Mortgage interest rates look pretty stable
January 27, 2011
By Steve Brown/The Dallas Morning News

With all the problems facing the housing market, at least the cost of money isn’t an issue.

Mortgage rates remain near decades-low levels, and even the most pessimistic forecasts don’t foretell a big run-up in rates.

That’s good news, because there are enough obstacles these days to buying a house — from tougher mortgage qualification standards to home appraisals that miss the mark.

The average long-term, fixed-rate mortgage is still going for less than 5 percent.

Not too long ago, anything under 7 percent was considered a steal.

Current mortgage rates are so low that some housing economists worry that recent homebuyers or refinancers will be reluctant to move a few years from now because they won’t want to give up their absurdly cheap interest rates.

Economists are predicting some increases in home lending costs this year, but nothing significant.

Lender Freddie Mac for instance, is projecting that 30-year loans will range from about 4.75 percent to 5.25 percent this year.

“We do have rates gradually rising over 2011,” Frank Nothaft, Freddie’s top economist, said at recent meeting of the National Association of Home Builders, “but it remains very low.”

Any bump in rates may be enough to chase a lot of home refinancers out of the market.

The Mortgage Bankers Association reported just this week that home refinancing levels are running at the lowest volume in a year.

Because of the drop in refinancings, Freddie Mac is anticipating that total home loan production across the U.S. will be down 30 percent in 2011 from 2010.

Even the most optimistic prognosticators don’t see much of a rise in home sales for 2011.

The recovery of the U.S. housing market — as well as North Texas’ — is moving at a glacial pace.

“We are going to rock along with little blips and blaps along the bottom,” said Dr. James Gaines, a research economist for the Real Estate Center at Texas A&M University. “In every single recession, the housing market led into the recession and then helped pull the economy up.

“We ain’t doing it this time,” he said.

Obstacles to arranging a home purchase are also higher.

Along with bigger down payments, buyers are sometimes bedeviled by continued price declines that can also make it harder to get a loan.

It’s especially an issue for homebuilders.

“In a recent survey, we found that 33 percent of the builders said they lost a sale because the appraisal [for financing] was below their cost of production,” said David Crowe, chief economist with the National Association of Home Builders.

Courtesy The Dallas Morning News
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