- Mike Ochs
- Related Posts:
Uninsured Americans Rose 9.4 Percent of the Population in 2009
Mortgage rates have hit a record low. According to Freddie Mac, rates for 30-year mortgages fell to 4.27 percent from 4.32 percent in just one week. At the same time, safe-haven government debt is more appealing to investors than ever, according to a Freddie Mac survey. The low rates may be a sign that housing sales will pick up since they slumped after the first-time homebuyer tax credit expired last spring. Rates for 15-year fixed mortgages averaged 3.72 percent, the lowest level since Freddie Mac began tracking these loans in 1971. In another bit of news, home prices rose 3.2 percent in July from the previous month, the smallest gain since March, according to a report from S&P/Case-Shiller.
“The 12-month growth rate in the core price index for personal consumption, which the Federal Reserve closely tracks, has been drifting lower over the past six months ending in August and suggests inflation is running at a tepid pace at best,” Frank Nothaft, Freddie Mac vice president and chief economist, said. “This allowed mortgage rates to ease to new or near record lows this week,” he said.
Michelle Meyer, senior U.S. economist at Bank of America Merrill Lynch, believes that potential homebuyers are staying on the sidelines despite enhanced affordability resulting from record low mortgage rates. “The missing link is confidence — consumers are still worried about future income prospects given high unemployment rates and many believe home prices will fall further,” she said. “In addition, credit conditions remain tight, making it difficult to get financing. Mortgage rates are only one input into the decision to purchase a home, and seemingly subordinate to current and expected income.”
Scott Brown, chief economist at Raymond James & Associates in St. Petersburg, FL, offers another perspective. “You’re going to get some people enticed to buy new homes,” he said. “But people are still a bit shell-shocked by the downturn in prices and they’re going to be a lot more careful than they were before.”