racing out of the country to back these industrial operations that have already moved abroad.

Just a matter of changing the taz code as Bernake said yesterday, "To reduce the deterents for investors, I mean WORKERSs"

Thu, 02/10/2011 - 13:57 | Link to Comment Sophist Economicus
Sophist Economicus's picture

I think the numbers I saw were actual Manufacturing numbers.    Manufacturing has been shrinking as a percentage of US GDP, as has its employment - but we still 'make stuff' for now...

Thu, 02/10/2011 - 12:16 | Link to Comment LawsofPhysics
LawsofPhysics's picture

Can you say "shadow banking".

Thu, 02/10/2011 - 12:15 | Link to Comment LawsofPhysics
LawsofPhysics's picture

"Mark to unicorn" accounting will continue until the unicorns come home.


Hedge accordingly.

Thu, 02/10/2011 - 12:18 | Link to Comment ghostfaceinvestah
ghostfaceinvestah's picture

BTW, highest since April 2010.  What happened in April 2010?

Oh, yeah, QE1 ended.  You remember QE1, the one that was supposed to lower mortgage rates?

Funny how rates dropped AFTER QE1 ended.

And then QE lite and QE2 come along, and rates go back up?

Bernanke = fucking liar.

Thu, 02/10/2011 - 12:38 | Link to Comment John McCloy
John McCloy's picture

Imagine where they would be without the QEs. Free market Terminator always looking for Sarah Conner. Ben has just been keeping her hidden for an unprecedented amount of time.

Thu, 02/10/2011 - 13:16 | Link to Comment In Fed We Trust
In Fed We Trust's picture

Bernake dosn't care if he looks like a fool or incompent.

Or if we all hate him.

In the end it is us that will be hoodwinked, as he flys of in his chopper after auctioning off their US real estate holdings.

He isn't stupid. He is a criminal! 

Thu, 02/10/2011 - 12:27 | Link to Comment ghostfaceinvestah
ghostfaceinvestah's picture

btw, this won't help

Chinese Economist Warns Of Risks In Freddie Mac, Fannie Mae Bonds

A popular Chinese economist on Thursday said China should be aware of risks in its holdings of debt issued by U.S. government-controlled mortgage giants Fannie Mae (FNMA) and Freddie Mac (FMCC), and suggested that China sell the securities soon.

The report by Lu Zhengwei, a senior economist at China's Industrial Bank Co., doesn't represent the views of China's leadership, but it does highlight persistent concerns about the security of Fannie Mae and Freddie Mac securities among Chinese civilians and some influential thinkers.

Lu's warning comes just ahead of a report from the Obama administration, which could come as soon as Friday, that will outline options to gradually phase-out the two companies, reducing the government's footprint in the U.S. mortgage industry.

The Obama administration has committed unlimited amounts of aid to ensure that the firms meet their obligations to holders of their debt, as well as investors in asset-backed securities issued by the two companies. The commitment has cost U.S. taxpayers $134 billion so far.

Nonetheless, Lu said in his note that this commitment amounts to an "empty check" without the support of the U.S. Congress.

"However, looking at the current political situation in the U.S., for the U.S. congress to give a clear guarantee on this issue is almost impossible," Lu said.

Although an outright default is unlikely, Lu said that the end of the Federal Reserve's program of quantitative easing could cause the price of the securities to fall. He suggested China sell its Fannie and Freddie holdings before the U.S.'s quantitative easing ends in June.

Thu, 02/10/2011 - 12:31 | Link to Comment halelauncher1940
halelauncher1940's picture

How long before the city of Washington D. C. is brought to a grinding halt, by millions of protesters, just like Egypt..Or are we all to civil for that type of demonstration.  Thank goodness for this site.

Thu, 02/10/2011 - 12:35 | Link to Comment dark pools of soros
dark pools of soros's picture

if there was 'goodness' ZH wouldn't need to exist

Thu, 02/10/2011 - 12:33 | Link to Comment OptionsHedge
OptionsHedge's picture

I guess the economy must be improving. Except for wash ups like CSCO, MSFT and the so yesterday herd.

Thu, 02/10/2011 - 12:34 | Link to Comment HedgeFundManager
HedgeFundManager's picture

This post makes sense I guess if you're married to the 30year fixed but if your loans are tied to Libor or better yet Fed Funds, then you could care less.

I am applying for a loan in Florida, 15% down with no PMI, $625k cap, at the Prime Rate.

Regional banks who are healthy, and that's more and more, are still making a killing on the spread.

Get with the program.

Thu, 02/10/2011 - 12:37 | Link to Comment dark pools of soros
dark pools of soros's picture

are you buying all of Daytona for $625k ?

Thu, 02/10/2011 - 13:23 | Link to Comment TruthInSunshine
TruthInSunshine's picture

It's sweeter on a non-recourse loan, too, if you can hook FHA along for the funding.


Thu, 02/10/2011 - 14:12 | Link to Comment Panafrican Funk...
Panafrican Funktron Robot's picture

"Regional banks who are healthy, and that's more and more, are still making a killing on the spread."

Yeah, those regional banks doing business in the South Atlantic region, they are killing it!

Thu, 02/10/2011 - 13:22 | Link to Comment DarkAgeAhead
DarkAgeAhead's picture

You don't buy real estate for fictional monetary profit.  The fee simple absolute is proxy for buying water (and taking physical delivery, rather than a right to water for those sipping from municipal taps).  You buy it to take and hold other absolute rights, even as eroded by taxes and the costs (and benefits) of being subject to a sovereign.  Same with vegetables, rice,  beans...whatever your local climate allows (with some do-it-youself greenhouses for year-round growing).

It was never about being "your biggest investment," at least not financially.  Connected to your budget for sure, but it's of a different nature and character than such things as gold or other shiny stuff prized by current (and past) cultures.

It just depends how simple life becomes.  Back to the middle ages, sure, gold's great.  Back to the stone age, I'll go with vegetables, clean water, and a query of my morals regarding the higher virtues.

Thu, 02/10/2011 - 13:52 | Link to Comment dark pools of soros
dark pools of soros's picture

Mosanto and shale frackin will have something to say about all those assumptions 

Thu, 02/10/2011 - 14:05 | Link to Comment DarkAgeAhead
DarkAgeAhead's picture

Absolutely true.  I have chosen those battles to make mine and to fight.  My assumption is that those are among the best to fight, in terms of survival, resilience and thriving over the next 75 years. 

I'll probably lose the hydrofracking, along with everyone else within the gas play in which I'm situated. If Halliburton et. al pollute my groundwater, I'll redesign my house and land to drink from the sky (and purify and recycle from within).  It's easy enough, while growing food...even fish.

But I'm already beating Montsanto and the oil interests (at least at home) in both easy and profitable ways.  The only trade is time for value, and time for health.

I'd assume all the various levels and forms of the "taxman" will have their say as well.

But it doesn't get much more fundamental.

Thu, 02/10/2011 - 13:27 | Link to Comment Scout6909
Scout6909's picture

Residential housing (sales) had a bit of a surge in November/December because of the 30 year fixed being at 3.875%.  When the rates dropped in August/September, people got prequalified.  Unfortunately, by the time they closed, rates had increased. Prequalified at 4.25%, closed at 4.875%.

Since the rate increase of mid-November, housing hasn't just slowed down, it has stopped. 

Expect substantial layoffs from the housing industry over the next couple of months (I personally know several banks/brokers that are letting lots of people go)

The Bernank can't help housing, the death spiral is too powerful, so he is trying to increase wealth through the stock market.

Tick Tock. 



Thu, 02/10/2011 - 13:39 | Link to Comment jmc8888
jmc8888's picture

It now cost you over 5 percent APR to purchase someone else's fraudulently foreclosed home.  You even get to pay someone who doesn't own the note, and if you don't pay them, they'll take it back again.

...and at a price ~300 percent too high

Diana Olick's job isn't going to get any easier, anytime soon. 

Thu, 02/10/2011 - 17:24 | Link to Comment redarrow
redarrow's picture

My bet is that after QE2 is nearing its end, Bernanke will lose control on the yeild curve. There is no QE3 and even if there was it will not work the bonds will be tendered to the Fed. ...ha. Sold to you.

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