Mortgage rates hit record low. Will buyers finally take the plunge?

couple trying to get a home loanRates for 30-year mortgages broke another record for the week ending today, dropping to an average 4.27% from 4.32% a week ago, according to Freddie Mac. That marks the lowest rate since 1971, when the mortgage-finance giant started tracking such data. The rates sank far below last year's 4.87%.

Similarly, 15-year fixed-rate loans tumbled, to an average 3.72%, down from 3.75% last week.

Does that mean buyers will finally head back to the housing market? Probably not in a significant way, experts say, mainly because the weak jobs market and fears of a still-shaky economy will continue to keep them on the sidelines. The U.S. jobless rate currently is at 9.6%. And qualifying for a loan -- even if your ducks are lined up -- still is a challenge.

So far, low rates have barely spurred buyers.

"Consumers don't want to jump into the cold water right now," says G.U. Krueger, an economist and president of in Los Angeles. "It looks risky, prices might drop again, and the general feeling about the future of the country isn't good at this point."

Buyers also are in a bad mood, says Krueger.

"When consumers are cranky, they don't buy. But they will again when jobs are growing, the economy is improving, confidence goes up, and they stop hearing about that pesky double-dip recession."

Home sales have tumbled since April, when a federal home buyer tax credit program expired. In August, sales of existing homes hit its second-lowest level on record, the National Assn. of Realtors reported in September.

The Mortgage Bankers Association reported Wednesday that the overall index of mortgage applications fell slightly from a week ago, for the fifth straight week. But applications for home purchases rose for the second straight week.

"The increase in purchase activity was led by a 17.2% increase in FHA applications," says Jay Brinkman, MBA's chief economist. Some applicants rushed to apply before new FHA requirements took effect Oct. 4, which include higher credit scores and bigger down-payment requirements.

What about refinancing? If you've tried to get one recently, you understand why the MBA's Refinance Index dropped 2.5% from the previous week, to an eight-week low. Banks still are putting the brakes on lending activity and some discouraged buyers are tired of trying for a loan.

Still, buyers inevitably will get back into the business of home buying.

"Maybe after the November elections," says Krueger. "Right now both parties are engaged in unhappy talk. Eventually the demand for housing will go up."

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