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Struggling Economy Drives Low Mortgage Loan Interest Rates

September 9, 2011

in Mortgage Interest Rates, This Week in Real Estate | Tagged , , ,

Despite the pall and gloom surrounding the nation’s real estate market, there are pockets across the country showing some recovery signs. A new economic index released by the National Association of Home Builders measuring improvement in areas such as housing permits, employment and housing prices for at least six months found a string of cities slowly emerging from the housing slump. On the spotlight are: Alexandria, LA; Anchorage, AK; Bangor, ME; Bismarck, ND; Casper, WY; Fairbanks, AK; Fayetteville, NC; Houma, LA; Midland, TX; New Orleans, LA; Pittsburgh, PA and Waco, TX. “By examining key indicators of home prices, employment and housing permits data, we are using a comprehensive, but conservative method in determining which markets are improving,” said NAHB Chief Economist David Crowe in a press release. “Last year at this time, there was not a single market that showed improvement using these criteria, and now we can point to 12 examples of growth.” Crowe said many of the states represented in the list were energy-rich areas with strong employment driving housing demand. Whatever the reason, any sign of growth is a bonus these days and we can all surely hope that the good showing in these cities would rub off on its neighbors.

Low Mortgage Loan Interest Rates Continue

Yet more nudging for potential homebuyers from the mortgage industry. Mortgage loan interest rates plummeted to the lowest level in four decades this week, according to Bloomberg. The average rate for a 30-year fixed loan slid 4.12 percent, down from 4.22 percent earlier, according to Freddie Mac. That’s the lowest in the company’s history since 1971, according to Bloomberg. The average rate for a 15-year fixed loan tumbled to 3.33 percent. But are homebuyers getting lured by the attractive interest rates? Apparently not, according to Patrick Newport, economist at IHS Global Insight. “The reason interest rates are dropping recently is that the outlook for the economy has gotten weaker,” Newport told Bloomberg. “A smart person would be very careful about buying a home unless he thinks his job is very secure.” Looks like a lot of people are considering the economic outlook. According to Mortgage Bankers Association, applications for mortgages decreased 4.9 percent in the week ended Sept. 2.

Refinancing Mortgage Loans May Not Work

Remember all that talk about making refinancing easier and stimulating the dreary housing market? A recent report by the non-partisan Congressional Budget Office said that it would “not address many of the problems facing the U.S. Housing market,” and the benefits would be not as significant when compared to the size of the housing market, the mortgage industry and the overall economy. The plan would be expensive for mortgage investors even though it would help borrowers and lower federal guarantee costs, the report said. The CBO paper would ruin the chances of an already shaky Team Obama finding broad support for its refinancing proposal, according to Reuters. The White House plan aims at cutting borrowers’ monthly payments and increasing their cash on hand. CBO estimated that it would provide $7.4 billion in savings for borrowers in the program’s first year, but private investors would take a hit of $13 billion to $15 billion. From the looks of it, it seems highly unlikely that the White House’s proposal will find supporters in Washington. We all may have to wait for some more new ideas to come through.

Group Warns Against Further Housing Market Decline

Consumer advocacy group National Mortgage Complaint Center wants Congress to act on legislation to restore buyer tax credit. The group, which follows and responds to complaints in the residential real estate market, is asking all qualified buyers be offered a tax credit. The group came down heavily on the Obama administration, calling the President’s attempts to help homeowners in foreclosures or loan modifications “an utter failure and a waste of taxpayer money.” “We desperately need to stabilize the US residential real estate markets, and we think restoring the Federal Tax Credit for a home purchase would a huge step in the right direction,” the group said in a press release. NMCC suggests that the tax credit be increased to $15,000 and should apply to everyone including investors.

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