The 15-year fixed-rate average fell to 4.23 percent with an average 0.5 point. It was 4.29 percent a week ago and 3.27 percent a year ago. The five-year adjustable rate average fell to 4.04 percent with an average 0.3 point. It was 4.14 percent a week ago and 3.23 percent a year ago.
“Mortgage rates declined slightly this week as continued market volatility caused bond rates to pause their upward trajectory,” said Danielle Hale, chief economist at Realtor.com. “Stocks and bonds appear to be reacting to the cost increases businesses are facing, which has led to uncertainty over profitability. Today’s lower mortgage rates are a mixed bag for housing. Builders are facing the same cost increases as other businesses. This is making it next to impossible to build entry-level homes, which could eventually hold back the homeownership growth rate.”
Fueled by first-time home buyers, the homeownership rate rose to 64.4 percent in the third quarter. However, sluggish data are raising concerns about a slowdown in the housing market. Home price gains were below 6 percent for the first time in a year, according to the most recent Case-Shiller home prices index. Existing and new-home sales fell last month, while pending home sales were flat.
“While higher mortgage rates have led to a decline in home sales this year, the weakness has been concentrated in expensive segments versus entry-level and first-time buyer which remains firm throughout most of the rest of the country,” Sam Khater, Freddie Mac’s chief economist, said in a statement. “Despite higher mortgage rates, the monthly mortgage payment remains affordable. For many buyers the chronic lack of entry-level supply is a larger hurdle than higher mortgage rates because choices are limited and the inventory shortage has caused home prices to rise well above fundamentals.”
A strong jobs report this week may push mortgage rates higher. Bankrate.com, which puts out a weekly mortgage rate trend index, found more than half of the experts it surveyed say rates will rise in coming week. Shashank Shekhar, chief executive of Arcus Lending, is one who predicts rates will go up.
“After staying mostly stable for three weeks, the market mood is turning bearish towards the mortgage-backed securities again,” Shekhar said. “The stock market has rebounded, ADP private payroll report showed a huge jump, and the October Consumer Confidence clocked the best reading in 18 years. All of this explains the bearish tone because good news for the economy is usually bad news for MBS, which then pushes the mortgage rates higher.”
Meanwhile, mortgage applications retreated, according to the latest data from the Mortgage Bankers Association. The market composite index — a measure of total loan application volume — declined 2.5 percent from a week earlier. The refinance index fell 4 percent from the previous week, while the purchase index dropped 2 percent.
The refinance share of mortgage activity accounted for 39.4 percent of all applications.
“The healthy economy, which grew 3.5 percent in the third quarter, continues to keep overall housing demand high,” said Bob Broeksmit, MBA president and chief executive. “A volatile October for the stock market, however, as well as rates being much higher than a year ago, appear to be causing some prospective buyers to pause. As a result, purchase applications last week were down from a year ago for the first time since August.”
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