U.S. rate on 30-year mortgage rises to 3.98%-Higher Rates Equal Lower Prices

Fixed U.S. mortgage rates rose for the sixth straight week, putting the average rate on the 30-year loan just shy of 4 percent.

Mortgage buyer Freddie Mac said Thursday that the rate on the 30-year loan increased to 3.98 percent. That's up from 3.91 percent last week and the highest since April 2012. The average rate was last at 4 percent or higher in March 2012.
The rate on the 15-year loan advanced to 3.10 percent from 3.03 percent. That's also the highest since April 2012.

Concerns that the Federal Reserve will scale back its bond purchases have pushed rates higher. Still, mortgage rates remain low by historical standards.

Cheap mortgages have helped sustain a housing recovery that began last year, encouraging more Americans to buy homes or refinance existing loans.

Housing’s up, but is the foundation sound?

 Demographics will play a major role in the strength and length of the housing market recovery. Those bullish on housing expect the rebound to last for several years because new-home construction and household formation fell during the downturn even though the U.S. population continued to grow.

As more young adults move out of their parents’ homes, they will seek apartments before achieving homeownership, and those who put off buying a home during the recession are now ready to make purchases.

Even after taking the so-called shadow inventory into account, the bulls say more housing units need to be built. Zelman & Associates calculates that 14 million additional housing units are needed this decade to accommodate population growth, but only 5.7 million will be built by 2015.

U.S. regains wealth from recession, but not equally

America as a whole has regained all the household wealth it lost to the Great Recession and then some, thanks to higher stock and home prices.

The average household still has a long way to go.

U.S. household wealth jumped $3 trillion to $70 trillion in the January-March quarter this year, the Federal Reserve said Thursday. That topped the previous peak of $68 trillion in the third quarter of 2007, just before the recession began.

Yet because of inflation and a rising population, the average household has recovered only about 63 percent of the wealth it lost, according to separate calculations by the Federal Reserve Bank of St. Louis. Affluent households have benefited most because most of the recovered wealth has come from higher stock prices. The wealthiest 10 percent of Americans own about 80 percent of stocks.

The recession cost Americans $15.6 trillion in wealth.

Average rate on 15-year U.S. mortgage above 3 percent

 The average U.S. rate on a 15-year fixed mortgage rose above 3 percent this week for the first time in a year, while the rate on the 30-year fixed loan approached 4 percent.

Mortgage buyer Freddie Mac said Thursday that the rate on the 30-year loan jumped to 3.91 percent from 3.81 percent last week. That’s the highest since March 2012.

The rate on the 15-year loan rose to 3.03 percent from 2.98 percent. That’s the highest since last May.

Concerns that the Federal Reserve may scale back its bond purchases have pushed rates higher over the last month. Still, mortgage rates remain low by historical standards. The 30-year loan hit a record 3.31 percent rate in November. The 15-year loan fell to its low of 2.56 percent a month ago.

Mortgage rates are rising because they tend to follow the yield on the 10-year Treasury note. The yield on the 10-year note climbed as high as 2.2 percent last week, its highest level in more than two years. It has since slipped to 2.1 percent in early trading Thursday. That compares with 1.63 percent at the beginning of May.

Wall Street goes shopping in weak housing markets

The last time the housing market was this hot in Phoenix and Las Vegas, the buyers pushing up prices were mostly small time. Nowadays, they are big time – Wall Street big.

Large investment firms have spent billions of dollars over the last year buying homes in some of the nation’s most depressed markets. The influx has been so great, and the resulting price gains so big, that ordinary buyers are feeling squeezed out. Some are already wondering if prices will slump anew if the big money stops flowing.

“The growth is being propelled by institutional money,” said Suzanne Mistretta, an analyst at Fitch Ratings. “The question is how much the change in prices really reflects market demand, rather than one-off market shifts that may not be around in a couple years.”

Wall Street played a central role in the last housing boom by supplying easy – and, in retrospect, risky – mortgage financing. Now, investment companies like the Blackstone Group have swooped in, buying thousands of houses in the same areas where the financial crisis hit hardest.

Blackstone, which helped define a period of Wall Street hyperwealth, has bought some 26,000 homes in nine states. Colony Capital, a Los Angeles-based investment firm, is spending $250 million a month and already owns 10,000 properties. With little fanfare, these and other financial companies have become significant landlords on Main Street. Most of the firms are renting out the homes, with the possibility of unloading them at a profit when prices rise far enough.