Mortgage rates down and other market news

By Melissa Wirkus

With all the doom and gloom about our failing real estate and housing market, there is finally some good news.
A recent article on Bankrate.com announced that mortgage interest rates fell again this week.

The September 7, 2006 article by Holden Lewis, “Mortgage rates fall for 8th time in 10 weeks,” explains some current trends in the real estate, mortgage and housing markets.

“Long-term mortgage rates fell for the eighth time in 10 weeks and are at their lowest since March. The benchmark 30-year fixed-rate mortgage fell 4 basis points to 6.45 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 0.33 discount and origination points. One year ago, the mortgage index was 5.8 percent; four weeks ago, it was 6.57 percent.”

“The benchmark 15-year fixed-rate mortgage fell 6 basis points to 6.14 percent. The benchmark 5/1 adjustable-rate mortgage went the other way, rising 2 basis points to 6.24 percent.”

Rates have not been this low since Bankrate’s survey at the end of March. These lower rates signal a lot of different things about the market.

They are definitely a sign that the economy is slowing down. Earlier this year, the Federal Reserve raised interest rates a consecutive 17 times in a row in order to curb inflation.

“Rates have fallen in mostly small increments as a picture emerges of a slowing economy. This week, the Federal Reserve released its Beige Book, the central bank's summary of economic activity nationwide and in the Fed's 12 districts. It said that five districts ‘indicated deceleration’ in economic activity in the past few weeks, while the rest ‘reported little change in the pace of growth.’”

In other findings, the Fed also announced that the weakest sect of our economy right now is the real estate market – duh! Residential real estate and construction were specifically the worst.

“The survey showed a sign of a serious slowdown in price appreciation. From April through June, house values rose 1.17 percent -- an annualized rate of 4.68 percent. House values haven't hit the brakes so hard since 1975, according to OFHEO. ‘These data are a strong indication that the housing market is cooling in a very significant way,’ says James B. Lockhart, OFHEO's director.”

“The housing market was ice cold during the second quarter in Indiana, Maine, Massachusetts, Michigan and Ohio. In those five states, house values fell slightly during the second quarter. Michigan led the pack, where the average home price fell 0.72 percent.”

We will just have to wait and see what happens to the rates and the market in the future, since we can only use these numbers and figures as a guideline for what is to come.

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