Monday, June 05, 2006
- by Robert T. Nash
The housing sector is exhibiting numerous signs of slowing, with a new report showing the pending home sales index falling for a third straight month. The pending sales index is the leading economic indicator for the housing sector, according to the National Association of Realtors.
Experts attribute the slowing to the impact of rising mortgage rates. Mortgage rates rose again last week, with one-year adjustable rate mortgages hitting their highest levels in nearly five years.
Freddie Mac reported Thursday that rates on 30-year, fixed-rate mortgages averaged 6.67 percent, up from 6.62 percent the week before.
The rate was the highest since the week ending June 13, 2002, when 30-year mortgages were at 6.71 percent
Rates on one-year adjustable rate mortgages were also up for the week, rising to 5.68 percent.
That was the highest point for one-year ARMs since they averaged 5.71 percent in mid-August 2001. Last week, the one-year ARM was at 5.61 percent.
A report from the government issued last Thursday indicates that residential construction spending dropped by 1.1 percent in April, the biggest drop in more than two years.
Rates on 15-year, fixed-rate home mortgages, a popular choice for refinancing, rose to 6.26 percent, up from 6.23 percent the week before.
Rates on five-year adjustable-rate mortgages also rose, climbing to 6.26 percent, compared with 6.21 percent last week.
The mortgage rates do not include add-on fees known as points. The 30-year and 15-year mortgages carried a nationwide average fee of 0.4 point. The one-year ARM had an average fee of 0.7 point while the five-year ARM carried an average fee of 0.5 point.
One year ago, 30-year mortgages averaged 5.62 percent, 15-year mortgages stood at 5.20 percent, one-year ARMs were 4.26 percent and five-year ARMs averaged 5.10 percent.
Experts predict mortgage rates will rise only slightly higher for the rest of this year and that the increase will be gradual and orderly.
Analysts believe housing will experience a further gradual slowing this year, especially if the Federal Reserve keeps raising rates.