The real estate market and it’s indicators are being closely eyed, one of those being mortgage rates, or the average interest rate of mortgage loans. Though existing home sales went up recently, the mortgage rates have gown down. One would think this would mean more home loans are due to follow due to more reasonable rates. However, coupled with higher unemployment, it may mean a recipe for a longer road to recovery.
Historic lows for mortgage rates
Mortgage rates have fallen to record lows. According to the Wall Street Journal, it was anticipated that rates would rise after the Federal Reserve stopped purchasing mortgage securities, but that did not happen. Rates were predicted to rise to 6 percent, but instead fell to 4.86 percent. In fact, by the middle of May, the number of applications for loans for purchasing new homes was at its lowest level in 13 years. Anyone with an existing mortgage may do well to get mortgage loan modification, as refinancing may put serious cash in their pockets.
Unemployment was a culprit
Rates are low, which they will remain as long as demand is low due to high unemployment. 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. Anyone with an existing mortgage, according to the same Wall Street Journal piece, would do well to refinance while demand is so low.
What’s next for housing
For now, it is apparent that demand was temporarily boosted by the tax credit being offered for homebuyers. The market currently has lower levels of demand, and as demand lowers, so does scarcity and therefore price. However, this lower demand is coupled with more difficult access and less willingness to commit to a mortgage because of the job market. This means that the housing market may stabilize at a lower point, and we may not see a real estate market at previous levels for years to come.
Citations
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
