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House prices have fallen in much of the country, and
that put a damper on mortgage rates this week.
The benchmark 30-year, fixed-rate mortgage fell 2
basis points to 6.22 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 0.3 discount and origination points. One year ago, the mortgage
index was 6.32 percent; four weeks ago, it was 6.46 percent.
The benchmark 15-year, fixed-rate mortgage fell 2
basis points to 5.96 percent. The benchmark 5/1 adjustable-rate
mortgage fell 2 basis points to 6.11 percent.
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Weekly national mortgage
survey |
|
| This week's rate: |
6.22% |
5.96% |
6.11% |
| Change from last week: |
-0.02 |
-0.02 |
-0.02 |
| Monthly payment: |
$1,012.72 |
$1,388.80 |
$1,000.96 |
| Change from last week: |
-$2.14 |
-$1.78 |
-$2.13 |
On Monday, the National Association
of Realtors announced that the typical American house lost value
in the third quarter of this year -- July through September. Of
the houses resold in the third quarter, half of them cost more than
$224,900. In the same quarter a year earlier, half the houses had
sold for more than $227,600. That 1.2 percent decline in the median
price was the first such year-over-year drop since the first quarter
of 1993.
The lower prices went along
with a plunge in sales volume. For every eight houses, condominiums
and co-ops that were sold in the third quarter of 2005, only seven
were sold in the third quarter this year. The number of would-be
sellers stayed about the same, but there were 12.7 percent fewer
buyers. House prices went down because supply exceeded demand.
Things went worse for home builders. Housing starts
dropped off a cliff in October, down 27.4 percent from the previous
October. Economists speculate that the colder housing climate knocks
about 1 percentage point off Gross Domestic Product.
"Housing starts in October
were down more than expected, which the market saw as an indication
housing would be a bigger drag on the economy than had previously
been thought," says Frank Nothaft, chief economist for Freddie
Mac. "Slower growth usually means less inflation and less inflation
means lower interest rates. Hence, the drop in mortgage rates this
week."
Almost half of mortgage applicants
are seeking to refinance their home loans, according to the Mortgage
Bankers Association.
About three-quarters of all
applicants are asking for fixed-rate mortgages, and the proportion
is probably higher among refinancers.
"With an estimated $560
billion in ARMs set to adjust in the coming year," says Bob
Walters, chief economist for Quicken Loans, "we're seeing a
growing trend of people taking advantage of these still historically
low rates by refinancing into a fixed-rate mortgage."
You can't blame them, because
the difference in rates between ARMs and fixed-rate mortgages has
narrowed. A year ago, the average 5/1 ARM had a rate of 5.85 percent,
while the 30-year fixed averaged 6.32 percent. The fixed rate was
almost half a percentage point higher. This week, the 30-year fixed
is only 11 basis points higher than the 5/1 ARM.
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