Mortgage Rates Drop As Bond Market Sounds An Economic WarningJanuary 8, 2015
The average rate for a conforming 30-year mortgage has dropped to 3.73 percent, the lowest rate since May of 2013 when the rate averaged 3.59 percent and 78 basis points below the 4.51 percent average rate at the same time last year.
While the Federal Reserve is expected to start raising interest rates in the second half of the year, a bullish move which should be driving rates up, the yield on the 10-year treasury has been dropping and the bond market is signaling expectations of economic weakness.
Averaging around 6.7 percent over the past twenty years, the 30-year rate hit a three-year high of 4.58 percent in August of 2013 and an all-time low of 3.31 percent in November of 2012.
Comments from Plugged-In Readers
Don’t worry, the hyper-inflation will hit any day now, just like it did for Japan…
Crazy cheap money!
I don’t consider myself a economics expert, but this all feels very troubling if you are looking to buy a home.
I refi’d at a great jumbo rate just a month ago and we’re already another .29% below it – at the same time the Feds are promising to raise within 6 months. Euro is a mess. Bonds are plummeting when they should be going up. Feels like wall st knows something we don’t but folks are yet to get out of stocks.
Lack of inventory and unnatural spikes in high-tech incomes (compared to rest of country) would appear to shield the bay area, but even here it just feels like the wind is picking up and we’re sitting on a house of cards. I don’t know how else to feel about these rates doing what they’re doing right now when most indicators (besides energy) are pointing to strengths at home.
yup – I just renewed my lease for another year to wait things out … methinks a small correction is coming at least!
why does it feel like the wind is picking up and we’re sitting on a house of cards? no data supports that
Why should bond yields be going up again? Interest rates are a function of the demand for capital and future inflation expectations. The world is awash in capital, and inflation is nonexistent. Be careful where you get your financial news.
The bond market is not signaling economic weakness, it is signaling that our low rates are still a better return than foreign investors can find in Europe, with a strengthening dollar to top it off. This strong demand for our bonds is outweighing the anticipated future tightening.
I thought bond markets and stock markets were supposed to behave inversely. No?
No inflation and crazy wide spreads vs. other sovereign debt, both as respect to rates and respective easy money stances of central bankers. Should be another good year for capital intensive assets (i.e., real estate). I do fear Halloween though…
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