As rates for a 30-year fixed-rate mortgage (FRM) moved down by a single basis point to an average of 5.40%, mortgage rates for a 15-year FRM rose from 4.80% to 4.82%, while rates for 5/1 adjustable-rate mortgage (ARM) loans remained static at 4.58%.
Existing Home Sales Plunge in January, Housing Markets Remain Weak
Home sales reports indicate that the US housing market is far from recovering. Business Week magazine reported a 7.2% plunge in existing home sales for January 2010. This is the second largest decline in prices since sales of existing homes fell by approximately 16% in December 2009. Reasons for these declines include:
- Typical seasonality plus extreme winter weather. Severe weather and the usual trend of falling home sales during winter months likely contributed to recent lagging sales of previously owned homes.
- Unemployment. Would-be buyers are hesitant to take on mortgage loans as the national unemployment rate continues to hover near 10%. Buyers may be waiting to see if low mortgage rates prevail during spring and summer.
- Mortgage lenders' tightened credit. Lenders burned by the foreclosure crisis are requiring higher credit scores to qualify borrowers for the best available mortgage rates. Less-than-excellent credit scores can cause the cost of mortgage loans to rise well above advertised rates, which are typically the lowest available.
If you've already committed to buying or refinancing, however, these macroeconomic factors do not have to change your plans. There are some offsetting benefits of buying a home now:
- Lower home prices and mortgage rates increase affordability. Lower home prices and mortgage rates expand affordability. You may qualify for borrowing more or buying the home you want with lower monthly payments.
- FHA loans still offering low down payment requirement. If you don't have cash for a 20% down payment and additional funds for closing costs, ask an FHA-approved mortgage lender about FHA home loan programs. FHA loans offer down payments as low as 3.5% and are more lenient in allowing gifts from family, friends, and employers as a source of down payment funds. (However, even the FHA has been tightening its terms for home loans in recent months.)
Comparing mortgage quotes and talking with real estate pros and mortgage lenders is helpful for learning about available homes and mortgage loans available in your area. Our live database of current mortgage rates can help you find the best mortgage rates in your area.