Historically Low Mortgage Rates Should Kick-Start Housing Market

Through a series of rate cuts and capital market tinkering, the Federal Reserve has finally managed to push down long term mortgage rates to levels not seen in nearly forty years. The rate on the conforming thrirty-year,  fixed-rate mortgage was hovering close to 5% on Friday as the yeild on the ten year treasury note sank to 2.07%. This thaw in the mortgage credit market is a welcomed sign that the ingredients are coming together to hopefully re-energize the comatose housing sector.

The Mortgage Bankers Association reported a surge in mortgage application activity over the past week as homeowners rushed to refinance their existing mortgages.  The combination of low rates and low housing prices should also create some demand in the purchase money market as well as consumers look for safe investments in these difficult economic times. Though a flood of buyers is unlikely, we can be optimistic that the first quarter of 2009 and beyond may see an increase in real estate sales and, hopefully, an end to home price declines.