While all the market players were keeping their fingers crossed for the jobs report, U.S. mortgage rates rose. The increase occurred based on the positive signs of economy rebound from the harsh winter conditions.
According to a statement from Freddie Mac. (FMCC), the average rate for a fixed-rate mortgage with 30-year lifespan was 4.41% this week, with a slight increase from 4.4%. For 15-year loans, the average rate increased from 3.42% to 3.47%, as reported by the same source.
The job report is expected to show that the employment rate has increased, which could trigger the growth of the interest rates by the Federal Reserve, in 2014. The home purchases were hindered due to several factors: the reduced affordability to buy homes due to high prices and borrowing expenses and the harsh weather conditions that affected a great part of the United States.
Economists want to find the explanation for the stagnation of the economic growth: is it or is not the winter? In past years, the Federal government made efforts to reduce borrowing costs. Scaling back in this strategy has caused the average interest rate for 30-year mortgages to increase from the 3.54% level, in 2013. At each of its past three meetings, the Central Bank has lowed bond purchases by $10 billion per month to $55 billion. Six months after debt stops being bought, a rise in interest rates is likely to happen.
According to the data reported by the Commerce Department, in February, the level of new-home sales was at its the lowest in five months. Another drop was registered for purchases of existing houses to a 4.6 million annual rate. This is the lowest level since July 2012 as shown by the National Association of Realtors.
For the quarter which ended on March 31, Beazer Homes USA Inc. (BZH) – an Atlanta-based home builder – reported a 9% decrease in orders. The company blamed the decline in demographics as well as the very harsh winter along the Eastern Coast for this situation.