Mortgage giant Freddie Mac reported at the end of December that mortgage rates had fallen to the lowest level since 1971, with average rates on 30-year fixed mortgages falling to 5.19 percent. How much lower can rates drop in 2009?
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That depends on a variety of factors. Forces pushing rates lower will be the poor economy and the U.S. Treasury entering the mortgage market and buying loans. Forces likely to push rates higher are the volume of loans coming into the market primarily from refinancing and new initiatives like the proposal to allow refinancing rate and term loans without an appraisal.
The wild cards in the market appear to be the question of whether the government will offer an outright guarantee on mortgage loans.
Although some pricing models do point to lower rates in 2009, the model makers themselves will admit that there is such a high level of uncertainty in the factors they are basing their assumptions on that they really don’t know how accurate their predictions can be.
The bottom line is that rates have not been this low in most of our lifetimes. If you still qualify, apply for a loan now before the huge bottleneck forms by the end of January.
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Will 2009 be the year of mortgage refinancing?
December of 2008 began the “year of refinancing” and there is no reason to think it will end [there]. The biggest question is that given the changes that have occurred in the mortgage industry, notably the huge reduction in capacity over the last few years, how will we handle the huge influx of volume? And make no mistake, it will be massive. Anecdotally, I had to pick up a few items at the pharmacy last Saturday and was approached about helping four people refinance their home loans.
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When will be the best time to buy in 2009?
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In stronger markets, the best time to buy was a few weeks ago. If you are in one of those markets, sooner will be better than later. The government finally seems to realize that the key to stabilizing the economy is to stabilize housing. Some weaker areas with huge supply overhangs will taking longer and be harder to stabilize. This year, expect that more traditionally strong markets will not only see stabilization in housing, but also will be stimulated to modest appreciation as a result of lower mortgage rates.
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What’s the housing outlook in 2009?
Trying to give a single forecast for the housing market in 2009 is like looking at the fragments from a shattered mirror and seeing a single picture. The housing market will be the sum of thousands of local stories. Some told county by county, others neighborhood by neighborhood. Hearing how the real estate market has rebounded somewhere else is little comfort to those owning homes in the most afflicted areas. That said, overall housing will improve in 2009. Not the type of improvement that will have homeowners wanting to bring out the brass band, but the type of improvement where most homeowners will at least feel the worst is behind them. I expect Realtors will be pleasantly surprised with purchase activity this spring. The top part of the market may continue to struggle as a result of the economy and Wall Streets woes, but I think the under a million market will be very strong.