Fixed mortgage interest rates dipped to new lows for the second consecutive week, according to the latest data from Freddie Mac.
Low fixed mortgage interest rates are keeping borrowing costs down and home affordability high, but also indicate the housing market is struggling as it continues to make a sluggish recovery.
Frank Nothaft, vice president and chief economist for Freddie Mac, believes low fixed mortgage rates will continue to spur the ongoing, albeit slow, recovery. “Already, new construction on homes was up 3.6 percent in October to the strongest pace since 2008,” he said in a press release. “In November, homebuilder confidence rose for the sixth straight month to its highest reading since June 2006 according to the NAHB/Wells Fargo Housing Market Index.”
Existing home sales also increased in October, ticking up 2.1 percent to an annualized pace of 4.29 million and exceeding the market consensus forecast.
Mortgage rates for the week ending November 21, 2012 are as follows:
- 30-year fixed rate mortgage (FRM) averaged 3.31 percent, down from last week when it averaged 3.34 percent. Last year at this time, the 30-year FRM averaged 3.98 percent.
- 15-year FRM this week averaged 2.63 percent, down from last week when it averaged 2.65 percent. A year ago at this time, the 15-year FRM averaged 3.30 percent.
- 5-year Treasury-indexed adjustable-rate mortgage (ARM) averaged 2.74 percent this week, unchanged from last week. One year ago, the 5-year ARM averaged 2.91 percent.
- 1-year Treasury-indexed ARM averaged 2.56 percent this week, up from last week when it averaged 2.55 percent. At this time last year, the 1-year ARM averaged 2.79 percent.
Despite the tight mortgage market, many experts believe these low rates are contributing to the slight boost we’ve seen in home prices. More buyers are purchasing homes, and that increased demand is having an effect on the market – although homes remain more affordable than they’ve been in years.
According to Zillow’s most recent home value index, national values rose 1.1 percent in October, up slightly from the previous month. The national median home value, according to Zillow, is $155,400.
The monthly increase was the largest since August 2005 and marks the twelfth consecutive monthly increase. Annually, home values were up 4.7 percent from October 2011, the largest gain since September 2006.
Of the 30 largest metro areas covered in the survey, only Chicago experienced monthly home value declines. Nationwide, foreclosures fell in October, down 0.8 percent from the previous month and 1.9 percent year-over-year.
“We’ve reached a milestone with one full year of monthly home value gains,” Zillow’s chief economist, Dr. Stan Humphries, said in a press release. “The bottom line is that homes are more affordable now than at any time in recent memory, and buyers are seizing this opportunity.”
Humphries notes the fiscal cliff, looming foreclosures and the large role investors are playing in the recovery as factors to be wary of. However, he remains optimistic. “We expect to see increasing numbers of potential buyers entering the market as the broader economy continues to recover and household formation picks up further.”