This article cover mortgage rates steady as FEDS announces it will not raise rates
There is no sign of a housing correction in today’s housing market. Mortgage rates remain steady at historic lows. Many homebuyers are pushing plans on buying homes sooner than later. This is because many feel rates will not remain low. This holds true despite Fed Chairman Jerome Powell assuring the public rates will remain at zero for the next few years. Inflation is being downplayed by the Feds. However, the public is seeing prices of goods skyrocket. Lumber and many home improvement prices have doubled in the past year.
Will Mortgage Rates Remain Low?
In this article we will cover the following topics:
- State of the economy since the coronavirus outbreak
- The announcement by the Federal Reserve is not to raise rates
- Demand for homes far exceed inventory
Low Rates and the Booming Housing Market
Mortgage Rates have been the lowest since the Great Recession of 2008. The economy has long recovered from the coronavirus outbreak in 2020. Home values have been rising over the past several years. Home prices keep on rising despite the highest mortgage rates in recent years. Rising interest rates have not slowed down housing demand. Rising home prices have been a major issue. FHFA has increased conventional loan limits for the past 3 years due to rising home prices.
HUD and the FHFA Increase Loan Limits for 2021
2021 Conforming Limits is capped at $549,250. HUD, the parent of FHA, followed FHFA and raised FHA Loan Limits for the past three years. 2021 FHA Loan Limits in most parts of the United States are at $356,362. The Federal Reserve Board raised interest rates four times in 2018. It was not until 2019 where rates started sliding downwards.
The good news is that after the announcement by Fed Chairman Jerome Powell has Mortgage Rates Steady. It is the first time since Mortgage Rates Steady. Rates have dropped since the news by FED Chairman Jerome Powell last week.
How Mortgage Rates Steady After FED Announcement Not To Raise Interest Rates
Mortgage interest rates for 30 year fixed rate mortgages closed at 2.90% last Friday, May 28th,2021. 15 year fixed mortgages closed 3 basis points higher at 2.625% the week ending May 28th, 2021. 2.875% was adjustable-rate mortgages on the week ending May 28th, 2021. That is 2 basis points higher.
Applications for purchases slipped 2 percent from the previous week while refinance applications, which tend to be even more sensitive to rate changes, dropped 6 percent.
Feds Will Not Raise Rates can be interpreted as good news but bad news as well. The Dow Jones Industrial has surpassed the 35,000 mark. Many investors and business experts feel the market is out of control. Analysts and reputable economists are banking on a major market crash. Some say we will have a stock market crash like never before. There is no reason for the Dow Jones to be as high as it is today. Even with international bad news of Joe Biden’s incompetency in his leadership over Afghanistan and the resurgence of Covid-19, the Dow Jones is skyrocketing to new territory every day.
In breaking news today, the Feds will keep rates near zero percent despite rising inflation as the U.S. economy recovers from the coronavirus pandemic. Fed Chairman Jerome Powell said the Central Bank will not interfere with the economy as it is recovering. Powell added the U.S. economic recovery is faster than expected. Weighing the option between higher inflation and increasing rates, he rather let inflation run its course than increase interest rates. Many analysts and economists are concerned about having runaway inflation in the coming weeks and months.
Why would the Fed leave short-term interest rates low when inflation is picking up? Because much of the increase in spending is due to a temporary intervention like stimulus payments. The Federal Reserve Board understands that it will take a more sustained push before the economy is in the clear and inflation becomes a real concern.
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Powell Says No Rate Increase or Reduction in Bond Purchases
The Federal Reserve Board will continue to support the economic recovery by keeping rates at and/or near zero percent. Jerome Powell announced that the Feds will leave rates at or near zero for the rest of 2021 going into 2022. The Central Bank will also purchase more than $120 billion worth of mortgage bonds to keep mortgage rates low. This is a great relief for the real estate and mortgage industries. Powell credits himself, the board of the Central Bank, and economic stimulus activity in keeping the employment rate and economy on a fast road to a full recovery, although inflation is a by-product of such intervention.
Fed Chairman Powell said he felt strong and confident the U.S. economy is going to make an expedient full recovery sooner rather than later. Most industries have shown improvements above expectations. He said this month’s numbers are far better than last month’s and he sees more economic improvements in the coming months. Other data showed a promising outlook, especially unemployment numbers. Over 8 million Americans are still out of work. However, that number is shrinking.
Despite the high unemployment numbers, the housing market forecast has never been stronger than in 2006. Home prices have been skyrocketing year after year with no signs of correction. More and more workers are becoming remote wage earners enabling them to relocate to lower-taxed states. Major U.S. cities like Chicago, New York, and Los Angeles are seeing a major exodus of city dwellers fleeing to the suburbs and/or rural areas due to the mass remote job opportunities with their existing employers and/or new remote job opportunities.
Consumers Feeling the High Cost of Goods
Most consumers can feel the higher cost of goods and services. But mortgage rates are at historic lows, and are expected to remain low into 2023. There is a major housing shortage in much of the nation. However, with the Feds buying more than $1.2 billion worth of bonds, rates remain low. Mortgage rates and real estate market conditions are a developing story. We will keep our viewers posted.
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What Experts Say About Rates
Home Prices Hot Housing Market Seems To Stabilize
Gustan Cho Associates has countless pre-approved home buyers shopping for homes. Some have been shopping for almost a year. Our home buyers were expecting a slowdown in the housing market. However, housing demand still remains strong. Due to low inventory housing prices remain strong. Many home buyers have canceled plans in buying a home now due to home prices increasing. They are either going to wait and save so they can put more money down or wait for a housing correction. Housing correction does not seem imminent.
Growth Of Home Prices In The United States
According to the S&P CoreLogic Case-Shiller U.S. National Home Price NSA Index, the growth of housing prices slowed to a 5.2% yearly gain in November 2020. This is down from the 5.3% in the month before. This accounts for the 9 divisions of the U.S. Census.
Mortgage Rates Steady Going Into Week of June 1st, 2021
Mortgage Rates Steady going into the week of June 1st, 2021 at 2.90% compared to 3.38% same period last year.
- Past average 30 year fixed-rate mortgages in the past 52 weeks averaged 3.54%
- This week’s 30 year fixed rate mortgages had 0.35 average discount points
- This is 125 basis points lower than the average 52-week average
- Please note these are bank rates for prime borrowers
Need to add mortgage rates pricing adjustments due to credit, property type, and loan-to-value.
The 30-year fixed mortgages in this week’s survey had an average total of 0.35 discount and origination points.
- The 15-year fixed-rate mortgages are 2.625% from 2.50%
- The 5/1 ARMS dropped to 2.875% from 2,95%
| Breakdown | 30 Year | 15 Year | 5/1 ARM |
|---|---|---|---|
| Mortgage Rates | 2.90% | 2.625% | 2.875% |
| Change from last week: | N/C | -0.03 | -0.02 |
| Monthly payment: | $847.84 | $1,217.18 | $813.63 |
| Change from last week: | N/C | -$2.48 | -$1.94 |
Builders are expected to have a stellar 2021. With more home buyers than inventory, they are scooping up vacant land nearby apartments, railroad tracks, and commercial properties. There is no sign of any market correction despite high mortgage rates and rising home prices.
