The economy is looking good. At the same time, it’s looking bad. What’s a mortgage rate to do?
The benchmark 30-year fixed-rate mortgage fell 2 basis points to 6.27 percent, according to the Bankrate.com national survey of large lenders. A basis point is one-hundredth of 1 percentage point.
The mortgages in this week’s survey had an average total of 0.16 discount and origination points. One year ago, the mortgage index was 6.64 percent; four weeks ago, it was 6.22 percent.
The 15-year fixed-rate mortgage fell 3 basis points, to 5.99 percent. The 5/1 adjustable-rate mortgage rose 1 basis point, to 6.12 percent.
This week featured a number of economic reports that comforted bears and bulls alike. The bulls tossed their horns at the report on durable goods orders in March. Orders rose more than expected for long-lasting items such as cars, airplanes and appliances. That was a sign of economic growth that would tend to push mortgage rates upward.
Home sale data counterpoint
But look at the home sales data. Resales of houses and condominiums plunged 13 percent in March compared to the previous March, according to the National Association of Realtors (NAR).
The NAR says 482,000 dwellings were resold this March, compared to 554,000 units in March 2006. Prices were down $600 versus a year before — a statistically meaningless difference.
Sales of single-family houses fell off a cliff and into shark-infested waters. According to the U.S. Census, people signed on the dotted line to buy 84,000 houses in March, compared to 108,000 in March 2006, for a 22.3 percent decrease.
The Census counts a house as “sold” when someone signs a contract to buy it, not when the buyer moves in.
That means that March is typically the biggest month for new home sales as buyers prepare to move in during the summer.
If 84,000 houses sold in a month is as good as it gets this year, it’s going to be a dismal 2007 for home builders. On top of that, in some markets, up to one-fifth of buyers bail out — they agree to buy a new house, but change their minds later.
From that perspective, the new home sales figure is inflated.
Surprise! Home prices rise
Amid this bad news comes this tidbit about prices of new houses: They’re up. Even with sales plummeting, and with a 6.4-month supply of houses on the market (compared to a 5.1-month supply in March 2006), prices rose. Half of the new houses sold this March cost more than $254,000, compared to a median price of $238,800 a year before — a 6.4 percent increase.
On top of this news, this week brought forth the Federal Reserve’s Beige Book, an anecdotal look at the economy in each of the Fed’s 12 districts.
The Beige Book’s summary says the economy is doing OK, but it’s nothing to brag about. It says that most districts “noted only modest or moderate expansions in economic activity,” although the federal banks based in Dallas, Minneapolis and New York saw things a little rosier in their areas.
As far as housing goes, the Fed says home sales are soft or declining in most areas. “In contrast,” the Fed wrote, “the Boston District reported that the volume of residential sales across New England shows signs of increasing, though prices remained below 2006 levels.”
Maybe sales are increasing because prices have dropped, not despite it.