Could the proposal to lower mortgage rate to 4.5% help stop the slide in home prices?

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Mortgage and Lending

We all know that home values have continued to decline as a result of unprecedented foreclosure and short sale activities through out the country. These actions have also resulted in huge housing inventory. It is a fact that lower interest rates would substantially increase consumers' buying power. But the question to you Active Rain pundits is, Do you think that lowering mortgage rates from a near 50-year low of 5.5% down to 4.5% (1 full percentage point) will help spark a new surge in lending, sell more houses by luring many more potential homebuyers, clear existing backlog of housing inventory, stop the slide in home values and prices and start creating new jobs as the experts believe? Or, do you think it wouldn't make much of a difference since the rates are already low? As a certified mortgage planning specialist, I reserve my comment and wait for your wise comments, instead.

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Rainmaker
536,206
Kenneth Cole
Weichert Realtors Appleseed Group, 2043 Richmond Ave. S.I.N.Y. 10314. office phone 718-698-9797, Appleseedhomes.com... - Staten Island, NY
NYS Licensed Real Estate Salesperson

Ive asked the same thing.

Dec 07, 2008 02:25 AM #1
Rainmaker
432,207
Anne Hensel
South Beaches Real Estate Professionals - Saint Petersburg, FL
Realtor - Broker - St. Pete Beach, Treasure Island

I think it will do the opposite. Hurt the market even more. All the buyers that were ready to go right now and in waiting once again. So, the idea has already killed the little progress we have made. Also, what do you think will happen to the people that have a mortgage right now with 7.5% interest rate? Keep in mind, the 4.5% will only be for NEW purchases NOT for refinancing.Our problem is NOT the mortgages people are about to get, the problem is the existing mortgages. These are the short sales and foreclosures that drive te home values down.

Dec 07, 2008 02:25 AM #2
Rainer
13,298
Michael Schindler
Your IRA guy! - Galesville, WI

I agree Ann and consumers right now see the news about 4.5% and are not wanting to refinance now because they think they will be able to wait for it.......  We thought a refi boom would be coming and the rates did indeed drop but, since the values did also, getting a refinance done and saving people money isn't the easiest thing to do right now........

Hans, what are your comments, insight.......we'd like to hear the opinion from the CMPS.  :)

Jobs, jobs, Jobs........THAT is what will pull us out of the economic funk the world is in...... You can't buy if you don't have a job and the job reports are absolutely miserable! 

 

 

Dec 07, 2008 02:35 AM #3
Rainer
19,741
Hans Iduma
Gaithersburg, MD
Certified Mortgage Planning Specialist

Anne and the mortgage guy, I tend to agree with you to an extent. I have had two of my refinance customers tell me to hold off on their refinancing until they know more about the proposed lower rate of 4.5%. Some even believe the rates will be lower than the proposed rate.

Dec 07, 2008 03:05 AM #4
Rainmaker
228,056
Gene Wunderlich
1st Action Real Estate - Murrieta, CA
Realtor & Legislative Liaison

The interest rate should be about 4.5% right now. It is being artificially maintained at a higher level  by lenders. Doesn't matter much since they're not lending anyway. However, the drop to 4.5% for a year, as proposed by the Nat. Homebuilders Assoc. and supported by NAR would get a few people off the fence. A drop to 2.99% for a year for a 30 year fixed rate would definitely drive the buy side. Bump that to 3.99% the 2nd year and much of our excess inventory would be absorbed and we could return to whatever a'normal' market is. The rate should be good for purchase OR refi's. Get the market rolling again.

Dec 09, 2008 09:34 AM #5
Rainmaker
722,804
Chuck Willman UtahHomes.me
Utah Homes - Alpine, UT
Utah Homes

I've been receiving more calls as the rates have gone down... one would think that buyers would be coming out of the woodworks... they're emerging somewhat, but nowhere near what I would have expected.

It's just crazy how low prices have gone and how little an interest rate drop does to the market.

Dec 16, 2008 10:04 AM #6
Rainmaker
175,187
Richard Stabile
Re/Max Real Estate Limited - Oradell, NJ
Bergen County New Homes Builder Realtor

Hans:

I blog this over a month ago to have this done and back in June to save us. You may scan my blog for a comprehensive detailed explanation why it could work.

Money, Money Money. We need it to be released!

Richard

Dec 16, 2008 11:09 AM #7
Rainmaker
184,095
Laura Gray
RE/MAX Realty Group - Gaithersburg, MD

Hans - The bottom line is "Money makes the world go around". Teaser rates are great to get the publics attention. But if the guidelines are so restrictive on the credit side and the valuation side of the property , it all is a moot point. The loan won't close and NO new money is circulated. It seems to me that we have ALOT of band-aids stuck on the mortgage (refi & new loans) , real estate , credit fiasco and none of them are stopping the bleeding.

May 18, 2009 12:14 AM #8
Rainer
118,327
Ginger Moore
Wilkinson & Associates Realty - Gastonia, NC

Hi Hans,  I think the problem is that some people do not have jobs. I think most people are hurting; if not they would be all over these low mortgage rates, if indeed they could afford to purchase a home.  thank you for sharing!

Aug 29, 2009 03:42 AM #9
Rainmaker
386,696
Dana Hollish Hill
Hollish Hill Group, KW Capital Properties - Bethesda, MD
REALTOR and Productivity Coach

Well, it seems to have worked. our market has low inventory and prices are rising at a quick pace. It's amazing how different things look a few years later. 

Jan 21, 2014 02:34 AM #10
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Rainer
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Hans Iduma

Certified Mortgage Planning Specialist
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