Mortgage Rates Reach All-Time Lows

Mortgage rates have hit an

all-time low according to Freddie Mac's Primary Mortgage Market Survey. 30-year fixed-rate mortgages averaged 4.15% last week. 15-year fixed-rate mortgages averaged 3.36%.

The drop has done little to help new home sales, but it did cause a surge in refinancings. Frank Nothaft, the vice president and chief economist of Freddie Mac, said "Not surprising, many homeowners took advantage of this low mortgage rate environment and have already refinanced their loans. The refinance share of applications averaged nearly 70 percent of all mortgage activity in the first half of this year, according to our survey. In addition, an increasing share of refinancing borrowers chose to shorten their loan terms during the second quarter."

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One of the primary reasons for the drop is that mortgage rates are tied to government debt. The 10-year Treasury hit an all-time low of 1.99% Thursday. The previous record was 2.03%.

No matter how attractive mortgage rates are, they have not caused an increase in homes sales, and are not likely to. Many banks now require at 20% down payment for home loans due to fear that house prices are still falling and the the creditworthiness of many Americans is weak.

And, home prices have continued to drop rapidly. S&P Case-Shiller data show that the prices of homes in the the 10 largest and 20 largest cities are still falling. RealtyTrac reports foreclosures are down, but expects them to accelerate after lawsuits over robo-signing activity clear the courts. Banks still hold "shadow inventory" of homes upon which they have foreclosed but have not put back onto the market. This pool is estimated at as large as 3 million houses. That inventory will probably drive prices down

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further in the markets in which they are concentrated. And, of course, the unemployment rate is still above 9% and the total of unemployment and "under-employment" is nearly 17%.

Mortgages rates may be down, and may even fall further. That will not help the housing market one iota, at least for the time being.

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