Home & Mortgage

The Office of Federal Housing Enterprise Oversight reported yesterday that the average home prices rose 12% in the 3rd quarter compared with a year ago, down from the 13.4% year-over-year rise in the 2nd quarter. Average prices rose 2.9% in the 3rd quarter vs. the previous quarter.

Inflation, as measured in a consumer-spending report released Thursday, was up 1.8%, excluding food and energy costs, in the past 12 months, the smallest gain since March 2004. This could be a factor for the decline in long term fixed rate morgages this week.

According to the weekly report from Freddie Mac, the 30-year fixed loan averaged 6.26%, down from 6.3% last week. Last year at this time, the rate averaged 5.75%. The average for the 15-year fixed-rate mortgage was 5.79%, down from last week's 5.85% but up from 5.18% at this time in 2004.

On the other hand, Adjustable-rate mortgages (ARMs) which are quite sensitive to Fed's short-term rate hike, were higher in the latest week after stabilizing in the past few weeks. The 5-year Treasury-indexed hybrid ARM averaged 5.82% this week, up from last week's average of 5.78%. The 1-year Treasury-indexed ARMs averaged 5.22%, up from 5.15% last week and 4.17% last year.

With rising interest rate, ARM is slowly but surely loosing its ground in the refinancing market, thus taking away with itself the flurry of activities we observed there in last few years.