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With 30-Year Mortgage Interest Rates Low, Is it a Buyer’s Market?

August 12, 2011

in This Week in Real Estate | Tagged , , , ,

S&P Downgrades Ratings of Fannie Mae and Freddie Mac

Exactly a week ago, Standard & Poor deemed the U.S. a not-so-lucrative investment by lowering the country’s credit rating. Wall Street hated the news. If that wasn’t bad enough, S&P added more salt to the wounds on Monday by downgrading its rating of mortgage behemoths Fannie Mae and Freddie Mac. The downgraded rating got the housing market nervous about a possible climb in mortgage rates. It’s too early to predict how this will all finally shake up. But if you are looking to buy, now may be the time to do it when rates are still low. Mortgage rates again slid this week, showing signs of heading to below 4 percent, which could be the record low. According to a Wall Street Journal report, for the week ended Thursday, the 30-year fixed-rate loan averaged 4.32 percent and borrowers paid origination fees equivalent to 0.7 percent of the loan amount. There could be better news in the future for potential homebuyers. The Federal Reserve said Tuesday that interest rates will remain at low levels for the next two years, which means mortgage rates may dip even lower, potentially leading to the best 30-year mortgage interest rates seen so far. That’s definitely good news for homebuyers.

But is it a buyer’s market?

In the aftermath of the downgrade, did a story debating whether it’s a buyer’s or a seller’s market. True mortgage rates are better than ever, and sellers are willing to go that extra mile to lure in buyers, but, the bad news from S & P could scare potential homebuyers from making one of their most expensive commitments. The key mantra is keeping in mind that sellers are willing to yield to your demands now. “There’s always the initial asking price and then there’s a discount to what the actual selling price is. Does that discount get greater now with this kind of uncertainty? It’s a tough market for sellers,” said Rich Guardino, of the Breslin Center for Real Estate Studies, Hofstra University to abcnews. And LA Times reported that consumers are taking advantage of their situation and of the low mortgage rates that many fear will eventually rise. The paper reported that online mortgage referral company LendingTree experienced one of its biggest days ever in applications for home loans last weekend – with many of those being applications for refinancing. If you are looking for the second or third home, it may not be a bad idea to scan the health of markets across the country now.

Reports suggest Tacoma could be a good bet.

By Spring 2013, home prices in Tacoma, Wash., would rise 25 percent, according to a report by financial data firm Fiserv. Inc. Other strong markets are Palm Bay and Melbourne area in Florida’s east coast (up 18 percent). Prices in Seattle, Tuscon and Memphis are expected to climb 10 percent. The report came close on the heels of another Wall Street study that crowned Tuscon as America’s sickest housing market. The study found that the city’s homeowner vacancy rate is 6.8 percent, the highest in the nation. The study also took into consideration factors such as rental vacancy rates, number of housing units and unemployment. Realtors® in Tuscon decried the study and deemed it flawed, chalking up the vacant units to snowbirds. They say it is definitely a buyer’s market. Low interest rates combined with a lot of choices is good news for those looking for a home, but bad news for those trying to sell. If you are thinking for a sunny life, definitely check out Tuscon. Especially after that prediction of a 10 percent price gain in two years, it may end up being a lucrative investment.

Speaking of price gains, to raise spiraling home prices, the Obama administration is considering turning government-owned foreclosures into rental units. Government-controlled mortgage firms Fannie Mae and Freddie Mac and the Federal Housing Administration now own an estimated 248,000 foreclosed homes. This week, The Federal Housing Finance Agency announced it’s seeking investors’ input to rent out the vacant homes, which are dragging the housing market’s recovery. A federal “request for information” sent out Wednesday includes an option for prior owners  to rent out homes or current renters to lease-to-own. The government is also mulling over allowing private investors to manage rentals. We don’t know if this plan will work out, but what we do know is that the government is willing to be flexible and creative to help the struggling market. For homebuyers and sellers, that definitely is a good omen.

18 responses to “With 30-Year Mortgage Interest Rates Low, Is it a Buyer’s Market?”

  1. Doria Pollman says:

    The September Mortgage Report just announced that there is a massive volume of new foreclosures on the way, amassing way more rapidly than they’re being cleared by foreclosure sales. Is there any way this won’t increase the risk of the mortgage market falling off a cliff?

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