Home sales fall despite record-low interest rates
(MoneyWatch) Fixed mortgage rates have reached new all-time lows, according to Freddie Mac's latest data. And while Freddie says the record low rates are helping fuel a housing recovery, the latest news from the National Association of Realtors indicates low rates are not spurring sales.
According to Freddie's Primary Mortgage Market Survey (PMMS), the average 30-year fixed rate has been below 4 percent for all but one week in 2012. The 15-year fixed-rate average has been below 3 percent for eight consecutive weeks.
The rates for the week ending July 19, 2012 are as follows:
- 30-year fixed mortgage rates averaged 3.53 percent, down from last week's average of 3.56 percent. One year ago, the 3-year FRM averaged 4.52 percent.
- 15-year FRM this week averaged 2.83 percent, down from last week when it averaged 2.86 percent. At this time last year, the 15-year FRM averaged 3.66 percent.
- 5-year Treasury-indexed hybrid adjustable-rate mortgage averaged 2.69 percent this week. That's down from last week's average of 2.74 percent, and much lower than last year's average of 3.27 percent.
- 1-year Treasury-indexed ARM also averaged 2.69 percent this week, unchanged from last week. Last year, the 1-year ARM averaged 2.97 percent at this time.
"With little signs of inflation and the Federal Reserve's "Operation Twist" keeping U.S. Treasury bond yields in check, fixed mortgage rates are remaining low and helping to stir the housing market," said Frank Nothaft, vice president and chief economist at Freddie Mac.
Unfortunately, the "stir" is barely a ripple. Low mortgage rates are luring some buyers into the market, but the recovery remains painfully slow. According to the National Association of Realtors, sales of existing homes fell 5.4 percent in June to an annual rate of 4.37 million. That's the fewest since October.
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Part of the problem is that new families are not coming into the market: The number of first-time homebuyers made up just 32 percent of sales in June, down from 34 percent in May and well below the ideal level of 40 percent of the market.
Even so, housing appears to be recovering, albeit slowly. Existing home sales rose 4.5 percent in June from one year ago, but the pace is still well below the 6 million that economists consider healthy. Home prices are also on the rise. In June, the national median price for existing homes rose 7.9 percent year-over-year to $189,400 -- the strongest gain since February 2006.
"Despite the frictions related to obtaining mortgages, buyer interest remains solid," said NAR chief economist Lawrence Yun in a press release. Interest is one thing, but it's closed deals that will fuel the recovery.
