Mortgage Rates Fall to 4.8%, Home Buyers Still Scarce

Post by Ken Grech, a top Simi Valley real estate agent. Search Simi Valley real estate listings. The Wall Street Journal, By Nick Timiraos:

Mortgage rates fell again last week, sending refinancing applications up. But in a sign that the housing market may be stumbling through a stimulus-induced hangover, new-purchase applications also fell again  to a 13-year low.

Average 30-year mortgage rates fell to 4.8% last week from 4.83% the previous week, according to the Mortgage Bankers Association. While rates on 15-year fixed-rate loans rose to 4.25% from 4.19%, the average fees charged to borrowers fell, effectively lowering the rate.

That helped refinance activity increase by 17% from the previous week, the third straight weekly increase. But purchase activity is down 27% over the past four weeks-a sign that the $8,000 tax credit that expired at the end of April simply moved demand forward.

“It’s not clear that we’re going to see much of an increase in purchase applications because anybody that wanted to buy a house probably did last month,” said Jay Brinkmann, the MBA’s chief economist.

For more than a year, low interest rates had been a key pillar of government support that, along with an $8,000 tax credit year, was widely credited with breaking a downward spiral in home prices by boosting demand for housing. The housing industry had braced for rates to rise once the Federal Reserve ended its $1.25 trillion in purchases of mortgage securities at the end of March.

But the European debt crisis has raised new concerns about the health of the global economy, benefiting U.S. consumers. Mortgage rates have fallen over the last two weeks as investors seek safe-haven assets such as U.S. Treasurys, to which rates on long-term mortgages are closely tied, and securities backed by mortgages that are guaranteed by the government.

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