The mortgage market is starting to get interesting, in a manner of speaking. Earlier this month, interest rates for mortgages rose in what was described as the largest one-day jump in at least 10 years, according to Mortgage News Daily. That in large part stemmed from the Federal Reserve, which has been snatching up $85 billion worth of mortgage-backed securities a month.
When that stops – even when the program is perceived to be only slowing down – mortgage rates are expected to rise. What all that means is that mortgage market officials have been and continue to urge potential buyers to seize the day – and in Shelby County, buyers certainly are heeding that advice.
Banks and mortgage lenders made 2,233 purchase mortgages in Shelby County during the second quarter, a 3.7 percent improvement from the 2,150 mortgages during the second quarter of 2012, according to the latest data from real estate information company Chandler Reports, www.chandlerreports.com.
Data for this report included purchase mortgages only, not refinances.
Mortgages averaged $169,247 during the quarter, up 7 percent from $156,933 during the same period in 2012, and the total volume held steady.
The second quarter’s nearly $378 million volume marked a small gain over the $337.4 million volume in the second quarter of 2012.
“Due to historically low interest rates, home purchases have dramatically picked up locally and in every major market across the country in which Evolve does business,” said Evolve Bank & Trust president and CEO Scott Stafford. “Current rates on 30-year fixed mortgages are around 4.5 percent and 3.5 percent on 15-year fixed mortgages. At Evolve, roughly 70 percent of our mortgage business is now new purchases and 30 percent (is) home refinance.”
Just two months ago, in contrast, about 60 percent of Evolve’s business involved refinances, underscoring the major shift in the market.
“We expect that rates will begin to level off once the Federal Reserve concludes its discussions regarding quantitative easing,” Stafford said, referring to the Fed’s bond-buying activity that’s expected to begin to ease by the end of this year.
The Fed’s intentions are not only front and center for the mortgage market, they’re also a matter of perspective. BankTennessee CEO Jim Rout, for example, said his bank hopes that rates drop even lower, though they’re currently at historic lows.
That hope springs from the fact that Federal Reserve Chairman Ben Bernanke signaled the central bank’s intent to keep supporting the economy with monetary stimulus, never mind that an end to that program now appears to be in sight.
“But my advice is that this exceptionally low rate environment won’t last forever, so I wouldn’t wait too long to purchase or refinance a home,” Rout said.
Not only will the current situation not last forever, but it’s almost becoming hard to get a read on where things will be from one week to the next. Here’s how a recent Salon.com article put it: “Rates in the mid-to-high 4’s are some of the best ever before mid-2011. But since then, not only are those rates on the highest end of the spectrum, but we were fairly close to all-time lows at the end of April. That makes the past two months incredibly abrupt.”
Regarding mortgage activity for the largest banks based in Memphis during the second quarter, First Tennessee Bank was down 52 percent (from 29 mortgages in the second quarter of 2012 to 14 mortgages during the second quarter of 2013). Over the same period, Independent Bank was down 30 percent, from 10 mortgages to seven mortgages.
Magna Bank, however, went the other way. Over the two second quarter periods, Magna’s total number of mortgages climbed from 153 to 182.
Chandler Reports is a division of The Daily News Publishing Co. Inc.