Mortgage Rates Drop Despite Contrary Expert Predictions
As discussed in our recent blog post 2015 Real Estate Predictions, a variety of real estate experts, including Zillow, the California Association of Realtors, Realtor Magazine, and the Home Buying Institute are predicting that mortgage rates in 2015 will rise to 5% or higher. Our prediction, based largely on the general economy and relatively high unemployment rate, was that a rise in the interest rate was unlikely absent a significant reduction in the unemployment rate.
The year is of course nowhere near over, but mortgage rates are already defying expert opinions by continuing to drop. At the end of 2014, mortgage rates on a 30-year fixed loan were at 3.87%. Last week Freddie Mac reported lenders on average were offering 30-year fixed loans at 3.66%, compared with 3.73% a week earlier. During that same time period in 2014, mortgage rates were 4.41%. The rates in the last week were the lowest since May of 2013, when rates slowly began to rise.
The dip in mortgage rates led to an insurgence of home loan applications. Refinance applications were up 66% and new loans in connection with home purchases were up 24%, resulting in a total increase of 49% in new applications for the week ended January 9. According to the Mortgage Bankers Association, the surge was the largest since 2008.
The dip in mortgage rates is due largely to a decline in the global economy. Investors are investing more in the United States dollar, putting less pressure on mortgage rates. It is unlikely that the global economy will recover quickly, and thus mortgage rates will likely remain low, giving buyers further incentive to enter the market.
So where will we be at the end of the year? According to Stuart Gabriel of UCLA’s Ziman Center for Real Estate: “There is very low probability of rising mortgage rates in the very near future. . . . It is very difficult to conjure up a scenario of 5% any time this calendar year.”
Funny how expert opinions can change so quickly.
For more information on how Esquire Real Estate Brokerage, Inc. can help you in the Los Angeles real estate market, feel free to give us a call at 213-973-9439 or send us an email at info@esquirereb.com.
