It’s no secret the U.S. has been in a real estate tailspin since June 2006. More than one-fourth (27 percent) of single-family homeowners are now in negative equity, which means their homes are worth less than what they owe on them. As a result of dropping home values, we are all caught in a sort of real estate limbo: homeowners are waiting on the sidelines to sell and home buyers are trying to time the bottom, waiting for the ultimate rock-bottom bargain. All of this leads many to wonder: “when will the bottom happen?” When will this frozen real estate landscape begin to thaw?

What many people don’t consider is that home prices are only one factor in how much a home will actually cost per month. The other major factor to take into consideration is mortgage rates.
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LOS ANGELES — Responding to sluggish economic and housing data, mortgage rates have fallen for the seventh straight week, following the yield on Treasury bonds to new lows for the year.

But many people remain on the sidelines of the housing market, expecting further price declines or unable to refinance their existing home because they have little or no remaining home equity.

The yield on the 10-year Treasury note, a benchmark for home lending rates, dropped below 3 percent Wednesday for the first time since early December as investors sought safety in bonds backed by Uncle Sam. And mortgage rates also fell to levels not seen since then, according to the widely watched Freddie Mac survey of lender offering rates.

Freddie Mac said Thursday that the typical rate for a 30-year fixed-rate home loan declined to 4.55 percent this week from 4.60 percent a week earlier. Not since the week of Dec. 2, when the survey showed the 30-year mortgage at 4.46 percent, have rates in the survey been lower.

The 15-year fixed loan averaged 3.74 percent in the latest survey, down from 3.78 percent a week ago and the lowest since Nov. 11, when it was at 3.57 percent.

Borrowers in the survey would have needed good credit and 20 percent down payments or 20 percent home equity in the case of refinancing to obtain the rates. They would have paid 0.6 percent of the loan amount on average in upfront lender fees to obtain the 30-year loan and 0.7 percent

Declining rates such as those might be expected to increase the number of people seeking to lower the cost of their home loans by refinancing.

Last fall, when the typical 30-year rate in the Freddie Mac survey dipped briefly below 4.2 percent on two occasions, refinance applications surged.

So is that starting to happen again?

“Not yet,” said Laguna Niguel mortgage broker Jeff Lazerson, “but I am praying to the mortgage gods.”

Another recent report showed Lazerson is not alone.

A weekly survey by the Mortgage Bankers Association, released Wednesday, found that applications for new mortgages decreased by 4 percent during the week that ended May 27, compared with the previous week.

Refinance applications were down by 5.7 percent.

MercuryNews.com