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Thursday, November 20, 2008
Mortgage Rates, Demand Continue Decline
Adam Samson
FOXBusiness
Mortgage rates and demand slipped in the last two weeks amid continued economic and financial tumult.
The average rate for a 30-year mortgage continued falling for a third straight week to 6.04% for the week ended November 20, from 6.14% in the previous week according to a report by Freddie Mac (FRE). This reading comes in at 0.2% below the average weekly reading since May 1.
The interest rates for shorter-term 15-year mortgages also declined, to 5.73% from 5.81% in the previous week. One-year adjustable-rate mortgages too saw some relief, falling to 5.29% from 5.33% in the previous week.
Freddie Mac says the decline is due to weakening increasing financial and economic headwinds.
"Long- and short-term mortgage rates fell for the third consecutive week amid continuing signs of a slowing economy," said Freddie Mac chief economist Frank Nothaft in a release. "Retail sales fell for the fourth straight month in October and consumer sentiment remained near a 28-year low in November.
Mortgage demand is also slipping, according to a report released Wednesday by the Mortgage Bankers Association. The MBA Purchase Index -- a proxy for new mortgage activity -- tumbled by 13% for the week ended Nov. 14. The report also showed nearly half of mortgage activity was due to individuals refinancing mortgages, up from 45% in the previous week.
Generally, mortgage demand increases as a result of lower interest rates, but this boost in demand has yet materialize.
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Most folks judge the health of a business by the revenue that comes in through sales. But not all revenue is equal. Companies can grow their sales by buying other companies, which means you don't get a clear view of how the real sales trends are moving.
So, many analysts, particularly those who look at retail, try to gauge what¿s known as "organic" growth, by looking at same-store sales. These are sales only at outlets open more than a year, so the metric can exclude any sales jump that comes from opening new locations. Retailers release same-store sales (which are frequently called "comps" since they're a true comparison from the previous period) every month.
Retail, incidentally, isn't the only industry to look at same-store sales. Hospital companies, also use the metric, to gauge how existing hospitals are performing compared to ones they just built or acquired.
