Mortgage Rates Finally Top 4 Percent as Economy Gains Steam

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WASHINGTON -- The average U.S. rate on a 30-year fixed mortgage rose above 4 percent for the first time in five months. The sharp increase suggests the window to buy or refinance a home at historically low rates is closing.

Mortgage buyer Freddie Mac said Thursday that the rate on the 30-year loan jumped to 4.08 percent, up from 3.92 percent the previous week. A month ago, it touched 3.87 percent, the lowest since long-term mortgages began in the 1950s.

The average on the 15-year fixed mortgage rose to 3.30 percent, up from 3.16 percent last week and a record low of 3.13 percent two weeks ago.

Mortgage rates are rising because they tend to track the yield on the 10-year Treasury note. The economic outlook has improved in recent weeks, leading investors to shift money out of long-term U.S. Treasury bonds and into stocks. That has driven Treasury yields higher.

"With the economy getting stronger, the markets are beginning to recognize that rates are too low," said Joel Naroff, president of Naroff Economic Advisors. "That means mortgage rates should rise."

The average rate on the 30-year mortgage had been at or below 4 percent since last October.

Higher mortgage rates could spur more sales, especially if home prices begin to rise. Potential buyers will likely move quickly to avoid paying higher rates down the line.

"As we move through the year, buyer reaction could be very strong," Naroff said.

The lowest mortgage rates on record have helped lift the housing market in recent months.

January and February made up the best winter for sales of previously occupied homes in five years, when the housing crisis began.

Builders have grown more confident over the past six months after seeing more people express interest in buying a home. They have responded by requesting the most permits to build single-family homes and apartments since October 2008.

Optimism is also rising because the job market has strengthened. Employers have added an average 244,600 jobs per month from December through February. That has helped lower the unemployment rate to 8.3 percent, the lowest level in nearly three years.

Even with the improvement, the housing market is still weak. Millions of foreclosures and short sales - when a lender accepts less than what is owed on a mortgage - remain on the market. And the housing crisis and recession have also persuaded many Americans to rent instead of buy, which has led to a drop in homeownership.

Economists say housing is years away from returning to full health.

To calculate the average rates, Freddie Mac surveys lenders across the country on Monday through Wednesday of each week.

The average rates don't include extra fees, known as points, which most borrowers must pay to get the lowest rates. One point equals 1 percent of the loan amount.

The average fees for the 30-year and 15-year fixed loans were 0.8, unchanged from 0.8 last week.

For the five-year adjustable loan, the average rate rose to 2.96 percent from 2.83 percent, and the average fee edged down to 0.7 from 0.8.

The average on the one-year adjustable loan rose to 2.84 percent from 2.79 percent, and the average fee was unchanged at 0.6.

Copyright 2012 The Associated Press. The information contained in the AP news report may not be published, broadcast, rewritten or otherwise distributed without the prior written authority of The Associated Press. Active hyperlinks have been inserted by AOL.

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Taking Inventory: Foreclosure Finds Across the U.S.
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Mortgage Rates Finally Top 4 Percent as Economy Gains Steam

Location: Trenton, N.J. 
Average Foreclosure Discount: 67.8 percent

Price: $198,500
Beds/Baths: 3/2
Sq. Ft.: N/A

Trenton ranks No. 1 on RealtyTrac's list of cities with the steepest foreclosure discounts. This single-family, whose price was slashed recently, represents one of the killer deals you can find in the city. 

See more foreclosed homes in Trenton, N.J.

Dating back to the 1960s, this Cape Cod-style home offers three bedrooms and two baths. Judging by the average foreclosure discount of New Jersey, the home could be running as much as $150,000 below market value. 

Location: Atlanta 
Average Foreclosure Discount: 49.67 percent

Price: $3.75 million
Beds/Baths: 7/10
Sq. Ft.: 22,000

Foreclosed homes in Atlanta are selling for a staggering 50 percent off, according to data from RealtyTrac. This vacant Mediterranean mansion offers a rather excessive four kitchens along with amenities that include a home theater, pool, spa, steam room and elevator. 

See other foreclosed homes in Atlanta

With its gleaming double staircase, the foyer's richly finished, sparkling-clean interior contrasts with the scene at many foreclosed homes, which often show neglect. 

See other foreclosed homes in Atlanta.

At a whopping 22,000 square feet, the home's cavernous interior is distinctly palatial.

See other foreclosed homes in Atlanta.

Location: Houston
Average Foreclosure Discount: 48.14 percent

Price: $4.29 million
Beds/Baths: 5/9
Sq. Ft.: 12,129

It may be hard to believe that $4.29 million is a below-market price, but given that this stucco Mediterranean is bank-owned and Houston's foreclosure discount approaches 50 percent, odds are that the home could be quite a deal for a well-heeled buyer. 

See other foreclosed homes Houston.

The home has a stone exterior and tile roof, along with a courtyard, pool and outdoor kitchen. The interior stretches 12,129 square feet. 

See other foreclosed homes in Houston.

After weaving around columns and through arched doorways, you reach the home's library or its fully-contained suite, accessible through its own entrance. 

See other foreclosed home for sale in Houston

Location: St. Louis
Average Foreclosure Discount: 54.61 percent

Price: $89,900
Beds/Baths: 3/2
Sq. Ft.: 1,342

This brick-built home, which dates back to 1930, probably hit the market at a reduced price to begin with, but now is running even lower, having just undergone a price cut. The home offers stained-glass windows and wood flooring along with a spruced-up kitchen. 

See more foreclosed homes for sale in St. Louis.

Pictured here is the home's updated kitchen. The residence is even more of a deal if you factor in its purported HomePath Mortgage status. That means if you've got the right credit, you could snatch it for as little as 3 percent down. 

See more foreclosed homes for sale in St. Louis.

Location: Lansing, Mich. 
Average Foreclosure Discount: 44.31 percent

Price: $124,900
Beds/Baths: N/A
Sq. Ft.: 2,228

Squeezed into a condo community, this historic home stands out in the neighborhood because of its stately portico. The home has a long residential tradition, but could go commercial if the buyer so chooses: The house can serve as an office, according to the listing. 

See other foreclosed homes in Lansing, Mich.

The home's portico gives it a tinge of the pastoral era in which it was built. The classic was constructed in 1855. 

See other foreclosed homes in Lansing, Mich.

Location: Grand Rapids, Mich. 
Average Foreclosure Discount: 43.45 percent

Price: $289,900
Beds/Baths: 4/4
Sq. Ft.: 4,339

You get a lot of bang for your buck if you buy  this four-bedroom contemporary. Located on a cul-de-sac, the home spans a generous 4,339 feet and offers a three-car garage. At under $300,000, that makes it an affordable luxury residence.  

See more foreclosed homes in Grand Rapids, Mich. 

Along with its expansive interior, the home also boasts its own heated greenhouse, along with a theater and office. 

See more foreclosed homes in Grand Rapids, Mich. 

Location: Flint, Mich. 
Average Foreclosure Discount: 21.55 percent

Price: $109,600
Beds/Baths: 4/3
Sq. Ft.: N/A

Purchase a foreclosed home in Flint and you're likely to enjoy the benefit of more than 20 percent off. While the city's foreclosure inventory doesn't offer deals quite as striking as those found in some other cities wracked by the housing crisis, the town's average foreclosed-home price still falls far, far below the national median (which hovers above $200,000). Flint's average foreclosed-home price is just $60,578. This well-landscaped home demonstrates how far just $110,000 gets you. 

See more foreclosed homes in Flint, Mich. 

The home may be a bit bare-bones now, but as the listing asserts, the home has "lots of potential." It comes with a pool, a deck and a two-car garage. 

See more foreclosed homes in Flint, Mich. 

Location: Tampa, Fla. 
Average Foreclosure Discount: 24.97 percent

Price: $143,900
Beds/Baths: 6/4
Sq. Ft.: 2,920

At just $49 per square foot, this cheery home in Tampa, Fla., a city that took has taken a real shellacking from the housing crisis, offers of six bedrooms. 

See more foreclosed homes in Tampa, Fla.

The bank-owned property spans nearly 3,000 square feet and boasts a well-equipped kitchen with cherry-stained cabinetry and marble countertops. 

See more foreclosed homes in Tampa, Fla.

Location: Easton, Pa. 
Average Foreclosure Discount: 41.17 percent

Price: $29,900
Beds/Baths: 3/1
Sq. Ft.: 1,556

Alright! A listing description that levels with you. "This is a property that needs some work," it states. The home is not without its virtues, however: It offers ample space, three bedrooms and an attic. Furthermore, buyers can acquire 3 percent buyer's assistance if they make an offer by the 31st of this month. 

See more foreclosed homes in Easton, Pa.

One thing buyers should watch out for if they think about shelling out for these digs is that, as with many other foreclosures, there is no seller disclosure for buyers interested in this home. That means, unless you pay for a thorough inspection, you could discover hidden flaws after purchasing the place. 

See other foreclosed homes in Easton, Pa. 

Location: Chattanooga, Tenn. 
Average Foreclosure Discount: 40.39 percent

Price: $129,000
Beds/Baths: 3/2
Sq. Ft.: 1,456

This staid but cozy home is running for $129,000, about $40,000 over the average foreclosed home price in Chattanooga. The home offers a nice porch and decently finished interior. 

See more foreclosed homes for sale

Pictured here is the home's open dining-kitchen area. The place seems to be in pretty good shape for a foreclosed home. Many fall into poor condition, succumbing to insect infestations or other symptoms of neglect. 

See more foreclosed homes in Chattanooga, Tenn.

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See also:
Strategic Default: Would Half of Homeowners Walk Away?
Foreclosure Starts and Sales Spiked in January, Report Says

Millionaire Foreclosures on the Rise



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