Housing Market Hasn’t Run out of Steam Despite Low Inventory

There has been just a slight bit of movement in the mortgage rate arena as of last month. The 30 year fixed-rate mortgage rate has had a slight increase to a 3.47% average. Regardless of this increase, rates are still at historic all time lows.

“This week, the 10-year Treasury yield continued its climb as an increasing number of financial market participants foresee a December rate hike after a series of positive economic data releases,” says Sean Becketti, Freddie Mac’s chief economist. “The 30-year fixed-rate mortgage moved up 5 basis points to 3.47 percent in this week’s survey, the first increase in one month. Even though we’ve seen economic activity pick up, consumer price inflation and implied inflation expectations remain below the Federal Reserve’s 2 percent target.”

As of the middle of October, Freddie Mac reported the following national averages:

  • 30-year fixed rate mortgage: averaged 3.47% up from 3.42%. Last year at this time the average was 3.82%
  • 15-year fixed rate mortgage: averaged 2.76% up from 2.72%. Last year at this time the average was 3.03%.
  • 5- year hybrid adjustable rate mortgage: averaged 2.8% up from 2.80%. Last year at this time the average was 2.88%.

While rates have been remaining at all time lows in 2016, mortgage applications have seen some ups and downs in their activity. The light inventory of housing has called for stalls as some consumers haven’t felt that it was necessary to apply until the inventory conditions change.

A recent report from Goldman Sachs has provided some positive information about the situation. This report includes positive states of the economy including:

  • Soft residential investment in Q2 likely reflected payback from an unusually warm winter across the country that pulled activity forward.
  • Growth in private residential investment still stands at 5.7% year-over-year in Q2, substantially above potential GDP growth.

What was most interesting was that the report shared that the National Association of Home Builders’ index had climbed to 65 in September where it had reached its highest level during this economic recovery. It had also shared that new single-family home sales have expanded 21% over last year and are almost back to the 4th quarter of 2007 levels.

Considering household balance sheets remaining healthy and the labor market continuing to grow and make progress, Goldman Sachs says it believes the “fundamentals of the housing recovery remain solid.”