By Mike Colpitts
Mortgage interest rates fell slightly on 30-year fixed rate loans to 4.78% from the previous week, according to Freddie Mac following bond yields as weak economic conditions and declining home prices drove rates lower. The fall in interest rates was only 0.02 from last week, but kept the bellwether rate well below the 5% threshold.
Despite the lack of government incentives to increase home sales, the number of single family homes, condominiums and townhouses selling are showing an upward trend in volume.
Foreclosures and bank-assisted short sales, in which lenders cooperate with mortgage holders to sell properties at less than what is owed on a mortgage, compose the largest number of residential sales.
Rates on 15-year fixed mortgages also dropped during the week, but declined more than the 30-year mortgage, falling to 3.97% from 4.02% a week earlier. Regional Federal Reserve Banks reported that business and manufacturing declined in a broad section of the U.S. indicating a weaker economy developing in many areas of the nation, including Philadelphia, Dallas and Richmond.
The Standard and Poor’s Case-Shiller 20-city composite home price index recorded year over year declines through February in 19 of the 20 major metropolitan markets it tracks. The S&P index showed similar results to the Core Logic home price index released earlier this month that also illustrated major declines in home values in most of the country.
Falling home values and near record high foreclosures are slowing a recovery in housing coupled with high unemployment in most areas of the nation. “Between the third quarter of last year and the first quarter of 2011, the housing stock experienced a decline of nearly 400,000 homeowners,” said Freddie Mac chief economist Frank Nothaft.
“However, the National Association of Realtors reported that during the same period there were almost 700,000 first-time homebuyers, which suggests gross losses may have been closer to 1.1 million homeowners over the October-through-March timeframe.”
The rate on the 5-year Treasury indexed adjustable rate mortgage also showed a fall to 3.51%, a full-tenth of one-percent from a week ago.