Mortgage rates down; home prices, sales up

What more could you ask for?

According to HSH.com’s latest Mortgage Rates Radar, rates continued their downward trajectory this week, as the 30-year fixed-rate set a new record.

The average rate for conforming 30-year fixed-rate mortgages fell by five basis points (0.05 percent) to 3.64 percent, a new record low. Conforming 5/1 Hybrid ARM rates increased by a single basis point, closing the Wednesday-to-Tuesday wraparound weekly survey at average 2.70 percent.

“The Federal Reserve has aimed their efforts squarely at the mortgage market,” said Keith Gumbinger, vice president of HSH.com. “They will be buying up to $40 billion of Mortgage-Backed Securities monthly in an effort to drive mortgage rates lower. The overall effect on rates might prove to be as much as a quarter percentage point in time, and it looks as though we started on that path this week.”

There are likely a number of possible reasons for the Fed’s move, each of which is discussed thoroughly in HSH.com’s latest Market Trends newsletter.

Are rates as low as they can be?

“There are a number of factors which might keep lower rates from being passed down to borrowers more rapidly,” noted Gumbinger. “For one, lenders can’t handle any significant increase in volume at the moment, and don’t need to price more aggressively to attract business, not with rates near sixty-year lows. Another is the forthcoming increase in the cost lenders will be charged to have their loans guaranteed by Fannie Mae or Freddie Mac. That said, if the Fed wants to see lower rates, it will probably get them in the end.”

Home prices and sales on the rise

The good news continues for prospective buyers and sellers. The National Association of Realtors reported on Wednesday that both existing-home sales and prices were up significantly in August and from one year ago.

Existing-home sales rose 7.8 percent in August, and are up 9.3 percent from August 2011. At the same time, the national median existing-home price saw its sixth-consecutive-monthly increase in August, landing at $187,400. Prices are up 9.5 percent from the same time last year.

What more could you ask for?

We come back to the question we led off with—what more could borrowers ask for? Despite the record-low rates and the rising sales and prices, less-stringent lending conditions continue to be that one more thing borrowers are asking for.

While the NAR remains confident despite strict lending conditions, the truth of the matter is that lenders are being picky, perhaps too picky.

Keep an eye out for a post next week from Michele Lerner where she’ll delve into the reasoning behind current lending conditions and talk with the experts to find out whether or not relief is just around the corner.