Mortgage Rates Under 4% May Not Help the Housing Market
Posted on | March 30, 2009 | 1 Comment
As many of you know, mortgage rates have dropped to historic lows over the last few weeks. At first glance, this seems like great news for home owners and the overall economy. When you dig deeper into the prospect of lower mortgage rates, you realize that even if rates continue to plummet, it may not help the housing market at all. I have been adament about the fact that unemployment is going to keep this country in a recession. Until we see the unemployment rate start to decline, the economy will not get better.
If hardworking Americans continue to lose their jobs, how are they going to make their mortgage payments? If mortgage rates were under 4% it would not matter if there are jobs being lost. The only way that we will see a bottom in the housing market is when supply equals demand. There is currently 12 months of housing supply which is still extremely high. Unfortunately, the housing supply graph shows that we are still in an uptrend for supply. If people are losing their jobs and housing supply remains high, who is going to buy all the homes on the market?
The only individuals who will have a chance to buy up some of these homes are investors or home owners with a great deal of money. It seems that the later of the two is quite reluctant to put any money into another house in the current economy. What have you done for me lately is a saying that many Americans use and think on a daily basis. The current pscyhology of the housing market is that if you buy a home you could immediately see a 20% loss of value; it is almost worse than buying a vehicle in some housing markets.
Overall, mortgage rates trending lower is great for those who want to refinance and save money over the long run, but it is going to do very little to help create a bottom in the housing market. If you have been financially smart with your money and have some extra cash saved up, now is one of the best times in history to get that low rate refinance that you have always wanted.
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March 30th, 2009 @ 12:59 pm
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