mortgage

Mortgage rates drop to new record low

Another week, another record low for mortgage rates.

The benchmark 30-year fixed-rate mortgage fell 6 basis points to 5 percent, according to the Bankrate.com national survey of large lenders. A basis point is one-hundredth of 1 percentage point.

That's the lowest rate on the 30-year fixed in the history of Bankrate's weekly mortgage index, which began in September 1985. The index's previous all-time low had been set last week.

The mortgages in this week's survey had an average total of 0.44 discount and origination points. One year ago, the mortgage index was 5.97 percent; four weeks ago, it was 5.35 percent.

The benchmark 15-year fixed-rate mortgage fell 1 basis point to 4.47 percent. The benchmark 5/1 adjustable-rate mortgage fell 4 basis points to 4.54 percent. That's the lowest it has been since Bankrate began collecting 5/1 ARM rates at the beginning of 2005.

Weekly national mortgage survey
Results of Bankrate.com's Nov. 24, 2009, weekly national survey of large lenders and the effect on monthly payments for a $165,000 loan:
30-year fixed15-year fixed5-year ARM
This week's rate:5.00%4.47%4.54%
Change from last week:-0.06-0.01-0.04
Monthly payment:$885.76$1,259.71$839.96
Change from last week:-$6.06-$0.84-$3.93

The good news is that mortgage rates are so low. The bad news is that unemployment is high and rising, causing more homeowners to fall behind on their mortgage payments. As a result, it's harder to get a mortgage because lenders are tightening their underwriting standards -- for example, requiring bigger down payments and scrutinizing borrowers' finances.

A good news/bad news dichotomy exists in home prices and sales. This week saw the release of the S&P/Case-Shiller home price indexes for September and for the third quarter. Depending on how you looked at the data, you could conclude that house prices were rising or barely rising or falling.

In Case-Shiller's national index, prices were down 8.9 percent in the third quarter, compared with the third quarter of 2008. In Case-Shiller's index of 20 big metro markets, prices were down 9.4 percent from the third quarter of 2008.

But things look different when you look at what's happening lately. In those same 20 big metro areas, prices went up 0.3 percent in September. But they had risen at faster -- 1.2 percent -- in August. With house prices, the foot let up on the accelerator in September.

Generally, prices have been rising in the last six months, says David M. Blitzer, chairman of the index committee at Standard & Poor's. But, he adds, "the gains in the most recent month are more modest than during the seasonally strong summer months."

Of the big metro areas, San Francisco and Washington, D.C., have had price gains for six months in a row. Las Vegas is on the other end of the scale: Prices there have fallen 37 months in a row in the S&P/Case-Shiller index.

Tax credit drives sales

Another widely watched indicator is the National Association of Realtors' report on existing home sales, which came out this week. It showed a robust increase in home sales in October. Sales were up 6.6 percent in October compared with September. Adjusting for seasonal factors (typically, sales slow down in October), the annual pace of home sales rose 10.1 percent in October.

The Realtors' chief economist, Lawrence Yun, attributes the sales increase to the first-time homebuyer tax credit, which originally had been scheduled to expire at the end of this month. Many buyers rushed to beat that deadline in October, Yun says.

Yun's theory is reinforced by what happened to prices. Even though sales were up in October, home prices were down. Normally, you expect prices to rise when there's an increase in sales. But first-time homebuyers tend to buy less-expensive houses. Sales of starter homes were up and sales of McMansions presumably were down, so the price of a typical home fell, too.

Nationally, half of the houses resold in October cost more than $173,100. That's a 1.7 percent decrease from September's median price of $176,000.

The Realtors' data imply that the Midwest is pulling out of the housing slump faster than other regions. In the Midwest, the median resale price fell just $600 in October, compared with November, to $146,600. And compared with a year earlier, house prices in the Midwest were actually up 1.1 percent -- the median price in October 2008 was $145,000. The Midwest was the only one of the four regions that had a year-over-year increase in median home price.

If you're in the market for a mortgage or refinance, you can look for the best interest rate by searching Bankrate's rate tables.

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