Historic Record Low Interest Rates...Where are the Buyers?

Long-term interest rates were the lowest in nearly 50 years, providing great opportunities to refinance a home or to purchase a new or foreclosed property at near record-low mortgage rates.

Investors on the other hand around the US stock market in the U.S. and around the globe have been pulling billions of dollars from stock markets and reinvesting into U.S. Treasury securities (bills, notes and bonds), still viewed as the most risk-free and marketable securities in the world … regardless of what Standard & Poor's thinks.

The Federal Reserve (this nation's central bank) has set its most important interest rate — the federal funds rate — at a record low target level of 0 percent to -0.25 percent since December 2008, a period now reaching 32 months. Equally important, the Fed's monetary policy arm — the Federal Open Market Committee (FOMC) — noted a few weeks ago that it would maintain this rate at the current record low "at least through mid-2013" — unlike any statement the Fed has ever made. A Federal Reserve that has traditionally found value in keeping financial market players guessing as to impending monetary policy changes, for the moment, abandoned such policy in a major way. 

The reasons that have kept consumer and business borrowers on the sideline, in spite of the low, longer-term interest rates that provide a very attractive refinance or home purchase opportunities, is because of the combination of weak U.S. economic growth, high unemployment, anxiety about Europe, enormous and destructive budget deficits, and a general mistrust in the political direction of this nation.

With everything put together, as a Realtor® one would think that the low mortgage interest rates of recent weeks and attractive home prices

would lead mortgage applications to jump sharply. Such is not the case. In fact, as reported last week, applications for new mortgages hit a 15-year low! Refinance applications dropped as well.

So the question is, why aren't more homeowners first-time home buyers not taking advantage of such low interest rates?  The Mortgage Bankers Association in a statement blamed the fall on "volatile markets and rampant uncertainty," which kept home purchasers on the sidelines. Today's reported plunge in consumer confidence only supports that view!

photo: Fotosearch

ShirLee McGarry®  Twitter, LinkeIn, Facebooks, Website

Prepare for Spring’s Housing Thaw

In the famous quote by Joseph P. Kennedy “When the going gets tough, the tough get going,” and to reiterate and expound in first voice as a Realtor® from excerpts in real estate opinion, reports and notes by Ron L. Phipps, NAR president; as a Realtor®, the going has been tough—and all Realtors® in the industry have been going, going and going! It definitely has been a long, cold and bitter economic winter in real estate which is affecting our own state of Utah and across the nation. The nation as a whole has seen some of the most challenging economic times that are facing each of us personally as Realtors® and as citizens of the world. 

With the rivers running swiftly looking like they might overflow their banks, there is definitely a hint of spring in the air with the melt of winter’s snow. I know all of us are ready to welcome the promise of warmer days ahead and have it stay that way for awhile. So it is with the projection of Real Estate for 2011.

Here is an overview of what is happening in the market.

Pending home sales: In late January, we reported the fifth monthly gain in six months.

February: In February home sales dropped by 10%. 

Home sales for 2011: 5.3 million sales are anticipated

Consumer confidence index. The Conference Board’s measure of consumer confidence dipped in December, but was up again in January to levels not seen since spring 2010.

These are all positive indicators of what is anticipated in home sales for the year of 2011. Beyond that, we have much to be thankful for. Home Ownership Matters!

References:

http://www.realtor.org/rmonews_and_commentary/Opinion/1101_notes_president
http://www.realtor.org/rmonews_and_commentary/opinion/1102_notes_president?presentationtemplate=rmo-design/pt_articlepage_v1_print&presentationtemplateid=1b18c0004a12c9a4b7e1ffbdd1ec736f
http://rismedia.com/2011-03-24/anticipating-a-spring-thaw/