Mortgage Rates Continue to Linger Near 2014 Lows
Fixed rate mortgages are still hovering around 4% this week, after lower-than-expected employment figures caused concern.
The average for a 30-year fixed mortgage dropped to 4.01% this week, from 4.02% last week, according to the Freddie Mac Primary Mortgage Market Survey. Mortgage interest rates averaged 4.35% this time last year.
“While the unemployment rate declined to 5.8%, nonfarm employment rose by 214,000 jobs, which was below consensus expectations,” said Frank Nothaft, vice president and chief economist at Freddie Mac, in a statement.
The unemployment rate may look good on the surface, but it hides larger implications. For the housing market to fully recover, according to Freddie Mac, there must be income growth and greater labor force participation especially among young people and the long-term unemployed—those 2.9 million people, or 32% of the unemployed, who have been out of work for more than 27 weeks.
The unemployment rate also doesn’t show that most of the job growth has been in the retail sector and food service sector (low-paying jobs). In fact, from 1999 to 2013, median household income has actually fallen from $56,900 in 1999 to $51,900 in 2013, according to Freddie Mac’s October 2014 U.S. Economic and Housing Market Outlook.
Still, consumer confidence is high, according to the National Association of REALTORS®, thanks to lower gas prices, higher home values and continuing job gains.
In the short term, mortgage rates are likely to hold steady, says Bankrate.com, which surveys experts in the mortgage industry to see if they believe mortgage rates will rise, fall or remain relatively unchanged. Of the analysts polled, 70% say rates will remain largely unchanged over the next week.
“Rates continue to please, and most recently, we got a little relief on the back of the American worker, or should I say the ones not working,” said Jim Sahnger, mortgage planner with Schaffer Mortgage in Palm Beach Gardens, FL. “While we had over 200,000 jobs added to the economy last month, there still aren’t enough to support the number of people looking for work. Until companies start hiring more folks, rates are going to have a hard time moving significantly higher on a long-term basis.”