After mortgage rates dropped to record lowsa few weeks back, they really had little room to keep falling. It should come as no surprise then that we now see rates on the rise again. According to Bankrate.com’s national survey of lenders, the average 30 year fixed rate jumped 9 basis points up to 5.13%. That rate is still very low by historic standards, and still lower than they were a year ago at 5.43%. The average rate for a 15-year fixed rate mortgage also rose, though by only 6 basis points up to 4.53%.
The look ahead.
Analysts are hoping that 2009 will become the year that residential real estate bottomed and began to turn around. Recent rebounding home sales have helped to support that view, but things may turn for the worse again in 2010. Fiserv, the financial analysis firm, predicts that home prices will drop another 11.3% nationwide my the middle of 2010, and Moody’s Economy.com issue a forecasting expecting a 5-10% drop.
The problem.
Several factors are seen as contributing to the potential protraction of the housing slump into 2010. One factor is that as the real estate market begins to pick up, a new rush of homeowners who have been waiting to put their homes on the market will do so, thus creating even more supply for the limited demand. Another factor is the next wave of foreclosures, that will also drag prices downward. And finally, there is the double whammy of high unemployment and the expiration of the home buyer tax credit that will further weaken demand.
The trend.
The upward trend in mortgage rates is expected to continue through 2010 even despite the above negative factors in the real estate market. Most of the reasoning for this is that the Federal Reserve is expected to stop its purchase of mortgage backed securities, which has been credited with keeping mortgage rates lower than they would be otherwise.
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