Real estate market data is closely monitored these days, and there’s just been a major development for the mortgage rate, or the average interest rate of mortgage loans. Despite a slight spike in existing home sales, overall mortgage rates are staying down. You would think an upsurge in sales was soon to follow. However, since unemployment is still high, this may mean a longer recovery period.
Historic lows for mortgage rates
Mortgage rates have fallen to record lows. It was believed, according to the Wall Street Journal, that mortgage rates would actually rise once the Federal Reserve stopped purchasing mortgage securities, but they did not. Rates were predicted to rise to 6 percent, but instead fell to 4.86 percent. By mid-May, the number of application for new home purchases fell to it’s lowest rate in 13 years. Anyone who has just bought a home at this rate may never need mortgage loan modification.
Unemployment a deciding factor
The rates may be down at this point, and they are likely to stay that way if demand stays low because of high unemployment rates. The boost in existing home sales was believed to have been spurred by the home buyer tax credit, and as it has just expired, demand is trailing off, according to CNN. According to the WSJ piece, even if there are fewer people looking to borrow, those with existing mortgages would do well to refinance now, while rates are low.
The future for housing
For now, it is apparent that demand was temporarily boosted by the tax credit being offered for homebuyers. As demand lowers, so does the scarcity of a commodity and therefore, the price goes down as well. As the job market is more volatile, there is less demand or reason for people to buy new homes, and with the stricter requirements on lending, this makes for a decrease in demand. This means the market may stabilize at a far lower point, and recovery in the housing market may take far longer than anticipated.
More information on this topic
Wall Street Journal
http://online.wsj.com/article/SB10001424052748704904604575262713807080890.html?mod=WSJ_Real+Estate_LeftTopNews
CNN
http://money.cnn.com/2010/05/25/news/economy/housing_recovery_slows.fortune/index.htm
