Mortgage Rates Tumble to a New Low
If you are in the market for a housing loan, your timing couldn’t be better. Homes have just become even more affordable because of falling interest rates.
For the sixth straight week, mortgage rates tumbled to a record low, according to Freddie Mac. The rate for 30-year loans dropped to 3.67 percent, the lowest since 1971 when the mortgage finance giant began keeping record. The 15-year rates also slipped from 2.97 percent to 2.94 percent.
But, it would take more than low rates to pacify nervous customers from buying up homes. The economy is still struggling and the job market continues to be depressed, shunning away consumers from making the biggest investment of a lifetime. Strict lending practices are also depriving many from taking advantage of the low rates.
“Low interest rates should be good news as long as people have a job,” Sal Guatieri, senior economist for BMO Capital Markets in Toronto told Bloomberg. “But if we see unemployment rising, it could overwhelm the beneficial impact of lower mortgage rates and cause the housing market to weaken again.”
Consumer Confidence Tied to Housing Market Recovery
To allow for a speedy market recovery, consumer confidence has to rise, said a panel of economists from Standard & Poor’s during an online presentation titled “U.S. Housing: Are we recovering?”
And to boost consumer confidence, we need more jobs at a faster pace.
According to Deseret News, the housing market has reached some stability, but consumer confidence continues to pull the brakes on a faster market turnaround.
“Housing market conditions generally do not yet appear robust enough to support a recovery in the new single-family home market,” said Robert Keiser, vice president of Global Markets Intelligence at S&P, according to the Deseret News. “Global Markets Intelligence Research believes that the pace of U.S. job creation is the key to a full recovery of both consumer confidence and the housing market.”
The past three months have had timid job and payroll reports, raising concerns that the economy is again headed toward a recession, Keiser said. When consumers see these reports, they are often unwilling to make any long-term financial commitments. Dwindling disposable income is also shutting out buyers form the market.
“A full recovery to post millennium high watermark standards, if at all, is likely years, if not decades, in the future,” Keiser said.
If there’s no job recovery and expanding disposable income, the market at best would remain flat, leading to more problems in the economy. Rentals will continue to rise while homeownership slides. Analysts believe consumers will again lean toward buying when rents start skyrocketing because of high demand.
But will we ever return to the market’s glorious time in 2005? Perhaps, but as of now it looks like it will take quite some time to get there.
Housing Market Stabilizing but Outlook Remains Mixed
The Obama administration’s May Housing Scorecard shows that the market is finally stabilizing, but officials are cautious about the future.
According to the report, April sales of previously occupied homes climbed in every region of the country, increasing 2.4 percent. With existing home sales increasing the number of new homes also showed an uptick for the first time since April 2007. Home supply, another measure for the industry, dipped to 5.1 percent from 5.2 percent a month earlier.
The numbers have been very encouraging, said HUD Acting Assistant Secretary Erika Poethig.
“More than 180,000 borrowers took advantage of our enhanced Home Affordable Refinance Program in the last quarter alone and foreclosure starts are declining as more homeowners secure mortgage relief,” Poethig said in a release. “ But, with so many households still struggling to make ends meet, it’s clear that we have more work ahead.”