US 30-yr Fixed Rate Mortgage Rate Dives to 50-yr Lows

#mortgage #homebuilding #retail #sales #Fed #QE #bonds #market #stimulus #economy

$DIA $SPY $QQQ $RUTX $VXX $SPSIHO

The S&P 500 Homebuilding Index (SPSIHO), which includes Lennar Corp.(NYSE:LEN), DR Horton Inc.(NYSE:DHI), and PulteGroup Inc.(NYSE:PHM), gained 2.4% Thursday. The index is up nearly 9% YTD, compared with a 0.05% decline in the broad S&P 500 overall.

US 30-year fixed-rate mortgages fell below 3% for the 1st time in records going back nearly 50 yrs this wk, according to data released by Freddie Mac Thursday.

The 30-yr mortgage rate fell to an average of 2.98% with an average 0.7 pt, from 3.03% in the previous wk. Before this wk, such rates had not fallen below 3% since Freddie Mac began its mortgage market survey in Y 1971.

Rates for 15-yr fixed mortgages fell to an average of 2.48% with an average 0.7 pt, from 2.51% in the prior wk.

5-yr Treasury-indexed hybrid adjustable-rate mortgages rose to an average of 3.06% with an average 0.3 pt, from 3.02% in the prior wk.

The historic decline in mortgage rates reflects an investor move into perceived safe-havens such as US Treasuries, which are now trading near all-time lows.

The Fed is signaling that it will continue its attempts to keep rates low by purchasing Treasuries and other bonds, a strategy known as QE (quantitative easing).

We are now seeing unprecedented policy support and it’s filtering down to the mortgage market

The steep fall in mortgage rates will trigger increased consumer spending as homeowners refinance, providing another stimulus for the economy

We will see more improvements in retail spending numbers and auto loan rates the lower interest rates go.

“Low mortgage rates are also spurring demand from potential home buyers”, said the chief economist at Freddie Mac.

In my early morning discussion with economist Bruce WD Barren, he pointed out the following: “Mortgage rates are forecasted to fall through November, 2021 when they are anticipated to bottom out. The reason is that real estate is a core element to any economic recovery in the United States and is also a feeder to many other industries that must continue in a positive trend in order to put us back on own feet. It is also important if this country is going to its reverse unemployment trend, which will be one of the most important platforms in any presidential election year. .The old adage is still true: as real goes, so goes the economy where consumer confidence typically leads the way to economic well being.”

He went on to say that: “A Key objective of all American workers has always to own a home which is our way to economic security, especially leading into one’s retirement years. According to Property Wire, the housing market activity is bouncing back to higher levels than before the lockdown based on home sales, demand and house price growth, Zoopla’s House Price Index has found. The number of agreed home sales has rebounded by 4% between early March and May. House price growth has risen to 2.4% in May, up from 1.6% at the start of the year. A positive indicator is that buyer demand in May was 46% higher than in early March, when demand for housing fell by 70%.” 

Note: Mr. Barren is the Chairman of The EMCO/ Hanover Group and a regular contributor to Live Trading News.

Overall, Real Estate listing firm Zillow (NYSE:Z) expects that US home prices will fall less than 1.7% in Y 2020 despite the steep slowdown in the economy, due in part to the positive effect of lower interest rates.

Thursday, the major US stock market indexes finished at: DJIA -135.39 at 26734.71, NAS Comp -76.66 at 10473.92, S&P 500 -10.99 at 3215.57

Volume: Trade on the NYSE came in light at 777-M/shares exchanged

HeffX-LTN’s overall technical outlook for the major US stock market indexes is Very Bullish in here.

  • NAS Comp +16.7% YTD
  • S&P 500 -0.5% YTD
  • DJIA -6.3% YTD
  • Russell 2000 -12.0% YTD

Looking Ahead: Investors will receive Housing Starts and Building Permits for June and the preliminary University of Michigan Index of Consumer Sentiment (MSI) for July Friday.

Have a healthy weekend, Keep the Faith!

#consumer#DHI#DIA#economy#Fed#homebuilding#investors#LEN#mortgages#NYSE#PHM#QE#QQQ#RUTX#spending#SPX#SPY#stimulus#Treasuries#very bullish#Z