By keeping rates low, the hope was that more people would be motivated to buy homes. And when that didn't happen, fingers of blame were pointed in the direction of more stringent lending standards. People can't qualify for loans, can't avail themselves of the low rates -- so went the bank-bashing.
But along came some numbers that tell a different story. Yes, lending standards are making it tougher to qualify for loans now, but the reality is that fewer people are even trying. The national Mortgage Bankers Association, which tracks new mortgage applications weekly, says those applications were down 14.9 percent last week from one week earlier. The group expects to see mortgage originations fall from an estimated $1.2 trillion in 2011 to $900 billion in 2012.
Could it be that when Federal Reserve Chairman Ben Bernanke announced that the low interest rates would be around through 2013, buyers just plopped back on their couches waiting to see if the housing prices would fall even further?
The 'Luxury of Waiting'
"By keeping rates low for two years, you gave buyers the luxury of waiting to see if the market is at the bottom," says Paul Habibi, professor of real estate at UCLA's Anderson School of Business Management. "Why wouldn't you wait if you were a buyer?" he asks. "There are no expectations of home value appreciation, so all that low interest rates have done is create a big holding pattern in buyer behavior."
So should we be praying for rates to start creeping up?
"Rising rates are absolutely a better motivator than falling ones," says Dan Green, loan officer with Waterstone Mortgage, who runs the award-winning TheMortgageReports.com website. He notes that for the second straight year, low rates sparked a boom in refis, but did little to help the purchase market.
"Falling mortgage rates do more to help home affordability than falling home prices," he says. Yet still no one is buying.
Which leads to the next line of thinking: If lower interest rates immobilized buyers, might not rising rates serve as a cattle prod? A few good pokes in the bellies of reluctant buyers might just get them off the couch and back into the game.
Location: Hickory Creek, Texas
Price: $35 million
Size: 36,630 sq. ft.
Commanding 90 acres, this French chateau is bursting at the seams with luxury. The home boasts a lavish master suite, two guest suites, indoor and outdoor pools, and a 15-car garage, among other features.
Oh, and don't forget the ballroom, bowling alley, theater, wine room, tennis court and veranda. If you get sick of the two pools, you also can take dips in the property's private lake. The sprawling residence may not be as proud as it used to be, however. The listing description tells us, "SELLER WILL CONSIDER ALL OFFERS."
Location: Fort Washington, Pa.
Price: $30 million
Size: 36,957 sq. ft.
This home's concrete and stucco exterior make it look like a castle. Its size jibes with that theme -- nearly 37,000 square feet -- and so does its "tower." Sitting on 70 acres, the home offers two dining rooms, a library, gourmet kitchen, media room, indoor tennis court and playroom.
One thing on the description of this fortress that really caught our eye was the residence's playhouse -- listed at 20,000 square feet. We're still trying to figure out just what that means exactly. The home also commands its own mini-village: two stone farm houses and a three-bedroom apartment.
Location: Beverly Hills, Calif.
Price: $55 million
Size: 36,000 sq. ft.
This sprawling home is as impressive for its ornate finishes as its jaw-dropping size. Some of its "exquisite designs" include hand-carved limestone, French moldings with 24-karat glitz and bronze double-paned windows and doors.
Location: Indian Creek Village, Fla.
Price: $60 million
Size: 30,000 sq. ft.
While it's not the most expensive house we've ever seen, this local sensation definitely deserves a nod of respect from the country's record-holder. The 30,000-square-foot home has some truly exceptional features, like the "chromotherapy spa" and "light-filtering louvered walls."
Feast your eyes on the home's 100-foot resort-size pool. This veritable pond, paired with other features -- like its gourmet kitchen, rooftop lawn and Jacuzzi, wine celler, servant room and massage room -- identify the residence as a home equipped to host terrifyingly large parties.
Location: Los Angeles, Calif.
Price: $6.3 million
Size: 53,000 sq. ft.
Our biggest listing yet. Clocking in at 53,000 square feet, this home once functioned as a secret research facility for the military. According to Sotheby's listing agent Brett Lawyer and some Internet sites, the Lookout Mountain Air Force Station was built in 1941 as the main West Coast air defense and radar communications headquarters in World War II. Converted into a research facility for the atom bomb a few years later, the space was visited by top generals and consultants.
Location: Farmington, Conn.
Price: $9.999 million
Size: 48,515 sq ft
Rapper/actor 50 Cent (aka Curtis Jackson) has been trying to unload his 17-acre estate in Farmington, Conn., which he bought from Mike Tyson's ex-wife, for several years. He only paid $4.1 million for the home but reportedly spent $6 million renovating it. Over the years, he has reduced the price from $18.5 million to its current ask of $10 million.
Location: Los Angeles, Calif.
Price: $125 million
Size: 35,046 sq. ft.
This $125 million French-style mansion is one of the most expensive homes on the market, and falls just short (sort of) of clinching the honor of highest ask ever. That would be Candy Spelling's former palace, which was initially listed at $150 million, but actually ended up selling for $85 million. But back to the $125 million "Fleur De Lys": it boasts two kitchens, multiple tennis courts, a giant movie theater, pool and nine-car garage -- for starters.
Location: Stateline, Nev.
Price: $75 million
Size: 38,000 sq. ft.
This $75 million estate is big in all ways: The house is 38,000 square feet and the property sprawls 210 pine-blanketed acres. It features exquisite landscaping, a covered patio, four-car garage and massive pool. The dining room even has coffered ceilings with frescoes.