Mortgage Rates in the U.S. Decline With 30-Year Loan at 3.98%

[Omaha Steve]

Source: Bloomberg

(Bloomberg) -- U.S. mortgage rates declined, sending long-term borrowing costs to the second-lowest level on record after an unexpected increase in home sales.

The average rate for a 30-year fixed loan dropped to 3.98 percent in the week ended today from 4 percent, Freddie Mac said in a statement. It reached 3.94 percent last month, the lowest in Freddie Mac records dating to 1971. The average 15-year rate fell to 3.30 percent this week from 3.31 percent, according to the McLean, Virginia-based mortgage-finance company.

Falling borrowing costs may be bolstering home demand. Purchases of previously owned houses rose last month to a 4.97 million annual rate from September’s 4.9 million pace, the National Association of Realtors said Nov. 21. The median estimate of 75 economists in a Bloomberg survey was for a decline to 4.8 million.

“Low interest rates have some effect,” Paul Dales, senior U.S. economist at Capital Economics Ltd. in Toronto, said in a telephone interview. “Housing is incredibly affordable at the moment due to the low interest rates and good valuations to be had as well.”

Read more: http://www.businessweek.com/news/2011-11-23/mortgage-rates-in-the-u-s-decline-with-30-year-loan-at-3-98-.html

[ParkieDem]

1. Affordable? Really?

Can a family earning the median income really afford payments on a home at the median price in their home city?

Let's see those stats. Where I live, I'm sensing another bubble. I don't understand how people are affording homes at the prices they're going for in this economy.

[stockholmer]

2. "Housing is incredibly affordable at the moment due to the low interest rates and good valuations"

A 4 or 5% 30 year mortgage on a house that stands a good chance of losing another 30 to 60% in value over the next 5 to 10 years is not "incredibly affordable". Underwater is underwater. I think the average house in the US still has a long way to fall in value as the overall economy further collapses. The industrial base is not coming back, and eventually the public/private debt load will crush what remains for at least 80 to 90% of the population, not to even mention the looming huge inflationary pressures building up, followed by deflationary collapse.

These events may be strung out for several years, as the can is kicked down the road, and the US dollar is enforced at gunpoint/wars of empire as the continuing global reserve currency, but the systemic tipping point has already been passed, and there is no way to avoid the system (in its current form) melting down.

[ParkieDem]

3. I agree.

I think the "underwater" crisis is a bit overblown, but there is no doubt that the average house price needs to fall a bit more in order for housing to be considered "overvalued." Perhaps the biggest and harshest lies told during the lead-up to the financial crisis was that housing prices would always go up, and that people would be just fine using their home as an "investment." What a load of crap.