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What’s Going on With Current Mortgage Rates?
How They Affect Your Home Purchase or Refinance Options
For Today’s Current Mortgage Rates
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State of the Real Estate Market
According to reports, using the S & P/Case-Shiller index, which was developed 20 years ago, the decline in housing prices is now much more than at the height of the Depression in 1932. Inflation is running rampant. When the market was at a peak in 2006, homes were worth an average of 16% more than they are today.
The past five years have seen a decrease in the value of homes amounting to 26%. To make matters worse, things are not looking good for improvement. The large number of homes still on the market may mean that prices are going to fall even more.
What parts of the country have been hit hardest by this decline?
California
Nevada
Florida
The industrial Midwest
Are Indicators Good for Recovery?
This is the million dollar question and conflicting opinions abound. According to Frank Hothaft, the chief economist for Freddie Mac, actions are being taken that will have an impact on the market. Is this hopeful thinking or is a recovery in sight? At the end of May, current mortgage rates were such that a 30-year fixed rate mortgage on a home was 5.87 percent, which was down from 6.13 percent in the period of time just prior.
Lowering the Rates: Does it Hurt or Help?
Mortgage rates being lowered certainly does not hurt the applications that are pouring in requesting loans. This, according to the Mortgage Banker’s Association, is what makes today’s market a buyers one.
If you have a steady income, good credit, and are in the market for a home, now is the time to buy. Although many sellers are opting to hold on to their property in hopes that an improvement in the market is forthcoming. This is especially true for new home construction. Many construction companies have money tied up in loans for the new home built and are unable to get the price they thought they were going to get.
Not only does this affect the builder but realtors are having a hard time as home sales are definitely not what they were three or four years ago. The market will eventually recover, but it is hard to say exactly when. Even economic forecasters are hard pressed to pinpoint a time when the real estate market will make a turn around. Some say a year.
How Does This Affect You and Me?
With the economy in dire straits and current mortgage rates on the rise, more people are facing foreclosures. Many are even walking away from their homes, letting the bank take it over. News of this type of action is becoming rampant and it seems that in most cases, it is because people are upside down in their mortgages. They owe the bank more than their home is worth. Services are even popping up which offer to assist those with the process of “walking away” The point here is this: the more people walk away, the longer the real estate decline will continue.
What could have been interpreted as a temporary decline is emerging as a crisis and could very well become a full blown epedemic. The 80%+ people who continue to ride out the storm will have a longer and more expensive ride as they meet their current mortgage obligations or live in a decreased-value property.
For people who want to buy right now, this is fantastic news because banks are short-selling foreclosed properties like crazy.
For people who are already homeowners, the news is bad on so many levels. Decreased home values mean less equity. With diminished or non-existent equity, one’s financial security becomes threatened. For many people, home equity is their retirement savings plan. If one plans to retire in the near future, his fiscal capacity may have taken a severe dip as a result of the current real estate decline.
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