Mortgage rates were unchanged last week while the markets were nearly void of news. One real estate-related item of note was disappointing news from one of America’s premier homebuilders. KB Home, which caters to first time home buyers, with smaller, less expensive homes, reported its first quarter revenues were down 25%, reflecting a 28% year-over-year decrease in homes sold. This news is probably not surprising considering last month we learned that New Home Sales declined to their slowest annual pace on record. Minutes from the Federal Reserve’s last meeting spurred speculation that central bankers may begin removing stimulus measures. The S&P 500 has surged 27% since the second round of asset purchases to stimulate the economy, a tactic known as quantitative easing. There are mixed opinions about how the expiration of QE2 might impact mortgage rates. With the US removed as the primary buyer of Treasury debt, some believe that higher yields will be necessary to attract new buyers, while other think the US economic recovery is still too fragile to cope with elevated interest rates, and this nervousness will once again trigger the “flight to safety” trade, keeping rates low.
Currently, the 30 Year Fixed is 4.500% (4.629% APR) and the 15 Year Fixed is 3.750% (3.976% APR). There is a ton of economic news this week with Retail Sales, Jobless Claims, Fed Beige Book report which monitors economic activity in various regions. All eyes will surely be watching the monthly inflation reports which consist of the Producer Price Index (PPI) and Consumer Price Index (CPI).