Mortgage Payment Program

In writing blogs about the mortgage and housing markets lately, it has been difficult to find anything not relatively depressing to write about. There simply is not a lot of good news about housing these days. This week, for the first time in what seems like months, I saw articles with at least a glimmer of good news.
New home sales rose unexpectedly in April over March but still remained near historically low levels. According to a key government report on the battered housing market, April sales came in at a seasonally adjusted annual rate of 526,000, up 3.3% from March. The reading was above the consensus forecast of 520,000. Another small bit of potentially good news is that, according to the same report, The median price of a new home sold in April was $246,100, up 1.5% from $242,500 a year earlier.
Like I said, it is a little good news. Unfortunately, that good news is still offset by the reality that April home sales were down 42% from their level a year earlier so that small rise in home sales prices could be skewed slightly and may not accurately reflect an uptick in home values.
By no means does this indicate the end is in sight to the housing slump. Far too many other key indicators point to tough times ahead for a while longer in the housing sector. I just thought it would be nice for a change to find some good news to talk about.

The Federal Reserve continued their long string of lowering rates and recently lowered rates again. The question I have been getting asked a lot lately is “Will this reduction lower mortgage rates and help with the mortgage crisis?” My answer to them is “Not so much.”

For those who watch mortgage rates closely have noticed that mortgage rates have actually risen slightly after of few of the recent Fed rate drops. Why? The rates that the Federal Reserve has been lowering are the rates at which banks borrow money. In a simple world, if the bank has access to cheaper funds that should mean that it trickles down to the consumers and drives down our cost to access funds in the form of loans. The mortgage market is much more complicated than that with access to funds, and the rates, driven mostly by Wall Street and their demand to buy and sell mortgage backed securities. This demand still remains low largely due to the still existing issues around declining home values and the still rising delinquency and foreclosure rates.

So, if the drop in rates by the Fed isn’t going to help the current mortgage and housing climate, what will? The best answer I can offer is time. At some point the inventory of houses will begin to shrink and home values will stabilize and the housing market will begin to recover. The silver lining? For those people who have equity in their homes – either from buying at a low point or paying down the principal balance faster – or cash to put down on a home there are a lot of bargains in the market to be had.