Economist's Commentary: May 12, 2008

Quick Take on the Economy: May 12, 2008

By Lawrence Yun, NAR Chief Economist

Freddie Mac reported a stable mortgage rate conditions last week. The 30-year fixed mortgage rate averaged 6.05 percent. The 1-year ARM averaged 5.29 percent.
These rates - in the big picture - have been unchanged for the past six months. But these rates do not reflect what may be occurring in the jumbo loan market, which had seized up since the August 2007 credit crunch.
One large mortgage broker in the Pacific coast market reported the following figures to me on what he saw from originations: The 30-year traditional conforming rate at 5.9 percent, the 30-year conforming jumbo rate at 6.1 percent, and the 30-year non-conforming jumbo rate at 7.8 percent.
Fannie and Freddie are beginning to impact the newly conforming jumbo market. Before last week, they did not engage in the jumbo market even after the new law raising the loan limit early in the year.
Great news: the new law on higher loan limit has brought the conforming jumbo rates down by more than a full percentage point.

Some homebuyers and homeowners needing a jumbo loan (that is still below the Fannie/Freddie loan limit) will now see much lower mortgage rates.
On average, it will mean a saving of about $3,000 to $4,000 in interest cost per year for these consumers.

This is one in a series of commentaries by the Research staff of the National Association of REALTORS®. Read more commentaries >

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