Mortgage Rates Tumble Again
It can’t get better than this.
Rates for 30-year fixed mortgages hit a new low, making it even more appealing to consumers to invest in homes. The average rate for 30-year mortgages slipped to 3.83 percent, according to mortgage giant Freddie Mac. That’s a record low since the mortgage-finance company began tracking rates in 1971.
Rates on 15-year loans also fell to 3.05 percent from 3.12 percent.
The new rates were announced at a time when there’s depressing unemployment news from the euro-region. At home, too, the economy seems to be still struggling.
Homeownership in the U.S. tumbled from 66 percent to 65.4 percent – the lowest levels in 15 years, according to the U.S. Census Bureau. The overall environment is bound to make consumers wary and restrain them from making large investments despite the low rates, experts say.
“Lower interest rates do provide support for housing,” Keith Gumbinger, vice president of HSH.com, a mortgage-information website based in Pompton Plains, New Jersey, told Bloomberg. “Unfortunately the economy appears to be sputtering again and that doesn’t foster the kind of confidence needed for consumers to want to take on what is one of life’s biggest financial obligations.”
Home Prices Rise in Half of U.S. Cities
There’s good news on another front. Prices for existing single-family homes increased in more than half of U.S. cities measured by the National Association of Realtors®, according to new data released by the organization.
The Spring awakening in the market is bound to energize buyers, sellers and builders. Prices for single-family homes climbed in 74 of the 146 metro areas covered by NAR. Only 29 areas had registered a gain in the fourth quarter.
Improving employment, record-low mortgages and tightening inventory are leading to the rise in prices. At March end, there were 22 percent fewer homes on sale compared to a year earlier. If the inventory continues to dwindle, prices will continue to rise because of the relationship between demand and supply. A few cities, such as Seattle, are already witnessing bidding wars with multiple buyers vying for the same property.
“The housing market is still depressed but it had a good quarter,” said Patrick Newport, an economist at IHS Global Insight, to Bloomberg. “We’re on the mend but it’s still something that will take two or three years before we’re back to normal.”
The national median existing single-family home price was $158,100 in the first quarter, according to NAR. That’s down 0.4 percent from the first three months of 2011. The best performers were Cape Coral, Fl., Grand Rapids, Mich., Palm Bay, Fl. and Erie, Pa. The worst performers were Kingston, Ny, Stamford, Conn. and Mobile, Al.
The price index is no indication that things are stable and will continue the same way. The market is still under threat from a flood of bank-owned foreclosures that could suddenly appear and drag prices down again. But for now, there seems to be a shortage of low-priced homes across the country, which definitely is a good sign.
Banks Keeping Buyers off Market, Says Bernanke
Despite the low rates and good prices, many worthy homebuyers can’t dream of owning a home because of tight lending practices. And the bank’s grip on lending isn’t about to loosen anytime soon, said Federal Reserve Chairman Ben Bernanke.
This can be frustrating for buyers who would otherwise jump on the record low mortgage rates and rightly priced homes in the market.
“To be sure, a return to pre-crisis lending standards wouldn’t be appropriate,” Bernanke said, according to Reuters. “However, current standards may be limiting or preventing lending to many creditworthy borrowers.”
After years of doling out loans like candy, banks became extra cautious about lending practices after a series of bad loans led to defaults in payments, contributing majorly to the financial and housing crisis. Although tighter regulations were warranted to correct old practices, Bernanke said that financial institutions may be overdoing it.
According to Bernanke, even homebuyers who can make a 20-percent down payment aren’t guaranteed a mortgage under the current rules.
U.S. Housing Secretary Shaun Donovan also told Reuters that 10 to 20 percent of potential homebuyers who could make payments on time were being “locked out” of the market because of tight regulations.
“We had risk-amnesia going into the crisis and I think now we’ve gone a bit too far in the other direction,” he said.
With federal officials taking notice, loan regulations hopefully will become more consumer friendly in the future.