Current Home Mortgage Rates Trends – Downtrend Intact
Posted on | July 11, 2009 | No Comments
The current home mortgage rates trend was definitely tested back in Early May and late June. Average mortgage rates shoot up from 4.8% to 5.59% in just three short weeks. After this movement, almost everyone in the financial industry claimed that mortgage rates were going higher no matter what. What they did not realize is the fact that the Federal Reserve Bank was going to make sure that mortgage rates stayed low. The Fed did this by continuing to buy US debt and forcing the yield on the 10 year treasury rate to go lower.
For those not aware, the 30 year fixed rate mortgage and the yield on the 10 year treasury rate have a very strong correlation. As one goes, so goes the other. When the Federal Reserve makes the decision to buy government debt, it almost certainly forces the yield on all treasury rates to drop significantly. Earlier this week, the yield on the 10 year rate dropped almost 5% in one day because of the actions by the Federal Reserve Bank.
Since October of 2008, there has been a strong downtrend for current home mortgage rates. There was little debate as to where the trend would lead mortgage rates. For quite some time, every single week showed declines in mortgage rates. Most of the reason for this is the fact that the economy has fallen apart and the government thinks one of the best ways to fix it is by forcing daily mortgage rates lower. Eventually low mortgage rates will pique the interest in new home buyers, right? Maybe not.
Since the steady decline in mortgage rates occurred back in October, home prices have continued their slide. Many market mavens felt that the month of March or April would bring about a bottoming process in home prices because the average 30 year fixed rate mortgage was under 5% for almost two whole months. The Case-Shiller data does not show that the low mortgage rates helped all that much. We are slowly started to see data that shows a couple of markets are up month over month, but there are still no markets that are up year over year.
This is disheartening to anyone who currently owns a home, especially if they are trying to sell it. Even though current home mortgage rate trends are pointing lower, there is still not a heavy interest in the housing market. Some home owners have had their homes on the market for over two years and have yet to get an offer that is even remotely acceptable. With mortgage rates going lower, one would think that homes would be attractive, but it is just not happening yet.
The only thing that will make home buying attractive again is for the unemployment rate to decrease. The only Americans who can logically afford to go home shopping right now are the ones who have money saved up. There are very few industries that are creating a lot of money right now, so many hard working Americans are just trying to get by rather than buying a home. When the unemployment rate decreases and more money is injected into the economy through private enterprise, we should see a bump in home prices and the interest in the housing market.
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