Individuals who missed buying a home or refinancing a mortgage when the 30-year fixed mortgage reached 3.94 percent a few months ago, have a second chance to take advantage of rates previously seen only in the decade of the 50’s. Last week, the 30-year fixed rate mortgage reached 3.94, down from3.99 percent the previous week. The 15-year fixed mortgage fell from 3.27 to 3.21 and 5/1 adjustable rate mortgages declined to 2.86 percent from 2.93 percent —both record lows.
Freddie Mac conducts a weekly poll of mortgage lenders across the nation, Monday through Wednesday, to determine mortgage interest rates. Freddie Mac’s chief economist, Frank Nothaft, expects low interest rates to remain in play, at least through the second quarter of 2012.
According to the U.S. Mortgage Bankers Association (MBA), mortgage loan applications rose last week. The MBA’s Composite Index, for mortgage loan applications increased, 4.1 percent for the week ending December 9, compared to the previous week. The MBA Refinance Index component of the index surged 9.3 percent over the prior week.
The revised HARP mortgage refinance program, which went into effect on December 1, account for a small portion of refinancing applications.
Low Interest Rates – Still Not Good Enough
When 30-year fixed rate mortgage hit five percent and lower last year, industry analysts believed rates had hit bottom. However, over the next year interest rates continued to fall-- reaching four percent or lower level for the second time in recent months. Once again, consensus opinion says interest rates have hit the floor, and can only go up. Fannie Mae predicts interest rates in the low four percent range for 2012.
Historic low mortgage rates simply have not mattered much in terms of stimulating mortgage application activities. It seems people who have the income, credit score and/or home equity to buy or refinance have done so. Many potential buyers either cannot qualify for a mortgage or do not have confidence that they will have a job or housing prices will not decline any further.
How Much Further Will Home Prices Decline?
The deterioration of home values has not approach the sharp drops of the past few years, but the housing and mortgage market remains weak. In 2011, home prices have declined an average of four percent this year. Analysts find comfort in the fact that conventional home prices have remained relatively flat. Significant discounts in short sales and foreclosures sale prices have directly influenced home values and fueled the decline.
Most housing analysts expect home prices to remain weak through 2012. Some believe the market will continue to decline three to five percent, but start to rebound by the end of the second quarter. Nonetheless, any rebound in the housing market has a direct correlation to improvement in the employment picture and consumer confidence.
Although mortgage rates have been below five percent for all but two weeks in 2011, homes sales have seen the worse numbers recorded in the last 14 years. Dismal employment numbers, little or no gain in personal income, and stricter credit standards have contributed to the weak demand f for refinancing or new loans.
In addition, many people still have concerns about purchasing a home that may lose value over the next 36 to 48 months. Both buyers and lender seem to understand that any negative economic news, domestic or global, could send real estate prices spiraling even lower.
Not all local markets have declining real estate values. Many locations with a strong job market also have stable housing prices and even modest increases. Real estate experts say buyers should look at markets on a neighborhood-by-neighborhood basis when analyzing home prices.