Mortgage Rates Going to 4.5%?
As reported by CNNMoney.com - "Lower mortgage rates no silver bullet":
While Treasury officials are keeping mum about the latest proposal, lobbyists said Thursday it is aimed at reducing rates to 4.5% only for people buying homes. Those looking to refinance would not qualify.
How will dropping rates put a dent in our housing crisis?
Lowering rates to 4.5% -- about a percentage point below today's rate -- would spur 500,000 home sales over the next year, he said. That would put a big dent in the supply of 4.6 million homes on the market. Right now, there is a 10-month supply of homes for sale, three to four months more than in normal conditions.
A 4.5% mortgage rate would prompt many people to buy, even if they fear home prices will continue to fall and the economy to weaken, he said. Rates have not fallen below 5.37% for 45 years.
A wave of purchases should stabilize home values, which, in turn, will help the economy to turn around.
Will dropping the rates to 4.5% do the trick?
What's keeping many home buyers out of the market are stringent lending standards, not interest rates, experts said. As long as credit remains tight and banks require 20% downpayments, many buyers will remain on the sidelines.
Instead, banks should make mortgages available with a 5% or 10% downpayment, Rosen said. And while he doesn't advocate a return to the "mirror standard" (when borrowers could get money if they simply could fog a mirror), banks should allow more people to qualify for fixed-rate mortgages if they show sufficient income.
Our thoughts. Sure, some of this is going to help. In the near term, it can't hurt. In the long term, another story.
Program after program. Dollars chasing more dollars. Bailout and incentives after bailout and incentives. Sooner or later some of this will ultimately make a mark. Throw enough against the wall, something will stick.
Unfortunately, all of these measures seem to be nothing more than haphazard attempts at applying band-aids to a severed artery.
"If at first you don't succeed, Try, try again." There's a lot of trying going on and not much of anything else.
Labels: mortgage rates, mortgage rates dropping to 4.5%, mortgage rates going to 4.5%
posted by PropertyQwest.com @ 8:22 PM
2 Comments
2 Comments:
Here's the thing. As much as current home owners don't want to hear this, home prices still need to come down. The price of a home has far outpaced a standard income. The only reason the banks would need to lower the percent down on a home is because the home values are so high, that it's not reasonable to expect that someone could save for their down payment. When you lower the rate, you end up magnifying the problem. Now there is false demand. People aren't buying because they have money, they are buying because financing is cheap. I think the best way is to let the market reset. This will be more painful, but it's the only way to bring homes back into reach.
Hi Augie,
Thank you for your insight, much of which we agree with.
It's mindbogglingly that most of the bailout strategies to this point seem to be fighting fire with the same fire.
The push to try and drop rates and hold on to low down payment programs are, as you state, because the affordability just isn't there but, thankfully, beginning to trend in the right direction.
It's definitely painful to let the markets reset but a change needs to be made and the markets do need to reset.
Hopefully some of the frauds who helped to get us to this point will pay the price for their errant behavior while mercy is bestowed upon the innocent who can least afford this economy and are now dearly paying the price ... We'll continue to dream the big dream.
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