Wednesday, November 24, 2004

The mortgage rate squeeze really appears to be on now for the US housing market.

According to Freddie Mac, the rate on 30-year fixed-rate mortgages fell to 5.72% the week ending November 24. That's the second weekly decline in a row and a full 62 basis points below the recent high of 6.34% in mid-May. The long money continues to be cheap.

At the same time, rates on 1-year adjustable rate mortgages are climbing rapidly. They now stand at 4.27%, marking the fourth weekly rise in a row and up 91 basis points from the recent low of 3.36% in late March.

That means the spread between the 30-year FRM and the 1-year ARM is compressing as it has been since June. Now the spread is down to just 1.45%, the lowest since November 2001.

Since all the bubbly California housing markets have gone over completely to ARMs, one would think that this compression of the FRM/ARM spread would signal the beginning of the end of the froth. One would think . . .

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