Driven by record low mortgage rates, the U.S. housing market is beginning to show signs of improvement as consumers search for discount priced homes. The 30-year fixed rate loan, 15-year fixed mortgage and the 5-year ARM all hit new all-time record lows this week to push hesitant buyers off the fence. The benchmark rate, the 30-year fixed fell three basis points to reach an average of 3.53%, according to the Freddie Mac survey. The mortgage has been below 4.00% all but one week for all of 2012. The15-year fixed hit an average of 2.83%, also down three basis points from last week. The 5-year adjustable rate loan smashed its old record, dropping to 2.69%. The only loan to not set a new record was the 1-year ARM, which remained the same as last week at 2.69%.
However, few consumers seeking mortgages to purchase a home or refinance lock-in adjustables these days with fixed loans being at record lows. The historic drop in rates has been driven by growing doubts about the U.S. economy and financial troubles in Europe. U.S. Treasury bond yields paid to investors have hovered in the 1.47% to 1.50% range most of the week. The low rates paid to investors have still attracted interest since other troubled world financial markets are offering negative rates of return to investors.
“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 Freddie Mac chief economist Frank Nothaft. New construction starts also rose to the highest rate in more than two years in June as new housing jumped for the fourth straight month. Demand for homes, however, has been tempered by a declining inventory in most regions of the country in the resale market.
But new home builder confidence rose for the fourth month in a row to the highest level since March 2007, demonstrating that improving conditions are developing in the housing market, despite other negative economic news.
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