Rick BissonGood physical health depends on feeding the body healthy foods, daily exercise and plenty of sleep. Keep these three vital elements in balance and the outcome is greater personal confidence and piece of mind. The three vital elements to a healthy housing market are a balanced supply of homes for sale and buyers looking to buy, confidence in the overall financial strength of the economy and affordable mortgage rates.

Predictions for the health of the housing market leading into 2017 contained a hint of caution due to a short supply of homes available for sale, political unrest, and an expected increase in mortgage interest rates throughout the year.

Nearing the halfway mark of 2017, the supply of homes remains tight. All three of the stock market’s major indexes are up, reaching historic levels. Concerns over the sustainability of these market conditions is causing some market tensions.

The average conventional mortgage interest rates on a 30-year fixed-rate mortgage began the year at 4.20 percent and reached as high as 4.3 percent in March. Since then, rates have steadily declined. The average conventional 30-year fixed-rate mortgage in June was 3.95 percent, according to Freddie Mac’s Primary Mortgage Market Survey. Freddie Mac’s June 8, 2017 survey pegged the 30-year mortgage rate down 7 basis points since May to 3.89 percent. Mixed and increasingly uncertain economic data were cited as factors pushing rates to the lowest levels in nearly seven months.

At these rates, mortgage loans now cost just $475 monthly for every $100,000 borrowed; excluding escrows for taxes and insurance, private mortgage insurance, and flood insurance, where applicable. That’s more than $40 per month cheaper on a $300,000 loan when compared to the costs at the beginning of the year.

It’s important to keep in perspective that although mortgage interest rates remain historically low, they may not stay that way for long. Mortgage interest rates change quickly with the economy, and with shifts in market sentiment.

At present, mortgage-backed securities – Wall Street’s asset upon which mortgage interest rates are determined – have been waiting for a reason to move one way or another.
Pricing for mortgage-backed securities is currently responding to influences impacting the economy. Those influences include the Federal Reserve’s monetary policy, the jobs market, and forecasts for the new administration in the White House’s stance on economic issues.

Watchful eyes are expecting a rate hike in the Federal Funds Rate following the Federal Open Market Committee’s June 13 meeting. The group will decide whether to hike its fund rate after holding rates at its May meeting. Analysts are forecasting an 87 percent chance of a rate increase in June, which would place the target rate between 1 percent and 1.25 percent – one-quarter of one percent above its pre-meeting level.

Over the last 20 years, the Fed Funds Rate and the average 30-year fixed-rate mortgage interest rate have differed by as much as 5.25 percent, and by as little as 0.5 percent.

The Fed’s policies influence fixed mortgage interest rates – they do not control them. If the Fed raises rates at the June meeting, little to no impact on 30-year fixed mortgage interest rates is expected. Markets build in hikes long before they happen. Through a series of pre-meeting statements and speeches by Fed members, the Fed all but telegraphs its move long before the meeting. For that reason, barring a significant event, mortgage rates are expected to remain steady after the Fed’s June rate hike.

If you, or someone you know thought the ship had sailed on getting low rates, it’s not too late. Current rates remain historically low and yet predicted rate hikes throughout the year appear imminent. Talk with your trusted Realtor and mortgage lender today. They will help you lock in the rate on a loan for your ideal home.

This column is produced by Rick Bisson and his family, who own Bisson Real Estate with Keller Williams Realty of Midcoast and Sugarloaf.