What Housing Recovery?

I’m watching CNBC right now. A financial analyst said we are at least three years away from an appreciation in housing prices and a demand for new housing that causes new construction and a boost in construction jobs.

Mortgage interest rates remain near record lows.

Why? As US stocks fall in price, investors pull their money out of the stock market. They have to put that money somewhere. So far, the preferred destination for such money are U.S. Treasury bonds. With huge demand for such bonds, their price goes up and yields go down.

You would think that after the S&P downgrade of the United States that investors would flee U.S. Treasury bonds. Nope! The opposite has happened. All these bad signals for the economy — the struggle to extend the debt ceiling, crashing stock market, Europe’s struggles — mean investors want safety for their investment and their preferred investment is U.S. Treasury bonds.

CNN reports: The savings for borrowers who lock in rock-bottom rates over the length of a mortgage loan can be sizable. Take, for example, a borrower with a $200,000, 30-year loan. If their mortgage carries a 4.32% rate their monthly payment is just $992 and they make total interest payments of $157,153. However, if the rate on their 30-year fixed mortgage is 5% (ordinarily considered a low rate), they’d pay $1,074 a month and $29,357 more in interest over the 30-year period.
The low rates are sparking a rash of refinancing activity, according to the Mortgage Bankers Association. Last week, total mortgage borrowing, most of it refinancings, jumped nearly 22%. This week’s activity could be even higher, according to Greg McBride, chief economist for Bankrate.com.


Mortgage rates are continuing to fall amid economic uncertainties and a sagging stock market, with the 30-year home loan available this week at an average 4.32% — the lowest fixed rate of the year, according to Freddie Mac.

The typical rate for a 15-year fixed mortgage was 3.50%, Freddie Mac said Thursday — the lowest since Freddie began tracking it in 1991.

Despite 30-year rates averaging about 4.5% and the cheapest housing prices in eight years, home lending has slipped this year to the lowest level since 1997.

But with rates near record lows, the Mortgage Bankers Assn. says loan applications have spiked by more than 20% thanks to the latest surge in refinancings.

The increase occurred despite a slight decrease in applications to buy homes. Refinance applications were up by 30%, the trade group said Wednesday.


The Fed announcement may help keep mortgage rates low for months or at least until the end of the year, some experts say.
But with so much volatility in the market, borrowers should not take a chance, Stearns says. “Don’t get so greedy with rates,” he says. “The market is so tense things could change at any time.”
Many borrowers have followed that advice. Mortgage applications surged 21.7% last week, according the Mortgage Bankers Association.
Not all applicants are able to refinance.
“Yes, it’s a great time to refinance,” Stearns says. “But for people who are underwater and don’t qualify, what good does that do?”

Read more: http://www.foxbusiness.com/personal-finance/2011/08/11/mortgage-rates-dip-send-refi-signal/#ixzz1UkfHSZzZ

About Luke Ford

Raised a Seventh-Day Adventist at Avondale College in Australia, Luke Ford moved to California in 1977. He graduated from Placer High School in 1984, reported the news at KAHI/KHYL radio for three years, attended Sierra College and UCLA, was largely bedridden by Chronic Fatigue Syndrome for six years, and converted to Judaism in 1993. From 1997-2007, Luke made his living from blogging. Living by Beverly Hills (Alexander90210.com), he now teaches the Alexander Technique (moving the way the body likes to move). Lessons cost $100 each and last about 45 minutes. In 2011, Luke completed a three-year teaching course at the Alexander Training Institute of Los Angeles. His personal Alexander Technique website is Alexander90210.com. Luke is the author of five books, including: » The Producers: Profiles in Frustration » Yesterday’s News Tomorrow: Inside American Jewish Journalism
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