Daily Forecast Update: Gold Prices, Mortgage Rates

November 20, 2009

By Jed Smith, Managing Director, Quantitative Research  

Daily Forecast Update

• NAR's monthly official forecast as of November 13th
• GDP 2009 Q4:  +2.8%
• GDP 2010 Q1:  +2.8% ↓
• GDP 2010 Q2:  +3.5%
• Unemployment rate by the mid-2010: 10.0%
• Average 30-year fixed mortgage rate by mid-2010 2009: 5.4%  

What Does This Mean for Realtors and Consumers?

• Today's economic news is that gold temporarily hit a historic high in price on Wednesday, while mortgage rates declined slightly this week. In the overall context of current economic trends, the 30 percent increase in the price of gold this year reflects the continued economic uncertainties widely discussed in the press.
• The gold markets have almost no effect on current economic activity but tend to reflect consumer expectations and confidence. The gold markets are stating that there is continued concern over the economic outlook.
• Low mortgage rates indicate that the economy is still in the early recovery phase from the recent recession. Behavioral economists note that consumers generally have a perverse tendency to buy high/sell low in stock and asset markets based on irrational responses to uncertainties. The economic news about concerns over the economy coupled with low interest rates and housing prices low relative to historical experience suggest that the buying opportunities in the housing markets continue to be attractive.
• Low mortgage rates also continue to sustain favorable buying opportunities for clients. Potential buyers are probably aware of higher mortgage loan delinquency rates, rumors of the increased potential for foreclosures in the future coupled with relatively high levels of distressed property today, and general economic concerns. 
• It is appropriate to note, however, that close to historically low interest rates make this a good time to buy in the case of potential buyers with good credit scores, jobs, and incomes.

Gold: Near Historic Highs

• Gold was reported a record high of $1,153 per ounce on Wednesday, closing on Thursday at $1,143 per ounce in New York. Total worldwide gold demand is reported as up 15 percent from the second quarter of the year, based on wealth preservation, inflation, and speculative factors. 
• Investors appear to be concerned over potential inflationary pressures due to the current level of the money supply, the outlook world economies, and general economic unease.

Mortgage Rates

• According to Freddie Mac on Thursday, the average rate for a 30 year fixed rate mortgage is currently at 4.83 percent, down from 4.91 percent last week. Commentators have noted that credit standards continue to be high, with the best rate available only to borrowers with high credit scores and 20 percent down payments.

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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