Mortgage rates are slipping, and lower rates of 4.75% should entice buyers to purchase some of the current multiple listing service (MLS) inventory. Due to an easing in 10-year Treasury note yields, 30-year mortgage-backed bonds issued by Fannie Mae and Freddie Mac slipped to a new low at 3.87% and 3.90%, respectively.
The mortgage rates lenders charge are directly influenced by the Fannie Mae and Freddie Mac bond yields and 10-year Treasury notes. These lower bond market yields and the current slow rate of home sales will help lower the mortgage rates further and keep real estate prices from dropping lower.
The national housing market inventory is still high, with an 8.3 month supply at current sales rates in May 2010. The housing market inventory is far above normal, and is expected to increase after the first-time-homebuyer credit spillover ends on June 30th. If potential buyers interpret the high housing inventory as a reason for prices to drop even lower, then the falling mortgage rates may not be incentive enough to bring them back into the market to stabilize prices.
Even worse, if homebuyers clue in to the fact that they can get both a lower home price and a lower mortgage rate if they wait a few months, and sense the slowdown in sales, then the housing resale market will weaken during the second half of the year.
first tuesday take: While current mortgage rates will entice some tenants into becoming homebuyers, California’s economy (particularly the real estate industry) is still lacking one important foundation for recovery: job growth. If our society is to hold together and not regress during a recession, than we must turn to the government, the employer of last resort, when businesses will not hire the necessary number of people to sustain the economy.
You should awaken every day with the hope that the government will acknowledge the total lack of job opportunities (1,500,000 are needed right now in California alone). Families cannot sustain themselves as a result of income lost in the struggling economy – until businesses see that money is being spent on products they produce.
Lender deregulation directly led to our present financial crisis, without which we would already have come out of this recession. Again, the government alone is the only lender and employer that can immediately correct the wrong and restructure business life, and thus employment. Re-education of the unemployed will be required to do this, and the young understand this concept as they are heading back to college in droves.
The general public is concerned with whether they will be keeping their job, and if not, how they can find another one. This anxiety inhibits real estate growth as homebuyers are staying out of the market until their jobs are stable again.
Today, brokers and agents in all types of real estate sales, leasing and financing need to focus on the employed, to better inform them about a rare confluence of factors:
- the availability of mortgage money to purchase a home at rates so low another 0.25 point drop in rates is not of concern now, tomorrow or in the years ahead;
- the large inventory of properties available at low prices;
- the rental rate of the properties at or above the mortgage payment for owning the home for the first time since the early 1970s; and
- time to be selective in the choice of property which will in time go up in value and add to personal wealth.
Re: “Unhappy couple: Falling mortgage rates and fading housing demand” from the Los Angeles Times