Last Year:
Home value: $350,000
Interest Rate: 6.65%
P & I Payment: $2.246.88
Today
Same home: $245,000
Interest Rate: 4.85%
P & I Payment: $1292.84
As you can see, you can own the same home for almost half the payment. This creates two types of home buyers. 1. first time homebuyers 2. full doc home buyers that can now prove sufficient income to qualify. This is why we are seeing the existing and pending home sales figures begin to rise. We just have to apply logic.
Simple equation: low rates + low home prices = more buyers. This is how the housing boom (bubble ) started in the first place, remember?
The Markets
Fixed rates hit their lowest levels in over thirty years last week after the government announced measures to purchase government securities and bad assets. Freddie Mac announced that for the week ending March 26, 30-year fixed rates averaged 4.85%, down from 4.98% the week before. The average for 15-year fixed fell to 4.48%. Adjustables also fell with the average for one-year adjustables decreasing to 4.85% and five-year adjustables falling to 4.96%. A year ago 30-year fixed rates were at 5.85%. "The Federal Reserve's announcement that it intends to purchase Treasury securities over the next six months caused bond yields to drop and mortgages followed," said Frank Nothaft, Freddie Mac vice president and chief economist. Rates for 30-Yr FRMs peaked last year at 6.63 percent on July 24th. With this week's 30-Yr FRM, the rate difference is almost 2.0%, which amounts to a savings of about $225 monthly for a $200,000 loan. And potential homebuyers are taking notice of these historically low rates. Both new and existing home sales rose 5.0% in February. First-time homebuyers accounted for half of all existing home sales, according to the National Association of Realtors."
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