Mortgage Rates Continue Slide for Fifth Straight Week

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Mortgage Rates
Keith Srakocic/AP
WASHINGTON -- Average U.S. long-term mortgage rates continued to slide this week, raising prospects of a wave of consumers refinancing their loans. The 30-year mortgage fell further below 4 percent.

Mortgage company Freddie Mac said Thursday that the nationwide average for a 30-year loan declined to 3.92 percent from 3.97 percent last week - the lowest level since June 2013. It stood at 4.53 percent back in January. The average for a 15-year mortgage, a popular choice for people who are refinancing, fell to 3.08 percent from 3.18 percent.

It was the fifth straight week that mortgage rates retreated.

The possibility of locking in a mortgage rate below 4 percent can be tantalizing for consumers. Across the country last week, homeowners and would-be homeowners eager for a bargain rate fired off inquiries to lenders.

Before last week, many bankers, lenders and borrowers had assumed that mortgage rates would soon start rising closer to a two-decade average of 6 percent. That was based on expectations that the Federal Reserve would start raising its key short-term rate next year - a move that likely would lead to higher mortgage rates.

But that assumption fell suddenly into doubt as stocks plunged last Monday and Wednesday amid fears about global economic weaknesses, the spread of Ebola and the threat of the Islamic State militia group in the Middle East.

Seeking safety, investors poured money into U.S. Treasurys. Higher demand drives up prices for those government bonds and causes their yields to drop. The yield on the 10-year note traded as low as 1.91 percent last Wednesday.

This week the yield on the benchmark Treasury note recovered to 2.22 percent Wednesday. It traded at 2.26 percent Thursday morning.

To calculate average mortgage rates, Freddie Mac surveys lenders across the country between Monday and Wednesday each week. The average doesn'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 fee for a 30-year mortgage was unchanged from last week at 0.5 point. The fee for a 15-year mortgage also remained at 0.5 point.
  • The average rate on a five-year adjustable-rate mortgage slipped to 2.91 percent from 2.92 percent. The fee was steady at 0.5 point.
  • For a one-year ARM, the average rate rose to 2.41 percent from 2.38 percent. The fee held at 0.4 point.
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Mortgage Rates Continue Slide for Fifth Straight Week
In 2013, the median lot size of a new sold single-family house was 8,596 square feet, or just under 0.2 acres. While that might not seem like a lot for you suburban homeowners, a regional breakdown shows that the small average size isn't due to urban inhabitants alone. The Northeast enjoys the largest average lot, at 13,052 square feet, while the less densely populated South and West lay claim to just 8,649 square feet and 6,796 square feet, respectively.
From a footprint of 1,650 square feet in 1978, the average American home has grown 50 percent, to 2,478 square feet. Yet tough times seem to be squeezing our expansionary attitude. Although new single-family homes sold in 2013 clocked in at a median 2,478 square feet, single-family homes completed in 2013 amounted to just 2,384 square feet. Homebuilder confidence has plummeted into pessimism in the last few months, hinting that the housing market's road to recovery might be rougher than expected.

While birth rates have held relatively steady for the past 40 years, everyone apparently needs more elbow room. The share of homes with four or more bedrooms has jumped from 27 percent in 1978 to 51 percent in 2013. And where would a bedroom be without a bathroom? While just 8 percent of 1978 homes had three or more baths, 37 percent of homes now fall in that category.

From 2008 to 2013, both the share of homes with four or more bedrooms and the share of homes with three or more bathrooms have jumped 10 percentage points, while median square footage is up 10.9 percent for the same period.
 

If there's one strong sign of new housing demand, it's home prices. After nose-diving during the Great Recession to a median sales price of just $216,700, home prices have been roaring back up. In 2013, the median sales price for a new single-family home was $268,900. But for those on the housing hunt, don't be discouraged. Home prices today still don't hold a candle to costs in 2006, according to the well-regarded Case-Shiller Home Price Index. In 2006, the index topped 200 before plummeting to less than 140, and current rates put the index just above 170.
It is America, after all. Our industrialized nation was built on the back of Henry Ford, and America is in no danger of breaking its automobile addiction. In 2013, a whopping 300,000 of the 429,000 new single-family homes sold included a two-car garage. And 98,000 new homes included a three-car garage -- the highest amount since 2007. Of all new homes built, only 10,000 failed to include a garage or carport.
American homebuyers are building bigger homes than ever before. But if there's one thing the recent recession has shown us, bigger isn't always better. Although 30 percent of Americans believe real estate is the best long-term investment, homeownership isn't for everyone. There are plenty of reasons to spend less or invest elsewhere -- and leave keeping up with the Joneses to Mr. and Mrs. Smith.
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