Rates for home loans tumbled for a third week, offering a glimmer of hope for would-be buyers.
The 30-year fixed-rate mortgage averaged 4.63% in the Dec. 13 week, down 12 basis points and touching its lowest since September, mortgage liquidity provider Freddie Mac said Thursday.
The 15-year fixed-rate mortgage averaged 4.07%, down from 4.21%. The 5-year Treasury-indexed hybrid adjustable-rate mortgage averaged 4.04%, down three basis points.
Mortgage rates track the 10-year U.S. Treasury, although they usually move more slowly. Investors have snatched up the perceived safety of bonds as geopolitical fears have rattled markets and deeper concerns about growth have hammered stocks. Bond yields fall as their prices rise.
The benchmark 30-year-fixed has now remained steady or declined in each of the past five weeks, and there are signs that prospective buyers are keeping a careful eye on it. Home loan purchase applications jumped 1.6% in the latest week, the Mortgage Bankers Association said Wednesday.
Meanwhile, the rate reprieve isn’t the only tailwind for the housing market. Anecdotal evidence from home builders and real estate agents suggest that some of this autumn’s slump may have been buyers holding their breath before the midterm elections. The question now is whether the market will thaw with the spring selling season.
In Washington, an equally weighty question moved a few steps closer to being answered this week. The White House on Tuesday announced it was nominating Mark Calabria, currently the chief economist to Vice President Mike Pence, as the next head of the Federal Housing Finance Agency, the regulator for Freddie and its counterpart Fannie Mae. Mel Watt, who currently runs FHFA, is due to step down January 6.
Calabria has been publicly quite critical of many deep-rooted aspects of the current housing finance system, not just the immediate limbo that Fannie and Freddie are in. “Our politicians have long been more interested in expanding ever cheaper credit than in promoting economic and financial stability,” he said in a 2016 essay that argued against securitization, the process of pooling many fixed-income streams together and selling portions of that new asset to investors.
Washington analysts largely believe that Calabria will likely tone down his more controversial views in order to be confirmed by Congress, and that he won’t upset the current system too much once in office.
“Dr. Calabria has a libertarian bent and has been an outspoken critic of the GSEs, but he will be implementing the administration’s agenda, not his own, so concerns that his nomination will be a negative for the housing market may be overdone,” KBW analysts said.
In fact, many housing observers think there’s plenty of room for consensus on some aspects of the current housing finance system, if not the big-picture end game. There’s widespread unease with the optics of extending government support to finance the purchase of million-dollar homes, and for cash-out mortgage refinances.
Still, as the KBW analysts also noted, housing finance reform hasn’t been a Congressional priority in the ten years that Fannie and Freddie have languished in conservatorship, and that’s not likely to suddenly change.