From Marketwatch this morning:
Freddie Mac said Thursday that the 30-year fixed-rate mortgage rate averaged 5.87% with an average 0.4 point for the week ending January 10. The company said the rate is the lowest since September 2005. A week ago the average was 6.07%, and in the year-ago period it was 6.21%. Freddie Mac cited the recent weak jobs report, slow non-manufacturing business activity, and a drop in home sales as contributing factors. "These weak economic reports renewed concerns about economic conditions in the near future," said Freddie Mac Chief Economist Frank Nothaft in a statement. "As a result, mortgage rates came down across the board, with 30-year fixed mortgage rates at their lowest level in more than two years."
It will be interesting to watch the Jim Cramer’s of the world and others who seem to think that low interest rates will "save" housing. Rates are back to where they were in the boom years. When you ask yourself what is wrong with housing though, you come to the conclusion that in general, homes are overpriced and there are too many of them. Lower interest rates might save buyers a few dollars, but not enough to fix the problem.
Lower interest rates are a band-aid on a shotgun wound- it won’t begin to cover the problem.
I’m skeptical, but I’m not so married to my theories that I can’t see a counterbalance here. The resets will still be coming next year, and frankly most subprimes are teaser rates so the adjustments are steep. It won’t help enough to stop a decline, but it’s better than what was previously the likelihood, 8% rates. On the other hand, you can’t have 8% rates and the current underwriting environment with the loose monetary policy. There’s a lot of money out there to lend, and until we find the Federal Reserve bank pushing on a string, the money is going to go out there at reasonable rates… but pretty much only to the most reasonable risk. Add in a recession and you have the likelihood of lower rates.
Cool. I’ve been wanting to lower the price on my house for a few months (but had to put that decision on hold for unrelated reasons). I just lowered the asking price 10% today, and the old price was 5% below the realtor’s recommendation (7 months ago). I’m praying the combination of lower price and lower mortgage rates will do the trick. I really don’t know how much longer I can stand this crappy city (San Antonio).
We’ve still got a long way to go until capitulation.
Housing: No room for bulls
Three bears took on a lone bull at a real estate conference debate in New York this week. Guess who won?
http://money.cnn.com/2008/01/09/real_estate/real_estate_bulls_bears/index.htm?postversion=2008011015