By Mike Colpitts
Mortgage rates on the benchmark 30-year fixed rate home loan slipped below 4% for the first time this year, according to Freddie Mac. The drop in rates came as Treasury bonds fell below 2% propelling the move as consumer worries over the European debt crisis impacted U.S. financial markets.
The 30-year hit an average of 3.99%, the nation’s giant lender said. The same loan averaged 3.94% in early October, reaching its all-time lowest level.
The fixed 15-year mortgage averaged 3.30% with an average 0.8 point, down from 3.31% a week ago prompting an increase in refinancing for homeowners who are able to qualify for lower rates. The 5-year adjustable rate Treasury hybrid averaged 2.98%, a slim two-basis point drop from a week ago.
“Soft house prices and low mortgage rates have kept home buyer affordability historically high,” said Freddie Mac chief economist Frank Nothaft. “In the third quarter 74% of the NAR’s (National Association of Realtors) metropolitan areas exhibited annual house price declines, compared to 72% in the second quarter.”
Rates averaged just 4.3% in the third quarter compared to 4.7% during the second quarter on 30-year fixed mortgages, sending home buying activity higher, despite the record long period of high unemployment.
The economy added 80,000 jobs during the month of October, according to the Commerce Department sending the U.S. unemployment average to 9%, the lowest in six months. The increase, however, will do little to boost the U.S. job market or help housing sales. Jobs would need to increase at least 400,000 positions a month to improve the nation’s housing markets, which have been weakened by a series of issues.
With fewer consumers able to make home purchases and more falling behind on mortgage payments, the housing market remains in a quandary, despite lower mortgage interest rates, awaiting more aggressive government programs. Home prices in the majority of the country continue to erode as the economy lingers, and are forecast to decline further in 2012 in most areas.