Keith Byrd pointed out that we will have the opportunity to enjoy a meteor shower the next two nights. We would like to take the opportunity for some co-marketing – mortgage interest rates, like stars in a meteor shower, are falling with consistency. As we discussed here on April 16, and April 9, and April 6 and March 26 rates have continually improved. This week is no different.
It has been awhile since we last explained what we mean by “rates dropping.” If you know what a “rate cost” is, feel free to skip ahead to the next section. A mortgage interest rate has a cost associated with it (like with anything you buy). The cost is on a spectrum. The lowest rates will require a higher closing cost, while the higher rates actually include a “credit” given back to the borrower to cover closing costs. These costs get funneled into the APR calculation, so you know that costs are dropping as APR decreases. Over the past four weeks, we have advertised the same interest rate – 3.500, however the costs have steadily fallen by between 1/8 and 1/4 of a point, which has meant a lower and lower APR. Remember that prices vary based on each situation.
Now that understand what we mean by “lower rates” (lower rate costs), we can tell you that already favorable closing cost scenarios have again improved. We are advertising the 30-year fixed at 3.500 percent (3.612) and the 15-year fixed at 2.750 percent (2.971 APR). What’s more, rate costs are now low enough that, with certain characteristics, it is possible to get most closing costs covered (nearly free) at rates as low as 3.625 (3.707 percent APR) and 3.750 percent (3.740 percent APR) for the 30-year fixed, and 3.000 percent (3.004 percent APR) for the 15-year fixed.
Other than interest rates, we have been keeping our eyes fixed on the economic indicators that have been coming out lately. Here is some of what we have seen:
Job growth and home sales have slowed after a steady period of good news, which suggests that we will continue with modest growth before making bigger gains. While home sales have slowed, homebuilders have submitted the most plans for construction permits in the last 3.5 years. Increased demand has been influenced by a more optimistic outlook on future growth. Meanwhile, the Dow has dropped below 13,000 after making steady gains up around 13,300. The S&P 500 is down 4 percent off 2012 lows. Declines are as a result of slumping economic indicators and concern about the European (and global) economy.
California (for once) is a little bit ahead of the curve in home sales. California home sales hit a five-year high during March, which was a three percent rise year-over-year. Median home prices for sold homes rose 1 percent year-over-year. On the other hand, the California unemployment rate continues to sit well above the national average of 8.2 percent. The March unemployment number of 11 percent ended two months of gains, which means about 2 million people are out of work.
As you can see, the news is all over the place. Still, as Dan Podesto likes to emphasize (host of Mortgage Matters our weekly radio show on KVEC 920): “To use a baseball analogy, we are just in the third inning of the recovery. We have some time to go, but we are heading in the right direction.”
For more numbers, please see our April 23 article Mortgage Matters Notebook.