Mortgage Rates Drop, But Will Housing Recover?
May 14, 2010
Average 30-year fixed mortgage rates dropped under 5 percent this week to their lowest level so far this year, according to the latest survey by Freddie Mac.
With rates continuing at such low levels, mortgages are about as affordable as they can get for buyers with good credit. But if you're looking to move up in the housing market, today's low rates won't do you much good unless you can sell your current house for a price that leaves you some equity.
Is It Possible to Have Equity in Your Home?
Recent news from the National Association of Realtors is encouraging. The association reported 91 of the 152 markets it tracks showed year-over-year positive growth in the first quarter of this year, compared to just 67 areas reporting positive growth in the fourth quarter of 2009 and 30 metro areas in the third quarter.
But that positive growth occurred when the homebuyer tax credit was still in effect. The big question is how the market may fare since the tax credit ended April 30.
Just two weeks into May, and we're already seeing some troubling signs. One week after the tax credit expired, the Mortgage Bankers Association reported that seasonally adjusted index for mortgage applications for purchasing homes dropped 9.5 percent from a week earlier. The unadjusted purchase index declined 8.9 percent compared to the previous week and 0.6 percent from the same week a year earlier.
And Trulia reported that the share of home listings with at least one price cut increased to 22 percent from 10 percent in the final week of the tax credit.
Real estate mavens say we won't know whether the housing market can get on its feet without the crutch of the tax credit until the home buying season wraps up at the end of this summer.