Mortgage Rates Slide Lower, Somewhat

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The never ending saga of increasing mortgage rates seems to have hit a wall; well, more like a small speed bump. After an 11 month high of 6.74 percent for 30-year mortgages, the rate lowered last week to an average of 6.69 percent, as reported by Freddie Mac. It seems that investors have awakened to the fact that the direct effects on the economy from the unending housing slum could last longer.

The pressure in the housing arena keeps building. The construction of new homes and apartments was down by 2.1 percent. The National Association of Home Builders said that the index that measures builder sentiment fell in June to its lowest point in 16 years.

There doesn't seem to be light at the end of the tunnel for the builders, the housing market still hasn't bottomed out. Many parts of the country, where the housing market was on steroids, seem to be the hardest hit, leaving a detrimental effect on these markets, including the Nevada mortgage, California mortgage, and Florida mortgage markets. Adding to the insecurity is mounting mortgage foreclosures, which keep adding to unsold inventory of new houses. Even slashing of prices and other incentives by builders hasn't made a dent in new home sales.

Also, the increasing interest rates in the past few months, increasing foreclosures, and tightening of lending practices has piled onto more woes to the weakened housing market. The buyers are still on the sidelines waiting for the prices to lower further. The growth rate for the first quarter was 0.6, the weakest growth increase in the last four years.

One indication of future home building is the number of buildings permits issued, which rose 3 percent from April. The single family homes performed less than multi-family units. This can be borne out by the fact that the demand for rental housing has gone up while sale of homes has gone down.

The government data for May shows that construction of apartments has risen by 3.1 percent while single family unit construction has decreased by 3.4 percent. The housing market being an important economic leading indicator could portend of an ominous downward economic situation in the near future.

Hopefully, the lower interest rates of last week will continue and may provide some impetus to increase home sales. The 15-year fixed rate fell to 6.37 percent last week, down 0.06 percent from the week before. The 5 year adjustable rate mortgage fell to 6.31 percent last week, down 0.06 from the week before.

The home sales will continue to decline in the coming months, adding burden to the weak housing market. The builders are being hurt by tighter home loan lending standards, especially in the subprime mortgage lending arena. The ripple effect is being felt throughout the economy from the investors to you and me. The experts predict that it will be more than a year before the housing market finds its bottom hopefully, it doesn't lead to the national economy finding its rock bottom.

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