Slow and Steady Wins
The economic recovery recently hit an important milestone. It is now officially the second longest expansion in our history. For much of the expansion, the recovery has felt more painful than others. For one, the Great Recession was extremely deep and painful. Therefore, most Americans needed a long-term for their personal recovery from the recession. Secondly, the recovery was quite slow. Sometimes it was so slow it did not seem like a recovery at all.
On the other hand, the slow pace of the recovery brought some major advantages to the equation. Interest rates were able to remain low for a longer period of time. We had a sale on money that has lasted most of the previous decade. Additionally, the long life of the recovery can be attributed to the fact that the economy has not overheated during the recovery.
Overheated economies bring inflation and rapidly rising interest rates which can turn the economy south in a hurry. Even as rates have risen in the past two years, it has been a slow and gradual process. As a matter of fact, long-term rates have taken their time to react to the Federal Reserve Board’s short-term rate hikes. Of course, the next question is–how long will the recovery keep going? We know it can’t last forever. Our hope is that when the recovery does pause, it does so in a very mild way, in contrast to the last recession. For now, the old guy is just trudging along.
The Weekly Market Update
Rates were stable in the past week. For the week ending May 10, Freddie Mac announced that 30-year fixed rates remained at 4.55%. The average for 15-year loans decreased slightly to 4.01% and the average for five-year adjustables rose to 3.77%. A year ago, 30-year fixed rates averaged 4.05%.
Attributed to Sam Khater, Chief Economist, Freddie Mac -- “The minimal movement of interest rates in these last three weeks reflects the current economic nirvana of a tight labor market, solid economic growth and restrained inflation. As we head into late spring, the demand for purchase credit remains rock solid, which should set us up for another robust summer home sales season.”
Note: Rates indicated do not include fees and points and are provided for evidence of trends only. They should not be used for comparison purposes.