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As Freddie Mac Reports An Uptick In The 30 Year Mortgage Rate, Have Mortgage Rates Hit A Floor?

Tyler Durden's picture




 

Is the floor in mortgage rates in? After hitting a record all time low of 4.19% in the week ended October 14, the Freddie 30 Year Fixed mortgage rate has risen slightly but appreciatively to 4.21% (chart below). This is not all that surprising considering the 10 Year UST has been meandering around the 2.5% spot for a while now. What it does indicate, however, is that absent QE2 mortgages may have just hit their floor for the current regime. As it is no secret the Fed is intent on lowering mortgage rates as low as possible the question becomes whether a level in the low 4%'s is enough for mortgage activity to finally pick up.

Rosenberg, who chimed in on the rate conundrum doesn't think so.

So here we have this completely bizarre situation where even with market interest rates at historic lows, mortgage applications for new home purchases — the root of housing demand — slid 6.7% during the week ending October 15, on top of the 8.5% decline the prior reporting week and the level is back to its lowest in nine months, at 169.7. In “normal” times, the level of mortgage rates would have translated into a purchase index closer to 400, more than double where it is today. The Fed may well be able to drag bond yields and hence mortgage rates down even more, but the reality is that the central bank has no tools to deal with a total shift in household attitudes regarding debt, discretionary spending and homeownership.

As an aside, the purchase index is down 50% on a 26-week annualized basis, and from a year ago, purchases are down 37%. Incredible.

 

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Thu, 10/21/2010 - 11:24 | 666818 TheGreatPonzi
Thu, 10/21/2010 - 11:31 | 666836 plocequ1
plocequ1's picture

 Why would anyone take out a mortgage with all the crap thats going on? I am perfectly happy renting my basment Appartment.

Thu, 10/21/2010 - 12:49 | 667135 Eternal Student
Eternal Student's picture

Because they think it's just a "paperwork" issue, like the media has been presenting. You should've seen the look on the faces of some acquaintances when I explained the problem for those who've bought foreclosures, REO's and/or flips done from those. They didn't really believe me until I pointed out the special addendum that Wells Fargo has been forcing on people (saying that you can't sue WF if they don't really own the title that they are selling you).

People are just clueless. And if they think this is the bottom for interest rates, you can bet that a lot of them will rush in to grab their pot of gold. Nevermind the problems, or the shadow inventory which is about to come on the market after this mess gets sorted out.

Thu, 10/21/2010 - 14:48 | 667738 Edmon Plume
Edmon Plume's picture

Because when hyperinflation destroys the dollar, you can pay off your mortgage with a single fiat note, and get change.

Renters will get shafted.

Thu, 10/21/2010 - 11:31 | 666837 the not so migh...
the not so mighty maximiza's picture

if rates go up , prices have to come dowm.... oh the horror Bernakles.

Thu, 10/21/2010 - 11:32 | 666844 hedgeless_horseman
hedgeless_horseman's picture

Just like BAC, down 3% so far today.

Thu, 10/21/2010 - 12:05 | 666933 Spalding_Smailes
Spalding_Smailes's picture

All the banks getting blowtorched ..... They will show the way on the next leg down.

Market Cap-

34.81 Billion

82.47 Billion

69.02 Billion

54.49 Billion

50 Billion

114 Billion

148.32 Billion

118.67 Billion

4.1 Billion

136.64 Billion

ect .....

All told over 1 trillion rolling over....

Thu, 10/21/2010 - 14:57 | 667768 Edmon Plume
Edmon Plume's picture

After it rolls over, will it play dead?

Thu, 10/21/2010 - 11:50 | 666860 FEDbuster
FEDbuster's picture

Trying to pump the real estate market is pushing on a string....  People now need good credit (only 65% of households have FICO over 620), a down payment (avg household savings in cash equivalents $18,100) and a job (U6 unemployment 17%).

They are doing a much better job manipulating the stock and bond markets.  Their actions have a direct influence on the direction, so they will focus on what is working.  Like a "code blue" patient, they will continue to turn up the juice and hit the market with the paddles. CLEAR!!

Thu, 10/21/2010 - 11:52 | 666907 SteveNYC
SteveNYC's picture

The average household definitely does not have $18,000 cash lying around, minus debts. It has to be distorted by the uber-rich having $ millions lying around, and J6P who has less than nothing.

Thu, 10/21/2010 - 12:21 | 667039 FEDbuster
FEDbuster's picture

Agreed, until they throw in the towel on tougher lending standards, and go back to "fog a mirror" loans, etc... the real estate market is toast.  Do they think 20-30 year olds will drive the market higher?  They can't even find jobs.  If they do, they pay $10/hr.  Boomers stuck in McMansions will either take the hit and sell at a loss, or the upside down ones will walk away (credit score be damned). 

Thu, 10/21/2010 - 11:32 | 666843 Oh regional Indian
Oh regional Indian's picture

Hey, have you all heard of this...

The Debt Free America Act calls for a 1% tax to be paid for every monetary transaction whether in cash or by check with every bank or financial institution in the US. This bill is slated to be ‘approved’ during the Christmas vacation, to keep it as secret as possible in order to finish the transfer of wealth from all citizens to the banks and the government.

 

“The bill is HR-4646 introduced by US Rep Peter DeFazio D-Oregon and U S Senator Tom Harkin.  It is now in committee and will probably not be brought out until after the Nov. Elections. 

 

It's from Jim Kirwan's latest piece.

 

If it passes, as it seems it will, what will that do to interest rates?

 

By the way, please consider converting some portion of yoru Au to Ag. Ag and Ag-ri. 

 

Gold is going to lose it's luster. 

 

ORI

http://aadivaahan.wordpress.com

Thu, 10/21/2010 - 11:38 | 666859 oddjob
oddjob's picture

China is shitting FRN's with violent diarrhea,keep some PM's handy.

Thu, 10/21/2010 - 11:42 | 666875 Ripped Chunk
Ripped Chunk's picture

"This bill is slated to be ‘approved’ during the Christmas vacation"  I have heard of something like this before. Hmmmmmmm, what was it? Oh right, The Federal Reserve Act of 1913.

Thu, 10/21/2010 - 11:50 | 666902 firstdivision
firstdivision's picture

Hey, way to tell half truths.  It seeks to repeal the individual income tax and replace it with a 1% tax on all financial transactions.  You left off the part of repealing income tax...yeah this will get no where.  It is a bill to create a flat tax and not to add more taxes to what we pay. 

Thu, 10/21/2010 - 12:08 | 666971 Ripped Chunk
Ripped Chunk's picture

That will pass overwhelmingly............................

Thu, 10/21/2010 - 12:19 | 667005 firstdivision
firstdivision's picture

As well as all the other attempts to create a flat tax. 

Also do not forget this will hurt the top 1% more than the rest as their transactions are rather large.

Thu, 10/21/2010 - 12:24 | 667049 Ripped Chunk
Ripped Chunk's picture

Sounds like an incentive for cash and barter transactions to me.

Thu, 10/21/2010 - 12:57 | 667184 RSDallas
RSDallas's picture

The way the bill reads is that the "Seller" is the payer of the tax.  This is a complete opposite of where the majority of the current tax burden lies.  It would garner HUGE public support despite what impact it might have on business. 

Thu, 10/21/2010 - 11:53 | 666912 SteveNYC
SteveNYC's picture

Sorry, our banks will be "uncompetitive", wages will become "uncompetitive", bonuses will become "uncompetitive", we will lose "talent" to foreign markets, margins will deteriorate....

 

 

.....you know how it goes.

Thu, 10/21/2010 - 11:33 | 666846 HarryWanger
HarryWanger's picture

What tends to happen is, as mortgage rates start to pick up, so will activity. It's like chasing a stock. People feel that it won't go lower and is starting to go up so they better get in. That usually causes a spike in activity from those who have been waiting and now see rates moving higher.

Thu, 10/21/2010 - 11:39 | 666854 the not so migh...
the not so mighty maximiza's picture

That is true in normal times, unemployment rates to high for that major increase now.    Also you have to be full time employed for a few years to get a mortgage.

Thu, 10/21/2010 - 11:41 | 666870 Ripped Chunk
Ripped Chunk's picture

Right, so once mortgage rates begin to rise, all the fence sitters buy. Once they are cleared out, inventory will start rising again without any real improvements in the unemployment situation.

So look for inventories to rise through 2011 - 2012.

Thu, 10/21/2010 - 11:51 | 666904 HarryWanger
HarryWanger's picture

That's probably true but there will be a pretty decent spike in buying before that happens giving the false hope that housing has bottomed and a temporary spark in prices.

Thu, 10/21/2010 - 12:10 | 666978 Ripped Chunk
Ripped Chunk's picture

Therefore, you have quantified the number of "fence sitters" and how much they will buy.........

How big with the spike be? Estimated number of units?

Thu, 10/21/2010 - 13:07 | 667234 RSDallas
RSDallas's picture

I sure hope so Harry.  I'm a bit skeptical that there will be much of a bounce because of the fact that we are still very much experiencing a consumer balance sheet event and Obama regime is not going anywhere soon.  There is still way too much debt and uncertainty in the system and more so "bad debt" on top of the fact that there is a large percentage of buyers (I'd say 50%) that can no longer buy real estate due to the tightening of the lending guidelines.  Which is a good thing.  But I'll take any kind of bounce, being that I'm in the home building industry and am gearing up too start a new project.

Thu, 10/21/2010 - 13:26 | 667343 Ripped Chunk
Ripped Chunk's picture

Harry just likes to come off like he has the answer to everything. Arrogant asshole.

Thu, 10/21/2010 - 11:43 | 666878 HelluvaEngineer
HelluvaEngineer's picture

How will that affect APPL?

Thu, 10/21/2010 - 12:05 | 666941 Village Idiot
Village Idiot's picture

"What tends to happen is, as mortgage rates start to pick up, so will activity. It's like chasing a stock. People feel that it won't go lower and is starting to go up so they better get in. That usually causes a spike in activity from those who have been waiting and now see rates moving higher."

 

On the margins, maybe.  For most people, that particular "tendancy" has gone the way of the do do bird.  The average re buyer has finally figured out that re comes with risk.  After how many cycles?  Not to say that re won't return.  Timing is everything - that's the message people are getting right now - just like stocks.  "Buy and hold" with no relevence for timing in re has been a painful lesson for many buyers.

Thu, 10/21/2010 - 12:07 | 666958 Kina
Kina's picture

What tends to happen is, as mortgage rates start to pick up, so will activity.

 

I think this is backwards. In Aussie the Reserve Bank will put up rates to deal with inflation or an over active housing market maybe. Activity first, then rate rise.

Otherwise it is the banks putting up rates because their other sources of funds are more expensive.

The housing environment just got a lot more complicated ontop of falling prices. People will be thinking there is probably more shit to hit the fan in the housing market yet and will stay away.

Thu, 10/21/2010 - 11:33 | 666848 T Rex
T Rex's picture

Uh, why did Mr, Market get cut in half?

Thu, 10/21/2010 - 11:46 | 666881 HelluvaEngineer
HelluvaEngineer's picture

Heard that CNBC was talking down QE2, but I did not see it.  Dollar about to go positive.

Thu, 10/21/2010 - 12:00 | 666932 Confused Indian
Confused Indian's picture

Seems, Bernanke went off to pee, and in the mean while all this happened.

No probs. He is back now.... 

Thu, 10/21/2010 - 11:38 | 666861 Ripped Chunk
Ripped Chunk's picture

Only Ben knows for sure.

Thu, 10/21/2010 - 11:39 | 666862 Chartist
Chartist's picture

They sure have hit a floor....Just try getting a 30 year fixed jumbo mortgage with a decent rate....Banks don't want to do it as they realize the rates are artificial.

Thu, 10/21/2010 - 11:40 | 666865 Calls and Putz
Calls and Putz's picture

I think the long-wave interest rate cycle hit bottom Oct. 8. The 29 year trend of falling rates is over. The 2.334% yield on the 10-yr won't be seen again.

Thu, 10/21/2010 - 11:43 | 666879 Bearster
Bearster's picture

Mortgage interest isn't set by the market.  It is set by government fiat.

Since home buyers today are not driven to get as much house as they possibly can for a given payment, lowering interest won't help home prices.

Thu, 10/21/2010 - 11:50 | 666903 SteveNYC
SteveNYC's picture

Just what Dr. Bernanke ordered:

"Look, rates are UP by 1 basis point! We must act with $5 trillion QE Infinity right now otherwise people can't afford homes!"

Thu, 10/21/2010 - 11:53 | 666911 1100-TACTICAL-12
1100-TACTICAL-12's picture

No jobs ,No houses. Everyone who wants one, or can actually get financed has one..No jobs, No houses

Thu, 10/21/2010 - 11:55 | 666918 notadouche
notadouche's picture

So the govt doesn't want me owning gold.  Didn't want me going into debt, now want's me to take on more debt.  Looked down their noses when i bought a house when others couldn't then wanted me to buy two houses then got pissed when I did now are pissed that I won't.  They want me to destroy my credit cards but is now pissed that I don't have any.  Oh Dear Leader please tell me what you want.  Just stop changing your mind and stick to one message.  Just know when you do I will turn to George Costanza rules and do exactly the opposite as in the long term I'm pretty confident that I will be safer.

Thu, 10/21/2010 - 11:57 | 666927 trav7777
trav7777's picture

rates can't rise because there is NO DEMAND for credit at these prices.

Interest rates are the price tag on credit.  It's important to realize this. 

Thu, 10/21/2010 - 14:11 | 667567 Variance Doc
Variance Doc's picture

Exactly, interest is the price of credit.  Interest is often mistaken as the price of money; which is false.

Thu, 10/21/2010 - 12:05 | 666947 prophet
prophet's picture

I expect 30 year will bottom between 3.5 and 3.75 and the 15 year will bottom between 3.0 and 3.25.  15 year today with a point is 3.5. 

Everyone not underwater, with income, and no credit blemishes will get auto refied.  

Underwater notes still an issue.  Purchases will remain marginal for a while.  Additionally, there is a wave of resets in 2011.

Securing the note with future earnings like in recourse states needs to be looked at more seriously.  Go ahead bankster, securitize my future earnings and give me a credit rating instead of a credit score.

-profd

 

Thu, 10/21/2010 - 12:06 | 666951 MarketTruth
MarketTruth's picture

The flooor will be near zero, Ben Shalom Bukkake will ensure this to be true.

Thu, 10/21/2010 - 12:14 | 667001 99er
99er's picture

(Reuters) - Fannie Mae (FNMA.OB) and Freddie Mac (FMCC.OB) may need as much as $215 billion in additional capital from the Treasury through 2013 to offset losses and maintain a positive net worth, their federal regulator said on Thursday.

Thu, 10/21/2010 - 12:16 | 667010 Greyzone
Greyzone's picture

NEW mortage activity can't pick up until hiring picks up and there is no increase in hiring. Any initial claims weekly over 400K is bad news and when was the last time we had a weekly under 400K? If you count unemployment using the same techniques as used during the Great Depression, unemployment in the US is about 22%. The Great Depression peaked at 25% unemployment and had several years near 22%.

In short, people can't buy new houses unless they have jobs to pay for them OR Congress authorizes more funny money games for the liars, shills, and whores on Wall Street. (And yes, if you work on Wall Street, you are, by definition, at least one of the above if not all three.)

New mortgage activity needs economic activity which is not happening under the current fascist regime, ergo, mortgage rates are irrelevant. Solve the economic problems and you solve the mortgage problem. Trying to solve the mortgage problem without providing jobs is simply ass backwards, but given Ben Bernanke's obsession with being always wrong, this does not surprise me.

Thu, 10/21/2010 - 13:21 | 667316 RSDallas
RSDallas's picture

This is no doubt a key ingredient that will help lead too a more stable housing market.  I don't think however that enough attention is being directed at the "Uncertainty" that is lingering in almost every Americans mind right nowconcerning Obama and his merry band of thieves.  This is emotional and emotions drive most all consumer buying decisions.  We need to find a way, as a Nation, too lower the anxiety level.  Obama and his regime has failed miserably in this category. There is a huge population of prospective home buyers and sellers just sitting idly on the sidelines waiting for our National financial and political situation to improve.

Thu, 10/21/2010 - 12:27 | 667064 treemagnet
treemagnet's picture

But the real estate agent assured me "Theres never been a better time to buy"....or was that Ben?   I forget which - does it matter?

Thu, 10/21/2010 - 13:23 | 667323 max2205
max2205's picture

Like savers are getting fucked now, the Fed will never let the 90% get a 30 mortgage for less than 4%. Even when the long bond goes to 2% they will say , no it's 4% to account for default risk. Love it or leave it

Thu, 10/21/2010 - 13:58 | 667500 Ned Zeppelin
Ned Zeppelin's picture

Have Mortgage Rates Hit A Floor? No.

QE2.0 will grind mortgages rates to below 4.0% early next year.

Thu, 10/21/2010 - 16:23 | 668030 Bonz
Bonz's picture

...the purchase index is down 50% on a 26-week annualized basis, and from a year ago, purchases are down 37%. Incredible.

Not really. These days homes are not viewed as commodities, they are still viewed as investments. With investments, demand increases as they become more expensive, not less. Just like when a stock price goes up people want that stock. When stock prices fall people don't want to hold those stocks.

I'd rather buy a home when they are getting more expensive. The last thing you want to buy is a house when their values are falling.

Thu, 10/21/2010 - 17:06 | 668175 snowball777
snowball777's picture

Is a 4.21% loan today better than a 4.5% loan on 80% of the principal next year?

Sat, 11/13/2010 - 08:07 | 724460 mark456
mark456's picture

Thanks for taking the time to discuss this, I feel strongly about it and love learning more on this topic.
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