Last week, mortgage bonds hit their highest levels in 2014, helping home loan rates reach some of their lowest levels this year. Read on for details.
One of the main reasons bonds and home loan rates have benefitted of late is due to safe haven trades, meaning that when there is uncertainty in the world, like the current situation in Ukraine, investors often move their money out of stocks and into less risky assets like bonds.
This includes mortgage bonds, the type of bond on which home loan rates are based. As tensions have escalated overseas in recent weeks, our bond markets have improved—and as mortgage bonds improve, so do home loan rates.
Another factor helping bonds right now is the old trading adage, “sell in May and go away.” Stock prices have been declining, helping mortgage bonds improve.
The index of leading indicators continues to expand. The index now stands at 101.4, up from 101.0 in March and 95.8 a year ago (see chart below). That represents a gain of 5.8% over the last year.
30-year mortgage rates declined to 4.14% for the week ending May 22. That’s down from 4.33% a month ago and 4.20% last week. A year ago, the 30 year rate was 3.59%.
Existing home sales increased for the first time this year in April, while inventory meaningfully increased and home price growth weakened. Total existing home sales rose 1.3% to a seasonally adjusted 4.65 million in April from 4.59 million in March. This is below the 4.99 million pace from a year ago. The median price, at $201,700, was 5.2% above April, 2013.
April new home sales were up an unexpected 6.4% from March. However, they are down 4.2% from a year ago. Keep in mind that March was a weak month. The supply of new homes remains scarce at 5.3 months’ supply. This actually is a negative for sales because the selection is not large.
According to the National Association of Home Builders Opportunity Index, affordability is still very strong. The Index is now at 65.5. That means that 65.5% of homes sold are affordable to families earning the local median income.