November 1, 2010 by MSI
In early October, average rates in the United States on a 30-year
fixed mortgage were 4.19%, the lowest average dating back to 1971. Through the
month average rates have crept up a bit, with the average last week at 4.23%,
but rates have been falling consistently since April. The low rates have not
helped the slumping housing market, which experienced its worse summer season
in over 10 years. With the housing market still limping along: stabilized, but remaining
on life support, will rates continue to fall or will they slowly rise as we
enter 2011?
The Mortgage Bankers Association (MBA) predicts that the average
rate for a 30-year fixed mortgage will reach 4.4% in Q4 of 2010, slowing rising
in Q1 2011 to 4.7% and then increasing a bit more to 5.1% by the end of next
year. I have to ask myself, how accurate are these predictions, especially
considering that the economic conditions are still shaky and the housing market
continues to experience high supply and low demand? In May of this year, Fannie
Mae predicted that rates by Q4 would be 5.4% and they would reach 5.8% by then
end of 2011, drastically off versus what actually occurred.
Regardless of whether the predictions or accurate or not, the
reality is that average mortgages are at record low levels right now, making it
a great time to buy a new home. Of course, the challenge is that due to the
real estate conditions a vast majority of Americans are in negative equity
situations in their existing home, making it nearly impossible for them to take
advantage of this opportunity. If rates, as predicted, slowly increase, it may
have an additional negative impact on workforce mobility as well, with
potential transferees reluctant to give up the record low rates on their
existing mortgage to purchase at a higher rate, albeit a moderate increase, at
their new location. What do you see on the horizon and what do you think the
impact, if any, will be on relocation?
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