WSJ: Mortgage rates drop below 5%

Posted by The Steamboat Group on Sunday, May 23rd, 2010 at 10:33pm.

It looks like the housing market will get some more help from low interest rates. The Fed started to ease some of the measures that were keeping rates low this spring. Now before rates got a chace to rise much the issues in Europe are bringing back the US's status as a safe haven and cash is flowing back into 10 yr Treasury Bonds which in turn drives lower mortgage rates. The mortgage market is also improving as private investors return offering more different products and better pricing than Fannie Mae. This is good news nationally as it will make sense for more people to buy homes easing the strain on troubled borrowers and their banks along with allowing more room in the budgets of those that refinance.

Needless to say this is good news for Steamboat too as a large portion of our market is made up of 2nd home buyers from aorund the country. As I talk to my clients most are seeing anywhere from nice increases in the business to significant comebacks. We have already seen a large increase vs last year in people looking at and buying property. Better national news has been a driver and many people are taking this as a chance to find the right place in Steamboat while prices are low and they can choose from the best selection.

From the WSJ 5/23/10: The financial turmoil in Europe is providing an unexpected windfall for American home buyers, as international money seeking a safe haven is flowing into the U.S., pushing domestic mortgage rates to the lowest levels of the year and back near 50-year lows. Falling mortgage rates could lift the U.S. housing market.

The housing industry had been bracing for months for a period of rising mortgage rates, triggered by the end of the Federal Reserve's $1.25 trillion mortgage-securities purchase program. Conventional wisdom held that mortgage rates would rise as the Fed pulled back from propping up the market. Instead, many in the industry now say rates could drift as low as 4.5% this summer from 4.86% now, instead of rising to 6% as some economists projected, making for significantly lower payments for Americans buying homes or refinancing their mortgages.

Falling mortgage rates can give a powerful lift to the housing market. A general rule of thumb holds that every one percentage point decline in mortgage rates is the equivalent of roughly a 10% reduction in the home price for the buyer. So, if the current rates hold, say economists, that could help stabilize prices and allow current homeowners to sell existing homes without substantial price cuts.

Now, more private investors are coming into the market for loans, offering better prices for securities containing mortgages with low rates than they were one year ago. That could lead banks and brokers to cut upfront origination fees, and borrowers who are able to refinance could find it cheaper to do so than last year.

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1 Response to "WSJ: Mortgage rates drop below 5%"

WSJ: Mortgage rates drop below 5%, good news for Steamboat wrote:
[...] It looks like the housing market will get some more help from low
interest rates. The Fed started to ease some of the measures that were
keeping rates low this spring. Now before rates got a chace to rise much
the issues in Europe are bringing back the US's status as a safe haven
and cash is flowing back into 10 yr Treasury Bonds which in turn drives
lower mortgage rates. The mortgage market is also improving as private
investors return offering more different products and better pricing
than Fannie Mae. This is good news nationally as it will make sense for
more people to buy homes easing the strain on trobled borrowers and
their banks along with allowing more room in the budgets of those that
refinance. Needles to say this is good news for Steamboat too
as a large portion of our market is made up of 2nd home buyers from
aorund the country. As I talk to my clients most are seeing anywhere
from nice increases in the business to significant comebacks. We have
already seen a large increase vs last year in people looking at and
buying property. Better national news has been a driver and many people
are taking this as a chance to find the right place in Steamboat while
prices are low and they can choose from the best selection. From
the WSJ 5/23/10: The financial turmoil in Europe is providing an
unexpected windfall for American home buyers, as international money
seeking a safe haven is flowing into the U.S., pushing domestic mortgage
rates to the lowest levels of the year and back near 50-year lows.
Falling mortgage rates could lift the U.S. housing market.For more from the WSJ Article including how much of an impact lower rates have on homebuying see the rest of the article on my Steamboat Real Estate Blog[...]

Posted on Sunday, May 23rd, 2010 at 10:46pm.

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