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Fixed-Rate Mortgages Fall to Lowest Levels in Four Years
Adding a further boost for housing affordability and home buying opportunities in the current marketplace, fixed-rate mortgages last week plummeted to their lowest levels in four years.
For the week ending on Thursday, Jan. 24, 30-year, fixed-rate mortgages averaged 5.48%, down from 5.69% the prior week, according to Freddie Mac's weekly Primary Mortgage Market Survey. This was their lowest level since March 25, 2004, when they averaged 5.40%.
One-year, Treasury-indexed adjustable-rate mortgages averaged 4.99%, down from 5.26% the week before. This was the ARM’s lowest level since Oct. 28, 2005, when it was an average of 4.91%.
Builders also were able to find some encouraging news in the Federal Reserve's emergency rate cut last week, which reduced the prime interest rate to 6.5%.
“When the Federal Reserve cut the target federal funds rate by three quarters of a percentage point, the action was extraordinary in both the magnitude and the timing of the rate cut,” said Frank Nothaft, Freddie Mac’s chief economist.
“It is the largest cut since October 1984,” he said, “and also the first time in more than six years that the Fed took action outside of a scheduled Federal Open Market Committee (FOMC) meeting. The last time the Fed decided to ease the target federal funds rate in an unscheduled meeting was immediately after Sept. 11, 2001.”
As a result of the Fed rate cut, “mortgage rates continued trending down for the fourth consecutive week across loan products,” Nothaft said.
NAHB Chief Economist David Seiders expects to see additional cuts in short-term rates at this week’s Federal Open Market Committee on Tuesday, Jan. 30. “We are assuming reductions” in both the federal funds rate and the discount rate, he said in his Jan. 23 “Eye on the Economy” newsletter.
“We’re looking for a 2.75% funds rate by the March 18 FOMC meeting, translating into a highly stimulate real, inflation-adjusted rate, and even stronger monetary stimulus will be delivered if conditions warrant.”
Parting company with some economic analysts, including former Fed Chairman Alan Greenspan, who believe that an economic recession is likely this year, Seiders said that a downturn will be “narrowly averted” and he put the probability of a recession at 40%.
NAHB’s forecasts for housing and the economy “are grounded on some key assumptions regarding monetary and fiscal policy as well as prospective housing policy adjustments,” Seiders said.
Webcast of NAHB Fall Construction Forecast Available Till Feb. 5
The webcast of the NAHB Fall Construction Forecast Conference held in Washington, D.C. on Oct. 24. is available for purchase through Feb. 5.
The conference webcast includes panels of nationally recognized experts discussing economic trends, government policies, developments in the housing industry and the results from NAHB's recent surveys.
Purchasers will receive unlimited access to the webcast archive though Feb. 5, as well as electronic copies of the conference handouts and presentation material. Purchasers can watch at their own pace, rewind, fast forward and review important sections.
To Purchase the Webcast
To purchase the webcast, visit www.nahb.org/cfcwebcast.
For more information, contact Kate Carrigan at NAHB, or call her at 800-369-5242 x8244.
 Want to Know the Housing Forecast for the Top 100 Metros?
Find out in HousingEconomic.com’s 2008 to 2009 Metro Forecast (free preview).
Get the metro forecast with in-depth analysis, overviews and downloadable Excel tables.
To learn more, visit www.HousingEconomics.com.
 Free NAHB Kit Gives Builders Back-to-Basics Tips to Navigate the Slowdown
What was once expected to be a relatively mild housing slump following three years of record new home construction and sales has given way to a significant downturn.
To help members navigate the uncharted waters of this slowdown, NAHB has compiled a comprehensive “Back to Basics” online toolkit — the best of the basics, the tried and true and the truly new. To access the toolkit, click here.
To access the “Back to Basics” toolkit, you must be an NAHB member and have a login to www.nahb.org. To create a login, go to www.nahb.org/login or click on the log-in button on the main menu bar.
For assistance, call the NAHB Member Service Center at 800-368-5242.
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