Mortgage Rates to Average 6% by End of 2010: PMI Group
PMI Group’s (PMI) latest monthly Housing and Mortgage Market Review projects mortgage rates will gradually rise over the coming months and average 6% by the end of 2010. However, PMI adds this projection is subject to the uncertainties surrounding the end of the Federal Reserve’s mortgage-backed securities (MBS) purchase program. Even after the program ends, it is possible the Fed could re-enter the market if mortgage rates spike or the housing market stumbles, the report said. This echoes other projections Freddie Mac’s chief economist made to HousingWire last week. PMI Group said short-term interest rates will show little change during 2010, before rising significantly in 2011. Longer-term rates are projected to move modestly upward over the year. The report also said concerns over the pending expiration of last year’s first-time homebuyer tax credit created a late summer surge in sales that fell considerably in November. Despite the year-end decline, PMI Group estimates 2009 existing home sales increased 5.1% compared to 2008 and 27% quarter-over-quarter in Q409. New home sales declined 23.3% year-over-year in 2009. But the report projects as the job market expands later this year, home sales will pick up again. “Even with the extension and expansion of the credit, it is likely that there will be a payback period from the original tax credit,” the report said. “As a result, we expect a decline in home sales over the next several months. With the new credit and continued expansion of the economy — especially as the job market begins to expand — home sales should begin to grow again within a few months.” PMI projects a 7.7% increase in existing sales and a 35.5% increase in new home sales in 2010. The oversupply of housing inventory caused prices to decrease 12.7% in 2009, the report estimates. This year, prices will fall an additional 5% by the spring, before stronger sales and reduced inventory to bring prices back to 2009 levels and remain unchanged by year’s end. Write to Austin Kilgore.