Mortgage rates fall for 2nd
straight week |
| By Holden
Lewis • Bankrate.com |
|
The good news is mortgage rates fell for the second
week in a row. The bad news is they're still almost half a percentage
point higher than they were three months ago.
The benchmark 30-year fixed-rate mortgage fell 2
basis points, to 6.74 percent, according to the Bankrate.com national
survey of large lenders. A basis point is one-hundredth of 1 percentage
point. The mortgages in this week's survey had an average total
of 0.26 discount and origination points. One year ago, the mortgage
index was 6.93 percent; four weeks ago, it was 6.47 percent.
The benchmark 15-year fixed-rate mortgage fell 5 basis points,
to 6.4 percent. The benchmark 5/1 adjustable-rate mortgage fell
11 basis points to 6.47 percent.
Rates have been rising for most of the year and skyrocketed
from mid-May to mid-June, when the average rate on a 30-year fixed
climbed from 6.32 percent to 6.84 percent in four weeks. While this
week's decrease is welcome news for borrowers, we're a long way
from the middle of March, when the 30-year bottomed out at 6.16
percent.
 |
| Weekly national mortgage survey |
|
| This week's rate: |
6.74% |
6.40% |
6.47% |
| Change from last week: |
-0.02 |
-0.05 |
-0.11 |
| Monthly payment: |
$1,069.09 |
$1,428.27 |
$1,039.66 |
| Change from last week: |
-$2.19 |
-$4.53 |
-$11.95 |
Swooning housing market
Analysts haven't come to a consensus to explain why mortgage rates
and associated bond yields have gone on their up-and-down trajectory
of the past few weeks. One thing is clear, though: The housing market
is swooning.
According to the National Association of Realtors, the pace of
home resales has slowed dramatically -- down 10.3 percent in May
compared with the previous May. The number of used houses on the
market is a record 4.43 million. That translates into an 8.9-month
supply.
Half of the houses resold in May cost less than $223,700 -- a 2.1
percent decline over the median price of $228,500 a year earlier.
On a year-over-year basis, median resale prices have gone down 10
months in a row. That's a sign of a genuine housing slump.
Fewer qualified buyers
Realtors' economist Lawrence Yun says, "Psychological factors
are currently the biggest drag on the housing market, in addition
to a disruption from tighter credit for subprime borrowers."
For many would-be buyers, the main psychological factor appears
to be the perfectly rational decision to wait for house prices to
drop even more. Why buy a house for $250,000 when you might be able
to snag one just like it for $220,000 a few months from now?
Yun has a point about the stricter requirements for subprime mortgages.
Fewer people are qualifying for subprime mortgages, reducing the
number of home buyers. According to the Commerce Department, sales
of inexpensive new houses -- those costing $150,000 or less -- have
plunged in the last year. Subprime customers are a target market
for inexpensive new houses.
"Once the lenders opened the Pandora's box of
loose credit, they created a Catch-22 situation in the housing market,"
writes Anthony Sanders, professor of finance and real estate at
Arizona State University, in an e-mail. "If they don't tighten
credit, defaults will increase and the supply of available housing
will put downward pressure on the housing market. If they tighten
credit, the demand for housing will fall and that puts downward
pressure on the housing market."
Sanders adds that this doesn't affect the entire real-estate market,
but a subset: condominiums, entry-level houses and low-income neighborhoods.
Midyear scorecard
Now that it's the end of June, here's an overview of what has happened
to the benchmark 30-year rate in the first half of 2007: It began
the year at 6.24 percent and went up in 16 of the year's first 26
weeks. The benchmark rate declined in nine of those weeks and remained
unchanged once.
In the first half of the year, there was only one period when the
benchmark rate fell more than two weeks in a row: a four-week period
in February and March, during which the rate fell a total of 13
basis points.
The biggest one-week jump happened between the June
6 and June 13 surveys, when the average 30-year rose from 6.61 percent
to 6.84 percent -- almost a quarter of a percentage point. The biggest
one-week drop happened between Jan. 31 and Feb. 7, when the average
30-year fixed fell from 6.42 percent to 6.31 percent.
The 30-year remained slightly below 6.25 percent from
February 28 to April 4. Pat yourself on the back if you locked your
rate back then.
|
This week: July 30 - Aug. 5
