Mortgage Rates Drop to New Lows
Mortgage rates have dropped, again. Homebuyers should thank that Wall Street trader who hit "b" for billion instead of "m" for million.
The resulting mess in the equity markets sent investors scurrying for cover to buy bonds, according to Nathan Becker of The Wall Street Journal. If you remember Finance 101, more buyers of bonds send their yields lower. And since mortgage rates tend to track Treasury rates, homebuyers are rolling in clover.
5/1 Treasury-linked ARMS, which are adjustable rate mortgages that are fixed for five years and then float yearly, are at 3.95 percent. (Here are all Freddie Mac's mortgage rates if you want to take a look at them for yourself.) The Journal notes that 3.95 percent is the lowest rate since Freddie began tracking those mortgages in 2005. Traditional 30-year fixed mortgages, meanwhile, dropped below April's 5 percent levels again, making it in my humble opinion a good time for spring homebuyers to lock in their rates, even if you have to pay a point or so.
There's been nervousness in the real estate community about the threat of rising rates, with many people, including myself, fearing the low-mortgage-rate party would end after the first quarter of this year. The fact that it hasn't yet may be a good sign for home sales volume for 2010. Many experts, including Zillow chief economist Stan Humphries, have suggested that the first-time homebuyer tax credit shifted home sales up from the summer to the spring. If we continue to see low rates and rising employment, however, we might see decent home-sale demand throughout the year, even though the credit expired on April 30.
And a quick reminder to first-time homebuyers: if you were in contract by April 30, you can still claim the first-time homebuyer tax credit, but you have to make sure you're closed by June 30. So now's the time to get going on your appraisal, inspection, etc.
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