Federal Mortgage Campaign Set To Expire

According to Freddie Mac rates on mortgages dropped below 5% again last week, just a few weeks before a government program designed to help keep rates low is scheduled to end.

The average rate on a 30 year fixed rate mortgage was 4.97% last week or down from 5.05% a week earlier. Rates had been as low as 4.71% in December of 2009 but have hovered close to 5% since then being held pretty much in check by a Federal Reserve program hoping to spur more home buying by lowering the cost of obtaining a loan.

The Fed set aside $1.25 trillion to buy mortgage backed securities. That campaign is scheduled to end or expire on March 31. Questions remain as to how effective the program has been. Most home buyers did not see any significant change in the cost of obtaining a new mortgage, although guidelines for lenders making mortgages have changed.

The other part of the equation of course, to encourage more lending by banks into the mortgage markets has not seemed to work at all. Data provided by the National Association of Realtors shows that pending sales, (homes in contract) of existing homes dropped 7.6% in January from December. That is the lowest reading since April 2009 and a disappointment. That index had declined for 2 of the past 3 months and was widely expected to improve.

Some market analysts think that mortgage rates may begin to rise once the Federal program ends later this month. This may be a good indication that potential home buyers and sellers should get into a contract and lock rates now.

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NAR has published it's June Pending Home Sales Index and it is encouraging. The Pending Home Sales Index (PHSI) is a leading indicator for the housing sector, based on pending sales of existing homes. A sale is listed as pending when the contract has been signed but the transaction has not closed, though the sale usually is finalized within one or two months of signing.

The June numbers don't reflect activity resulting from the Housing & Economic Reform legislation recently signed. Projections are for a improvement in existing homes sales in the months ahead and stronger gains in the fourth quarter as homebuyers begin taking advantage of the First Time Homebuyer Tax Credit and FHA Modernization.

According to Lawrence Yun, NAR chief economist: " This is welcome news because a rise in contract activity is necessary for an overall housing recovery. With a tax credit now available to first-time home buyers, increases in home sales could be sustained with the momentum carrying into 2009.”

According to the report the PHSI rose 9.3% in the South and sales have remained consistently strong in areas where prices have seemingly bottomed, like Sacramento CA, Las Vegas and Ft. Myers. Yun also noted that builders are still facing higher construction costs and new home sales may not benefit as quickly as existing homes until they are able to reduce inventory and costs.
With mortgage rates remaining favorable many buyers may be sensing the bottom and recognizing that owning a home is again affordable.

contact me at http://www.ges-realty.com , email me at rebuygeorge@yahoo.com or call me directly 561-306-6736