August 31, 2010 – Mortgage rates have continued to remain low throughout the summer months. With the 30 year fixed rate at 4.125% and the 15 year fixed rate at 3.625%, one would expect that potential home borrowers would be waiting in line at banks to secure their mortgage. This is not the case today as mortgage rates are not moving the housing market in the direction that it should be going under normal circumstances.
There are several factors that can be blamed for the continued depressed housing market. Without knowing which way housing prices will go, buyers are not looking at purchasing a home as a way to make money and to secure their financial future. As housing prices continue to fall, it will take many years before a buyer will see any equity in their home. Many buyers are still waiting to see if housing prices continue to drop at which point there may only be foreclosures and short sales available.
Mortgage Rates Not Moving Housing Market
Some buyers do not want to deal with the problems with purchasing a foreclosure or a short sale. The time and paperwork involved for these homes is stressful and only the beginning of a long journey. The cost associated with potential repairs and maintenance involved with foreclosures is another drawback. Because of this, buyers, who have the upper hand in this market, are looking to purchase homes currently owned and occupied by sellers at the same prices as those offered for foreclosures and short sales. Sellers, on the other hand, are not willing to reduce their prices to those levels. By doing that, many sellers would have to bring cash to the closing table which many are unwilling or not in the financial position to do. With millions of homes in negative equity, sellers are sitting tight on their homes instead of taking a devastating financial hit.
When employment is high and jobs are plenty, people tend to move around more often seeking that better position. With the overall unemployment rate in the country high, people are not looking to change jobs and relocate. As many areas of the country continue to have a stubborn unemployment rate, many people are worried about the security of their own jobs which is keeping them from purchasing a home. Those who already own homes are staying put and waiting for the market to change for the better. There is just not enough consumer confidence in the job market or the economic recovery to boost the slumping housing market no matter how low mortgage rates drop.
With existing home sales the worst that has been seen in 15 years but refinancing on the increase, it is evident that consumers are more interested today in reducing their current debt. Many are beginning to live within their means and saving money instead. The enticement of lower mortgage rates may not move the housing market until jobs are created and consumers begin to have confidence in the economic outlook.
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