The below chart is really interesting for a few reasons.
Average 30 Year Fixed Mortgage Rate – Last 12 Months (Link to interactive chart)
Interesting Thing #1: Mortgage rates are near 12-month-lows – just above 6.0% (for the average rate).
Interesting Thing #2 (Mortgage Rates Vs. Treasury Yields)
10 Year Treasury yields were LOWER than they are today in April, September, and November of last year – but mortgage rates were higher. This is another reminder that the “spread” between the 10 Year yield and the average mortgage rate continues to tighten. The spread is currently about 2%, but it was close to 3% for much of the last 3 years.
Historically, the spread has been only 1.7%, implying that mortgage rates could fall further even if interest rates in general do not. Spreads are tightening because there is less mortgage supply amid greater investor demand, among other factors.
Interesting Thing #3 (Historically Very Low)
As this 10 Year Treasury Yield Chart indicates, rates were higher than today’s rates from the late 1970s – 2007 (with the exception of a few blips from 2003 – 2005).
Interesting Thing #4 (the Other Reasons Rates Are So Low)
THIS is what really interests me. Every pundit on the planet was predicting inflation last year because of deficit spending and “money printing.” But inflation has been falling sharply – and that is a big reason why rates are so low.
Analysts also love to scare us into believing that an excess supply of Treasuries (from too much government borrowing) will push rates up. But yet, that never seems to happen – implying that maybe we don’t need to be so afraid of an excess supply of Treasuries.
Blaming the Weather… (For Once, We Can)
Pending home sales plummeted in January, coming in well below expectations. The “crash bros” and “bitter-ati” were gleeful… telling us everyone who would listen that the housing market had finally died.
But – this time we really can blame the weather, as America experienced one of the worst winter storms in decades – and horrible weather across a large swath of the country will always adversely impact home sales.
This is in contrast to when government officials blame the weather for every other negative economic report possible (construction, retail sales, car sales, etc.) – even when the weather issues are isolated.
Anyway – the housing market lives…
