House Price Falls, Mortgage Rises

U.S. Census Bureau reported (see full report) that sales of new homes unexpectedly rose 5.3% in September to a seasonally adjusted annual rate of 1.075 million, the most in three months. Homebuilders slashed prices at the fastest pace in 36 years in September, boosting sales to this high level. Median sales prices dropped 9.7% in the past year to $217,100, the lowest price in two years. It's the largest percentage decline in median prices since December 1970. Median prices for existing single-family homes are down 2.5% in the past year, the largest decline ever recorded.

As median house prices slipped, mortgage rates edged up, according to Freddie Mac's weekly survey. In fact, the slowdown in housing market was a reason behind the Federal Reserve's decision to not raise rates on Wednesday.

According to Freddie Mac's weekly survey, the 30-year fixed-rate mortgage averaged 6.40% in the week that ended today -- up from its 6.36% average last week. At this time last year, the loan averaged 6.15%. The 15-year fixed rate averaged at 6.10% this week, again an increase from last week's 6.06%. At this time last year this rate was 5.69%.

Rate for 5-year Treasury-indexed hybrid adjustable-rate mortgages (ARM) averaged at 6.14% increasing from last week's 6.11%. This rate averaged 5.63% a year ago. The 1-year Treasury-indexed ARMs also moved up this week to 5.60% from last week's rate of 5.57%. At this time in 2005, the 1-year ARM averaged only 4.91%.