Mortgage rates hit the lowest levels of the year this week. Shouldn't low mortgage rates be good news for the housing market? Shouldn't it be good news that sales were up in April too? But despite all of the attractive mortgage rates, mortgage applications plummeted after the home buyer tax credit deadline April 30. Plus, many of the different homeowners are nevertheless out of work, more than 1 million more foreclosures are expected to occur and banks still have yet to put the homes they’ve already seized on the market. The recovery of the housing market will have to wait. The market might nevertheless get worse.
Article Source: Mortgage rates near record lows – housing market not responding By Personal Money Store
All of the mortgage rate trends
The average mortgage rate dropped to 4.72 percent this week, which is actually down from 4.79 percent last week, as outlined by mortgage finance business Freddie Mac. It was above what was set last December in 4.71. All of the mortgage rate trends point even lower than that. The average rate on a 15-year fixed-rate mortgage hit somewhere around 4.17 percent, down from 4.2 percent last week and the lowest on record since August 1991. But the U.S. housing market is not responding. It was reported by the Associated Press that the market is struggling without a tax credit of up to $8,000 for first-time buyers, which expired at the end of April. A campaign that was done by the Federal Reserve to lower borrowing costs for consumers pushed mortgage rate trends down to extraordinarily low levels last year. Rates were expected to rise following the program ended this spring, but have fallen instead over the past two months.
Forecast of mortgage rate
The mortgage rate forecast is subject to a domino effect of economic setbacks. A jobs report that was released last week showed that private sector hiring was practically non-existent at 41,000 jobs. Investors worried quite a bit about the stock market shifted money to the safety of U.S. Treasury bonds. As outlined by the Los Angeles Times, investors have rushed to purchase Treasury securities given that late April, within the process driving market yields on the bonds sharply lower. Investors bought $21 billion of the securities at a Treasury auction Wednesday, even though they are paying just 3.20 percent. The yield on US treasury has been pushed down by it. The mortgage rate forecast tends to track that yield.
Housing market predictions 2010
With mortgage rates at near record lows, the number of customers applying for a mortgage to purchase a property fell to the lowest level in 13 years last week and was down 35 percent from a month ago, according to the Mortgage Bankers Association. MarketWatch reports that any housing market recovery will likely continue to be slowed by additional homes on the market from “shadow inventory” and “sidelined sellers.” Shadow inventory is what we call foreclosed homes not on the market yet. There seems to also be quite a few homes that haven't foreclosed yet. At about 2 million, analysts think foreclosures will peak later his year or next.
On hold is housing market recovery
Sidelined sellers are people who want to sell their homes but are waiting for the housing market recovery. It was reported by MarketWatch that about 7 percent of homeowners — representing more than 5 million homes — fall into this category. They will wait a when. In May the US unemployment rate was 9.7 percent. Many salaries are cut or frozen. In a National Foundation for Credit Counseling survey of a lot more than 2,000 consumers, 49 percent said if they tried to buy a home they’d never be able to conserve enough money for a down payment. People underwater on their mortgages, about 25 percent of borrowers, can’t get the financing to move to another house. Individuals who are buying for mortgages aren’t only worried about getting a home, but additionally want to be able to keep it. Doug Duncan, who’s the chief economist at Fannie Mae, told MarketWatch that within the long run, that attitude is a good thing for the economy.
Finally we are getting some good news.