Mortgage rates give house hunters window of opportunity

By Personal FinanceFOXBusiness

Fed’s Powell issues ‘flexible’ stance on interest rate hikes amid strong jobs report

Bankrate chief financial analyst Greg McBride on the strong December jobs report and why he expects the Federal Reserve to raise interest rates twice this year.

The swings in the U.S. stock market have indirectly opened up a window of opportunity for prospective house hunters, but it may not last long.

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“Mortgage rates are down almost a half percentage point since mid-November, and given the strength of this economy, I don’t think this is going to last,” Greg McBride, chief financial analyst for Bankrate.com, said during an interview with FOX Business.

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The volatile stock market, which in 2018 produced the worst annual returns since 2008 amid recession fears that gathered steam in December, correlated with a decline in the 10-Year Treasury yield, which is now at 4.66 percent. The longer-term bond is viewed as a predicator of mortgage rates.

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A 30-year fixed rate mortgage fell to 4.84 percent, the lowest since September 2018, as reported by the Mortgage Bankers Association on Thursday. McBride’s advice to home buyers now: just do it.

“If you’re in the market for a home, I think now is a great time to take advantage and lock in,” he said, adding the rates are likely to move above 5 percent in the near future. Plus, even though Federal Reserve Chairman Jerome Powell has indicated policymakers at the U.S. central bank will likely slow their planned pace of short-term interest rate hikes in 2019, at least two increases are expected.

Mortgage Rate Snapshot 

    30-Year Fixed: 4.84%

    15-Year Fixed: 4.25%

    5/1 ARMs: 4.16%

    Source: MBA

The blockbuster December jobs report, which revealed that U.S. employers added 312,000 jobs, while annual wages jumped 3.2 percent – the most since 2008 – is evidence the U.S. economy is strong. While the unemployment rate ticked up to 3.9 percent, economists say that reflects more people coming off the sidelines to look for work.

“It doesn’t get any better than this,” White House Economic Advisor Larry Kudlow said when describing the report and his view on the state of the U.S. economy to FOX Business. "There is no recession coming. There is no recession in sight," he stressed.

Although attractive mortgage rates are a bonus, house hunters are likely to experience some headwinds fueled by tight supply, which is contributing to higher home prices.

U.S. home prices rose 5.1 percent in November, compared with the same period last year, according to CoreLogic. Experts expect they will rise another 4.8 percent throughout the coming year.

Suzanne O'Halloran is Managing Editor of FOXBusiness.com and is a graduate of Boston College. Follow her on Twitter @suzohalloran