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Rates fall for second week in a row
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| By Holden Lewis • Bankrate.com |
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Mortgage rates mostly fell for the second week in
a row. Meanwhile, home prices are up in some markets and continue
declining in others.
The benchmark 30-year fixed-rate mortgage fell 6 basis
points, to 6.6 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 0.39 discount and origination points. One year ago, the mortgage
index was 6.43 percent; four weeks ago, it was 6.7 percent.
The benchmark 15-year fixed-rate mortgage fell 4 basis points,
to 6.14 percent, and the jumbo 30-year fixed, for large loan amounts,
fell 1 basis point, to 7.61 percent. Adjustable-rate mortgages went
the other way. The benchmark 5/1 ARM rose 1 basis point, to 6.27
percent, while the 1-year ARM rose 4 basis points, to 6.28 percent.
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| Weekly
national mortgage survey |
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| This week's rate: |
6.60% |
6.14%
|
6.27%
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| Change from last week: |
-0.06 |
-0.04
|
+0.01
|
| Monthly payment: |
$1,053.79 |
$1,404.87
|
$1,018.08
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| Change from last week: |
-$6.54 |
-$3.59
|
+$1.07
|
This week's drop in fixed mortgage rates happened around the
same time that reports emerged that government officials were meeting
with executives from Fannie Mae and Freddie Mac to discuss how a
rescue of the struggling mortgage giants might proceed. With this
reminder that the federal government intends to keep the mortgage
market functioning, prices for mortgage-backed securities went up
and rates went down.
Declining mortgage rates might make for doubly good news in housing
markets where prices continue to decline because the combination
makes houses even more affordable. Of course, this combo only works
for people who can afford down payments and qualify for loans, and
who aren't afraid to buy homes in declining markets.
Home prices down more than up
This week yielded a passel of housing data, including the S&P/Case-Shiller
Home Price Indices. The Case-Shiller composite index of 20 large
housing markets showed a 0.5 percent price decline from May to June;
for the 12 months ending in June, the aggregate home price in those
markets fell 15.9 percent.
The biggest decliners were the former boom cities out West and
in Florida. Prices declined more than 28 percent from June 2007
to June 2008 in Las Vegas and Miami, according to the Case-Shiller
index. Los Angeles, Phoenix, San Diego, San Francisco and Tampa, Fla.,
all saw annual declines of more than 20 percent. None of the 20
major markets saw overall prices rise from June 2007 to June 2008.
But things are a bit different when you compare June with May.
In Denver, prices advanced 1.5 percent in one month; in Boston,
prices went up 1.2 percent, and in Minneapolis, up 1 percent.
"While there is no national turnaround in residential real
estate prices, it is possible that we are seeing some regions struggling
to come back, which has resulted in some moderation in price declines
at the national level," says David Blitzer, chairman of the
index committee at Standard & Poor's.
Home shoppers probably remain in wait-and-see mode in Phoenix,
where prices declined 2.6 percent just in June, and in Las Vegas,
Los Angeles, Miami, San Diego, San Francisco and Atlanta, where
prices fell more than 1 percent that month.
"Nobody knows where the bottom is, but we're closer to it,
certainly, than to the top," says Bob Walters, chief economist
for Quicken Loans, a mortgage lender. "The market will work.
When houses start to become cheap, people will buy them."
Turnaround in sight?
Unfortunately for home sellers, there are a lot of houses on the
market, which means they will have to become cheaper before people
will buy them. According to the Census Bureau's report on new home
sales, 10.1 months' worth of new homes are on the market, sitting
empty and waiting to be sold. The National Association of Realtors
says there's an 11.2-month supply of existing homes on the market,
waiting to be resold. And that might underestimate the inventory
because of foreclosed houses that aren't in the Realtors' listing
services.
What will reverse the housing market? "A lot of time,"
says Kenneth Thomas, lecturer in finance at the Wharton School of
Business at the University of Pennsylvania. "It's going to
take time for this cycle to go through." He thinks the housing
market won't hit bottom until 2010 and that "we're still on
the downside of the curve."
Thomas believes that the government and private business can't
accelerate the recovery. It's like getting a cold, he says: You
can take medicine and recover in two weeks, or not take medicine
and recover in 14 days.
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This week: Dec. 4 - Dec. 10 
