Mortgage rates remain unbelievably low, and as long as they keep scraping the bottom, the housing bubble will continue to swell.
Freddie Mac (NYSE:FRE) today released the results of its Primary Mortgage Market Survey in which the 30-year fixed-rate mortgage (FRM) averaged 5.68 percent, with an average 0.6 points, for the week ending December 16, 2004, down from last week when it averaged 5.71 percent. Last year at this time, the 30-year FRM averaged 5.88 percent.The federal funds rate sat at 1.00% from July 2003 to June 2004. Cutting off the first and last months to try to excise some pre-emptory moves by the market, the average rate on a one-year ARM in that period was 3.69%. Now the federal funds rate stands at 2.25% while the one-year ARM rate is 4.18%.
The average for the 15-year FRM this week is 5.11 percent, with an average 0.6 points, down as well from last week when it averaged 5.14 percent. A year ago, the 15-year FRM averaged 5.24 percent.
One-year Treasury-indexed adjustable-rate mortgages (ARMs) averaged 4.18 percent this week, with an average 0.7 point, up from last week when it averaged 4.15 percent. At this time last year, the one-year ARM averaged 3.77 percent. . . .
�The Commerce Department report on housing starts showed a considerable drop in starts in November,� said Frank Nothaft, Freddie Mac vice president and chief economist. �However, with December�s mortgage rates continuing to dip even further, we expect housing starts will bounce back fairly quickly.
�There is no doubt now that 2004 will be a record year for single-family construction. That said, because of low mortgage rates, we feel confident that 2005 will not be very far behind this year.�
So explain to me why the federal funds rate has risen 125 basis points but the one-year ARM rate has risen only 49 basis points.
I'm getting the feeling the US Fed has little to no control over US interest rates, one way or another.